Refusal of shadow licence for nightclub “unlawful”, says High Court judge

A decision by a council’s licensing services manager to reject an application from a landlord for a 'shadow' licence was unlawful, a High Court judge has ruled.

The case of Extreme Oyster & Anor v Guildford Borough Council [2013] EWHC 2174 (Admin) centred on two nightclub premises in Guildford.  

The second claimant, Star Oyster, was the freehold owner of the premises, the ‘Casino and Players Lounge’ and ‘Bar Mambo’. The first claimant, Extreme Oyster, was the trading company of Star and ran Bar Mambo prior to Luminar taking over in May 2012.

Luminar is the tenant of the clubs and the holder of licences covering the premises, granted in respect of ‘licensable activities’ under the Licensing Act 2003.

In May 2012, the claimants applied to Guildford Borough Council for ‘shadow’ licences in respect of the premises and the areas within them.

The claimants wanted to have the benefit of licences operating in parallel to those held by Luminar, in the event of involvency, transfer, surrender, review and future development.

However, Guildford refused the applications on the basis that they had failed to satisfy the terms of s. 16 of the 2003 Act. The companies subsequently launched judicial review proceedings.

In defending the claim, the council accepted that circumstances might arise in which a shadow licence could be lawfully granted but argued that such circumstances did not arise on the facts of the case.

The authority advocated a narrow approach to the question as to just how wide is the category of applicants which the law permits to apply for such a licence.

In addition to arguing for a wider approach, the claimants also contended that:

• The purported delegation of the decision to the council’s licensing services manager was unlawful, and that any decision should have been taken by the licensing sub-committee; and
• The council should not have refused to return to the claimants the fees that they had paid in respect of the failed applications.

In the High Court Mr Justice Turner said Guildford's contention that s. 16 did not provide “for a free for all” did not advance its case. "it is self-evident that Parliament would not have imposed the section 16 gateways unless it considered that some benefit would thereby be achieved. This, however, begs the question as to where the line is to be drawn. The existence of the line cannot, of itself, determine its position."

However, the judge accepted as being “not without some weight” the council's other contentions that numerous licences make enforcement more difficult and unrestricted applications placed an undue burden on licensing authorities.

Mr Justice Turner concluded that this weight was not sufficient to preclude a broad interpretation of s. 16(1).

The judge said the potential deleterious consequences must be balanced against the following factors:

• The holder of a premises licence was under duties imposed by s. 57 of the Licensing Act 2003 (breach of any one of which is an offence) in respect of keeping, displaying and producing such a licence. These obligations applied equally to holders of a shadow licence.
• The broader interpretation of s. 16(1) continued to preserve the important control measure that any given applicant must demonstrate a sufficient nexus between its business and the relevant licensable activities.
• A further disincentive to the making of multiple applications was that a fee was payable in respect of each of them.
• Situations might arise, in any event, in which one set of premises was covered by a number of licences. “Even on a narrow approach, a multiplicity of licences is not precluded in respect of any given premises.”

The judge said there were also a number of factors providing support for a broader interpretative approach. These were:

1. The Licensing Act 2003 was not intended to support a regime based on a narrow and restrictive approach to licensing.
2. The applicant for a shadow licence may have very good and perfectly legitimate business, or other, reasons to include some details of the relevant licensable activity not included in the original primary licence. “The automatic exclusion of such applications from further consideration under section 16(1)(a) would celebrate the triumph of bureaucracy over common sense.”
3. If, in any given case, there were sound policy reasons for taking issue with any differences between the terms of the shadow application and those contained in the primary application, then these could be considered at the hearing and dealt with on their merits based upon an assessment of what would be necessary for the promotion of the licensing objectives in the light of representations made.
4. If Parliament had wished to preclude the making of second or subsequent licence applications on anything but identical or near identical bases to those contained in first licences, then this could have been made clear in the Guidance. It was not.
5. Section 17 of the 2003 Act treats the "relevant licensable activities" as enjoying a separate conceptual existence from, for example, "the times during which it is proposed that the relevant licensable activities are to take place".

Mr Justice Turner ruled in the companies’ favour and ordered Guildford to proceed with the two applications on the basis that they passed through the s. 16(1)(a) gateway and should go to substantive determination.

The judge said that even if he were wrong about the interpretation of s. 16, he would have quashed the decision because the council’s licensing services manager had been under the mistaken impression that the lease contained a three-year break clause when in fact it was a one-year break clause. This amounted to a material misdirection.

Mr Justice Turner went on to say that the decision on s. 16 was not one that ought to have been determined by its licensing services manager, and that there was no justification for Guildford to act in breach of its delegation policy.

James Rankin of Francis Taylor Building appeared for the claimant companies.