Grundig (Great Britain) Ltd v The Commissioners of Customs and Excise
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ORMEROD,LORD JUSTICE HARMAN,LORD JUSTICE PEARSON |
| Judgment Date | 20 December 1961 |
| Judgment citation (vLex) | [1961] EWCA Civ J1220-5 |
| Court | Court of Appeal |
| Date | 20 December 1961 |
[1961] EWCA Civ J1220-5
In The Supreme Court of Judicature
Court of Appeal
Lord Justice Ormerod,
Lord Justice Harman and
Lord Justice Pearson.
THE SOLICITOR-GENERAL (The Right Hon. Sir Jocelyn Simon, Q.C., H.P.), The Hon. J.R. CUMMIHG-BRUCE and MR R.A. BARR (instructed by the Solicitor of Customs and Excise) appeared as Counsel on behalf of the Appellants (Defendants).
MR NEVILLE FAULKS, Q.C., MR LEON MacLAREN and MR DOUGLAS FALCONER (instructed by Mr R.C. de M. Blum) appeared as Counsel on behalf of the Respondents (Plaintiffs).
: The question in this appeal is by no means easy, and my mind has fluctuated during the hearing of the arguments. I have come firmly to the conclusion, however, that the appeal should be dismissed. It is an appeal by the Defendants, the Commissioners of Customs and Excise, from part of a judgment of Mr Justice Barry delivered in London on the 27th February of this year. There were originally two actions in which the Plaintiffs, Grundig (Great Britain) Limited, were claiming a declaration as to the amount of import duty payable on certain tape recording machines imported by them from Germany. The Writ was issued in the first action on the 26th June, 1958, and in the second on the 16th December, 1959, and an Order consolidating the two actions was made on the 28th March, 1960. The consolidated action was heard by Mr Justice Barry in February, 1961. The learned Judge decided the question in the first action in favour of the Plaintiffs, win are the Respondents to this appeal, and in the second action in favaur of the Defendants. The issues concerned in the second action involved provisions of other Orders than the ones for consideration here and are not the subject of this appeal.
The issue in the first action was whether certain tape machines imported by the Respondents from Germany in 1958 attracted ad valorem duty of 10 per cent or the higher duty of 20 per cent. The Import Duties Act, 1932, imposed a general 10 per cent ad valorem duty on all goods imported into the United Kingdom other than certain excepted goods, and the powers given to the relevant Ministry were extended by the Import Duties (Emergency Provisions) Act, 1959. The Statutory Instrument with which we are concerned principally in this appeal is the Import Duty (Consolidation) Order, 1949, ( Statutory Instrument No. 2355 of 1949). This Order was made on the 16th December, 1949, laid before the House of Commons on the 19th December, 1949, and came into operation on the 1st January, 1950. The effect of it, so far as this appeal is concerned, is that the Second Schedule, Group XVIII, 26(i) includes at (a) "Gramophones with electrical amplification, including radio-gramophones", and the rate of duty was prescribed at 20 per cent. There was, however, in the Order a "Second Annex" which dealt with goods not chargeable with additional duty and in paragraph 4(1) there is to be found "Dictating machines, i.e. machines of the type used for recording dictated correspondence, and reproducing machines and record shaving machines adapted for use in connection therewith". That is the only part of the Order of 1949 which calls for the consideration of this Court. There was, however, a further Order, No. 1632 of 1956, called the "Import Duties (Geneva Agreement) Order 1956" which amended in some respects the Order of 1949 and imposed additional duties on certain imports upon which there had been no additional duty, or a smaller one, in the past. It did not, however, alter the position as to machines which came within paragraph 4(1) of the Second Annex of the Order of 1949. Dictating machines were still included in the Annex and still defined as in the 1949 Order, but paragraph (a), which in the original Order related to "gramophones with electrical amplification including radio-gramophones", was amended by the addition of the words "combined recorders and reproducers (complete with amplifiers) for magnetic sound recordings on tape or wire; and combinations of such recorders and reproducers with such gramophones or with wireless receivers of the domestic type". The combined effect of these two Orders would therefore appear to be that tape recorders other than dictating machines would attract an import duty of 20 per cent, whereas a dictating machine coming within the definition of paragraph 4(1) the Second Annex would attract a duty of 10 per cent only, and the issue in this appeal is whether instruments imported by the Respondents in the summer of 1958 were dictating machines within the definition in the Second Annex or tape recorders attracting the larger duty . I think I should say here that any duty claimed by the Appellants has been paid by the Respondents. The Respondents or their local representatives were aware of the procedure adopted by the Appellants and there has at no time been any suggestion that the Respondents acted other than in good faith. Indeed these proceedings were initiated by the Respondents in order that the matter could be put on a proper basis by a declaration of the Court.
The facts in the case arc somewhat unusual. In 1949, when the Statutory Order which we have to consider became law, the only dictating machine used commercially was one of the "dictaphone" or phonograph type. There may well have been tape recorders in course of development at that time, and indeed there is I think some evidence that at that time there was a tape recorder on the market, but it is common ground that they had not become as universal in their use as they are today. Tape recorders may be used for various purposes. They may be used on the one hand for the reproduction of musical performances of the highest class, and on the other hand for nothing other than the dictation of correspondence and similar uses requiring nothing more than the efficient reproduction of the spoken word. It appears that the important matter, or one of the important matters, is the speed at which the machine runs, and the belief in 1950 and 1951 and for some considerable time thereafter was that a machine which only ran at 5,000 to 5,500 cycles per I second was not suitable for any form of recording or reproduction other than that of the spoken word. In consequence, as the Respondents were contemplating importing from their parent company in Germany a large number of tape recorders, they were naturally anxious to know what duty these machines would attract and some correspondence took place between the Respondents on the one hand and the Appellants on the other, and a letter was written on behalf of the Respondents to the Appellants on the 8th October, 1952, the first paragraph of which read as follows: "Further to my call on you on Tuesday 7th October I wish to thank you for enlightening me on the position regarding importation of recorders and I would confirm that the position as I understand it is that tape recording instruments operating at a frequency of not more than 5,500" - in the letter it said "kilo-cycles", but the word is "cycles" -"per second will be accepted by the Customs and Excise and that a duty will be payable of 10 per cent ad valorem". On the 20th October, 1952, the Appellants, by Mr Mair, replied as follows: "In reply to your letter of the 8th October I am directed by the Commissioners of Customs and Excise to confirm that tape recording instruments of u. kind used for recording and reproducing dictated correspondence which operate at a frequency not exceeding 5,500" – again the word "kilocycles" appears; it should be "cycles"–"per second are liable on import into this country to duty at the rate of 10 per cent ad valorem under Parts of the Customs Tariff. Parts of such instruments are chargeable with duty at 20 per cent ad valorem under Group 10 of the Tariff". A further letter was written on the 27th May, 1953, by the Appellants to the Respondents which ran as follows: "With reference to your letter of the 5th May and to previous correspondence I am directed by the Commissioners of Customs and Excise to inform you that they are prepared to regard Grundig Tape Recorders with a frequency response not exceeding 5)500 cycles per second suitable only for the recording of speech as liable to duty at the rate of 10 per cent ad valorem whether or not they include any of the following articles at the time of importation" – and then following a series of articles which might or might not be included.
It will be seen from the correspondence which I have read that the parties did not appear to be ad idem, hut the arrangement seems to have been accepted that duty would be charged at the rate of 10 per cent only if the machines in question did not operate at a higher speed than 5,500 cycles per second.
In consequence of this arrangement the Respondents entered into a simple but ingenious arrangement with their parent company in Germany. The machines which the Respondents were anxious to import were a sequence of machines known as the "TK" machines, and, in order that these should attract the lower rate of duty only, they were altered in Germany by the removal of a small part know as a resistor which had the effect of reducing the capacity of them a chine so that it would not operate at a higher speed, than 5,500 cycles per second. The machines were then imported, and duty of 10 per cent was paid on thorn, but on their arrival in England they were once more made capable of operating at a much higher speed by the introduction of another register similar in effect but not necessarily in appearance to the one which had been removed by the parent company. This device was certainly known to the local representative of the Appellants and may have been known at their head office. He that as it may, a large number of machines of the "TK" marks capable of...
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