Eastenders Cash & Carry Plc and Another v The Commissioners of HM Revenue & Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Elias,Lord Justice Davis |
| Judgment Date | 20 January 2012 |
| Neutral Citation | [2012] EWCA Civ 15 |
| Docket Number | Case No: C4//2010/2740 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 January 2012 |
[2012] EWCA Civ 15
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT
THE HON MR JUSTICE SALES
CO/15215/2009
CO/1142/2010
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Elias
and
Lord Justice Davis
Case No: C4//2010/2740
Mr Geraint Jones QC and Mr Marc Glover (instructed by Rainer Hughes) for the Appellant
Mr Jonathan Swift QC and Mr Neil Sheldon (instructed by HMRC Solicitors) for the Respondent
Hearing date : 5 th October 2011
The issue
This case is about the lawfulness of the exercise of the power claimed by the Commissioners of Her Majesty's Customs & Excise (HMRC) to detain goods temporarily for the purpose of investigating their status. It turns on the contested interpretation of s. 139(1) of the Customs & Excise Management Act 1979 (the 1979 Act) in the context of other provisions in that Act and its application to the facts of this case.
The issue on the appeal is whether the decision of Sales J, on the hearing of an application for judicial review against HMRC, was wrong. He accepted HMRC's submissions on quite a narrow, but nevertheless important, legal point, which impinges on the rights of the subject and affects the investigatory and enforcement powers of HMRC. As the differences of judicial opinion might indicate, the answer is not obvious. I have reached a clear conclusion, but only after wavering on the way. I have read the judgments of Elias and Davis LJJ in draft. I recognise their force and respect their conclusions, but I remain unpersuaded that Sales J was wrong to dismiss the application for judicial review against HMRC.
Eastenders Cash & Carry PLC and related companies (the Claimants) relied on their interpretation of the 1979 Act as the basis for their application for judicial review of a decision of HMRC to detain quantities of the Claimants' alcoholic goods pending HMRC's enquiries whether the goods had been improperly imported. HMRC never went to the lengths of seizing the goods in question or forfeiting them: they detained them for a limited period while they carried out investigations into their status. The inquiries about whether or not duty had been paid on the goods were inconclusive. HMRC released the detained goods to the Claimants, who then sought an order from the court that HMRC's detention of them was unlawful and for damages to be assessed.
The power to detain
I agree with Sales J that seizure and detention of goods, which are only two of HMRC's many intrusive powers, are distinct in nature, purpose and scope, though contained within the same single short sub-section of s.139 of the 1979 Act ("Provisions as to detention, seizure and condemnation of goods, etc"):-.
"(1) Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard."
This case is not about seizing or forfeiting goods. It is only concerned with the less drastic option of detaining goods for a reasonable time for the purpose of investigation. Detention of the suspect goods in this case was anterior to HMRC's possible use of wider powers to seize and forfeit them. Detention was used as a temporary and precautionary measure enabling HMRC to protect and preserve the goods in question while undertaking inquiries into their status. HMRC then had to make a decision whether (a) to seize the goods and take proceedings for their forfeiture, or (b) to restore them to the Claimants.
Nothing is expressly spelt out in the subsection, either in relation to the seizure or the detention of goods, about the need for the actual existence of facts, or about the need for a reasonable belief on the part of HMRC in the existence of facts, such as non-payment of duty on imported goods, which would actually justify the forfeiture of goods described as "liable to forfeiture." Nor is anything said about the length of time, such as "for a reasonable period", or about the specific purpose, such as "for the purpose of further inquiries" or "for the purpose of investigation", for which HMRC may lawfully detain goods.
Although HMRC's power to detain goods is, on the face of s.139(1), an unqualified one, it is, like all public powers, liable to judicial review for excess or abuse on grounds that its exercise was flawed by error of law, or by procedural irregularity, or was irrational or disproportionate. On this appeal the only challenge to the lawfulness of HMRC's exercise of the power to detain the Claimants' goods is based on the description in s.139(1) of the things in question as being "liable to forfeiture." The Claimants' case is that HMRC's interpretation of s.139(1), which the judge accepted, is wrong.
The Claimants argue that the legal effect of the description in s.139(1) of things as "liable to forfeiture" is to subject HMRC's discretionary power to detain suspect goods to a condition precedent of the existence of facts that justify forfeiture of the goods. In other words, the exercise of the power to detain goods temporarily for investigatory purposes can only be justified in law, if the forfeiture of those goods still under investigation would be justified in fact. According to the Claimants it is not sufficient that the goods may be liable to forfeiture if and when the true facts are established by the investigation, or that HMRC are able to show reasonable grounds for believing that they may be liable to forfeiture on the ground, for instance, that the correct duty on them has not been paid.
The appeal
The appeal is from the order made by Sales J on 4 November 2010. He dismissed the Claimants' application: [2010] EWHC 2797 (Admin)). He granted permission to appeal. The main ground of appeal is that the judge was wrong in law to interpret s.139 (1) as making it lawful for HMRC to detain the Claimants' goods in circumstances when they actually turned out not to be liable to forfeiture.
Background facts
On 16 October and 4 December 2009 HMRC visited the Claimants' warehouses in Coventry and Birmingham respectively. They detained quantities of alcoholic goods. The Claimants were unable to provide documentary evidence that duty had been paid on them. Inspection of the documents produced by the Claimants revealed significant discrepancies and indicated that duty may not have been paid, either in full or at all, on the goods contained in the consignments.
The goods in question consisted of pallets of beer and cases of wine and spirits. If the goods had not been detained by HMRC pending further enquiries, there would have been nothing to stop the Claimants from selling the goods on to their customers before HMRC could conclude their enquiries about the lawfulness of the imports.
HMRC detained the goods at the Claimants' premises pending further enquiries. It was common ground before the judge that in the present case HMRC had reasonable grounds for suspecting that duty had not been paid on the goods and that it was reasonable for HMRC to make further enquiries in that regard.
HMRC set about making enquiries as to the supply chains of the detained goods. The purpose of the enquiries was to determine whether duty had in fact been paid. The goods had passed through a number of suppliers before reaching the Claimants. The investigation whether duty had been properly paid was difficult and time-consuming.
The enquiries revealed that duty had not been paid on a large majority of the goods making up the two detained consignments. As a result some of the goods were then seized by HMRC as "liable to forfeiture" and they became subject to condemnation proceedings pursuant to Schedule 3 to the 1979 Act ("Provisions relating to Forfeiture"). Some goods were returned to the Claimants, as HMRC concluded that they would be unable to complete their enquiries within what they considered to be a reasonable time. The decision to return those goods did not constitute acceptance by HMRC that duty had in fact been paid on them.
The claims advanced against HMRC only concern the detained goods that were later returned to the Claimants. The Claimants contended that s.139(1) did not provide HMRC with lawful authority to detain the goods pending their enquiries and that, if HMRC had such a power, they had detained the goods for an unreasonably lengthy period such that their continued detention became unlawful at some point prior to their return. The latter point was rejected by the judge and has not been pursued by the Claimants on appeal.
Legislation and internal guidance
I begin with s.49(1) of the 1979 Act ("Forfeiture of goods improperly imported"). It specifies the conditions that must be satisfied for the forfeiture of goods improperly imported. It provides that imported goods chargeable on their importation with customs or excise duty shall be "liable to forfeiture" if specified acts, such as unshipping them in any port, or unloading them from any aircraft in the United Kingdom, are done without payment of that duty. As Sales J correctly observed, s. 49 is not a definition section. It does not define the meaning of the expression "liable to forfeiture" either as used in that section or as used in s.139(1). It specifies the circumstances in which goods improperly imported are liable to forfeiture.
Section 138(1) makes provision for the detention of persons. Although this case is concerned with the detention of goods, not persons, that...
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