HT & Company (Drinks) Ltd and Another v The Commissioners for HM Revenue & Customs
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Cobb |
| Judgment Date | 12 March 2015 |
| Neutral Citation | [2015] EWHC 659 (Admin) |
| Docket Number | Case No: CO/880/2015 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 12 March 2015 |
[2015] EWHC 659 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Cobb
Case No: CO/880/2015
The Queen On the application of
James Pickup QC, Conrad McDonnell, Marc Glover (instructed by Neumans) for the Claimants
James Eadie QC, Sarah Harman (instructed by Solicitor's Office, HMRC) for the Defendant
Hearing date: 6 March 2015
The principal issue before the Court is whether I should grant interim injunctive relief within prospective judicial review proceedings, in favour of parties who have an appeal pending in the First-Tier Tribunal (Tax) ("FTT"). The Claimants in this application (and the Appellants in the FTT) are warehousekeepers and traders in duty-suspended goods; the Defendants/Respondents in both actions are the Commissioners for Her Majesty's Revenue and Customs ("HMRC").
By a claim dated 24 February 2015, the Claimants, HT & Co. (Drinks) Ltd. ("HT") and Malcolm Cowen Drinks Ltd ("MC"), seek permission to apply for judicial review against decisions of HMRC, communicated by letters dated 15 December 2014, by which HMRC revoked the Claimants' authorisation to trade in duty-suspended goods (i.e. wines, beers and spirits). By separate application dated 27 February 2015 the Claimants seek urgent interim injunctive relief, namely a stay of those revocations, and orders reinstating the revoked authorisations (on suggested new conditions), pending determination of their potential claims for judicial review.
The application for urgent interim relief was considered on the papers by Haddon-Cave J. on 27 February 2015; he refused the application. The Claimants renewed the application orally before the court on 6 March 2015; both sides were represented by leading and junior counsel. Following a full day of argument, I reserved this judgment for a short time to consider the submissions and the evidence. A decision is required before 16 March 2015.
The Claimants and HMRC both further invite me to consider the Claimants' application for permission to apply for judicial review. The Claimants invite me to grant permission if I accede to the application for interim injunctive relief, but to adjourn the question of permission if I refuse the application for an injunction so that they can elaborate further on points not argued in full at this hearing. The Defendant invites me to refuse the Claimants' permission to apply for judicial review.
The context in which this application arises is factually and legally similar to that recently considered by the Court of Appeal in CC&C v HMRC [2014] EWCA Civ 1653 (" CC&C"); Underhill LJ described (at [1]) the grant of authorisation by HMRC in these circumstances as one which:
"… permits wholesale trading in alcoholic drinks and other dutiable goods which are held in, or moved between, excise warehouses without giving rise to an "excise duty point" and thus attracting liability for excise duty. Goods so traded are generally described as "duty-suspended goods". The regime is governed by both EU and domestic regulations. The Warehousekeepers and Owners of Warehoused Goods Regulations 1999 ("the Regulations" – also known as "WOWGR") provide for persons holding or buying duty-suspended goods to be approved and registered by Her Majesty's Revenue & Customs ("HMRC") as "registered owners". The regime is highly prescriptive as regards the procedures and paperwork to be employed, but there is a recognised problem of dishonest traders seeking to manipulate the system in order to evade duty, typically by so-called "duplicate loads" being moved under cover of paperwork generated for legitimate movements. Registered owners are expected to use all due diligence to prevent their legitimate trade being exploited to facilitate fraudulent transactions."
By its substantive proposed claim for judicial review, the Claimants challenge the four decisions of HMRC communicated by letters dated 15 December 2014; those decisions were:
i) Revocation of HT's authorisation as a registered owner of duty-suspended goods (this was to have immediate effect);
ii) Revised approval of HT's premises at Admiral House, London Rd, West Thurrock from 15 December 2014 to 16 March 2015 with termination operable from 16 March 2015; in the meantime a condition banning the exportation of goods from this warehouse to the EU;
iii) Revocation of HT as an authorised warehousekeeper with effect from 16 March 2015;
iv) Revocation of MC's authorisation as a registered owner of duty-suspended goods with immediate effect.
The effect of these decisions was to prohibit (a) the Claimants' ability to buy and hold duty-suspended goods in bonded warehouses in the UK with immediate effect, and (b) the operation of its bonded warehouse and the warehouse premises with effect from 16 March 2015. The decisions further prevented the Claimants from exporting goods from the UK; since December 2014 they have only been able to withdraw goods from the warehouse for the purposes of making duty-paid supplies in the UK.
By Notices of Appeal dated 14 January 2015, the Claimants have separately lodged appeals against these decisions to the FTT.
Relevant background
The Claimants are long-established wholesalers, registered in England and Wales, specialising in the sale of beers, wines and spirits; they operate large-scale businesses, and have both been trading for a number of years, in companies with significant financial turnovers (HT = £130m in 2014, MC = £50m in the same period). The majority of the market is in UK duty-paid sales including sales from a Cash and Carry warehouse. MC has an account in a tax warehouse in Belgium from which it supplies goods to third party customers largely in France. HT has been a registered owner of duty-suspended goods under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 ("the 1999 Regulations") since 1999, and an authorised warehousekeeper since 2008. Its warehouse has been approved as a tax warehouse since 2008.
HT and MC are wholly-owned by the same company, Everwine Ltd. (an English company). Mr Prakash Thakrar is director and 99% shareholder of Everwine Ltd.; the only other director of Everwine Ltd. is Mr Sanjay Thakrar. The two companies are closely linked in their trading operations; the majority of HT's EU export is to MC's account in the Belgian tax warehouse.
It is in HMRC's power to grant approvals/authorisations to businesses such as the Claimants to operate excise warehouses and to hold goods in such warehouses; these authorisations are known as (and indeed treated by all as) 'privileges' (see Part VI of the 1999 Regulations). In this case, the relevant approval was issued on 18 March 2014 to HT in respect of its warehouse premises, and as a warehousekeeper of an excise warehouse, and to HT and MC as registered owners of goods in an excise warehouse.
Given the Claimants' challenge to the proportionality of HMRC's action in revoking the authorisations, and their complaint about unfair process in effecting the same, it is necessary to outline the background to the decisions under challenge in a little detail. In doing so, I wish to emphasise that HMRC does not allege that the Claimants, or either of them, have been involved in fraudulent or dishonest trading.
During 2013, HMRC had cause to investigate the Claimants' trading activities, concerned about the extension of credit limits and the receipt of large cash round-sum payments in its duty-suspended business. In March 2013 HMRC officers interviewed the Claimants' directors; interviews were repeated in August 2013, this time over a number of days, and under caution. The Claimants' directors had accepted that they agreed to grant customers credit limits of £100K-£200K without sight of any formal business plans, trade references or financial security. The second round of interviews gave the Claimants opportunity to explain its customer due diligence arrangements and credit procedures, and gave the directors an opportunity to appraise HMRC of improvements to their operations since the concerns had been raised earlier in the year.
In November 2013, given the suspicions about the large cash sums, HMRC requested the Claimants' records of internal Suspicious Activity Reports, Suspicious Activity Reports to the Serious Organised Crime Agency and contemporaneous documents recording continuing anti money-laundering due diligence in respect of thirty-three customers. The Claimants' solicitor replied by letter dated 17 January 2014, indicating that neither company had any of these documents to disclose. This was, in the circumstances, surprising to HMRC. Following this enquiry the Claimants engaged the service of its first due diligence company, namely Due Diligence Exchange Ltd.
None of this early history is materially in dispute.
On 18 March 2014, HMRC granted renewed authorisations to the Claimants as 'registered owners' under the 1999 Regulations; these authorisations were subject to certain conditions relevant to ensuring that the companies conducted due diligence in relation to their customers. The schedule of conditions attached to the authorisations bears the warning:
"Failure to comply with a condition of approval could result in your registration being revoked. You may also incur a financial penalty".
These conditions were explained directly to the directors of the...
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