The Supreme Court handed down its ruling on 19 July in relation to whether local authorities and other regulated bodies could charge licence holders for administrative and enforcement fees in relation to any licences they administer. The case related to a number of sex shops in Westminster who had brought proceedings against the local authority in relation to the high fees they were charged annually for their licences to operate. It was argued by the council that they were entitled to charge high fees as although the administration of the licences may not be expensive, enforcement action taken against unlicensed operators was, and as it benefited the licence holders, the cost should be theirs.
It was argued by the operators that only a reasonable fee for administering the process could be charged by the authority and that under Provision of Services Regulations that were brought in following an EU directive, any fees charged for enforcement against unlicensed operators were illegal. When the Court of Appeal found in favour of the operators, Westminster Council were forced to make repayments of over £1 million to them. However, they appealed the ruling.
The Supreme Court disagreed and determined that the council was entitled to charge a fee for both the administration of the licensing regime, but also for enforcement against unlicensed operators if the enforcement element was only charged to applicants who had been successful with their licence applications - i.e. the fee was itemised and paid in two distinct parts. Both parts of the fee had to be reasonable and the council had to calculate the actual costs they incurred and levy the fee accordingly.
However, the Supreme Court asked for a ruling from the European Court of Justice whether it would be lawful for a council to ask for the total fee for administration and enforcement up front, when an applicant applied for a licence, on the basis that the enforcement part of the fee could then be refunded to unsuccessful applicants. The Court of Justice ruled that this would be illegal.
When remitted to them, the Supreme court determined that whilst the Westminster scheme, which had for years demanded the payment for administration and enforcement in full prior to the licence being granted, the illegality of doing so was of very little practical importance. The sex shop operators bringing the case all had licences, and therefore were all obliged to pay the enforcement part of the fee in any event on grant of their licences. The fact that they had been charged a little early in the process really had very little consequence. Only those applicants who had been refused a licence, or had not had it renewed, but had paid the enforcement part of the fee would be entitled to a refund.
Moving forward, however, applicants for licences for sex shops, street cafés, sexual entertainment venues, marriage licences or any form of licence where a local authority or similar body sets the fee and includes an element of enforcement action within it, can expect to have to pay both on application or renewal of their licence for the administering of the process and then make a second payment on grant of the licence prior to the licence being deemed valid to cover enforcement. Hopefully any delays in having to invoice applicants twice and process payment won't create an unnecessary frustration for operators of businesses waiting for their often very expensive licences!