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R (on the application of First Stop Wholesale Ltd) v Revenue and Customs Commissioners
[2013] EWCA Civ 183; [2013] All ER (D) 105 (Mar)
12 March 2013
Court of Appeal, Civil Division
Lord Justice Jackson, Lord Justice Lewison and Lord Justice Beatson
This case concerns the operation of s139 of the Customs and Excise Management Act (CEMA) and the circumstances in which HMRC may exercise the “costs shield” afforded by s144(2).
Section 139 deals with the detention, seizure and forfeiture of goods – that is goods imported or exported in contravention of the rules relating to prohibition and payment of duty.
By operation of s144(2), where a court determines the detention or seizure of the goods was unlawful but is satisfied that there were reasonable grounds for the detention or seizure, HMRC are not liable for costs.
Whether it is a condition precedent to the exercise of the power in s139 CEMA to detain goods that they are in fact liable to forfeiture is a matter to be determined (hopefully soon) by The Supreme Court in HMRC’s appeal against the decision in R (Eastenders Cash and Carry Plc) v Revenue and Customs Commissioners [2012] EWCA Civ 15 (“Eastenders No 1”) which was handed down on 20 January 2012 – the majority of the Court of Appeal found that it was a condition precedent. Elias and Davis LJJ held that, although at the time of the detention it may not be known whether goods are in fact liable to forfeiture, section 139 only empowers their detention if they are in fact so liable on account of inter alia unpaid duty. It does not suffice that the goods are “at risk” of being forfeited or that there are reasonable grounds for their detention or seizure: see Elias LJ at [85] – [90] and [93] and Davis LJ at [99] – [100], [107] and [108]. Mummery LJ dissented.
Pending that appeal, the Court of Appeal (and all lower courts of course) is bound by it.
The provisions of Sch 3 of CEMA (challenging the legality of a seizure) can be found here
Provisions relating to restoration of goods are found at s152 CEMA and ss14 – 16 of the Finance Act 1994
The summary below is shamefully lifted directly from LexisNexis links to that site and to a pdf copy of the judgment therefrom are provided below.
Customs and Excise – Forfeiture – Imported goods – Revenue and Customs Commissioners detaining and removing quantities of alcohol from claimant taxpayer’s premises – Taxpayer challenging lawfulness of Revenue’s removal of goods – Judge finding Revenue unlawfully removing certain quantities of goods – Judge ordering Revenue to pay taxpayer’s costs – Judge also finding other goods lawfully removed – Revenue and taxpayer appealing – Whether judge erring – Customs and Excise Management Act 1979, Sch 3, para 1.
Abstract

Customs and Excise – Forfeiture. The Court of Appeal, Civil Division, held that a judge had erred in finding that alcoholic goods detained by the Revenue and Customs Commissioners had been unlawfully detained and, further, that the Revenue was, therefore, liable to pay the taxpayer’s costs of the action challenging their seizure. The judge had mis-applied authorities upon which he had been bound.

Digest

The judgment is available at: [2013] EWCA Civ 183

The instant proceedings related to challenges made by the claimant taxpayer to the detaining and removal by the Revenue and Customs Commissioners (the Revenue) of large quantities of alcohol from the warehouse and other premises of the taxpayer. The taxpayer challenged the detention of the goods by way of judicial review. First, it challenged the detention of goods after 4 November 2011, when, at that time, the Revenue gave as the grounds for detention that the goods were being detained and removed from premises pending evidence of duty status. The taxpayer submitted that detention had not been lawful where a legally insufficient reason for detention had been given at the time of detention. Secondly, the taxpayer challenged notices served pursuant to para 1 of Sch 3 to the Customs and Excise Management Act 1979 that goods seized and retained prior to 4 November 2011 were being detained ‘pending further inquiries into their duty status’. The taxpayer submitted that such notices had been unlawful because they had not stated that duty had not been paid on the alcohol. In the first judgment (the first judgment) the judge found that the detention by the Revenue of the taxpayer’s goods after 4 November 2011 had been unlawful because the reasons given in the notices for their detention had been ones which were flawed and erroneous as a matter of public law. He held that Eastenders Cash and Carry plc v Revenue and Customs Comrs [2012] STC 817 (Eastenders No 1) had the effect that there was no power to detain goods pending evidence of duty status and that the purported exercise of the power to detain the goods was flawed by an error of public law because, whether or not it turned out later that the goods had in fact been liable to forfeiture, there was no power to detain for the purposes of investigation. Consequential to that decision, the judge held in a separate judgment (the second judgment) that, following Eastenders Cash & Carry plc v Revenue and Customs Comrs[ 2012] STC 2036 (Eastenders No 2), since the Revenue’s reasons for detaining the alcohol had been unlawful, there had been no reasonable grounds within s 144(2) of the Act for the Revenue to rely upon the ‘costs shield’. Accordingly, the Revenue was ordered to pay the taxpayer’s costs. In regard to the goods detained by the Revenue before 4 November 2011, the judge found that the notices served under para 1 of Sch 3 to the Act had not been unlawful because there could have been no doubt that the Revenue had been stating that it believed the duty had been owed on the goods in question (the third judgment). The Revenue appealed the first and second judgments. The taxpayer appealed the third judgment.

The Revenue submitted, first, that the judge had erred in his approach to Eastenders No 1 since, inter alia, the legality of detention could only be determined with hindsight after the full examination before the court in condemnation or other proceedings and, until then, it could not be said that the initial decision to detain was, in itself, unlawful. Secondly, the judge had erred in granting costs to the taxpayer. The taxpayer submitted that the notices served under para 1 of Sch 3 of the Act had been unlawful. Consideration was given to s 100 of the Act.

The court ruled:

(1) It was settled law that goods could be liable to forfeiture on grounds that had not been advanced or even known at the point of seizure or detention. Further, there was no requirement that, when detaining goods, the reason for their detention had to be given (see [27], [30] of the judgment).

There was no requirement in the Act for any formal written notice of detention and it was not necessary for the notice required by para 1(1) of Sch 3 of the Act to be given at the time of seizure. Even in the case of seizure, notice was not required where goods were seized in the presence of the owner or the owner’s agent. Further, the fundamental principle of public law, namely, that, where the public law illegality concerned the decision-making process rather than the end result, the decision would be susceptible to judicial review and liable to be set aside even though the same result could be achieved lawfully without recourse to the illegitimate part of the reasoning, cut directly across and was inconsistent with the reasoning inEastenders No 1 (see [26]-[30] of the judgment).

Accordingly, in the instant case, the judge had erred in his approach and to the application of Eastenders No 1 and, in particular, upon his reliance upon public law principles (see [39] of the judgment).

The Revenue’s appeal against the first judgment would be allowed (see [39] of the judgment).

Padfield v Minister of Agriculture, Fisheries and Food [1968] 1 All ER 694 applied; Eastenders Cash and Carry plc v Revenue and Customs Comrs [2012] STC 817 applied.

(2) In determining whether the Revenue could take advantage of the costs shield provided by s 144(2) of the Act, it was necessary to consider the objective grounds that existed for detaining the goods, which involved considering the reason relied on at the time of detention and the evidence provided (see [35] of the judgment).

In the instant case, the judge had placed his consideration upon a distinction that had been rejected in Eastenders No 2. Accordingly, he had fallen into error (see [35] of the judgment).

The Revenue’s appeal against the second judgment would be allowed (see [39] of the judgment).

Eastenders Cash & Carry plc v Revenue and Customs Comrs [2012] STC 2036 applied.

(3) The seizure notices in regard to those goods seized before 4 November 2011 had stated that the goods had been seized on the basis that no evidence of duty payment had been provided and that each seizure had been pursuant to the relevant statutory provisions, including s 100 of the Act. If there had been any doubt, the express references to s 100(1)(e) of the Act had made it clear that the Revenue’s position had been that the alcohol was liable to forfeiture because duty had not been paid on it. Further, in any event, a notice under para 1 of Sch 3 of the Act was not a requirement for the exercise of the power to seize. Even where a notice had been required, there was no requirement that the notice been given at the time of seizure or decision to seize the goods (see [36], [37] of the judgment).

Accordingly, the third judgment would be upheld (see [39] of the judgment).

Decision of Singh J [2012] EWHC 1106 (Admin) Reversed.

Decision of Singh J [2012] EWHC 2191 (Admin) Reversed.

Decision of Singh J [2012] All ER (D) 67 (Oct) .

Geraint Jones QC and Marc Glover (instructed by Rainer Hughes Solicitors) for the taxpayer.
Jonathan Swift QC and James Puzey (instructed by Commissions for HM Revenue and Customs) for the Revenue.
Source: LexisNexis
If you have a LexisNexis subscription you can access a copy of the judgment here
If not, here is a pdf of the judgment as recorded on LexisNexis: R_(on_the_application_of_First_Stop_Wholesa