Mehmet Aldermir v Cornwall Council [2019] EWHC 2407

Mehmet Aldermir v Cornwall Council [2019] EWHC 2407 (Admin) was an appeal by way of case stated in which Mr Justice Swift held that magistrates hearing appeals under section 181 of the Licensing Act 2003 have power to make costs orders against non-parties, but that such applications must comply with the principles of natural justice.

Eden Bar Newquay Ltd (EBNL), a company whose sole director and shareholder was Mr Aldermir’s brother (resident in Cyprus), operated Eden Bar in Newquay. Cornwall Council revoked EBNL’s premises licence on 25 April 2018 following a review under sections 51 and 52 of the 2003 Act. Mr Aldermir owned the premises and the fixtures, leased them to EBNL, was employed as its general manager, and was the designated premises supervisor. EBNL appealed to the magistrates’ court under section 181 of the 2003 Act. The hearing took place on 19 to 21 November 2018 before District Judge Baker. The Council’s decision had been based on two matters: an incident on 4 August 2017 in which Mr Aldermir had been convicted under section 4 of the Public Order Act 1986, and evidence of repeated breaches of licence conditions by the premises. During the appeal hearing, documents dated 18 November 2018 were produced purporting to show that Mr Aldermir had leased the premises to a new company, Newquays Ltd, and sold the business goodwill and fixtures to that company. EBNL contended that these changed circumstances meant the revocation should be overturned. Mr Aldermir, though at court and expected to give evidence, did not do so; the explanation offered was that it would be “inappropriate” because the business had been transferred.

District Judge Baker dismissed the appeal. She found the August 2017 incident to have been appalling and Mr Aldermir the aggressor in an unprovoked and sustained attack. She found the Council’s conclusions on licence breaches correct and rejected any suggestion of procedural unfairness. She described Mr Aldermir’s behaviour following the Council’s decision as violent and disorderly on a number of occasions. She concluded that Mr Aldermir’s behaviour had been manipulative, that he showed disrespect for authority and an apparent belief he was above the law, and that she was far from convinced the 18 November 2018 documentation was genuine. She noted it was unclear whether the documents were in final form or merely drafts, and that the solicitor advocate appearing for EBNL appeared uncertain. She further anticipated that in the event of default under the lease the premises would likely revert to Mr Aldermir. Taking all these matters together, including Mr Aldermir’s character, his manipulation of due process, the delays in the proceedings, his earlier application to transfer the licence to another company entirely controlled by him (Max Leisure Ltd, of which he was sole director, which had appealed an earlier refusal of a transfer application in August 2018 but withdrawn that appeal in October 2018), and the hasty and incompletely executed documentation purportedly transferring the business only three weeks before the hearing, the District Judge held that the appellant had not satisfied her that the current arrangements justified allowing the appeal on changed circumstances.

The Council then applied for costs orders against Mr Aldermir personally rather than against EBNL. The application was made without prior notice and only after judgment had been handed down. Mr Dadds, the solicitor advocate instructed by EBNL, explained he was not instructed by Mr Aldermir and requested an adjournment. District Judge Baker refused the adjournment but permitted Mr Dadds fifteen minutes to take instructions from Mr Aldermir by telephone. District Judge Baker then made costs orders against Mr Aldermir in the sum of £30,935.50 in respect of EBNL’s appeal and £2,431.50 in respect of the discontinued Max Leisure Ltd appeal. She reasoned that Mr Aldermir was the driving force behind EBNL, there had been no involvement of his brother, and the business was entirely owned and controlled by Mr Aldermir as the only person to enter into the lease and sale contracts. She stated there were times when a court could look behind the veil of incorporation and that Mr Aldermir was de facto EBNL. She also noted it would be inappropriate to put the directors and shareholders of the new company at risk of costs, and that Mr Dadds had always been in a position to know costs might well be ordered if the appeal was lost, and knew Mr Aldermir was the controlling force behind the company and no doubt the person who paid his fees. As to the Max Leisure Ltd appeal, she found it had been bound to fail and that Mr Dadds had conceded the costs sum.

Mr Aldermir applied to state a case. The District Judge posed four questions: first, whether she had any statutory power to order costs against a non-party; second, if so, whether it was reasonable to do so in this case; third, whether the total costs were reasonable; and fourth, whether she was wrong to hear and determine an application for costs against a person who was not a party to the appeal, was not present at court, did not have legal representation in court, and had no notice of the application. Before Mr Justice Swift, argument concentrated on the first and fourth questions.

On the first question, Mr Kolvin QC submitted on behalf of Mr Aldermir that section 181(2) of the 2003 Act, which provides that the court may make such order as to costs as it thinks fit, should be construed as limited to making costs orders only as between the parties to the appeal. He drew comparison with section 51(3) of the Senior Courts Act 1981, which provides that the court shall have full power to determine by whom and to what extent costs are to be paid, and emphasised that those words “by whom” did not appear in section 181(2). He relied on Aiden Shipping Ltd v Interbulk Ltd [1986] 1 AC 965 and submitted the reasoning in that case supported the conclusion that, absent language identical to section 51(3), section 181(2) did not confer power to make a non-party costs order. He also referred to section 19B of the Prosecution of Offences Act 1985, which contained an express enabling power for regulations to permit third party costs orders in criminal proceedings, and submitted that the absence of such express provision in section 181(2) was significant. He further submitted that it was significant that paragraphs 1 to 8B of Schedule 5 to the 2003 Act were highly prescriptive as to when and by whom rights of appeal could be exercised, in contrast to general civil litigation where persons chose for themselves whether to litigate. He contended that a non-party costs jurisdiction was warranted in the latter situation because the circumstances could be very complex, but not in licensing appeals. He also submitted that much licensing litigation involved small, sometimes family-run, businesses and that it would be inappropriate for persons working within or directing such companies to face the possibility of non-party costs orders.

Mr Justice Swift rejected each submission. As a matter of language, he held that the material part of section 181(2), that the court may make such order as to costs as it thinks fit, was framed in the widest of terms and was wide enough to encompass the power to make costs orders against non-parties. He held that the power to determine by whom costs are to be paid is inherent in any power to make any costs order at all, and that the only question was whether under section 181(2) it was only the parties to the appeal who may be required to pay costs. He held that section 181(2), as enacted, was silent as to any such limitation. He considered the language of the provision strikingly different from section 64 of the Magistrates’ Courts Act 1980, which was expressly restricted to orders against either complainants or defendants to civil proceedings under that Act. Under Rule 34 of the Magistrates’ Courts Rules 1981, appeals to magistrates’ courts against decisions of local authorities or other bodies are by way of complaint for an order, and therefore absent section 181(2) of the 2003 Act the costs powers on an appeal under the 2003 Act would be governed by section 64 of the 1980 Act. The broad frame provided by the words in section 181(2), in contrast with the prescriptive approach in section 64 of the 1980 Act, was strongly indicative of the conclusion that the power at section 181(2) included power to make non-party costs orders. Swift J further rejected the submission that the power “to make such orders as to costs as it thinks fit” was equivalent only to the words now in section 51(1) of the 1981 Act that the costs of proceedings are in the discretion of the court, and that there was nothing in section 181(2) equivalent to the words now in section 51(3) that the court has full power to determine by whom and to what extent the costs are to be paid. He held this was not a point of true substance, noting that in section 51(1) of the 1981 Act as originally enacted the words now in subsections (1) and (3) appeared in subsection (1) side by side, and were separated out only in October 1991 when the 1981 Act was amended. He saw no significance in this reorganisation, nor in the fact that the 1981 Act referred sequentially to costs being in the discretion of the court and to the court being able to determine by whom costs are to be paid, while section 181(2) was formulated in terms of a power to make such order as to costs as the court thinks fit. He held that each formulation created a broadly-framed power and that the difference in language had no material consequence.

As to Aiden Shipping Ltd, Swift J held that Lord Goff’s reasoning did not suggest that the presence of language such as “by whom… costs are to be paid” was a condition of the existence of a power to make a non-party costs order. Lord Goff had emphasised that the power to make costs orders was framed in broad terms and that there was no compelling reason to read in any limitation. He had stated that in the vast majority of cases a non-party costs order was likely to be unjust, but that was a consideration going not to jurisdiction but only to the exercise of the power. Swift J held that the key consideration for the present case was not whether section 181(2) contained language materially identical to section 51(3) but whether the provision, construed on its own terms, conferred the power. As to context, he held that the prescriptive nature of paragraphs 1 to 8B of Schedule 5 to the 2003 Act, which identified the rights arising from determinations by licensing authorities, was a common feature of many statutory schemes and functionally corresponded to the common law and equitable principles that determine the availability of non-statutory causes of action. He held that the fact that claims before the County Court or the High Court might arise from common law rights was immaterial in terms of the appropriateness of a power to make non-party costs orders, and that such claims were no more or less likely to entail the complexity of circumstances behind them than proceedings under section 181, as the present case involving EBNL, Mr Aldermir, his brother, Newquays Ltd, its directors, and Max Leisure Limited made good. In any event, the rigid distinction between parties and non-parties that Mr Kolvin’s submission suggested was undercut by the conclusion in R (Chief Constable of Nottinghamshire Police) v Nottingham Magistrates’ Court [2011] PTSR 92 that the provisions of paragraphs 1 to 8B of Schedule 5 do not exclude the possibility that magistrates may, in the exercise of their powers to regulate and control proceedings, join other persons as parties to such appeals. As to the submission that much licensing litigation involves small, sometimes family-run, businesses, Swift J held this point harked back to one considered and rejected by Lord Goff in Aiden Shipping Ltd, namely that the existence of a power to make a non-party costs order said little as to the circumstances in which it may be appropriate to exercise the power, and that in the vast majority of cases it may be unjust to make such an order. He concluded that the power at section 181(2) of the 2003 Act included the power to make a costs order against a non-party, and that the effect of the language used was materially the same as that in the successive iterations of what is now section 51 of the Senior Courts Act 1981.

On the fourth question, Swift J held that a fair procedure had not been followed when the costs applications were determined. An application for costs against a non-party was out of the ordinary and could lead to significant financial consequences. It was important that such an application was heard and determined in accordance with a fair procedure. The person against whom the application was made must have fair notice of the application and the grounds on which it was made, and a fair opportunity to respond. Those principles had not been observed in this case. No notice of the application was given, and it was raised without notice only after judgment had been handed down. Swift J accepted that any application for costs might be conditional on the outcome of the substantive issue, but held that where a party intended, if successful, to make a non-party costs application, there was no reason why it could not or should not give notice of that intention well in advance. Similarly, although the precise grounds might be formulated only after the reasons for the substantive decision had been given, it might in many instances be possible to indicate in general terms the nature of the grounds well in advance. If such notice was given, an application could be made and considered at the time judgment was handed down. However, if prior notice was not given, it was likely that the hearing of a non-party costs application would need to be delayed for a short time to allow the non-party a fair opportunity to consider and respond. In the present case, the lack of prior notice had caused the problems that followed. Mr Aldermir had not had a fair opportunity to respond to the applications. He should have been given more than fifteen minutes to respond. The District Judge’s comment in the case stated that what happened was fair because Mr Dadds was an experienced licensing solicitor who must have realised that costs would be an issue missed the point. Costs were always likely to be an issue when an appeal had been determined, but not so an application for a non-party costs order. Mr Dadds had been put in a difficult if not impossible situation. His brief telephone conversation with Mr Aldermir and such response as he could make provided only the barest appearance of a fair procedure; the substance of a fair procedure was lacking. Swift J held that in most if not all cases it would be good practice for the grounds on which a non-party costs application was made to be reduced to writing, provided to the respondent before the application was made, and for the application to be heard and determined only after the non-party had had the chance to consider the grounds and respond to them. Because no prior notice had been given, fairness required the District Judge to adjourn the applications for a short period, in all likelihood no more than a day, to allow the grounds to be provided to Mr Aldermir and to allow him the chance to attend court in person or through a representative. If, having had that opportunity, Mr Aldermir had not attended, it would have been open to the District Judge to

Aiden Shipping Ltd v Interbulk Ltd [1986] 1 AC 965
Smith v Forbes -Smith [1901] P 258
Sons v EC de Witt and Co [1958] 1 QB 323
R(Chief Constable of Nottinghamshire Police) v Nottingham Magistrate Court [2011] PTSR 92
Ltd v Todd and others [2004] 1 WLR 2807
Deutsche Bank AG v Sebastian Holdings Inc [2014] 4 WLR 17