Commissioner of Customs v Delta Petroleum (Caribbean) Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Carnwath |
| Judgment Date | 17 October 2016 |
| Neutral Citation | [2016] UKPC 27 |
| Date | 17 October 2016 |
| Docket Number | Appeal No 0043 of 2015 |
| Court | Privy Council |
[2016] UKPC 27
Privy Council
From the Court of Appeal of the Eastern Caribbean
Supreme Court (British Virgin Islands)
Lord Kerr
Lord Wilson
Lord Reed
Lord Carnwath
Lord Hughes
Appeal No 0043 of 2015
Appellant
James Guthrie QC (Instructed by Simons Muirhead and Burton)
Respondent
Sir Fenton Ramsahoye SC Naina Patel (Instructed by Bankside Commercial Ltd)
This appeal from the Eastern Caribbean Court of Appeal (British Virgin Islands) concerns the lawfulness of the seizure by the appellant Commissioner on 20 September 2012 of Delta's fuel storage tank No 7 at Pockwood Pond, Tortola, together with its contents (some 248,000 US gallons). The seizure was in reliance on powers given by the Customs Management and Duties Act No 6 of 2010 ("the Customs Act"). The issue in short is whether the fuel was liable to forfeiture under that legislation, properly interpreted. The judge (Ellis J) upheld the forfeiture, but her decision was reversed by the Court of Appeal. The Commissioner appeals. (For convenience, I shall refer to the Commissioner and his department as "Customs".)
Delta has imported fuel into the British Virgin Islands since at least 1992, including fuel for use by the British Virgin Islands Electricity Corporation ("BVIEC"). The importation of fuel generally attracts customs duty, but there are exceptions. Relevant in this case is section 20 of the British Virgin Islands Electricity Ordinance, which allows BVIEC to import free of duty petroleum products used in the generation of electricity.
Procedures and conditions for the importation of goods had been set out in a letter from Customs to Delta, dated 21 January 1992. They included requirements for the advance notification of Customs, and for access by their officers for inspection. The letter indicated that outstanding duty payments could be cleared on a monthly basis, prior to the end of the calendar month in which importations took place. This was said to be a "concessionary arrangement", given that the law required duty to be paid "at the time of importation". This letter appears to have been concerned with importation of petroleum products generally, and made no specific reference to BVIEC.
Tank 7 was added to Delta's tank farm in 2008. A letter from Customs dated 25 August 2008 noted Delta's request that it be "added to the BVIEC storage tank farm for an additional 250,000 gallons". The letter stated that permission would be given "to utilize Tank 7 (under special requirements established and approved by HM Customs) for additional storage and delivery only to the BVIEC". This was said to be "a privilege" which could be lost in the event of any contravention of "the Laws and guidelines of Customs".
Mr Sylvester, regional manager for Delta, gave further evidence (second affidavit para 4) about the use of Tank 7, which though not in terms mentioned by the judge, does not seem to have been disputed. He described it as "a bonded tank" containing fuel specifically for BVIEC. According to him it was "in the custody and control of HMS Customs who had the only keys for the locks which allowed fuel to be discharged into the tank as well as released to the BVIEC".
This account is consistent with the terms of a later agreement between Delta and BVIEC dated 3 August 2012, by which BVIEC agreed to purchase exclusively from Delta its requirements of specified fuel products, for a "supply period" from 1 September 2012 to 31 August 2014. Under clause 3(5) Delta was required to maintain a bonded tank filled with a minimum 100,000 US gallons of No 2 diesel at Pockwood Pool, Tortola, and —
"HM Customs in the British Virgin Islands shall retain custody of the keys required to open all valves to this tank and the fuel will be reserved solely for the use by [BVIEC]."
On 23 July 2012 Customs wrote to Delta, following a meeting at which there was discussion of "a new procedure … which (would) eliminate the need for (Delta) to submit requests for refund of duty on fuel sold duty-free". The letter made no specific reference to BVIEC. The new procedure described in the letter was subject to a number of "conditions". They included requirements that Customs should be notified of the arrival of any vessel into the territory for Delta at least 72 hours in advance; notification should be given, and permission sought for the discharge of cargo, before commencement of any unloading operation; Customs should attend the discharge process; imported cargo was permitted to be released "on a bond where necessary, provided that such bond is approved by Customs and remains current"; and in the case of duty free entries, "an authorised person from the eligible entity" must stamp and certify that the cargo was for the sole use of the entity. The letter concluded by reminding Delta that the Customs Act imposed substantial penalties for breach of certain conditions, including possible forfeiture. Reference was made to the possibility of penalties for breach (including forfeiture) under sections 22(1), 24 and 29, but not section 30.
I turn to the judge's account of the events leading up to the actual seizure:
"On 29 August 2012, the vessel, M/T Charmer arrived in the Territory for the purpose of delivering approximately 117,000 gallons of fuel to (Delta). (Delta) notified (Customs) on 28 August 2012 of the vessels' arrival and certain arrival documentation was submitted to (Customs) by Mr Damian Lettsome, on 29 August.
An attempt was made to discharge the fuel from the tanker into the bonded tank on 29 August 2012 but this had to be cancelled due to technical difficulties. On 5 September 2012 Mr Lettsome informed (Customs) that (Delta) would be attempting to discharge the fuel from the tanker within the next few days. (Customs) indicated that it would wish to be present to witness this process.
By emailed correspondence dated 12 September 2012, Mr Lettsome advised two officers of the Customs Department (G Romney and S Chinnery) that the discharge was due to take place on 13 September 2012 at approximately 10.00 am. However further technical difficulties ensued and this process was again postponed. Mr Lettsome advised the officers of this in an email on 13 September 2012 at 8.46 am in which he also indicated that they would be updated once alternative arrangements had been made.
Eventually on 16 September 2012 (Delta) commenced and completed the discharge process which saw the removal of fuel from the vessel at Pockwood Pond and its discharge into fuel Tank No 7.
(Delta) contends that several efforts were made to contact Mr Romney by phone both prior to and during the discharge process but these were futile. The result is that no customs officer or other representative of (Customs) were aware of or witnessed the discharge process." (judgment paras 5–10)
It seems that the problem of unloading was caused by the hose being too short. This was resolved by the use of the hose from M/V Ocean Princess, another Delta vessel which had arrived in the territory on 16 September.
On 20 September 2012, Delta was served with a Notice of Seizure under section 131 of the Customs Act asserting that Tank No 7 and its contents were liable to forfeiture under section 30 of the Customs Act. The particulars set out in the notice were as follows:
"Petroleum fuel was discharged into storage tank No 7 a tank that was bonded by Customs to be used solely for the storage of fuel for British Virgin Islands Electricity Corporation. This tank was accessed by Delta Corporation (Caribbean) Ltd without receiving permission from Customs and without customs supervision which is contrary to the Customs Management and Duties Act No 6 of 2012."
On or about 24 September 2012 Delta gave notice of its intention to commence proceedings in the High Court for return of its goods and damages. On 2 November 2012 Customs responded by lodging an application in the High Court for a forfeiture order for the tank and its contents. The hearing was fixed for 6 December 2012 before Mrs Justice Ellis.
The Customs Act is a comprehensive piece of legislation dealing with the collection and management of customs revenues, including duties on importation (Part III).
The following provisions provide the background. The "time of importation of any goods" when brought by sea is "deemed to be … the time when the vessel carrying them comes within the limits of the territorial waters" (section 3(2)). The importer of goods by sea is required within 14 days to deliver an "entry" to the proper office in the form and manner directed by Customs (section 25(1)). Duty is levied "at the time of first importation into the Territory or delivery from customs charge" (section 54(1)); and, except as permitted under the Act or any other relevant enactment, imported goods may not be removed on importation until the importer has paid the duty chargeable on them (section 54 (2)). Duty is payable by the owner of the goods at the time of making the entry (section 58(1)).
More directly relevant to the issues in the appeal are sections 29, 30, and 69. Section 29 enables the Commissioner "by direction in writing" to impose "conditions and restrictions" in respect of the movement of imported goods. A person who contravenes or fails to comply with such a direction, or a requirement imposed under it, is guilty of an offence and liable on summary conviction to a fine not exceeding $10,000, and "any goods in respect of which the offence was committed are liable to forfeiture".
Section 30 provides so far as material:
"30. (1) Without prejudice to any other provision of a customs enactment, where
(a) imported goods, being goods subject to duty on their importation, are without payment of that duty
(i) unloaded at...
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