Commissioners for HM Revenue and Customs v First Stop Wholesale Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Beatson,Lord Justice Lewison,Lord Justice Jackson |
| Judgment Date | 12 March 2013 |
| Neutral Citation | [2013] EWCA Civ 183 |
| Docket Number | Case No: C1/2012/2016; C1/2012/2759 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 March 2013 |
[2013] EWCA Civ 183
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM the Queen's Bench Division, Administrative Court
The Hon. Mr Justice Singh
[2012] EWHC 1106 (Admin), [2012] EWHC 2191 (Admin), [2012] EWHC 2975 (Admin)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Jackson
Lord Justice Lewison
and
Lord Justice Beatson
Case No: C1/2012/2016; C1/2012/2759
Jonathan Swift QC and James Puzey (instructed by Commissioners for HM Revenue and Customs) for HMRC
Geraint Jones QC and Marc Glover (instructed by Rainer Hughes Solicitors) for First Stop
Hearing date: 22 February 2013
Further submissions: 27 February and 6 March 2013
Introduction
These appeals are against orders in three linked judgments of Singh J dated 27 March, 16 July, and 5 October 2012 arising out of the detention in June 2011 by Her Majesty's Revenue & Customs ("HMRC") of large quantities of alcohol from the warehouse and other premises of First Stop Wholesale Ltd ("First Stop"), the respondent to the first two appeals and the appellant in the third. At the time the alcohol in this case was detained in June 2011, HMRC gave as the grounds for their detention that they were "detained and removed from premises pending evidence of duty status" and were "goods detained and removed pending duty status".
The first two decisions concern goods still detained on 4 November 2011. In the first the judge declared the detention of the goods unlawful because the reasons given in the notices for their detention were ones which were flawed and erroneous as a matter of public law. In the second he ordered HMRC to pay First Stop's costs. HMRC appeals against these orders. The third appeal is by First Stop. It concerns goods the subject of notices of seizure issued under paragraph 1 of Schedule 3 to the Customs and Excise Management Act 1979 ("the 1979 Act") before 4 November 2011 which the judge held were valid notices.
Section 139(1) of the 1979 Act provides that "any thing liable to forfeiture under the Customs and Excise Acts may be seized or detained by any officer…". Sections 49(1) provides that goods improperly imported inter alia because duty has not been paid on them are liable to forfeiture. Section 144(2) provides a "costs shield" for HMRC. Under it, a person who obtains judgment against HMRC is not entitled to recover any damages or costs where "the court is satisfied that there were reasonable grounds for seizing or detaining" the goods in question.
One difference between the position of goods seized and goods only detained is that in the case of goods seized, a person claiming the goods are not liable to forfeiture can give notice within a month and HMRC must then institute condemnation proceedings in the High Court or a magistrates court: Schedule 3 paragraphs 3, 6 and 8 of the 1979 Act. Either party has an appeal either by way of case stated or to the Crown Court against any decision in condemnation proceedings: paragraph 11 of Schedule 3 to the 1979 Act. In the case of goods detained, there is no statutory appeal and the remedy of the goods owner is by an application for judicial review or a civil suit for wrongful interference with goods.
The outcome of these appeals depends on the scope of two judgments of this court in a judicial review brought by Eastenders Cash and Carry Plc ("Eastenders") about the meaning of sections 139 and 144(2) of the 1979 Act. I shall therefore summarise the effect of those judgments before turning to the decisions of the judge in this case.
EastendersNo 1
R (Eastenders Cash and Carry Plc) v Revenue and Customs Commissioners [2012] EWCA Civ 15 (" EastendersNo 1") was decided in January 2012. Before that decision, there was no binding authority on the construction of section 139(1) of the 1979 Act, and there were differing views.
In Gora v Customs and Excise Commissioners [2003] EWCA Civ 525, at [50] – [52], Pill LJ (with whom Chadwick LJ agreed) suggested that the power of detention in section 139 was intended to allow for a reasonable investigation to be carried out where it was uncertain whether duty had been paid or not. Longmore LJ, however, considered (at [64] and [68]) that it was arguable that the section be given a narrower construction and that detention of goods which were not in fact liable to forfeiture was an unlawful interference with goods. In Demand & Supply Cash & Carry Ltd. v. Revenue and Customs [2009] EWHC 3321 (Admin) at [24] Kenneth Parker J broadly agreed with Pill LJ, but in R (Millenium Cash & Carry Ltd) v Revenue and Customs [2010] EWHC 1308 (Admin) Mitting J shared Longmore LJ's reservations.
In EastendersNo 1. a majority of this court took the narrower approach to the scope of section 139. 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. An appeal against that decision is pending before the Supreme Court.
In the "discussion" section of his judgment in EastendersNo 1., Elias LJ stated that the starting point was the natural construction of section 13On its face it made the conditions for exercising the power to detain and the power to seize the same, namely where goods are liable to forfeiture. He considered (see [78]) that to read the provisions to enable a difference to be made between the position of detention and seizure goes "well beyond the legitimate approach to statutory construction". He concluded that the inevitable inference from the way the section is drafted is that "the conditions precedent to the lawful exercise of the power of detention must be precisely the same as those which will justify the lawful exercise of the power of seizure". Once goods are seized (see [79]), this is the first stage in the route to forfeiture. Because the scheme of Schedule 3 leaves the court no discretion as to whether to order forfeiture, "Parliament could not possibly have intended to permit goods to be seized on suspicion alone where this leads to automatic forfeiture of the goods unless challenged by their owner": see [82].
Elias LJ considered that the existence of the immunity in section 144 of the 1979 Act where the court is satisfied that the Commissioners or the officers had reasonable grounds for the seizure or detention supported this construction: see [83]ff. Section 144 would (see [84]) have no purpose if a seizure or detention on reasonable grounds were lawful. It is directed and premised on the assumption that the seizure or detention, even if based on reasonable grounds, is unlawful. Elias LJ also relied on the need not to construe a power to interfere with property rights more widely than is reasonably necessary (see [88]), the fact that, had Parliament intended the section to be interpreted to empower detention on reasonable suspicion alone, it would have been easy to have said so in terms as was done in section 138 (see [89]), and, albeit of less significance, that once one departs from the literal approach "it is not obvious why the test for determining whether goods can lawfully be detained should be the reasonable suspicion of the relevant official as opposed to, say, an honest suspicion": see [90].
It was stated that the effect of this analysis was that the Revenue would not know for sure until a determination of the court whether a seizure or detention is lawful or not, and (see [92]) "legality is determined with hindsight". Elias LJ accepted that this "is a surprising way to draft the legislation". He, however, again pointed to the fact that the potential difficulties are largely catered for by section 144, and added (at [93]) that his construction might have certain advantages to HMRC. He stated that:
"if reasonable suspicion that goods are liable for forfeiture is the test for determining the legality of detention, HMRC may be liable on the basis that any suspicions are not reasonable, even though it turns out that the goods are in fact liable to forfeiture. Conversely, if the test is whether goods are in fact liable to forfeiture, detention will be lawful even if it was not in fact reasonable for HMRC to suspect that they were at the time of detention, and indeed even if HMRC justifies forfeiture on some basis not known at the time of detention."
Davis LJ stated (at [114]) that Elias LJ's reasoning "in essentials" corresponded with his approach and he agreed with it. He considered (at [99] – [100]) it "particularly telling" that in Schedule 3 to the 1979 Act the phrase "liable to forfeiture" means to be given up on account of unpaid duty or some other breach. That meaning is incorporated into section 139 by section 139(6). It is also telling because judgment could only be given in favour of the goods' owner in condemnation proceedings if the court has found that the goods are not in fact liable to forfeiture. He also considered (see [103], [105]) section 144 to be important in the construction of section 139. He stated (at [108]):
"… there are wide ranging grounds for forfeiture in the legislation, not confined to non-payment of duty; and it...
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