Landmark Court of Appeal Ruling thwarts Councils on excessive licence fees for legitimate Adult Entertainment Industry establishments

Ref. R (Hemming & Others) v Westminster City Council (2012) EWHC 1260

In a Court of Appeal ruling that has led to fears of a “free-for-all for the sex industry”, funding for regulation of sex shops has taken a serious blow. The case referenced above centred on the attempt by 7 Adult Entertainment Industry shop owners to reduce dramatically their annual special licence fees, set at a staggering £29,102 by Westminster City Council since 2005.

The Council had persistently charged such high levies in part to fund their battle against illegal sex shops, with the accentuated fees allowing them the funds to investigate and challenge unregulated dens of iniquity.

However, on 28th December 2009 the Provision of Services Regulations 2009 transposed into UK law the European Services Directive 206/123/EC.

Regulation 18(4) states that any charges provided for by a competent authority which applicants may incur under an authorisation scheme must be reasonable and proportionate to the cost of the procedures and formalities under the scheme and must not exceed the cost of those procedures and formalities.

The wording of such a regulation, the claimants argued, leaves no room for punitive charges. Westminster was charging 10 times what they should legally have been doing.

The case was first taken to the High Court, where the claimant’s arguments were accepted. Appealing to the Court of Appeal, Westminster was again rebuffed. The resulting judgment included orders for the Council to:

  • recalculate fees as far back as 2004 after deficiencies were found in its procedures for determining them;
  • pay interest at 10% above the Bank of England base rate;
  • pay indemnity costs after it rejected an offer to settle on better terms at the start of proceedings.

Philip Kolvin QC, representative for the Claimants, said:

“The judgment has important consequences for the funding of regulation in the UK because the new laws apply to all forms of authorisation to provide service activities. These include all forms of licensing (except for gambling and taxis which are excluded), street trading, subscriptions payable by professions including the legal professions in order to be able to practise and even the fees for planning applications.

“Most importantly, the judgment will limit the scope of fees which licensing authorities will be able to charge under the Licensing Act 2003, following the right to determine fees introduced by the Police Reform and Social Responsibility Act 2011. The Home Office has delayed introducing Regulations implementing the legislation, it is thought in order to enable it to consider the Hemming judgment.”

Cllr Nickie Aiken, Westminster City Council’s cabinet member for Public Protection and Premises, commented in reply:

“This is not what we wanted, this is not what the Government wanted and it is not what the taxpayer will want. Soho’s reputation and central location means Westminster has more sex shops than anywhere in the country. It is a unique problem, totally unlike any other area in the UK. And clamping down on the unlicensed shops costs a lot of officer time and money.

“This ruling, using EU law, will open the floodgates for illegal sex shops and we will no longer have the resources to deal with them.”

Westminster City Council has not been granted leave to apply to the Supreme Court, although it is thought that they may apply directly nonetheless. Their chances seem slim though, which means that the result here could, as Mr Kolvin QC indicated, have wide reaching effects for not only the sex shop industry, but a diverse variety of licensed activities– particularly those which Councils around the country have seen fit to discourage through high fees.

To compound these issues, the Government’s amendment to the General Permitted Development Order is now in force, as of 30th May.

SRJ/LCB                                                                                                         04/06/2013

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