R (on the application of Hemming (t/a Simply Pleasure Ltd) and others) v Westminster City Council

Premises licensing – Sex establishments – Licensing fees – Local Government (Miscellaneous Provisions) Act 1982 – Appellant council charging fees for licensing applications – Part of fee relating to costs of administration – Further refundable part relating to costs of running and enforcement of licensing scheme – CJEU ruling appellant not entitled to operate scheme – Whether appellant entitled to be paid or repaid sums repaid to licence holders – Appeal allowed The appellant council was the licensing authority for sex establishments in Westminster under Schedule 3 to the Local Government (Miscellaneous Provisions) Act 1982. The respondents were licensees of sex shops in that area. The appellant required applicants for the grant or renewal of a sex establishment licence for any year to pay a fee made up of two parts. The first, non-returnable part related to the administration of the application; the second larger, part related to the management of the licensing regime and was refundable if the application was refused. The appellant took the view that the fees were permitted under para 19 of Schedule 3 to the 1982 Act, so far as it provided for an applicant to pay “a reasonable fee determined by the appropriate authority”. The respondents brought judicial review proceedings to challenge the appellants’ fees, in particular the larger, refundable part. The courts below held that, following the coming into force of the Provision of Services Regulation 2009, giving effect domestically to EU Directive 2006/123/EC, the only charges which the appellant could legitimately levy related to the administrative costs of processing applications and monitoring compliance with the licence terms by licence holders. The appellant was not entitled to levy enforcement costs: [2012] EWHC 1260 (Admin), [2013] EWCA Civ 591. On that basis, the Court of Appeal ordered the appellant to determine a reasonable fee excluding enforcement costs for the two years ending 31 January 2011 and 2012, and to “determine afresh” a reasonable fee excluding enforcement costs for the year ending 31 January 2013. Pursuant to that order, the appellant made repayments totalling £1,189,466 to the licence holders on 28 June 2013, together with a further £227,779.15, apparently paid by mistake. The Supreme Court overturned those decisions but referred to the CJEU the question whether the appellant was entitled to adopt a scheme whereby applications for licences were made on terms that the applicant had to pay a fee, at the time of making the application, refundable if the application failed, to cover the cost of administering and enforcing the licensing regime: [2015] UKSC 25; [2015] PLSCS 133. The CJEU ruled that the appellant was not entitled to operate such a scheme, meaning the costs of enforcement could only be claimed from successful applicants: see (Case C-316/15) [2017] PTSR 325. The case returned to the Supreme Court where the appellant argued that it was entitled to be paid or repaid the sums repaid to licence holders in June 2013. The respondents contended that they were entitled to retain the repayment made to them in full, because it was charged in a way for which there was no warrant. Held: The appeal was allowed. (1) The scheme which the council operated was only defective in so far as it required payment up front at the time of the application. Its invalidity was limited. European law permitted a fee to cover the costs of running and enforcing the licensing scheme becoming due upon the grant of a licence. There was no imperative under European law, as incorporated domestically by the 2009 Regulations, to treat the whole scheme as invalid, rather than to invalidate it to the extent of the inconsistency. Even under purely domestic law principles, a test of substantial severability was appropriate, rather than a rigid insistence on textual severability. Any remaining element of the scheme which could stand by itself was able to do so: Director of Public Prosecutions v Hutchinson [1990] 2 AC 783 applied. Here, the appellant was entitled to set and require payment of a fee including enforcement costs as well as processing costs applicable to all those who, like the licence holders, actually received licences and benefited by the appellant’s enforcement action. Although it was wrong to charge the element of that fee relating to enforcement costs conditionally at the time of any licence application, that element was under the scheme due unconditionally once a licence was granted. When the application succeeded, the payment made became due unconditionally. (2) Even if that were not the right analysis, nothing in the course of events to date could have affected para 19 of Schedule 3 to the 1982 Act, or the appellant’s right to determine a proper fee under it. It followed that, in so far as the appellants had determined a reasonable fee, including enforcement costs, there was no answer to iys claim to be paid or repaid it now. The parties agreed that any such re-determination should be undertaken by a judge of the Administrative Court. (3) Accordingly, the question of reasonableness would be remitted to the Administrative Court to decide in the light of the litigation so far. At the same time, the court would be asked to deal with the appellant’s claim to recover the £227,779 allegedly paid by mistake. In addition, the court should determine: (i) whether it was in breach of the Court of Appeal’s order not to bring an apparent surplus of £116,520 into account, said to have arisen from a difference between the total income from licences and the total cost of the licensing regime for the year ending 31 January 2005; (ii) whether the appellant failed fully to account for £80,611 of income received when calculating fees, and so accounting for profits, in respect of the years ending 31 January 2010 and 2011; and (iii) whether a further claim by the licence holders for interest should be allowed on the appellant’s surpluses in relation to sex shop licensing totalling £207,869 in respect of the years ending 31 January 2006 to 31 January 2010. Daniel Matthias QC and Charles Streeten (instructed by Westminster City Council Legal Services) appeared for the appellant; Philip Kolvin QC, Victoria Wakefield and Tim Johnston (instructed by Gosschalks) appeared for the respondents. Eileen O’Grady, barrister Read a transcript of R (on the application of Hemming (t/a Simply Pleasure Ltd) and others) v Westminster City Council here