Note: This is a transcript of a talk I gave to the Institute of Licensing Training Conference at Stratford upon Avon on 16 November 2023: “The Fit and Proper Person test”. 

 

The ‘Fit and Proper Person’ test

Is it a relevant consideration in decision-making under the Licensing Act 2003?

Introduction

Before the Licensing Act 2003 (“the 2003 Act”) came into force, a licence for the sale of alcohol was issued to a person, in respect of the licensed premises. And that person had to be ‘fit and proper’ to hold the licence.

Since the 2003 Act came into force in 2005, both the person and the premises are separately licensed. The relationship between a personal licence and a premises licence is illustrated by section 19, which places a mandatory condition on premises licences that every supply of alcohol under the licence must be made or authorised by a person who holds a personal licence.

A personal licence is only required for the supply of alcohol, however; other regulated activities (such as regulated entertainment or the provision of late-night refreshment) do not need to be carried on or authorised by a personal licence-holder.

A discussion of the role (or otherwise) of the ‘fit and proper person’ test necessitates separate consideration of personal licences and premises licences.

Personal licences

There is no express ‘fit and proper’ criterion for the grant of a personal licence. The exercise of judgment by the licensing authority is all but denied them. Instead, the 2003 Act prescribes in minute detail when an application for a personal licence, must be granted, must not be granted, and may be granted.

Section 120(2) provides:

The authority must grant the licence if it appears to it that—

(a) the applicant is aged 18 or over,

(aa) he is entitled to work in the United Kingdom,

(b) he possesses a licensing qualification or is a person of a prescribed description,

(c) no personal licence held by him has been forfeited in the period of five years ending with the day the application was made, and

(d) he has not been convicted of any relevant offence or any foreign offence or required to pay an immigration penalty.

Section 120(3) provides:

The authority must reject the application if it appears to it that the applicant fails to meet the condition in any of paragraphs (a) to (c)] of subsection (2)

Section 120(7) provides (in effect):

The authority may grant the application even if the applicant falls foul of (d) of subsection (2), if the grant would not be inappropriate for the promotion of the crime prevention licensing objective.

If anyone should be looking for an illustration of micro-managed over-regulation – to the likely detriment of sound decision-making – they could not do better than to turn to the statutory definition of “relevant offence” in the 2003 Act. Section 113 says, with disarming insouciance, that a relevant offence “means an offence listed in Schedule 4”. In the talk I gave to the Institute of Licensing on November 16, I cited the entirety of Schedule 4 in a long sequence of ten Powerpoint slides. Rather than take up space in this published article, it is perhaps sufficient to say that there are over 100 offences in Schedule 4.

I have rarely encountered such a prescriptive check-list for the determination of what should be a relatively straightforward issue. Indeed, I cannot begin to understand why a licensing authority is not trusted to make the judgement-call itself, and issue a personal licence only to those whom it thinks are fit and proper to hold one.

Premises licences

Section 3 of the repealed Licensing Act 1964 provided:

Licensing justices may grant a justices’ licence to any such person, not disqualified under this or any other Act for holding a justices’ licence, as they think fit and proper.

The breadth of that discretion (“may grant”, and “as they think fit and proper”)[1] allowed for a degree of local control which must surely be the envy of modern licensing authorities having to make decisions under the more prescriptive Licensing Act 2003 (“the 2003 Act”).

 

The ‘fit and proper person’ test in Scotland

 

The Licensing (Scotland) Act 2005 (“the Scotland Act”) is similar in many regards to the 2003 Act, and it is clearly indented to be so.  It follows, for example, the scheme of separate ‘personal licences’ and ‘premises licences’. It gives the same licensing objectives, albeit in slightly different language: (“preventing crime and disorder”, “securing public safety”, “preventing public nuisance”, “protecting children and young persons from harm”), with an additional licensing objective of “protecting and improving public health”.

But in spite of the similarities, the Scotland Act expressly preserves the ‘fit and proper’ criterion, which the 2003 Act does not. Section 23 of the Scotland Act gives one of the grounds for refusal of a premises licence “that the applicant is not a fit and proper person to be the holder of a premises licence.”

Definition of ‘Fit and Proper Person’

 In Regina v Warrington Crown Court [2]  Lord Bingham said:

“[Fit and proper person] is a portmanteau expression, widely used in many contexts. It does not lend itself to semantic exegesis or paraphrase and takes its colour from the context in which it is used. It is an expression directed to ensuring that an applicant for permission to do something has the personal qualities and professional qualifications reasonably required of a person doing whatever it is that the applicant seeks permission to do.”

Although an express ‘fit and proper person’ test has not been carried-forward into the 2003 Act, the concept is far from alien to modern regulation. It is a dominant force, for example, in taxi-licensing, it being a requirement of a private hire vehicle driver’s licence, a private hire operator’s licence, and a hackney-carriage driver’s licence, that the holder is a fit and proper person. [3]

In McCool v Rushcliffe Borough Council [4] the issue was the past conduct of a private hire driver (indecent assault on a passenger), and in the course of his judgement Lord Bingham made it clear that the ‘fit and proper person’ test in the context of taxi-licensing went beyond a simple appraisal of his ability to drive a vehicle safely. He said that the purpose of the test in the taxi-licensing regime was: –

“… among other things, to ensure so far as possible that those licensed to drive private hire vehicles are suitable persons to do so, namely that they are safe drivers with good driving records and adequate experience, sober, mentally and physically fit, honest, and not persons who would take advantage of their employment to abuse or assault passengers.”  [my italics]

In other fields, too, the ‘fit and proper person’ test is alive and kicking: the Finance Act 2010 introduced a requirement for charities to be run by ‘Fit & Proper Persons’ if they were to enjoy the status (and tax benefits) of a charity. The ‘fit and proper’ test is also the benchmark for providers of health and social care, as well as owners and managers of park home sites, and even the owners and directors of football league clubs.

It would be strange indeed if, in the field of alcohol and entertainment, unfit and improper persons were tolerated as the licensees of premises.

The licensing objectives

Obviously, if a representation is made (and accepted) that an applicant for a licence is so unfit to hold a premises licence that the licensing objectives would be undermined if it were granted to them, then a refusal will most likely follow. But strictly, it would be because rejecting the application was ‘appropriate for the promotion of the licensing objectives’, rather than because the applicant was not a ‘fit and proper person’.

So it is that an application by a convicted drug dealer is likely to be thought to undermine the ‘prevention of crime’ objective, or the grant of a licence to a known paedophile palpably inconsistent with the protection of children from harm objective. The character of the applicant – their fitness and propriety – is in truth the reason for refusal, but it has to be channelled through the licensing objectives.

The analysis is easy when the unfitness goes directly to one of the licensing objectives, but what when the unfitness is more general, and a direct connection cannot be made? For example, when an applicant shows a total disregard for laws unrelated to the licensing objectives.  I have known conduct of an applicant which amounted to contempt for the law – stubborn refusal to make maintenance payments, repeated driving whilst uninsured, flagrant breaches of planning laws – to be rejected as irrelevant to a determination of a premises licence application because they did not relate to the licensing objectives.  Surely, if an applicant is demonstrably not law-abiding, it is undesirable that they hold a premises licence, even if their disinclination to obey the law is manifest in areas not directly related to the licensing objectives?

In the unreported case R v Preston Crown Court ex parte Cooper (1989)[5], the Divisional Court upheld the refusal of a licence on the ground that control of the premises would rest with a family who had regularly “flouted the law in relation to mock auctions”. The Crown Court had said: “We find that this application has behind it a family firm which we do not accept is law-abiding and of the integrity required…”.

That was a case under the licensing Act 1964, where an express ‘fit and proper person’ criterion was in play. But I think analogous reasoning could legitimately figure in an application for a premises licence under the 2003 Act. The key is the word “appropriate” in section 18(3) –

18        Determination of application for premises licence

(3) Where relevant representations are made, the authority must—

(a)   hold a hearing to consider them…

(b)  having regard to the representations, take such of the steps mentioned in subsection (4) (if any) as it considers appropriate for the promotion of the licensing objectives.

I think it is strongly arguable that in a suitable case past conduct, and in particular conduct that displays a lack of integrity or habitual law-breaking, may be relevant to a licensing decision under the 2003 Act, even if the past conduct or unlawful behaviour cannot be directly linked to any of the licensing objectives. That is because it may legitimately be thought inappropriate for the promotion of the licensing objectives to give a person who is not a law-biding citizen – or even a person who is of bad character more generally – the responsibilities of a premises licence.

The Knightsbridge Crown Court case [6]

The ‘fit and proper person’ principle was stretched to its limit in this case, which concerned the cancellation of casino licences under the Gaming Act 1968 on the ground that the licensees were not fit and proper persons.  The licences had been cancelled by the licensing justices, and there was an appeal against their decision. By the time the matter reached the crown court, the entirety of the shares in the holding company of the various subsidiary licensee companies had been sold to new owners, against whom there was no complaint. The crown court dismissed the appeals. On further appeal to the Divisional Court, the issue was summarised in the judgement of Griffiths LJ as follows –

“Whereas it might be difficult for an individual with a bad record to persuade a court that he had completely reformed, a company was in a different position for it was as good or as bad as the people who controlled and managed it, and where there had been a complete change of shareholding and management there should be no impediment to holding that the company was now a fit and proper person to hold a gaming licence, if the shareholders and managements were now respectable and capable of the proper management of a gaming club.”

The licensees won their appeal in the Divisional Court, but only because the Crown Court had failed to regard the character of the new owners of the licensee-companies as relevant. The Divisional court did not  say that the past conduct of the replaced owners was irrelevant: far from it.  It is instructive to cite two passages in the judgment of Griffiths LJ in more detail:

“On the question of whether or not the companies are fit and proper persons to hold the licence it is conceded that this question must be determined in the light of the circumstances existing at the time of the appeal. Past conduct will, of course, be relevant as we shall discuss more fully hereafter.”  …

“We have no hesitation in saying that past misconduct by the licence holder will in every case be a relevant consideration to take into account when considering whether to cancel a licence. The weight to be accorded to it will vary according to the circumstances of the case. There may well be cases in which the wrongdoing of the company licence holder has been so flagrant and so well publicised that no amount of restructuring can restore confidence in it as a fit and proper person to hold a licence; it will stand condemned in the public mind as a person unfit to hold a licence and public confidence in the licensing justices would be gravely shaken by allowing it to continue to run the casino. Other less serious breaches may be capable of being cured by restructuring.

It is also right that the licensing justices or the Crown Court on an appeal should have regard to the fact that it is in the public interest that the sanction of the cancellation of a licence should not be devalued. It is obvious that the possibility of the loss of the licence must be a powerful incentive to casino operators to observe the gaming laws and to run their a premises properly. If persons carrying on gaming through a limited company can run their establishment disgracefully, make a great deal of money and then when the licence is cancelled sell the company to someone who because he is a fit and proper person must be entitled to continue to hold the licence through the company, it will seriously devalue the sanction of cancellation… A licensing authority is fully entitled to use the sanction of cancellation in the public interest to encourage other operators or would-be operators of gaming establishments to observe the law in the area of their jurisdiction.”

In a scholarly and thought-provoking article in the current edition of the IOL journal, Philip Kolvin KC suggests that the Knightsbridge case “has no application to bodies which are not charged with the function of imposing sanctions.” He writes –

“A licensing authority has no power to impose a sanction of cancellation. Its role is to impose measures to protect the licensing objectives in the future. Therefore, the ideas propagated in Sporting Club, including whether the licensee will “stand condemned” in the public mind, and whether “public confidence” in the licensing system would be affected by a failure to cancel the licence, have passed into history. They have no place in the modern licensing system.”

What Philip seems to be saying is that although a licensing authority most certainly has the power to revoke a licence, that is not a ‘sanction’ – it is only a ‘step to promote the licensing objectives’ – and the Kingsbridge reasoning only applies to ‘sanctions’. Adopting the language of a proverbial dissenting judge in the Court of Appeal “I have the misfortune to disagree with my brother KC”.

Surely there is as much need for the public to have confidence in the licensing regime provided by the 2003 Act as there was for them to be confident in the scheme of Gaming Act 1968 or in any other licensing regime.  Loss of public confidence can lead to civil disobedience of varying scales, whether it is extreme, as in the poll-tax riots, or at the other end of the scale as in the recent ULEZ lawlessness. It is by no means difficult to postulate a potential and realistic link between loss of confidence in the 2003 Act (should it occur) and the undermining of the crime prevention licensing objective, or the prevention of public nuisance objective. The reason why confidence had been lost, the scale of that loss and the likely continuance of it, would obviously be important factors.

The flaw, if I may respectfully say so, in Philip’s argument is his assertion that the 2003 Act ‘steps appropriate for the promotion of the licensing objectives’ are not ‘sanctions’. I am not sure it matters what label one gives to the power of revocation.

I think that there could well be a decision on a review in which a licensing authority lawfully concludes that it is appropriate for the promotion of the licensing objectives for the public to have confidence in the licensing regime, and that in the circumstances of that review confidence would be seriously undermined if the licence were not revoked. It would be immaterial whether that revocation were labelled a ‘sanction’ or (more accurately) a step which is appropriate for the promotion of the licensing objectives.

Philip concludes that the Knightsbridge case “has nothing to tell a modern licensing authority under the Licensing Act 2003” and “should be allowed to rest in peace.” In the days and weeks following Halloween, he should not be too sure that it will do so – certainly not while I am around!

 

 

Gerald Gouriet KC

Francis Taylor Building

Inner Temple

16 November 2023

 

 

[1] See, for example, the discretion as explained by the House of Lords in Sharpe v Wakefield

[2] [2002] UKHL 24

[3] LGMPA 1976, ss 51, 55 and 59; Private hire Vehicles (London) Act 1998, ss 3, 13.

[4] 1998 WL 1043984

[5] Cited by Lord Bingham in Warrington

[6] Regina v Knightsbridge Crown Court, Ex parte International Sporting Club (London) Ltd, [1982] QB 304