An end to exorbitant licence fees?

Posted: June 8, 2012

The days of licensed sex shops paying exorbitant annual licence fees to councils could be at an end following a landmark ruling in the High Court last month. London’s 13 licensed stores which fall under the jurisdiction of Westminster City Council, in Soho and Covent Garden, sought a judicial review against the annual licence fees – £29,102 per year per outlet, the highest in the UK, and this came before the court on 16th of May. The store owners claimed that Westminster City Council was using the licence fees for purposes other than administration – in effect profiting from the fees.

The fee had been set at £29,102 in 2005/6 but the council had failed to determine a fee for any subsequent years, contrary to the Local Government (Miscellaneous Provisions) Act 1982. The Council argued that the sum set was a rolling annual fee but Mr Justice Keith disagreed.

Westminster City Council claimed that the vast majority of the sums collected in licensing fees were used to prosecute unlicensed traders but the licensed stores’ legal team, led by Philip Kolvin QC, a leading licensing barrister, and Stephen Dillon, a partner at Gosschalks Solicitors, argued that while it was previously lawful to calculate and spend licence fees in this way, it became unlawful upon the commencement of the Provision of Services Regulations 2009 on 28th December 2009.

Mr Justice Keith agreed, saying that after that date licence fees should only have reflected administrative costs, the costs of vetting the applicants and the costs of investigating their compliance – and that the costs of enforcement should come from general funds rather than licensing fees. Accordingly the claimants were entitled to be credited with the enforcement costs for the licensing years 2010-2011, 2011-2012 and 2012-2013. Mr Justice Keith also ordered Westminster City Council to determine the fees for the years 2006-2007 through to 2012-2013 and to refund the difference between what was collected and what was charged.

Westminster City Council said it intends to appeal against the judgement.

Stephen Dillon commented after the case: “The claimants in this case didn’t believe it was right that legitimate businesses were being charged so much simply for the right to trade. Under the practices adopted by Westminster City Council had there been only one lawful sex shop operating in Soho it would presumably have been charged an annual licence fee of more than £400,000 at times.”

Speaking on behalf of the licensed store owners who brought the action, Tim Hemming of Simply Pleasure said: “I am delighted with this judgment and I am sure I speak for all the licensees of Westminster when I say it confirms what we all have believed for a number of years – Westminster City Council have been overcharging us for a licence that allowed us to trade legally. It has been a long journey in proving our case and its success has been down to the determination of all licensed shop owners in Westminster and the support of both Philip Kolvin QC and Stephen Dillon, who believed in our cause and supported us along the way. I hope that other councils who are still charging outrageous fees will now review them in light of the judgment.”

Assuming the judgement is upheld following an appeal, this case will have set a precedent in which any licensed store can challenge the fee set by a local council. Indeed, ETO is aware of at least one licensed chain of stores that has written to councils in areas where it feels licence fees are unreasonable, informing them of the facts of this case and saying, in effect, ‘you’re next’.

Tim Hemming concluded by telling ETO: “This is a big case which has ramifications for every council in the UK and how they determine their licence fees, and not just for sex shops. The outcome is very positive for everyone in the UK adult industry.”

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