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||Neutral Citation Number:  EWHC 1996 (Admin)
||Case No: CO/2448/2016
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE HICKINBOTTOM
MR JUSTICE PICKEN
MR JUSTICE FRASER
|| THE QUEEN ON THE APPLICATION OF PETER GASKIN
- and -
||(1) RICHMOND UPON THAMES
LONDON BOROUGH COUNCIL
(2) LAVENDER HILL & WIMBLEDON MAGISTRATES' COURT
Jonathan Manning and Alexander Campbell (instructed by way of Direct Access)
for the Claimant
Simon Butler and Jake Richards (instructed by South London Legal Partnership)
for the First Defendant
The Second Defendant neither appearing nor being represented
Hearing date: 3 July 2018
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Hickinbottom:
- This claim gives rise to a narrow but important issue: does the owner of a house in multiple occupation ("HMO") provide a "service" for the purposes of Directive 2006/123/EC of the European Parliament and Council of 12 December 2006 on services in the internal market ("the Services Directive")?
- The issue arises in the context of criminal proceedings brought in the Second Defendant magistrates' court by the First Defendant local authority ("the Council") against the Claimant Peter Gaskin ("Mr Gaskin") for, amongst other things, having control of or managing an unlicensed HMO. Part 2 of the Housing Act 2004 ("the 2004 Act") requires HMOs to be licensed by the relevant local authority. One reason why Mr Gaskin's HMO is unlicensed is because he refuses to pay the Council's application fee for renewal of his HMO licence which, he contends, is a charge levied by the Council in contravention of the Services Directive. If, however, he is not providing a "service", as the Council contends, then the relevant provision of the Services Directive does not apply.
- The hearing before us was concerned solely with the lawfulness of the fee demanded for the renewed licence by the Council from Mr Gaskin under EU law. Other grounds of judicial review under domestic law were considered by a different constitution of this court (Bean LJ and Carr J), following a hearing on 29 November 2017. Their relevant findings are at paragraph 31 below, and their full judgment is at  EWHC 3234 (Admin). That court adjourned the point the subject of this judgment to enable notice to be given to the Crown, so that a Minister of State or Law Officer could seek to be joined as a party, if so advised. Notice was given, but the Crown did not seek to become involved; and therefore the hearing before us was argued solely on behalf of Mr Gaskin and the Council. Mr Gaskin seeks various declarations as to the correct position in law, for the guidance of the magistrates' court. In the meantime, the criminal proceedings against him are stayed.
- Before us, Jonathan Manning and Alexander Campbell, both of Counsel, appeared for Mr Gaskin; and Simon Butler and Jake Richards, also both of Counsel, appeared for the Council. In the usual way, the Second Defendant court neither appeared nor was represented.
- This is the judgment of the court to which each member of the constitution has contributed.
Part 2 of the Housing Act 2004
- Part 2 (i.e. sections 55-78) of the 2004 Act concerns "Licensing of Houses in Multiple Occupation", which covers not only the licensing procedure including variation and revocation, but also (at sections 72-75) enforcement.
- By sections 55(2) and (3), that part of the Act applies to any HMO in a local authority's district which falls within any description as prescribed by the appropriate national authority, i.e. for England, the Secretary of State. Article 3 of the Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2006 (SI 2006 No 371) defines HMO for these purposes as follows:
"(1) An HMO is of a prescribed description for the purpose of section 55(2)(a) of the Act where it satisfies the conditions described in paragraph (2).
(2) The conditions referred to in paragraph (1) are that –
(a) the HMO or any part of it comprises three storeys or more;
(b) it is occupied by five or more persons; and
(c) it is occupied by persons living in two or more single households."
Although not relevant to this claim, for the sake of completeness, we should say that a new description has been prescribed with effect from 1 October 2018 which omits the reference to three or more storeys (see Article 4 of the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 (SI 2018 No 221)).
- Section 61(1) of the 2004 Act provides that, subject to exceptions not relevant to this claim:
"Every HMO to which this Part applies must be licensed under this Part…"
- Sections 63 and 64 deal with procedure for licences, as follows:
"63 Applications for Licences
(1) An application for a licence must be made to the local housing authority.
(2) The application must be made in accordance with such requirements as the authority may specify.
(3) The authority may, in particular, require the application to be accompanied by a fee fixed by the authority.
(4) The power of the authority to specify requirements under this section is subject to any regulations made under subsection (5).
(5) The appropriate national authority may by regulations make provision about the making of applications under this section.
(6) Such regulations may, in particular –
(d) specify the maximum fees which are to be charged (whether by specifying amounts or methods for calculating amounts);
(e) specify cases in which no fees are to be charged or fees are to be refunded.
(7) When fixing fees under this section, the local housing authority may (subject to any regulations made under subsection (5)) take into account –
(a) all costs incurred by the authority in carrying out their functions under this Part, and
(b) all costs incurred by them in carrying out their functions under Chapter 1 of Part 4 in relation to HMOs (so far as they are not recoverable under or by virtue of any provision of that Chapter).
64 Grant or refusal of licence
(1) Where an application in respect of an HMO is made to the local housing authority under section 63, the authority must either –
(a) grant a licence in accordance with subsection (2), or
(b) refuse to grant a licence.
(2) If the authority are satisfied as to the matters mentioned in subsection (3), they may grant a licence…
The matters are –
(a) that the house is reasonably suitable for occupation by not more than the maximum number of households or persons mentioned in subsection (4) or that it can be made so suitable by the imposition of conditions under section 67;
(b) that the proposed licence holder –
(i) is a fit and proper person to be the licence holder, and
(ii) is, out of all the persons reasonably available to be the licence holder in respect of the house, the most appropriate person to be the licence holder;
(c) that the proposed manager of the house is either –
(i) the person having control of the house, or
(ii) a person who is an agent or employee of the person having control of the house;
(d) that the proposed manager of the house is a fit and proper person to be the manager of the house; and
(e) that the proposed management arrangements for the house are otherwise satisfactory."
- Section 63(3) provides that an authority may require the application to be accompanied by a fee fixed by the authority; and section 63(7) stipulates that, when fixing the fee, the authority may (subject to regulations made under section 63(5)) take into account the costs incurred by the local authority in carrying out its functions under Part 2 (including enforcement) and Chapter 1 of Part 4 of the Act (which concerns management orders).
- For these purposes, the relevant regulations are the Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006 (SI 2006 No 373) as amended, with effect from 10 September 2012, by the Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (Amendment) (England) Regulations 2012 (SI 2012 No 2111)). Regulation 7 of, and paragraph 2 of Schedule 2 to, the 2006 Regulations set out the mandated form of application and the information that is required to be provided by the applicant. That information is focused upon the dwelling itself. It does not include any information about the occupiers of the HMO.
- Where an application for an HMO is made, the relevant local authority must either grant or refuse it (section 64(1)). It may only grant a licence if it is satisfied as to the matters set out in section 64(3), including that both the proposed licence holder and the proposed manager of the house are fit and proper persons, and that the proposed manager is either the person having control of the house, or is the agent or employee of the person having control of the house.
- Section 72 provides for several offences in relation to licensing of HMOs, including, as section 72(1):
"A person commits an offence if he is a person having control of or managing an HMO which is required to be licensed under this Part (see section 61(1)) but is not licensed."
- Finally, to complete the domestic statutory position, where a local authority is performing a statutory function and considers that it ought to have information connected with any land, section 16(1) of the Local Government (Miscellaneous Provisions) Act 1976 ("the 1976 Act") gives the authority the power to obtain particulars of all persons interested in land by serving a notice on any person who occupies, manages or has an interest in the land. By section 16(2), where a person fails to comply with such a notice, he is guilty of an offence.
The Factual Background
- Mr Gaskin owns four properties, each an HMO, from which he lets out a total of 37 bedrooms. In his second witness statement dated 12 June 2018, he explained that he does not use letting agents; and, in paragraph 16 of that statement, he set out the day-to-day work that his letting business involves. He is an accredited landlord with both the National Landlords Association and the London Landlord Accreditation Scheme.
- One of the properties is at 157 Mortlake Road, Kew Gardens ("the Property"), the freehold of which he purchased in 1987. At first, he lived in part of the Property, and let out each of the four bedrooms. Over time, he himself moved out, and the house was extended.
- After Part 2 of the 2004 Act came into force, Mr Gaskin applied for and, on 9 December 2009, was granted a five-year HMO licence by the relevant housing authority, namely the Council. On 14 June 2013, following the extension of the house, he applied for a variation to the licence to increase the permitted number of occupiers from seven to twelve, and this variation was granted on 5 December 2013. Mr Gaskin did not provide, and was not asked for, any details of the occupants.
- Prior to the expiry date of the licence on 2 December 2014, Mr Gaskin applied for renewal of the licence on the standard form provided by the Council for this purpose. Under part 3.1, under the heading "Tenant Information", the form requested:
"Please write the rooms making up each separate letting and list the occupiers in each of those rooms. The names of all the members of the household including children should be given. Indicate vacant rooms."
- Mr Gaskin declined to give this information, stating that it was not relevant to his application. He completed the remainder of the application form, including a declaration that to the best of his knowledge none of the information previously submitted to the Council had materially changed since the grant of the earlier licence.
- Part 16 of the application form included a schedule of fees, which had been fixed by the Council's Cabinet on the basis of a report from the Cabinet Member for Adult Services, Health and Housing dated 29 January 2014. Neither the report nor any record of the decision-making process can now be found; but it is uncontroversial that no distinction was made between the fee on initial application and the fee on renewal, and that the fee payable by an applicant included elements attributable to the costs of both the application process and management and enforcement after the grant of a licence. The report from the relevant Cabinet Member in respect of a review of fees in June 2017 is available, having been obtained by Mr Gaskin under a Freedom of Information Act request. This proposed a fee structure based on a total of 25 hours of staff time for a standard application, split 10 hours on the application process and 15 hours on management and enforcement. That may give some idea of the allocation at the relevant time, although for the purposes of this claim the precise breakdown is immaterial.
- At the time of Mr Gaskin's renewal application in 2014, the form showed a basic fee payable on submission of any application for an HMO licence (including a renewal application) of £257 per lettable unit. The total fee that would have been due on the basis of the schedule of fees on the Property was £1,799; but, given that this was a renewal and that other boroughs charged a much lower figure, Mr Gaskin considered that level of fees for a renewal to be too high and unlawfully so. Therefore, in addition to objecting to providing information in respect of the occupants, Mr Gaskin objected to paying the level of fees sought.
- He therefore submitted his application for renewal, part-completed as we have described, together with £850 which was the amount that he assessed his renewal ought to cost. He transferred that sum to the Council's account on 1 December 2014.
- Perhaps unsurprisingly, the Council considered that Mr Gaskin's application for a renewal was incomplete, both in respect of his failure to provide the information in part 3.1 and because it was not accompanied by the correct fee. It notified Mr Gaskin that, until these deficiencies were remedied, he would not be issued with a licence. In the meantime, it returned his self-calculated sum of £850 to him. However, Mr Gaskin held firm to his view, and refused to provide the information and to pay the fee the Council demanded.
- On 11 December 2014, the Council wrote to Mr Gaskin indicating that the Council had still not received either the outstanding information or the correct fee, and that if these deficiencies were not rectified in 14 days, in line with Council policy, the fee would increase to £308 per unit. Mr Gaskin was reminded that it was an offence to operate an HMO without a licence. A reminder letter was sent on 13 January 2015.
- On 3 March 2015, the Council served a notice under section 16 of the 1976 Act ("the section 16 notice") requiring Mr Gaskin to provide information of "any other person known to [him] who has an interest in [the Property]…" within 14 days, that information being required by the Council as the enforcement authority under Part 2 of the 2004 Act. Mr Gaskin did not comply with that notice.
- On 19 June 2015 the Council commenced a prosecution against him for (i) having control of or managing an HMO without a licence contrary to section 72 of the 2004 Act, and (ii) failing to comply with the section 16 notice.
- On 7 July 2015, Mr Gaskin pleaded not guilty to both offences, and the trial was fixed for 17 May 2016.
The Judicial Review Proceedings
- On 12 May 2016, Mr Gaskin issued this claim for judicial review, challenging the refusal of the Council to issue him with a renewed HMO licence; and, within that decision, the decisions to require him to provide the names of all occupiers of the Property and to apply the fee scheme to his renewal application.
- As part of that claim, he applied for interim relief in the form of a stay of the criminal proceedings, which was granted by Wyn Williams J on 12 May 2016. Those criminal proceedings remain stayed pending the resolution of this claim.
- On 13 June 2016, permission to apply for judicial review was refused on the papers, both on the ground of delay and on the merits, and the claim was certified to be totally without merit. However, on 7 December 2016, on an application for permission to appeal, Gross LJ granted permission to apply for judicial review and any necessary extension of time.
- The grounds of challenge evolved over time, but it is unnecessary for us to trace those developments. Suffice it to say that, on 11 December 2017, a Divisional Court comprising of Bean LJ and Carr J held the following.
i) They allowed the judicial review on the ground that the Council was not entitled to require Mr Gaskin to provide the information relating to the occupiers of the HMO and consequently the Council's refusal to process his HMO renewal application on the basis of his refusal to provide that information was unlawful.
ii) They adjourned the challenge to the Council's refusal to process the application because Mr Gaskin refused to pay the fee on the ground that the Council's action was contrary to the Services Directive in order to allow the Crown to be put on notice as explained at paragraph 3 above.
iii) They dismissed the claim on all other grounds, including (a) the ground that the Council's conduct in seeking the fee that it did was contrary to domestic law and (b) the ground that the section 16 notice was unlawful.
- Thus, there is before us a single issue: in refusing to process the application without the fee demanded from Mr Gaskin, did the Council act contrary to the Services Directive?
The Services Directive and Services Regulations
- As Article 1 describes, the Services Directive:
"… establishes general provisions facilitating the exercise of the freedom of establishment for service providers and the free movement of services, while maintaining a high quality of services."
- Article 2(1) scopes the Directive as follows:
"This Directive shall apply to services supplied by providers established in a Member State."
Article 2(2) sets out a lengthy list of activities in respect of which the Directive shall not apply, none of which is relevant to this claim.
- For the purposes of the Directive, Article 4 defines "services" and "provider" as follows:
"1) 'service' means any self-employed economic activity, normally provided for remuneration, as referred to in Article 50 of the Treaty;
2) 'provider' means any natural person who is a national of a Member State, or any legal person as referred to in Article 48 of the Treaty and established in a Member State, who offers or provides a service;…".
- The reference to "Article 50 of the Treaty" was a reference to the Treaty establishing the European Community, now found as Article 57 of the Treaty on the Functioning of the European Union ("the TFEU"), which is in these terms:
"Services shall be considered to be 'services' within the meaning of the Treaties where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.
'Services' shall in particular include:
(a) activities of an industrial character;
(b) activities of a commercial character;
(c) activities of craftsmen;
(d) activities of the professions.
- Article 56 of the TFEU is also relevant:
"Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended…".
- In respect of the scope of the Services Directive, Mr Manning highlighted a number of recitals which he suggested were relevant.
"(17) This Directive covers only services which are performed for an economic consideration."
"(27) This Directive should not cover those social services in the areas of housing, childcare and support to families and persons in need which are provided by the State at national, regional or local level by providers mandated by the State or by charities recognised as such by the State with the objective of ensuring support for those who are permanently or temporarily in a particular state of need because of their insufficient family income or total or partial lack of independence and for those who risk being marginalised. These services are essential in order to guarantee the fundamental right to human dignity and integrity and are a manifestation of the principles of social cohesion and solidarity and should not be affected by this Directive."
"(33) The services covered by this Directive concern a wide variety of ever-changing activities, including business services such as management consultancy, certification and testing; facilities management, including office maintenance; advertising; recruitment services; and the services of commercial agents. The services covered are also services provided both to businesses and to consumers, such as legal or fiscal advice; real estate services such as estate agencies; construction, including the services of architects; distributive trades; the organisation of trade fairs; car rental; and travel agencies.…
(34) According to the case-law of the Court of Justice, the assessment of whether certain activities, in particular activities which are publicly funded or provided by public entities, constitute a 'service' has to be carried out on a case by case basis in the light of all their characteristics, in particular the way they are provided, organised and financed in the Member State concerned.…"
"(43) One of the fundamental difficulties faced, in particular by SMEs, in accessing service activities and exercising them is the complexity, length and legal uncertainty of administrative procedures. For this reason, following the example of certain modernising and good administrative practice initiatives undertaken at Community and national level, it is necessary to establish principles of administrative simplification, inter alia through the limitation of the obligation of prior authorisation to cases in which it is essential and the introduction of the principle of tacit authorisation by the competent authorities after a certain period of time elapsed. Such modernising action, while maintaining the requirements on transparency and the updating of information relating to operators, is intended to eliminate the delays, costs and dissuasive effects which arise, for example, from unnecessary or excessively complex and burdensome procedures, the duplication of procedures, the 'red tape' involved in submitting documents, the arbitrary use of powers by the competent authorities, indeterminate or excessively long periods before a response is given, the limited duration of validity of authorisations granted and disproportionate fees and penalties…."
"(49) The fee which may be charged by points of single contact should be proportionate to the cost of the procedures and formalities with which they deal….
"(87) Neither should this Directive affect terms and conditions of employment in cases where the worker employed for the provision of a cross-border service is recruited in the Member State where the service is provided. Furthermore, this Directive should not affect the right for the Member State where the service is provided to determine the existence of an employment relationship and the distinction between self-employed persons and employed persons, including 'false self-employed persons'. In that respect the essential characteristic of an employment relationship within the meaning of Article 39 of the Treaty should be the fact that for a certain period of time a person provides services for and under the direction of another person in return for which he receives remuneration. Any activity which a person performs outside a relationship of subordination must be classified as an activity pursued in a self-employed capacity for the purposes of Articles 43 and 49 of the Treaty."
- Section 1 of Chapter III of the Services Directive deals with "authorisations". Article 9 provides that:
"Member States shall not make access to a service activity or the exercise thereof subject to an authorisation scheme unless the following conditions are satisfied:
(a) the authorisation scheme does not discriminate against the provider in question;
(b) the need for the authorisation scheme is justified by an overriding reason related to the public interest;
(c) the objective pursued cannot be attained by means of a less restrictive measure, in particular because an a posteriori inspection would take place too late to be genuinely effective."
Article 2(6) defines "authorisation scheme" in the following terms:
"… any procedure under which a provider or recipient is in effect required to take steps in order to obtain from a competent authority a formal decision, or an implied decision, concerning access to a service activity or the exercise thereof;…".
- Article 13(2) provides:
"Authorisation procedures and formalities shall not be dissuasive and shall not unduly complicate or delay the provision of the service. They shall be easily accessible and any charges which the applicants may incur from their application shall be reasonable and proportionate to the cost of the authorisation procedures in question and shall not exceed the cost of the procedures."
- The Services Directive is implemented in the United Kingdom by the provision of Services Regulations 2009 (SI 2009 No 2999) ("the Services Regulations"). For the purposes of this claim, it is common ground that they fully and properly implement the Services Directive. Indeed, in this judgment, we shall generally refer only to the relevant provision on the Services Directive, unless the context requires otherwise.
- Regulation 2(1) of the Services Regulations defines "service" for the purposes of the Regulations as:
"… any self-employed economic activity normally provided for remuneration (as referred to in Article 50 of the Treaty)."
Regulation 2(2) then goes on to describe activities to which the Regulations do not apply in terms which essentially replicate Article 2(2) of the Services Directive.
- Regulation 3(1) defines "competent authority" as:
"… a body or authority having supervisory or regulatory functions in the United Kingdom in relation to service activities…".
For England, the "competent authority" for the regulation of HMOs is the relevant local housing authority.
- Regulation 4 ("Interpretation: general"), sets out certain definitions, again in line with the Services Directive:
"In these Regulations –
'authorisation scheme' means any arrangement which in effect requires the provider or recipient of a service to obtain the authorisation of, or to notify, a competent authority in order to have access to, or to exercise, a service activity;
'provider', in relation to a service, means a person who provides, or offers to provide, the service (but see regulation 5(4));
'recipient', in relation to a service, means a person who, for professional or non-professional purposes, uses, or wishes to use, the service (but see regulation 5(3));
'service' has the meaning given by regulation 2;…".
- Under the heading, "Conditions for the granting of authorisation", Regulation 15 provides:
"(1) An authorisation scheme provided for by a competent authority must be based on criteria which preclude the competent authority from exercising its power of assessment in an arbitrary manner.
(2) The criteria must be –
(b) justified by an overriding reason relating to the public interest,
(c) proportionate to that public interest objective,
(d) clear and unambiguous,
(f) made public in advance, and
(g) transparent and accessible."
- Regulation 18 concerns "Authorisation schemes: general requirements":
"(1) Authorisation procedures and formalities provided for by a competent authority under an authorisation scheme must –
(a) be clear,
(b) be made public in advance, and
(c) secure that applications for authorisation are dealt with objectively and impartially.
(2) Authorisation procedures and formalities provided for by a competent authority under an authorisation scheme must not –
(a) be dissuasive, or
(b) unduly complicate or delay the provision of the service.
(3) Authorisation procedures and formalities provided for by a competent authority under an authorisation scheme must be easily accessible.
(4) 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."
- These provisions were considered by the Court of Justice of the European Union in R (Hemming trading as Simply Pleasure Limited) v Westminster City Council (Case C-316/15)  3 WLR 317. The applicant in that case was the owner and operator of sex shops, which required a licence under Schedule 3 of the Local Government (Miscellaneous Provisions) Act 1982. The defendant was the licensing authority for its area. It operated a scheme whereby an applicant for the grant or renewal of a licence had to pay it an application fee made up of two parts, one relating to the administration of the application which was non-returnable, and the other relating to the management and enforcement of the licensing scheme. This second element of the fee was refundable if the licence application was refused. The Court of Justice held (at ) that:
… [A]rticle 13(2) of the Services Directive must be interpreted as precluding the requirement for the payment of a fee, at the time of submitting an application for the grant or renewal of authorisation, part of which corresponds to the costs relating to the management and enforcement of the authorisation scheme concerned, even if that part is refundable if that application is refused."
- The Court essentially accepted the analysis of Advocate General M Wathelet, at -:
"70. In my view, the expression 'cost of the procedures' appearing at the end of the second sentence of article 13(2) of the Services Directive refers to the expression 'cost of the authorisation procedures' used earlier in that sentence which, in turn, refers to the 'authorisation procedures and formalities' mentioned in the first sentence of that provision.
71. I note that although the expression 'authorisation procedures and formalities' is not defined in the Services Directive, it must be distinguished from 'authorisation scheme' as defined in article 4(6) of that Directive.
72. During the hearing, Westminster City Council argued that the second part of the fee in question covered the cost of investigating and prosecuting both unlicensed sex shop operators and licensed sex shop operators who infringed the terms of their authorisation.
73. Even if the cost of investigating and prosecuting licence holders could form part of the cost of the authorisation scheme, the cost of investigating and prosecuting third parties operating sex shops without a licence could not, because those activities do not form part of the authorisation scheme.
74. Furthermore, it is impossible to see how the management and the enforcement of an authorisation scheme, even in so far as they are directed at offences committed by authorisation holders, could form part of 'authorisation procedures and formalities', because these are not activities which lead to the authorisation but rather activities which follow it. As regards action to combat offences committed by unlicensed sex shop operators, this has an even more tenuous link to 'authorisation procedures and formalities' and is directed at the conduct of third parties as opposed to authorisation holders.
75. It is therefore apparent from the wording of the second sentence of article 13(2) of the Services Directive that the costs of processing an application for authorisation cannot include costs other than those incurred by the competent authority in connection with the administration of the application for authorisation. They cannot therefore exceed what is needed to cover the actual costs of the procedure leading to that authorisation."
The Parties' Submissions
- Mr Manning submitted that, by letting and managing private residential accommodation for profit, Mr Gaskin is providing a "service" for the purposes of the Services Directive. He emphasised that the Directive defines "service", in what he characterised as the broadest terms, as "any self-employed economic activity, normally provided for remuneration" (see Article 4 which, but for the removal of the comma, is repeated in Regulation 2 of the Services Regulations).
- In these circumstances, Mr Manning submitted that Mr Gaskin was clearly providing a "service" by managing rented accommodation as a self-employed person, in particular by purchasing, converting and repairing properties for letting purposes, by advertising and letting those properties (including through the taking of references and complying with legal formalities), and by the management of those properties in accordance with his contractual and statutory obligations, but also in accordance with the regulatory requirements laid down in part by the licensing requirements of Part 2 of the 2004 Act. Mr Gaskin's activity therefore falls within the scope of the Services Directive.
- Mr Manning submitted that, that being the case, the fee sought to be charged by the Council in his case was unlawful on the basis that it contravened Article 13(2) of the Services Directive and Regulation 18(4) of the Services Regulations as it constituted a charge under an authorisation scheme which (in the language of Regulation 18(4)) is not "reasonable and proportionate to the cost of the procedures and formalities under the scheme" and which exceeds "the cost of those procedures and formalities". In this regard, Mr Manning relied upon the conclusion in Hemming, based upon those provisions, that a fee which covers more than the simple costs of administering the application process itself cannot lawfully be charged at the application stage – even if, as in that case although not in this, part of the fee would subsequently be returned to unsuccessful applicants.
- Mr Manning's submissions therefore turned upon whether, by letting and managing private residential accommodation for profit, Mr Gaskin is properly to be regarded as providing a "service" for the purposes of the Services Directive. There is no issue that, if that be the case, the Council is a "competent authority" running an "authorisation scheme" for the purposes of the Services Directive.
- On behalf of the Council, Mr Butler submitted that letting rooms in a house in an HMO is not providing, as he put it, "a business service for remuneration" so as to amount to a "service" activity for the purposes of the Services Directive. It did not have the appropriate characteristics. A "service" activity would generally entail a service being provided to customers or clients (such as legal services, medical services or car repair services); would have in place internal processes to provide and support the service; would amount to a commercial enterprise that provides services performed in an expert manner by an individual or a team for the benefit of its customers or clients; and would be provided for remuneration. He suggested also that a typical "service" activity provides intangible products, for example legal, accounting, banking, consulting, cleaning, education, estate agent, insurance or transport services. An agreement between the owner of a residential property to let rooms in an HMO, Mr Butler submitted, is not comparable; and does not amount to a "service" activity.
- He also placed emphasis upon how the licence under Part 2 of the 2004 Act is in respect of the property being occupied as an HMO. It is the property itself which is licensed rather than the person who makes the application for the licence. He drew attention to the fact that section 64(3)(a) of the 2004 Act requires that the licensing authority be satisfied that "the house is reasonably suitable for occupation by not more than the maximum number of households or persons mentioned in subsection (4) or that it can be made so suitable by the imposition of conditions under section 67"; and, he submitted, this underlines the point that the Council has no right to regulate the terms under which occupants of the HMO occupy, in particular in relation to the rent which they must pay.
- Therefore, Mr Butler submitted, Mr Gaskin's activities fall outside the scope of the Services Directive.
- If he was wrong in that, despite reliance in his skeleton argument on certain observations made by Lord Mance JSC in the post-CJEU decision of the Supreme Court in R (Hemming trading as Simply Pleasure Limited) v Westminster City Council (No 2)  3 WLR 342 (Hemming (No 2)), during the course of his submissions Mr Butler appeared ultimately to accept that the Council had no right to demand from Mr Gaskin the fee that was sought from him at the time of the application, as this included a significant contribution to the costs of management and enforcement in fact on a non-refundable basis.
The Issue of Construction: Is Mr Gaskin providing a service?
- In respect of the primary issue before us, we prefer Mr Manning's submissions. In our judgment, in letting and managing the Property for profit, Mr Gaskin does provide a "service" within the scope of the Services Directive. We consider that that conclusion is clear as a matter of construction of the Services Directive itself.
- Although we acknowledge that "service", as used in the Services Directive, is a word whose meaning is ultimately a matter of construction, we nonetheless consider that a good starting point is the common use of that word together with the term "self-employed economic activity … provided for remuneration".
- We consider that Mr Gaskin would, in general terms, be regarded as providing a service by managing rented accommodation as a self-employed person and in return for the payment of rent. Having purchased, converted and extended the Property for letting purposes, Mr Gaskin manages the Property (and his other properties) himself, rather than using letting agents (see paragraph 15 above). The functions which he carries out include a host of different aspects, ranging from negotiating energy terms and conditions (and rates) and negotiating insurance terms and conditions to carrying out (or arranging to be carried out) maintenance work such as plumbing. We see no reason why these do not amount to activities which, together, comprise a "self-employed economic activity … provided for remuneration". We therefore do not accept that, in the present case, Mr Gaskin does not provide the occupants of the HMO with the type of service (using this word in its usual sense) which Mr Butler submitted is generally involved in the provision of a service to a customer or client. In that respect, although Mr Butler sought to contrast the position in a case such as this with Hemming, where the service sought to be provided was that of a sex shop, we do not consider that, on analysis, there is any material difference. In both cases it can be said that a service is being provided which constitutes "self-employed economic activity … provided for remuneration".
- Turning to the Services Directive itself, as a term, "service" is clearly used in a very broad sense in the Directive and the Services Regulations. It is defined in Article 4 of the Services Directive (and in Regulation 2 of the Services Regulations) as meaning "any self-employed economic activity" which is "normally provided for remuneration" (emphasis added). The use of the word "any" can only have been intended to ensure that the "self-employed economic activity" which qualify as "services" includes the broadest range of activity. That is emphasised in Recital 33 (quoted at  above), which refers to the fact that "services covered by this Directive concern a wide variety of ever-changing activities". The fact that that recital goes on to describe such "ever-changing activities" as "including business services such as management consultancy, certification and testing; facilities management, including office maintenance; advertising; recruitment services; and the services of commercial agents" and "services provided both to businesses and to consumers, such as legal or fiscal advice; real estate services such as estate agencies; construction, including the services of architects; distributive trades; the organisation of trade fairs; car rental; and travel agencies" illustrates, again, that the ambit of the Services Directive is wide. We consider that, subject to the requirement that the activity be "self-employed economic activity, normally provided for remuneration", it is unlimited.
- The broadness of the scope of the term is also apparent from the definition of "service" used in the Services Directive expressly referring to the relevant activity being "as referred to in Article 50 of the Treaty", now Article 57 of the TFEU, which is itself couched in wide terms. Specifically, "services" are described in Article 57 as being simply "Services … where they are normally provided for remuneration", which is very general language. The only qualification, on the face of the provision, is that the services "are not governed by the provisions relating to freedom of movement for goods, capital and persons". Article 57 goes on to state that "'Services' shall in particular include" the activities listed at (a) to (d). The use of this inclusionary language is again a firm indication that the activities covered by Article 57 are intended to be wide. So, too, is the list itself since references to activities "of an industrial character", "activities of a commercial character", "activities of craftsmen" and "activities of the professions" are apt, in our view, to cover a very wide variety of activities. It is, furthermore, instructive that the words used in describing the four categories are themselves broad, with the first two descriptions referring to "character", and so quite obviously being intended to include rather than to exclude.
- As Mr Manning submitted, approaching the references to "service" in Article 4 on the basis that the term has a wide scope is also consistent with the clear distinction which is drawn in Recital 87 to the Services Directive (quoted at paragraph 38 above) between activities which are performed by an employed person on the one hand, and activities which are carried out by self-employed persons on the other. This is most apparent in the last sentence of this recital where it is spelt out that:
"Any [the same, all-embracing, word which is used in Article 4 of the Services Directive and Regulation 2 of the Services Regulations] activity which a person performs outside a relationship of subordination must be classified as an activity pursued in a self-employed capacity".
That language is inconsistent with an intention to restrict the scope of the self-employed activities to which the Services Directive beyond the requirement that the activities are "normally provided for remuneration".
- Mr Butler conceded that the management of property by a letting agent would constitute a "service" for the purposes of the Services Directive. We consider that concession was properly made. However, if that is right, it is difficult to see why, in carrying out management activities which might otherwise be performed by a letting agent, Mr Gaskin should not also be regarded as providing a "service". We do not see how, as a matter of logic and analysis, the question of whether the relevant activities are a "service" should depend upon whether it is the owner/operator of an HMO who provides them, or a letting agent. Clearly, the draftsman of the Services Directive intended no such distinction to be made.
- We do not consider it to be of relevance that the "recipients" in an HMO are living in the rooms which they rent and not themselves carrying on a business there, in contrast to the prostitutes in J Harmsen v Burgemeester van Amsterdam (Case C-341/14) (1 October 2015) ("Harmsen") (see paragraphs 79-85 below). We do not consider that it can make a difference were one of the people occupying a room in the Property to use that room not only to live but also to carry on business activities. This is because the issue is not the nature of activity of the occupants, but whether what Mr Gaskin does amounts to a "service" for the purposes of Article 4 (and Regulation 2). The focus is upon the "provider", not the "recipient".
- We are furthermore unpersuaded that the fact that Mr Gaskin "is not registered as a business" – a point relied upon by Mr Butler in his skeleton argument – is of relevance either. Whether the services are provided by Mr Gaskin on his own account, rather than through an incorporated company, does not affect the correct characterisation of the services provided.
- Nor does it matter that Mr Gaskin pays council tax in respect of the Property, rather than business-related rates, since we accept Mr Manning's submission (which was not disputed by Mr Butler) that the issue before us, concerning as it does the application of EU law, cannot depend on the domestic property taxation rules of individual Member States.
- We are not persuaded by Mr Butler's submission that the licence which is obtainable under Part 2 of the 2004 Act is in respect of the property being occupied as an HMO, i.e. it is the property itself which is licensed rather than the person who makes the application for the licence. Although, as Mr Butler emphasised, section 64(3)(a) requires that the authority be satisfied that "the house is reasonably suitable for occupation by not more than the maximum number of households or persons mentioned in subsection (4) or that it can be made so suitable by the imposition of conditions under section 67", his submission overlooks the fact that, as other provisions in the 2004 Act make abundantly clear, the licensing regime is concerned not only with the suitability of the HMO but also with its management. By way of example, as we have explained (see paragraph 10 above above), section 64(3) itself provides that the "matters" about which the authority needs to be satisfied before a licence will be granted include that "the proposed licence holder… is a fit and proper person to be the licence holder, and is, out of all the persons reasonably available to be the licence holder in respect of the house, the most appropriate person to be the licence holder" (see section 64(3)(b)); that "the proposed manager of the house is either … the person having control of the house or a person who is an agent or employee of the person having control of the house" and "is a fit and proper person to be the manager of the house" (see section 64(3)(c) and (d)); and that "the proposed management arrangements for the house are otherwise satisfactory" (see section 64(3)(e)). Section 66, under the heading "Tests for fitness etc. and satisfactory management arrangements", sets out detailed requirements which apply not only to "the licence holder or (as the case may be) the manager of the house" but also to associates of such a person. Finally, section 66(5) and (6) provide:
"(5) In deciding for the purposes of section 64(3)(e) whether the proposed management arrangements for the house are otherwise satisfactory, the local housing authority must have regard (among other things) to the considerations mentioned in subsection (6).
(6) The considerations are –
(a) whether any person proposed to be involved in the management of the house has a sufficient level of competence to be so involved;
(b) whether any person proposed to be involved in the management of the house (other than the manager) is a fit and proper person to be so involved; and
(c) whether any proposed management structures and funding arrangements are suitable."
- That this is the position is further illustrated by section 67(1) ("Licence conditions") which states:
"(1) A licence may include such conditions as the local housing authority consider appropriate for regulating all or any of the following –
(a) the management, use and occupation of the house concerned, and
(b) its condition and contents."
The reference in (a) to "the management" clearly signals that the focus is not confined to the property itself. Section 67(1) makes it clear that any conditions imposed on the grant of the licence by the authority can include conditions concerning not just the "condition and contents" of the property, but also its "management, use and occupation". Similarly, a licence may be revoked for such a reason (see section 70(1) and (2)). Moreover, "a licence may not be transferred to another person", and "if the holder of the licence dies while the licence is in force, the licence ceases to be in force on his death" (sections 68(6) and (7)). This is also reflected in the offence with which Mr Gaskin was charged, i.e. of "having control of or managing an HMO" without being licensed (section72(1)).
- It is therefore quite clear that, in considering licensing decisions, an authority has a power and indeed a duty to take into account more than just the property or HMO. It is also concerned with its management – in other words, in the language of Article 4 of the Services Directive and Regulation 2 of the Services Regulations, the economic activity which is subject to the authorisation scheme includes the way in which privately rented accommodation is let and managed.
- Our conclusion on construction is also supported by reference to Recital 27 to the Services Directive, which refers expressly to the Directive not covering "those social services in the areas of housing, childcare and support to families and persons in need which are provided by the State at national, regional or local level by providers mandated by the State or by charities recognised as such by the State" on the basis that "these services are essential in order to guarantee the fundamental right to human dignity and integrity and are a manifestation of the principles of social cohesion and solidarity and should not be affected by this Directive". That is echoed in Article 2(2)(j) of the Services Directive (and Regulation 2(2)(i) of the Services Regulations) by the exclusion in respect of "social services relating to social housing, childcare and support of families and persons permanently or temporarily in need which are provided by the State, by providers mandated by the State or by charities recognised as such by the State". We highlight, in particular, the reference to "social housing". If the provision of housing simpliciter were not a "service" within the meaning of the Services Directive and Services Regulations, there would have been no need to exclude social housing from the definition of "service". Indeed, given how Article 2(2)(j) and Regulation 2(2)(i) are drafted, it seems to us that it must follow that, even in the case of "social housing", its provision would be covered provided, of course, that it constitutes "self-employed economic activity, normally provided for remuneration".
- We therefore conclude that, as a matter of construction, by letting and managing private residential accommodation for profit, Mr Gaskin is properly to be regarded as providing a "service" for the purposes of the Services Directive. It further follows that the Council is a "competent authority" running an "authorisation scheme" within the meaning of the Services Directive and the Services Regulations.
- We have arrived at our conclusion on the basis of the words used in the Services Directive. In support of their submissions, however, both parties prayed in aid certain CJEU authorities which they frankly acknowledged had no direct bearing on the issue which we must decide, but which, together with certain other material, they suggested were supportive of their case. It is to those we now turn.
- The first of the CJEU decisions cited by Mr Manning was Eric Libert v Gouvernement Flamand (Case No C-197/11) (8 May 2013). This concerned certain Flemish legislation (Book 5 of the Decree of the Flemish Region of 27 March 2009 on land and real estate policy: Belgisch Staatsblad of 15 May 2009, p. 37408) which sought to restrict the people to whom land and buildings constructed on that land in particular locations could be transferred (defined as meaning "sale, leasing for more than nine years, or grant of a right under a long-term lease or a building lease") "only to persons who have, in the opinion of a provincial assessment committee, a sufficient connection with the commune", namely people who have "been continuously resident in the commune or in a neighbouring commune for at least six years" or who carry out "activities in the commune, provided that those activities occupy on average at least half a working week" or who have "established a professional, family, social or economic connection to the commune as a result of a significant circumstance of long duration" (see the judgment at ).
- There were two sets of proceedings before the Cour Constitutionnelle: an action brought by Mr Libert and others as residents in Belgium in which they applied for annulment of the provisions of Book 5 of the Flemish Decree on the ground that they restrict the right to purchase or sell property in the target communes (see -); and another action brought by certain companies which were "professionally active in the property sector in the Flemish Region" and which contended that the Book 5 "special condition" constituted "an obstacle to the exercise of rights under EU law and fundamental freedoms under the [TFEU] given that, as a result of the application of that condition, there has been a reduction in the number of potential buyers for the lots and housing units developed by those companies in the target communes" (see -).
- In each case, the Cour Constitutionnelle sought preliminary rulings concerning the compatibility of the Book 5 "special condition" with various provisions of the TFEU (as well as with the Services Directive in the case of the claim brought by the various companies). The CJEU decided at  that the provisions of Book 5 "undoubtedly constitute restrictions on the fundamental freedoms guaranteed by Articles 21 TFEU, 45 TFEU and 49 TFEU and Articles 22 and 24 of Directive 2004/38", before stating at  as regards Article 56 of the TFEU:
"Next, as regards the freedom to provide services under Article 56 TFEU, the provisions of the Flemish Decree at issue may also hinder the business activities of undertakings active in the property sector, as regards both undertakings established in Belgium which offer their services to, inter alia, non-residents and undertakings established in other Member States."
- The CJEU continued at :
"By application of those provisions, immovable property located in a target commune cannot be sold or leased to just any Union citizen, but only to those demonstrating a 'sufficient connection' with the commune in question, which clearly restricts the freedom to provide services of the property undertakings in question."
- Mr Manning submitted that Libert supports his contention that Mr Gaskin is providing a "service" since, he suggested, the CJEU should be regarded as having considered that the sale and/or letting of private accommodation constituted the provision of a "service" for Article 56 of the TFEU purposes. He submitted that the fact that the Flemish legislation question concerned lettings for more than nine years is immaterial since, if the letting of accommodation for such a period amounts to the provision of a service, there is no logical reason why the letting of accommodation for shorter periods would not also be.
- In our view, however, Libert is of no real assistance in this case, because there is no equivalence between the present case and either of the two cases which were considered by the CJEU. It is clear that the CJEU's focus, when referring to the Book 5 "special condition" as hindering "the business activities of undertakings active in the business sector" was on the type of business activities carried out by the companies which were claimants in the second of the two cases which the Cour Constitutionnelle referred to it, and not on activities such as those carried out by Mr Gaskin.
- The second of the cases cited by Mr Manning is Harmsen. Mr Harmsen operated a "window prostitution" business in Amsterdam, which entailed rooms with a window facing the street being rented by prostitutes for the purposes of their work. Mr Harmsen applied to the Mayor of Amsterdam for authorisation to operate two further window prostitution businesses. That application was refused on the basis of a rule imposed by the Mayor which required the window operator and the prostitute renting from him to be able to communicate in a common language, in order to help prevent prostitution offences (see -).
- Mr Harmsen challenged the Mayor's decision, only for the Rechtbank Amsterdam to dismiss the action which he brought. The Raad van State subsequently decided to stay the proceedings, and refer a number of questions to the CJEU for a preliminary ruling. These included (as the CJEU put it at ) whether the Services Directive "must be interpreted as meaning that the provisions set out in Chapter III relating to freedom of establishment are applicable to purely internal situations and what the relevant criteria are for determining whether such a situation exists".
- As to that question, the CJEU held as follows:
"41. In that regard, it should be noted that in Case C-340/14, ECLI:EU:C:2015:641, while it is true that, according to the wording of the third question, the service provided by Mr Trijber which is the subject of the application for authorisation at issue in the main proceedings is in essence intended for residents of the Netherlands, the fact remains that the referring court itself notes, in the order for reference, that that service may also be enjoyed by nationals of other Member States and that the scheme at issue could impede access to the market for all service providers, including those from other Member States who wish to establish themselves in the Netherlands in order to provide such a service. Moreover, with respect to Case C-341/14, ECLI:EU:C:2015:641, that court clearly states that the recipients of the services provided by Mr Harmsen which are the subject of the applications for authorisation at issue in the main proceedings are nationals of Member States other than the Kingdom of the Netherlands.
42. It follows that since the situations which are the subject of the questions referred for a preliminary ruling are not purely internal, there is no need to examine the second and third questions in Case C-340/14 and the first and second questions in Case C-341/14."
- The CJEU considered a number of further questions, including "whether Article 10(2)(c) of the Services Directive must be interpreted as precluding a measure, such as that at issue in the main proceedings, under which the grant of authorisation for the exercise of an activity consisting in the operation of window prostitution businesses by renting rooms out in shifts is subject to the condition that the service provider is able to communicate in a language which is understood by the recipients of those services, in this case prostitutes" (see ), which was answered as follows (at ):
"… the answer to the third question in Case C-341/14 is that Article 10(2)(c) of Directive 2006/123 must be interpreted as not precluding a measure, such as that at issue in the main proceedings, under which the grant of authorisation for the exercise of an activity, such as that at issue in the present case, consisting in the operation of window prostitution businesses by renting rooms out in shifts is subject to the condition that the service provider is able to communicate in a language which is understood by the recipients of those services, in this case prostitutes, where that condition is such as to ensure that the legitimate objective of general interest pursued - namely the prevention of criminal offences related to prostitution - is secured, and does not go beyond what is necessary to achieve that objective, which is for the referring court to determine."
- Mr Manning submitted that the CJEU accordingly accepted that Mr Harmsen, in letting out space, was a "service provider", and that the prostitutes who were renting the space from him were "recipients of those services". It follows, he submitted, that in the present case Mr Gaskin should similarly be regarded as providing a "service" by renting out rooms to his tenants.
- The difficulty with that submission is, however, twofold. First, it is clear that each case must be considered on its own facts (that is, indeed, what is stated in Recital 34 to the Services Directive); and so the assistance to be derived from other cases that were determined on their own different facts is limited. Second and in any event, on analysis, in Harmsen it was not in dispute that the Services Directive applied, subject to the argument concerning its applicability to "internal situations". As such, Harmsen is not a decision in which there was any detailed consideration by the CJEU of the issue which we must decide.
- That said, for reasons which we have explained earlier, we agree with Mr Manning that the fact that the "recipients" of the services in Harmsen (the prostitutes) were themselves carrying on a business, whereas Mr Gaskin's tenants at the Property are not doing so, but are merely living in the rooms with which Mr Gaskin provides them, is nothing to the point. What matters is not what any "recipient" does but whether the activities of the "provider" amount to a "service" or not. The case does not therefore assist Mr Butler either.
- The third case relied on by Mr Manning was Cura Anlagen GmbH v Auto Service Leasing GmbH (ASL) (Case C-451/99) (21 March 2002), a case which pre-dates the Services Directive but in which the CJEU recognised that the leasing of cars constitutes a service within the meaning of the then Article 50 (now Article 57) of the TFEU in the context of a dispute as to whether it was legitimate for the Austrian Law on Motor Vehicles to prohibit the driving of vehicles hired in Munich which retained their German registration plates for more than a certain time period (see -). As the CJEU framed the issue at :
"In that respect, it should be noted that, by its question, the referring court is primarily seeking to ascertain whether the Austrian legislation entails restrictions on intra-Community trade and, if so, whether those restrictions can be justified. For that purpose, it asks the Court of Justice whether legislation such as that at issue in the main proceedings is compatible either with Articles 49 EC to 55 EC, or with Articles 28 EC to 31 EC, according to whether the leasing of vehicles constitutes a supply of services or a delivery of goods."
- The CJEU went on in the next paragraph () to say this:
"In relation to that question, this Court would point out that leasing constitutes a service within the meaning of Article 50 EC. It consists of an economic activity provided for consideration. The fact that that activity implies the handing over of goods by the lessor to the lessee, in the main proceedings in this case a motor vehicle, cannot invalidate that classification since the supply relates not so much to the goods themselves as to their use by the lessee, the goods in question remaining the property of the lessor."
- This was followed at  by this further observation (albeit in relation to a different Directive):
"The Court of Justice has, moreover, already held that the leasing of vehicles constitutes a supply of services within the meaning of Article 9 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1; 'the Sixth VAT Directive'), those services consisting principally in negotiating, drawing up, signing and administering contracts and in making the vehicles concerned, which remain the property of the leasing company, physically available to customers (Case C-190/95 ARO Lease  ECR I-4383, paragraphs 11 and 18)."
- Although it was Mr Manning's submission that Cura Anlagen provides further support to Mr Gaskin's case that he is similarly to be treated as providing a "service", again we are unable to agree. As Mr Butler observed, a car leasing company is, quite obviously, providing a "service". The fact that the CJEU has confirmed that that is the position takes the dispute in the present case no further.
- Lastly, Mr Manning referred us to Erich Ciola v Land Vorarlberg (Case C-224/97) (29 April 1999). This was another case which, like Cura Anlagen, pre-dates the Services Directive. As appears from the judgment at -, Mr Ciola was the manager of ABC-Boots-Charter GmbH, which in 1990 leased certain land on the shore of Lake Constance and obtained permission to establish 200 moorings for pleasure boats there. At the company's request, the Bezirkshauptmannschaft Bregenz (the administrative authority of first instance of the Land of Vorarlberg) addressed to it on 9 August 1990 an individual administrative decision (Bescheid), point 2 of which stated:
"With effect from 1 January 1996 a maximum of 60 boats whose owners are resident abroad may be accommodated in the harbour. Until that time the proportion of boats owned by persons resident abroad is to be progressively reduced. No new allocation of moorings to boat-owners resident abroad or extension of expired rental contracts with such owners is permitted until the maximum foreigner quota has been reached ...."
- Some years later, the Unabhängiger Verwaltungssenat (Independent Administrative Senate) of the Land of Vorarlberg found Mr Ciola, in his capacity as manager of the company, guilty of renting two moorings to boat-owners who were resident abroad, namely in the Principality of Liechtenstein and the Federal Republic of Germany, over and above the maximum quota of 60 moorings which had been reserved for foreigners. Mr Ciola was fined accordingly.
- On his appeal before the Verwaltungsgerichtshof, proceedings were stayed to allow the CJEU to answer certain questions referred to it, the first of which was as "whether the Treaty provisions on freedom to provide services are to be interpreted as precluding a Member State from establishing a maximum quota of moorings which may be rented to boat-owners resident in another Member State". The CJEU addressed this issue at - and -, concluding at  that "Article 59 of the Treaty is to be interpreted as precluding a Member State from prohibiting the manager of a boat harbour, on pain of prosecution, from renting moorings in excess of a specified quota to boat-owners who are resident in other Member States".
- Mr Manning submitted that this also supports his case. He drew attention, in particular, to the fact that Ciola involves the rental of moorings, and suggests that there is an analogy here with Mr Gaskin's rental of rooms. However, in our view, Ciola is not on point at all because – as made clear from the CJEU's reasoning in some detail – there was no argument in that case as to whether the provision of moorings amounts to a "service" activity since that appears simply to have been taken as read. This was again a case which turned upon its own facts.
- As to the other material on which Mr Manning (and, to a limited extent, Mr Butler also) relied, whilst it does not assist on the construction issue – since the question of construction is an objective matter for this court, and opinions held by others are merely their own views of the matter – this material at least gives us some degree of comfort, because it shows that relevant institutions have proceeded on the basis that the interpretation we favour is correct. There are four documents.
- First, there is a document entitled "Guidance for Business on the Provision of Services Regulations", issued by the Department for Business Innovation & Skills in October 2009. In a section entitled "WHICH SERVICE PROVIDERS ARE COVERED?", examples were set out of the types of "services" considered covered by the Services Regulations, including "management consultancy", "professional services such as lawyers, accountants and actuaries", "facilities management, including office maintenance", "logistics" and "Services provided to both business and to consumers" such as "estate agents and letting agents". The document went on, in a section entitled "WHICH SERVICE PROVIDERS ARE NOT COVERED?", to list "the main exclusions, as set out in regulation 2(2)"; and to state this as regards one of the exclusions (contained in the Services Directive at Article 2(2)(j) and in the Services Regulations at Regulation 2(2)(i)):
"Social services relating to social housing, childcare and the support of families in need, where these are provided by the State, by providers mandated by the State or by charities recognised as such by the State. The Government's view is that housing services provided on a charitable basis by Registered Social Landlords are out of scope of the Directive. Services provided on a commercial basis by registered charitable organisations or their trading subsidiaries are, however, in scope of the Directive."
- Mr Manning submitted that this passage, with its reference to the "the Government's view", proceeds on the basis that social housing provided "on a commercial basis" (even by charities) is caught by the Services Directive and the Services Regulations. If that is right, then, Mr Manning submitted with some force, it must follow that non-social housing is also considered to be covered.
- Second, Mr Manning relied upon a 2007 publication entitled "Handbook on Implementation of the Service Directive", produced by The Directorate-General for Internal Market and Services. In section 2 (entitled "THE SCOPE OF APPLICATION OF THE DIRECTIVE"), this is stated (under the sub-heading "Services covered" and the sub-sub-heading "The concept of 'service'"):
"As a basic rule, the Services Directive applies to all services which are not explicitly excluded from it.
To start with, it is important to understand the concept of 'service' and the scope of activities it covers. The concept of 'service' is, in line with the EC Treaty and the related case law of the ECJ, defined in a broad manner. It encompasses any self-employed economic activity which is normally provided for remuneration, as referred to in Article 50 of the EC Treaty.
Thus, within the meaning of the EC Treaty and the Services Directive, in order to constitute a 'service' an activity has to be a self-employed activity, i.e. it has to be supplied by a provider (which could be a natural or a legal person) outside the ties of a contract of employment. Moreover, the activity must normally be provided for remuneration; in other words, it must be of an economic nature. This has to be assessed on a case-by-case basis for each activity.…
Consequently, Member States will have to ensure that the rules of the Services Directive apply to a wide variety of activities, whether provided to business or to consumers. Without being exhaustive, the following can be mentioned as examples of services covered by the Directive: the activities of… accommodation and food services (such as hotels, restaurants, catering services),… rental (including car rental) and leasing services, real estate services,… household support services (such as cleaning services, private nannies or gardening services), etc."
- Later on in the same publication, the following is said in respect of the social housing exclusion:
"… On the basis of the wording of this exclusion, and the explanations given in Recital 27, it is clear that such services are not excluded if they are provided by other types of providers, for example private operators acting without a mandate from the State.… Thus, for instance, private household support services are services not excluded from the Services Directive and have to be covered by the implementing measures."
- Mr Manning submitted (again with some force) that, although only an opinion as to the true interpretation of the Services Directive, it is the opinion of the relevant European Directorate-General which is responsible for the Services Directive.
- Third, Mr Manning relied upon an "Explanatory Memorandum" produced by the Department for Business, Innovation & Skills in about October 2009, in which reference was made to a "draft final Impact Assessment, which is currently being updated" and which was attached. In that draft Impact Assessment, which considers the impact of the Services Directive, under the heading "Analysis", this was stated:
"This overarching Impact Assessment describes the estimated economic impact of implementing the Directive to the UK.…
The impact of the Services Directive on the UK economy is analysed using the same detailed bottom-up approach and data presented in Copenhagen Economics (2005) in work undertaken for the European Commission. There are 4 service sectors … included in the model:
Distributive trade and
The sectors regulated professions, business services and distributive trade are explicitly included in the analysis of the Services Directive. Table A1 gives an overview of the definition of these sectors.
Table A1: service sector definitions
||Legal, accounting, business and management consultancy
||IT services, recruitment, cleaning, real estate
||Wholesale trade, retail trade
The benefits are estimated using an economic model which simulates the economy. …".
- Mr Manning explained by reference to another document, entitled "STATISTICAL CLASSIFICATION OF ECONOMIC ACTIVITIES IN THE EUROPEAN COMMUNITY (NACE Rev.1.1)", that:
"NACE is the acronym used to designate the various statistical classifications of economic activities developed since 1970 by the European Union; it is designed to categorise data relating to 'statistical units', in this case a unit of activity, for example an individual plant or group of plants constituting an economic entity such as an enterprise. It provides the basis for preparing a large range of statistics (output, inputs to the production process, capital formation and financial transactions) of such units."
- The same document went on to describe the "History of NACE", including the various revisions which took place. Specifically, "NACE Rev.1.1" (introduced in 2002) contained a class of activity which was described as "70 … Real estate activities" and which at "70.1" referred to "Real estate activities with own property" and then at "70.2" stated as follows:
|"Letting of own property
||This class includes:
- Letting and operating of self-owned real estate such as:
Apartment buildings and dwellings
|This class excludes:
Operation of hotels, rooming houses, camps, trailer camps and other non-residential or short-stay lodging places, …"
- In similar vein, a document produced by the Office for National Statistics entitled the "UK Standard Industrial Classification of Economic Activities 2007 (SIC 2007), Structure and explanatory notes" contains a "Section L" described as "Real Estate Activities" which includes, at "68.2", "Renting and operating of own or leased real estate" and the same again at "6.20", with "68.20/9" later on being characterised in these terms:
"Letting and operating of own or leased real estate (other than Housing Association real estate and conference and exhibition services) n.e.c.
This subclass includes:
- renting and operating of self-owned or leased real estate:
Apartment buildings and dwellings
- providing of homes and furnished or unfurnished flats or apartments for more permanent use, typically on a monthly or annual basis
This subclass excludes:
Operation of hotels, suite hotels, holiday homes, rooming houses, campgrounds, trailer parks and other non-residential or short-stay accommodation places, …."
- It was Mr Manning's submission, in the circumstances, that the NACE position demonstrates that, when the Services Regulations were introduced (and since), the understanding must have been that Mr Gaskin's activities would count as a "service" for the purposes of Article 4 of the Services Directive and Regulation 2 of the Services Regulations since it would make no sense for to be an impact assessment in relation to activities which did not amount to a "service" for such purposes.
- As we have said, although not directly relevant to the construction task in which we have engaged, it seems to us that this material is consistent with our conclusion on the true construction of the relevant provisions of the Services Directive.
The Legality of the Required Fee
- That brings us to the second of the issues which arise, namely the Council's contention that, even if the Services Directive applies in this case because Mr Gaskin is to be regarded as providing a "service", then the fee demanded from him by the Council was in any event lawful. As we have indicated (see paragraph 56 above), as we understood him, Mr Butler effectively conceded that, were the Court to conclude that Mr Gaskin was providing a "service", the Council had no right to demand that he should pay the fee what was sought of him. In any event, we are able to address the issue quite shortly.
- In support of his submission, Mr Butler relied on certain observations by Lord Mance in Hemming (No 2), to the effect that the fee scheme involved in that case was only invalid inasmuch as it required sums to be paid upfront at the time of the application and this did not render the whole scheme invalid. Specifically, Lord Mance said:
"9. The scheme which the council operated was only defective in so far as it required payment up front at the time of the application. Its invalidity was limited. Contrary to the respondents' case, European law permits a fee to cover the costs of running and enforcing the licensing scheme becoming due upon the grant of a licence. There is no imperative under European law, as incorporated domestically by the 2009 Regulations, to treat the whole scheme as invalid, rather than to invalidate it to the extent of the inconsistency…. Even under purely domestic law principles, a test of substantial severability is appropriate, rather than a rigid insistence on textual severability…. Any remaining element of the scheme which can stand by itself is able to do so.
10. Here, the council was entitled to set and to require payment of a fee including enforcement costs as well as processing costs applicable to all those who, like the licence holders, actually received and benefitted by the council's enforcement action."
- In this case, however, those observations do not assist Mr Butler's cause, because it is clear that Lord Mance was there dealing with a different scenario where, the Court of Appeal having ruled in favour of the applicant, the authority had repaid the applicant a proportion of the licence fee and what the council was seeking to do before the Supreme Court at this stage – the Supreme Court and the CJEU having ruled that the full fee could be charged to those who were granted a licence – was to recover the money which it had been repaid to the applicant. That this is the position is evident from what Lord Mance stated at :
"Westminster City Council submits that it is entitled to be paid or repaid the sums which it repaid to sex shop licence holders on 28 June 2013, following the Court of Appeal's order. The licence holders, on the other hand, submit that they are entitled to retain the repayment made to them in full, because it was charged in a way for which there was no warrant."
- In contrast, in the present case Mr Gaskin refused to pay the whole fee upfront, and he was refused a licence by the Council despite the Council having no lawful entitlement to demand the whole fee upfront because of the Services Directive. As such, Mr Gaskin is not somebody who has been granted a licence and so who would have been liable to pay the sums anyway; but rather somebody who has been refused a licence due to his refusal to submit to an unlawful demand for a fee which was not limited (as it should have been) to the application stage of the renewal process. Indeed, it is telling that at the hearing Mr Butler frankly accepted that he was in no position, even then, to say what proportion of the fee sought from Mr Gaskin was attributable to this stage. The Council of course had declined to accept the £850 which Mr Gaskin offered to pay by way of fee.
- We might add in this respect that we see no merit in a further point made by Mr Butler – again in his skeleton argument rather than orally – namely that the requirement to make payment upfront for the five-year licence renewal process included the costs of processing the application and the running and managing of the HMO scheme for a period of five years, Mr Gaskin having not submitted an application for a new HMO licence relating to a new property but applied for a licence renewal for five years. It seems to us that it is wholly artificial to seek to distinguish between an initial application and a renewal application in such a way, since the relevant differentiation is obviously as between the application process (whether initial or renewal) on the one hand, and the "running and enforcing" of the licensing scheme on the other.
The Section 16 Notice
- We should deal with one final point, namely the late suggestion by Mr Manning that, were the Court to consider it appropriate to grant Mr Gaskin the declarations which he seeks, then, we should go on and hold that the section 16 notice was unlawful. We can deal with this briefly.
- Mr Manning's submission was made notwithstanding that the earlier Divisional Court dismissed Mr Gaskin's Ground 3 in the following terms (at  and  in Bean LJ's judgment):
"38. As noted above, after [Mr Gaskin] refused to complete section 3.1 of the renewal application form or to pay the full fee of £1,799 the Council served a notice under section 16 of the 1976 Act requiring him to state the nature of his interest in the Property and the names and addresses of any other person who had an interest in the premises as lessee or otherwise. Mr Manning submits that this was an unlawful attempt to circumvent the restrictions imposed by the 2012 Regulations on the information to be supplied with the renewal application.
39. We do not agree. By the time the section 16 notice was served [Mr Gaskin] had failed to pay the proper fee and was accordingly liable to prosecution. The purpose identified on the face of the notice was to enable the Council to carry out its enforcement functions under the 2004 Act. The power to seek information under section 16 is a broad one. A notice of this kind can be served whenever the local housing authority considers that it ought to have information about the number of occupiers at the premises. It is certainly not a request which can be made only at the time of a first application for an HMO, nor only once every 5 years thereafter or when there is a change in ownership of the freehold. The HMO licensing regime established by Parliament in the 2004 Act clearly requires local housing authorities to have proper powers of inspection and enforcement, and a section 16 notice is an appropriate means of obtaining information with a view to enforcement."
- That was reflected in the Order which the Divisional Court made, and which dismissed the section 16 notice (Ground 3) challenge. So far as this court is concerned, that is the end to the matter. The challenge having been dismissed, there is now no jurisdiction within these proceedings for it to be considered again by this Divisional Court. In the matter of L and B (Children) (Preliminary Finding: Power to Reverse)  UKSC 8 at - makes it clear that once an order is sealed and perfected, the only way it can be varied is to bring an appeal against that order. There has been no appeal, which means that the Order stands.
- In any event, it will be noted that in the passage from Bean LJ's judgment we have quoted, there is no mention of Mr Manning having submitted that, in the event that the EU law issue now before us being determined in Mr Gaskin's favour, this would provide a freestanding reason why the section 16 notice was unlawful. This is because on that occasion no such submission was made. There was not the slightest hint that Mr Gaskin's case was put on anything other than a domestic basis.
- In the circumstances, it is simply not open to Mr Manning to advance the contention he sought to do at the hearing before us. There is no proper basis on which to allow that challenge to be re-opened.
- In conclusion, we shall allow the claim for judicial review and, subject to any further written submissions on the precise form of the order, we shall grant Mr Gaskin the declarations which he seeks as drafted by Mr Manning during the course of the hearing, as follows:
"(1) The Claimant, by letting the building at 157 Mortlake Road, Kew Gardens, London, TW6 4AW, is engaging in a service activity for the purposes of the EU Services Directive 2006/123/EC and the Provision of Services Regulations 2009.
(2) The licensing provisions of Part 2 of the Housing Act 2004 are an authorisation scheme for the purposes of the EU Services Directive 2006/123/EC and the Provision of Services Regulations 2009.
(3) Therefore the Defendant local authority was not entitled to demand that the Claimant pay, when making his application to renew his licence for the said property under Part 2 of the Housing Act 2004, an application fee of £1,799.00 because that fee infringed Article 13(2) of the EU Services Directive 2006/123/EC and Regulation 18(4) of the Provision of Services Regulations 2009 as it was not limited to the costs of the procedures and formalities of the authorisation scheme under Part 2 of the Housing Act 2004."
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