Costs recovery - 'Hemmings' may find relief in Europe

We have reported on the legal case of R (on the application of Hemming (t/a Simply Pleasure Ltd) and others) v Westminster City Council for several years.  A decision in the Supreme Court published on 29^th April 2015 was decided against Mr. Hemmings and in favour of Westminster City Council. 

The case concerned the fees charged by Westminster City Council to operators of sex shop establishments.  Although a complex case, the main thrust of the Hemming’s case against Westminster was that following the introduction of the Provision of Services Regulations 2009, Westminster were no longer entitled to include within their set fees the cost of enforcing the licensing system (£26,345).

The Supreme Court ruled against Mr. Hemmings but did refer a further question to the ECJ concerning the structure of the Council’s fees.

The Court question concerned how the fee was demanded and whether this was in contravention to the relevant Regulations.  The Court considered 2 scenarios:

Option A:

1. on making the application, the costs of the authorisation procedures and formalities, and
2. on the application being successful, a further fee to cover the costs of the running and enforcement of the licensing scheme.

Option B (as operated by Westminster historically)

1. on making the application, the costs of the authorisation procedures and formalities
2. at the same time, but on the basis that it is refundable if the application is unsuccessful, a further fee to cover the costs of the running and enforcement of the licensing scheme

The Court believed that Option A was clearly within the terms of the Regulations and required Westminster to operate in this manner until the legality of ‘Option B’ was ruled upon by the Court of Justice in Luxemborg, to whom they referred the issue.

On 28^th July Advocate General Wathelet delivered his opinion prior to the ECJ’s final determination.  Although the final decision is for the ECJ the Advocate General’s comments are often an indicator of the final decision.  In the judgement both Option A and B potentially fall foul of the regulations. 

The decision appears to strongly swing back in Mr. Hemmings’ favour declaring that “Article 13(2) of the Services Directive must be interpreted as precluding the competent authority of a Member State from taking into account, when calculating the fee due for the grant or renewal of an authorisation, the cost of managing and enforcing the authorisation scheme, even if the part corresponding to that cost is refundable where the application for the grant or renewal of the authorisation in question is refused.”

The requirement to pay a sum for enforcement costs in order to be granted or be allowed to utilise an authorisation would appear to be illegal, irrespective of when it is levied. 

If the ECJ confirm the Advocate General’s opinion, many local authority schemes may face multi-million claims from licensees who have previously paid these potentially unlawful fees.

We shall keep you updated. 

Original source: Local Government Lawyer