Supreme Court rules on important “unjust enrichment” principles

19/07/17

Judgment was handed down this morning in R (on the application of Hemming (t/a Simply Pleasure Limited and others) (Respondents) v Westminster City Council (Appellant), a long-running case concerning licence fees for sex shops in Westminster.

The Supreme Court had referred the case to the European Court of Justice, which ruled in November 2016 that Westminster had acted unlawfully when it charged applicants the costs of running the licensing regime (including prosecuting non-licensed undertakings) upfront at the time of applying for the licence. The Court of Justice concluded that the Council’s fee structure was therefore contrary to Article 13(2) of the Services Directive (2006/123/EC).

The Supreme Court had already decided that it would have been lawful for Westminster to charge the costs of running the regime at a later point, namely at the time the licence was granted. The question for the Supreme Court now was whether, since there was a lawful alternative scheme, the licensees were entitled to restitution of the (substantial) fees paid under the unlawful scheme.

The Supreme Court concluded that it would be unjust for the licencees to hold on to sums that could lawfully have been charged (albeit they were not actually charged in a lawful manner). The judgment offers an important point of principle in the law of unjust enrichment.

The matter has now been remitted to the Administrative Court for the redetermination of the hypothetical lawful licence fee and an accounting between the various parties.

The judgment is here.