The Supreme Court today gave a second judgment in a long-running row over the licence fees that Westminster City Council, and other local authorities, can charge for sex shops.
In 2015, the Supreme Court overturned earlier decisions by the High Court and Court of Appeal that sex shop licence fees should not include the cost of administering and enforcing the licensing regime – which would have seen Westminster’s fees reduced from almost £30,000 to less than £3,000 for each licence.
However, the CJEU in Luxembourg was asked whether it is lawful for Westminster to require payment in full on applications for a sex shop licence, with the larger element refundable if an application is refused. It ruled last November that Westminster was not entitled to operate such a scheme, meaning the costs of enforcement can only be claimed from successful applicants.
The case returned to the Supreme Court as Westminster claimed that it is entitled to recover the sums it repaid to licence holders in June 2013, following an order made by the Court of Appeal. It says it paid almost £1.2m to licence holders involved in the case, as well as a further £227,779 by mistake to other licence holders not party to the proceedings.
The licence holders argued Westminster was not entitled to the money back, but Lord Mance, giving the court’s unanimous judgment, ruled that – insofar as the council had determined a “reasonable fee, including enforcement costs” – it is entitled to be repaid now by the licence holders.
The question of reasonableness must now be sent back to the High Court to decide in the light of all the litigation so far. At the same time, the court will deal with Westminster’s claim to recover the £227,779 allegedly paid by mistake.
Timothy Hemming, who runs sex shops in the Westminster area under the name Simply Pleasure, had challenged the licence fee claimed by Westminster to be paid by sex shops with their applications for a licence. The fee in 2011/2012 was £29,435, comprising £2,667 relating to the processing of the application and £26,435 relating to the cost of administering and enforcing the licensing regime as a whole. The larger amount was refundable whenever an application failed.
Hemming claimed that this system was illegitimate under domestic and EU law, arguing successfully at the High Court and Court of Appeal that there was no basis for requiring successful or unsuccessful applicants to meet the costs of administering and enforcing the regime.
Following the Supreme Court and CJEU rulings, local authorities are entitled to charge for the costs of enforcement, but not upfront at the application stage. As a result, applications for licences are made on terms that the applicant must pay: (i) on making the application, the costs of the authorisation procedures and formalities, and (ii) on the application being successful, a further fee to cover the costs of the running and enforcement of the licensing scheme.
