Where the police are unsuccessful in a closure order application there is no presumption that there be no order compensating the Respondent for financial loss. Unlike when considering the position on costs, the court's focus on an application for compensation should be on the respondent’s behaviour, not that of the police, so held the Administrative Court in R (Qin) v Commissioner of Police of the Metropolis [2017] EWHC 2750 (Admin).

The Commissioner had been investigating massage parlours believed to be operating as brothels and had issued closure notices in respect of the claimants’ premises, six massage parlours, under s 76(1) of the Anti-Social Behaviour, Crime and Policing Act 2014. The claimants applied to adjourn proceedings on the basis that they were seeking permission to judicially review the validity of the closure notices, contending that the requirement to inform under s 76(6) had not been complied with:

(6) A closure notice may be issued only if reasonable efforts have been made to inform—
(a) people who live on the premises (whether habitually or not), and
(b) any person who has control of or responsibility for the premises or who has an interest in them, that the notice is going to be issued.

It was not in dispute that the Commissioner had not complied with s 76(6). However, he had reasons for not complying, including the confidentiality of the operation, the nature of the offences being investigated and concerns over the possible effect on potential victims of human trafficking [7].

The district judge refused the application for an adjournment on the basis that challenging the validity of closure notices was a matter for judicial review and should not delay the determination of the closure order application [8].

At the substantive hearing, the district judge held that the test for granting a closure order under s 80(5) was not satisfied on the balance of probabilities. It could be said only that there was a 'suspicion' that sexual services were being carried out at the premises. Accordingly, the application for closure orders was dismissed [11].

From the issuing of the closure notices until the dismissal of the application, the premises were closed for thirteen days. The massage parlours, accordingly, lost business in that period. The Claimants applied both for compensation for financial loss under s 90(5) and for their costs.

As to costs, the district judge took into account the principles established by the Court of Appeal in R (Perinpanathan) v City of Westminster Magistrates’ Court [2010] EWCA Civ 40; [2010] 1 WLR 1508, namely that no order for costs should be made against the police in cases where they have behaved reasonably, honestly and properly in pursuit of an application which is refused.

By way of reminder, Perinpanathan followed the principles established in Bradford Metropolitan District Council v Booth [2000] EWHC Admin 444. In that case, Lord Bingham CJ noted that courts should consider the need to encourage public authorities to make and stand by honest and reasonable administrative decisions without fear of being subject to undue financial prejudice if these decisions were successfully challenged [26]. These principles sought to avoid any ‘chilling effect’ on the regulatory activities of public authorities that might arise if costs merely followed the event.

In applying these principles, the district judge in Qin considered that the Commissioner had behaved reasonably, honestly and properly and so held that there should be no order for costs.

As to compensation, the district judge had regard to the test under s 90(5):

(5) On an application under this section the court may order the payment of compensation out of central funds if it is satisfied—
(a) that the applicant is not associated with the use of the premises, or the behaviour on the premises, on the basis of which the closure notice was issued or the closure order made,
(b) if the applicant is the owner or occupier of the premises, that the applicant took reasonable steps to prevent that use or behaviour;
(c) that the applicant has incurred financial loss in consequence of the notice or order, and
(d) that having regard to all the circumstances it is appropriate to order payment of compensation in respect of that loss.

Whilst the district judge considered that s 90(5)(a)-(c) had been satisfied, he did not consider it ‘appropriate’ under s 90(5)(d) for a payment of compensation out of central funds to be paid. In particular, the judge took into account the principles established in Booth and Perinpanathan, notwithstanding that they related to costs. He refused the Claimant’s application for compensation.

Permission in respect of the claimants’ first judicial review application, in relation to the decision to issue the closure notices and the non-compliance with s 76(6), was initially refused. The claimants then made a second application for judicial review in respect of the district judge’s refusal to award costs and compensation and, also appealed against the judge’s decision by way of case stated. At a rolled-up hearing, the two applications were heard together with the appeal by way of case stated.

The matter came before Choudhury J, who considered three questions:

- Did the district judge apply the proper test for the award of compensation pursuant to s 90?
- What were the legal consequences of the Commissioner’s failure to comply with s 76(6)?
- Was the district judge’s ‘en bloc’ approach to costs and compensation correct?

Issue 1: The proper approach to compensation

Choudhury J held that the district judge was wrong to apply the principles regarding costs (those in Perinpanathan and Booth) to the determination of whether compensation should be awarded under s 90(5). It was wrong because, unlike an award of costs, any award of compensation under s 90 was made out of central funds. A costs order under s 90 involved no financial prejudice to the paying authority and no chilling effect on its regulatory activities. In fact, it was quite the opposite in that payment out of central funds meant that the police could apply for closure orders ‘without the fear of having to pay large sums by way of compensation’ [43].  Choudhury J also found that there was no basis for suggesting (as the district judge had), that the default position in claims of compensation was that there should be no award.

Choudhury J went on to explain that in deciding not to award compensation on the basis of the reasonableness and propriety of the police’s actions was to focus on the wrong conduct. Factors relating to the conduct of the respondent rather than that of the applicant were ‘primarily’ those which might render it appropriate not to award compensation [46].

Choudhury J quashed the district judge’s decision and remitted the issue of compensation to the Magistrates’ Court, so that it could be reconsidered without regard to Booth and Perinpanathan.

Issue 2: The effect of non-compliance on costs and compensation

Choudhury J held that the district judge was correct to disregard the invalidity of the closure notices when determining costs. The invalidity of a closure notice was a matter for judicial review and ‘not within the jurisdiction of the Magistrates’ Court’ [52], which was not affected by any shortcomings in the closure notice [54], [57]. Indeed, ‘if the Magistrates had expressed a view on the correctness or otherwise of conduct relating to the challenge on validity, then it could be encroaching onto territory reserved for the Court dealing with the judicial review’ [75].

Choudhury J went on to hold that there was no duty on the police to consult residents of premises prior to issuing a closure notice. To require the police to do this ‘would be likely to frustrate or undermine the purpose of the legislation, which is to provide a “fast and flexible remedy” in the event of serious nuisance or disorder’ [68(c)]. On the basis that a closure notice may be issued only if reasonable efforts have been made to inform affected persons that it is going to be issued, the requirement to inform under s 76(6) was not one that could be waived [72]. However, as the claimants had notice of the closure order application, were present at the hearing and had the opportunity to make representations, there was ‘substantial compliance’ with the requirements for the issuing of the closure notices [74].

All in all, questions relating to the validity or otherwise of a closure notice were not relevant to the determination of costs. The claimants were, therefore, unsuccessful on this issue. 

Issue 3: ‘En bloc’ assessment of costs and compensation

Costs are, of course, a matter for the court’s discretion. Choudhury J held both that there was nothing wrong in principle in the district judge’s taking an overall approach to costs rather than on a property-by-property basis [82] and that even if he had, he would have reached the same conclusion that costs not be awarded [83].

Compensation, by contrast, should not be assessed ‘en bloc’ – to do so would be unworkable and incorrect. This is because the Magistrates’ Court is required by s 90(5) of the Act to consider the position of each applicant for compensation separately, in order to determine whether they were associated with the impugned behaviour on the premises concerned and whether they had taken reasonable steps to prevent it: s 90(5)(a)-(b). Moreover, the use of the words ‘that loss’ in s 90(5)(d) required the Magistrates’ Court to consider the particular loss of each applicant [85]. The Claimants were, therefore, partially successful on this issue.

Conclusion and points for practice

Qin teaches the proper approach to the determination of applications for compensation following a court’s refusal to make closure orders.

Respondents will be pleased that where they have suffered financial losses in circumstances where the court has made no negative findings as to the actions taking place on their property, they properly will have a good prospect of achieving restitution.

Notwithstanding Choudhury J’s view the risk of a compensation order would have no ‘chilling effect’ on the police applying for closure orders, it is likely that the police’s knowing that there is no default position that compensation will not be awarded will discourage forces from issue closure notices unless it is considered that there is a good prospect of success. While any financial loss suffered by respondents to unsuccessful closure order applications is paid out of central funds rather than by the applicant police force, forces will no doubt be wary of the appearance of public money being spent in consequence of unsuccessful applications.

Those seeking to issue closure notices will be pleased by Choudhury J’s holding that, notwithstanding the requirement to inform under s 76(6), there is no duty on the police to consult owners or occupiers of premises prior to issuing a closure notice.

Finally, forces, at least, will be reassured by Choudhury J’s comments in respect of the jurisdiction of Magistrates’ Courts. Any respondent to a closure order application who seeks to adjourn proceedings on the basis of any alleged invalidity in the closure notice will likely be referred swiftly to Choudhury J’s judgment.