Westminster Council wins Hemming appeal at the Supreme Court

The City of Westminster Council has won a key victory at the Supreme Court in the long-running battle over the level of fees that local authorities can charge licensed premises.

The dispute between Westminster and Hemming, which operates a chain of sex shops, began in 2012 over the council’s charge of £29,120 for annual renewal of licences for the shops. Of this, only £2,000 related to administering the application process, while more than £26,000 represented the costs of management and enforcement, including the investigation and prosecution of unlicensed traders.

Hemming argued that, following the coming into force in December 2009 of the Provision of Services Regulation 2009 (SI 2009/2999), giving effect domestically to EU Directive 2006/123/EC, the only charges which the Council could legitimately levy related to the administrative costs of processing the relevant applications and monitoring compliance  with  the licence terms by licence holders. The council was not entitled to levy enforcement costs.

The case reached the Court of Appeal in 2014 which ordered the council 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. The Council 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.

On appeal in 2015, the Supreme Court drew a distinction between two types of scheme. Under Type A, applications for licences are made on terms that the applicant must, upon their application being granted, pay a fee to cover the cost of administering and enforcing the licensing regime. Under Type B, which represents the scheme actually adopted by the Council, applications for licences are made on terms that the applicant must, at the time of making the application, pay a fee, refundable in the event that the application fails, to cover the cost of administering and enforcing the licensing regime.

The Supreme Court held that Type A schemes are permissible both under domestic and EU law, and referred to the European Court of Justice (ECJ) the question whether the Council was entitled to operate a Type B scheme. In November 2016, the ECJ ruled that it was not.

Westminster City Council subsequently applied to the Supreme Court, claiming that it was entitled to be paid or repaid the sums it repaid to licence holders on 28 June 2013. The licence holders in turn contend that they are entitled to retain the repayment made to them in full, because it was charged in a way for which there was no warrant.

In a unanimous judgment given by Lord Mance, the Supreme Court ruled that in so far as the Council has determined a reasonable fee, including enforcement costs, it is entitled to be paid or repaid it now by the licence holders, according to the pro rata sums actually received by each licence holder.

The Supreme Court said that the Council’s scheme was only defective in so far as it required payment up front at the time of the application: EU law permits a fee covering enforcement costs becoming due upon the grant of a licence. As a matter of both EU and domestic law, there is no imperative to treat the whole scheme as invalid, only to invalidate it to the extent of the inconsistency.

The issue of the reasonableness of the sum identified as enforcement costs is to be remitted to the Administrative Court, together with the claim to recover the £227,779.15 allegedly paid by mistake.

The full judgment can be read at the following link: https://www.supremecourt.uk/cases/uksc-2013-0146.html