ABC Ltd (First Appellant) X Ltd & Y Ltd (Second and Third Appellants) v The Commissioners for HM Revenue and Customs

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Burnett,Lady Justice King,Lord Justice Patten
Judgment Date07 July 2017
Neutral Citation[2017] EWCA Civ 956
Docket NumberCase No: C1/2017/0385 & C1/2017/0332

[2017] EWCA Civ 956





Mr Justice Andrew Baker; Mr Justice William Davies


Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Patten

Lady Justice King


Lord Justice Burnett

Case No: C1/2017/0385 & C1/2017/0332

ABC Limited
First Appellant
X Limited & Y Limited
Second and Third Appellants
The Commissioners for Her Majesty's Revenue and Customs

Philip Coppel QC & David Bedenham (instructed by Rainer Hughes for the First Appellant and Bark & Co Solicitors) for the Second Appellant

James Eadie QC & Amy Mannion (instructed by HMRC's Solicitors Office) for the Respondent

Hearing dates: 10th May & 11th May 2017

Approved Judgment

Lord Justice Burnett

In April 2016 a new regulatory scheme ("the Scheme") was introduced which requires a wholesaler of duty-paid alcohol to be registered and approved as a "fit and proper" person for that purpose by the Commissioners of Her Majesty's Revenue and Customs ("HMRC"). A wholesaler commits a criminal offence if it sells alcohol after a determination by HMRC that it is not fit and proper. Those approved appear on a register which is accessible to the public. From 1 April 2017 anyone purchasing alcohol from a wholesaler who is not approved commits a criminal offence if he knows or ought to have known of the lack of approval. There is an appeal to the First-tier Tribunal ("F-tT") on limited grounds against an adverse decision by HMRC, but there is no power in the F-tT to grant any interim relief to enable the wholesaler to continue to trade lawfully pending the appeal. The Scheme applies to new entrants to the wholesale duty-paid alcohol business and also to those who had been operating as wholesalers before the Scheme's introduction.


The claimants seek to locate a power in HMRC equivalent to a stay, namely temporary approval and registration, or alternatively for the High Court to grant an injunction on those terms either as an adjunct to judicial review proceedings or on a free-standing basis.


New entrants to the wholesale market who fail to satisfy HMRC that they are fit and proper persons must simply wait until their appeal is heard. If they succeed they will be able to enter the market. No question of being eligible for what amounts to an interim approval could arise. The problem, which these judicial review claims raise, concerns those who were in business before the Scheme came into operation and were then refused approval. Given the inevitable delay between any decision of HMRC and the hearing of an appeal in the F-tT, during which period the appellant cannot trade in wholesale alcohol, there is at least a possibility of many wholesalers going out of business. That would have serious consequences not only for the owners of the business but also its employees.


The issues in these two judicial review claims are:

i) Do HMRC have power to allow a wholesaler to continue to trade lawfully pending appeal, and if so in what circumstances?

ii) What are the powers of the High Court to grant interim relief to enable a wholesaler to continue trading pending the appeal in the F-tT?


In the cases before us Andrew Baker J and William Davies J both concluded that HMRC had no power to allow the wholesalers to trade lawfully pending their appeals to the F-tT. Each also applied the decision of this court in CC & C v HMRC [2014] EWCA Civ 1653; [2015] 1 WLR 4043 to the question whether the High Court should grant injunctive relief and concluded that it was not available. They were unimpressed by the evidence suggesting that the companies were immediately doomed if they could not trade pending appeal.


The decisions under challenge in these proceedings are not those by which HMRC determined that the wholesalers were not fit and proper persons under the Scheme, but rather the decisions to refuse to provide a temporary approval to enable trading to continue pending appeal.

The Facts


X Ltd and Y Ltd are corporate vehicles of a single businessman. Y Ltd owns the trademark of a brand of wines produced in Europe. That wine is sold to another company under the same control and ownership. That company sells its products to X Ltd in bond. X Ltd then sells the wine duty paid to Y Ltd which sells it on wholesale. There is an associated company which sells the wine online. The evidence suggests that the group turnover is between £10 million and £15 million a year, with profits of over £500,000. It employs 37 people. The owner estimates the brand to be worth £25 million. He says that the group has no significant reserves and is heavily mortgaged. He asserts that if the companies cannot engage in wholesale trade in alcohol they would not be able to meet their immediate liabilities. They would become insolvent within about a month. He would have to dismiss the staff and close the doors of the businesses. The companies are said to have only a small income stream outside wholesaling (less than £400,000 a year). Moreover, without its distribution network, the brand would become worth very little.


Y Ltd applied for approval on 18 December 2015 and X Ltd on 29 February 2016. On 11 November 2016 each was issued with a minded to refuse letter which gave reasons and invited a response. On 25 November 2016 representations were made on behalf of the companies in support of the grant of approval. The applications for approval were then refused on 19 December 2016. The refusal letters indicated that the companies could continue to trade for a month. The letters explained why HMRC were not satisfied that the companies were fit and proper persons to conduct wholesale alcohol sales.


On 23 December 2016 the companies' advisers explained the consequences of a lack of temporary approval pending an appeal to the F-tT (which was expected to take at least eight months, even with expedition). It was said that "unless HMRC puts some remedial arrangement in place, the statutory right of appeal will be rendered worthless." That was because the companies would cease to exist and, in any event, a successful appeal could not make good the substantial losses that would result from a cessation of trading. They asked to be placed on the approved register pro tem. They referred to the property rights of the companies protected by Article 1 Protocol 1 ("A1P1") of the European Convention on Human Rights ("ECHR") and contended that the goodwill of the companies built up over many years was being destroyed. Such interference pending appeal, given the irremediable nature of the loss, would be disproportionate. That argument was not advanced in relation to the impact of the eventual appeal if it was unsuccessful. It was said that it would be disproportionate in A1P1 terms to put the companies out of business pending their appeals.


HMRC replied on 29 December 2016. The decision to refuse approval was maintained and the argument pursuant to A1P1 rejected.


ABC Ltd is a substantial cash and carry business trading not only in wholesale duty paid alcohol but also in a wide range of other goods. Sales of alcohol to retailers and traders are said to account for between 65% and 70% of the turnover of the business. ABC Ltd has ten employees.


ABC Ltd applied for approval under the Scheme on 11 March 2016. On 29 November 2016 HMRC sent a minded to refuse letter setting out the nature of the concerns, and inviting representations by 9 December. ABC Ltd's sole director says that the letter was not received until 9 December. ABC Ltd's advisers telephoned HMRC and were given a short extension to make representations, which they did on 12 December. ABC Ltd's application was refused by HMRC on 14 December 2016; but it was allowed a month to continue trading as a wholesaler. Solicitors acting for ABC Ltd wrote to HMRC on 19 December asking that trading be permitted until 31 March 2017 or until the F-tT decision if sooner. The request was couched in terms of a request for an extension of the month's grace already granted. There was about £1m worth of stock which would become liable to seizure even though, as was contended, all duty had been paid on it. An argument relying upon A1P1 was also set out.


On 20 December an HMRC officer offered to visit to inspect the stock and records relating to its purchase. The purpose was to ensure that the one month grace period was "reasonable and proportionate". The implication was that it might be extended. Following the visit by its officer, HMRC did extend the period during which ABC Ltd could continue to trade as a wholesaler to 14 February 2017, that is another month. HMRC considered that this period should be used to wind down the duty-paid wholesale part of the business. ABC Ltd's case continued to be that it should be allowed to trade in wholesale alcohol pending its appeal to the F-tT.


HMRC considered that it had no power to grant a temporary approval, as opposed to allowing a period to wind down that wholesale business. That was the position it maintained against each of the claimants in these proceedings.

History of Proceedings


X Ltd and Y Ltd issued proceedings for judicial review on 4 January 2017. Permission to apply for judicial review and interim relief was refused on the papers on 16 January but interim relief was granted the following day pending an oral renewal of the applications. The wind-down period allowed by HMRC came to an end on 18 January 2017. The oral renewal followed on 2 February with judgment being given the next day. Whilst permission to apply for judicial review was refused the judge granted interim relief pending an application for permission to appeal to the Court of Appeal.


On the 28 March 2017, the papers came before me and the following orders were made:

(i) X Ltd...

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