R Seabrook Warehousing Ltd v Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Mr Justice Holman |
| Judgment Date | 13 October 2017 |
| Neutral Citation | [2017] EWHC 2583 (Admin) |
| Docket Number | CO/3626/2017 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 13 October 2017 |
[2017] EWHC 2583 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
Royal Courts of Justice
Mr Justice Holman
CO/3626/2017
Mr A Webster QC and Mr M Firth (instructed by Morrisons Solicitors) appeared on behalf of the claimants.
Mr B Hayhurst (instructed by Her Majesty's Revenue and Customs) appeared on behalf of the defendants.
These are applications for permission to apply for judicial review and for interim relief by way of an injunction. They were directed to be listed for oral hearing by the single judge who first considered them on paper. As a result, I have had the benefit today of sustained, albeit necessarily brief, argument by Mr Alistair Webster QC, well supported by Mr Michael Firth, on behalf of the claimants, and Mr Ben Hayhurst on behalf of the defendants. I have been particularly grateful to all counsel – well supported, I am sure, by their legal teams – for the cogency and expertise of their arguments today. As so often, the quality of the argument has not made the task of the judge any easier, for it serves only to highlight the weight of the conflicting considerations in this particular case.
It is clear that in general terms the case occupies the same legal and factual territory as, and raises similar issues to those raised in, the case of HT & Co (Drinks) Ltd v the Commissioners for HM Revenue and Customs [2015] EWHC 659 (Admin), in which Cobb J handed down a written judgment on 12 March 2015. In that case also, he was considering an application for permission to apply for judicial review and a linked application for interim relief. On that occasion he reserved his judgment, and about a week later handed down a magisterial judgment which had obviously taken considerable preparation. I myself cannot indulge in that expansiveness in this case. Today is the last day of my current sitting in the Administrative Court. The time, as I speak, is 4.20 pm. On Monday I start with a very full list and the demanding work of the Family Division. So I must necessarily give a short ex tempore judgment today.
The essential factual context is as follows. The claimants are, and remain, authorised warehousekeepers for the purposes of, and pursuant to, the Warehousekeepers and Owners of Warehoused Goods Regulations 1999. They have indeed been so authorised ever since 1999, some 18 years. Later, they became also duty representatives within the meaning of, and for the purpose of, those regulations.
In October 2014, the defendants, HMRC, published a document called Excise Notice 196 pursuant to those regulations. In general terms, the effect of EN 196 was to impose upon warehousekeepers who were duty representatives a condition of due diligence. This required them, amongst other matters, to carry out what are known as FITTED checks. FITTED apparently stands for the Financial health of the company you intend trading with; the Identity of the business you intend trading with; the Terms of any contracts, payment and credit agreements; Transport details of the movement of the goods involved, whether or not you are directly involved in this; Existence/provenance of goods – where goods are said to be duty paid you should normally seek sufficient detail to satisfy yourself of the status of the goods; and the Deal, understanding the nature of the transaction itself.
As I understand it, a considerable body of warehousekeepers who are duty representatives have accepted, and purport to comply with, the clearly onerous duties and obligations which EN 196 and the requirement of FITTED checks impose upon them. These claimants, however, took the view, really from the outset, which they continue to maintain, that the requirements of EN 196 shift unlawfully and unfairly onto the warehousekeeper duties of making checks which should properly be the responsibility of HMRC themselves. This clearly led to a prolonged period of dialogue between these particular warehousekeepers and HMRC. As I understand it, there were a number of meetings; there has been a great deal of correspondence; but neither appears to have shown much willingness to shift their ground.
Matters came to a head during 2017. On March 2017, HMRC wrote what is headed as a “Minded to revoke letter”. This document now begins at bundle 1, tab 4, p.78 and itself extends to about 12 pages. In it, HMRC set out with some degree of detail and particularity why they considered, as indeed they still do consider, that the claimants are not a fit and proper company to continue to be approved as a duty representative. It is to be noted that at para.9 of that document, now bundle p.80, HMRC clearly state that:
“It is also evident that SWL [the claimants] is failing to adhere to its own internal Due Diligence Policy document. In this regard, HMRC have noted in particular that…” [emphasis in the original document]
and their contentions are then set out. So, pausing there, Mr Hayhurst is at pains to stress today that the reason why HMRC did ultimately revoke the duty representative approval was not limited to the dispute between the claimants and HMRC as to whether or not the claimants should be put under the duties imposed by the document EN 196. It was also because, in the opinion of HMRC, they were not even reliably applying and adhering to their own internal due diligence policy.
The claimants replied to that “minded to revoke” letter by a reply dated 20 March 2017. That document is now at bundle 1, tab 4, p.314 and extends to almost 50 pages. It certainly does engage in detail and with particularity with what was said in the “minded to revoke” letter, and for the limited purposes of today Mr Webster particularly focused on para.56 of that letter, now at bundle p.328. HMRC had said that in relation to certain seizures there had been a loss to the Revenue of excise duty of £347,521. At para.56 of their letter, the claimants explained that that was a loss that had occurred further downstream (my word, not theirs) of a series of movements of the goods concerned. In effect, the position of the claimants is that they cannot reasonably be required to apply due diligence as to the manner in which dutiable goods may be dealt with after leaving their own warehouse.
That letter, as I say, was dated 20 March 2017. HMRC did not reply to it until their letter of 20 June 2017. In that letter, they say on the first page, now bundle 1, tab 3, p.41:
“A response to the minded letter was received from SWL representative 20 March 2017. This was a lengthy letter consisting of 48 pages, plus annexes, which the Commissioners have considered very carefully; this has, of necessity, taken time.
We have taken account of your representations, but the Commissioners' concerns as to the quality of your due diligence on your duty representative customers remain.”
I must, certainly for the purposes of today, accept that what the writer of that letter wrote on 20 June 2017 was in good faith and true, namely that in the period between 20 March and 20 June the Commissioners had considered very carefully the lengthy response of the claimants to the “minded to revoke” letter.
The decision of the Commissioners as announced in that letter of 20 June 2017 was that:
“The Commissioners have maintained their position and conclude that you are not a fit and proper person to hold this registration.”
As a result of that, the registration was revoked, although as I understand it a run off period of a small number of weeks was allowed to enable the goods then warehoused with the claimants to be dealt with in an orderly way.
There are attached to the letter of 20 June 2017 two annexes. The first, annex A, deals in some detail with the numbered paragraphs in the claimants' own letter under reply of 20 March 2017. With regard to para.56, to which Mr Webster made particular reference today, the Commissioners said, now at bundle p.43(c):
“The Commissioners accept the point that the tax losses HMRC make reference to in the ‘minded to’ letter, do not relate to SWL as the loss took place after SWL had handled the goods and delivered them to [another warehousekeeper], and that there is no database to consult in relation to tax loss letters. The point the Commissioners are demonstrating here is that SWL's poor due diligence can lead to tax losses and that SWL allowed those goods into the country and for the onward movement from the warehouse to happen. Had SWL undertaken meaningful due diligence then the goods would never have been allowed into the supply chain.”
It does seem to me that those observations by HMRC may raise as many questions as they answer, and this issue as to the duty upon the claimants in relation to future dealings with goods which have passed through their warehouse may require more thorough consideration at a later stage.
The claimants took two steps in reaction to the revocation of their duty representative...
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