R (On the application of Eastenders Cash and Carry plc and others (Respondents) v The Commissioners for Her Majesty's Revenue and Customs (Appellant)
R (on the application of First Stop Wholesale Limited) (Appellant) v The Commissioners of Her Majesty's Revenue and Customs (Respondent)
Lord Neuberger, President
JUDGMENT GIVEN ON
11 June 2014
Heard on 27 and 28 November 2013
Jonathan Swift QC
(Instructed by HMRC Solicitors Office)
Geraint Jones QC
(Instructed by Rainer Hughes Solicitors)
James Pickup QC
(Instructed by Rainer Hughes Solicitors)
Jonathan Swift QC
(Instructed by HMRC Solicitors Office)
LORD SUMPTION AND LORD REED (with whom Lord Neuberger, Lord Mance and Lord Carnwath agree)
The Eastenders appeal
The First Stop appeal
The statutory scheme
"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."
It can be seen that section 139(1) confers two distinct powers on the Commissioners, a power of seizure and a power of detention. Neither power is expressly said to be exercisable on the basis of reasonable grounds for suspicion or belief. In this respect they differ from some of the other powers to which we have referred.
"It does not require much imagination to see that there may be many cases in which there is uncertainty when HMRC officers inspect goods whether duty has been paid on them or not, and to see that in such cases the effective and fair implementation of the relevant tax and its associated enforcement regime will require that goods are held for a period while investigations are carried out in an effort to remove that uncertainty. In general (and without seeking to level criticism against the claimants in the present cases), Parliament cannot have intended that an owner of goods should be able, just by obfuscating and creating uncertainty at the point of inspection in relation to his supply chain and whether duty has or has not been paid, to avoid the full rigour of the machinery for the enforcement of payment of taxes, including by forfeiture of goods on which duty has not been paid."
"144.—(1) Where, in any proceedings for the condemnation of any thing seized as liable to forfeiture under the customs and excise Acts, judgment is given for the claimant, the court may, if it sees fit, certify that there were reasonable grounds for the seizure.
(2) Where any proceedings, whether civil or criminal, are brought against the Commissioners, a law officer of the Crown or any person authorised by or under the Customs and Excise Acts 1979 to seize or detain any thing liable to forfeiture under the customs and excise Acts on account of the seizure or detention of any thing, and judgment is given for the plaintiff or prosecutor, then if either -
(a) a certificate relating to the seizure has been granted under subsection(1) above; or
(b) the court is satisfied that there were reasonable grounds for seizing or detaining that thing under the customs and excise Acts,
the plaintiff or prosecutor shall not be entitled to recover any damages or costs and the defendant shall not be liable to any punishment."
Where an officer detains property under section 139(1) because he reasonably considers that it is "liable to forfeiture", section 144(2) assumes that that he may be liable if he turns out to be wrong about that, but protects him against an order for financial relief.
"Liable to forfeiture"
(1) Throughout the 1979 Act, the draftsman has said in terms when statutory powers may be exercised on the basis of suspicion or belief rather than objective fact. A particularly striking example is section 138, which is the power corresponding to section 139 relating to the detention of persons who are "liable to be detained" under the Customs and Excise Acts. The power of detention is exercisable if there are "reasonable grounds to suspect" that the person has committed an offence. The omission of any such language from section 139 must have been deliberate.
(2) The expression "liable to forfeiture" is used in no less than thirty sections of the 1979 Act. It would be wearisome to go through them all to make exactly the same point, which is that they are almost all sections providing that property is liable to forfeiture in defined circumstances, or in some cases providing that it is not to be liable to forfeiture in defined circumstances when it otherwise would be. In these sections, the words can only refer to actual liability to forfeiture. In all of the other sections in which the expression is used, with the possible exception of sections 139(1) and 144(2), it is equally clear that the reference is to an actual liability to forfeiture.
(3) In section 139(1) it is a precondition for both seizure and detention that the goods should be "liable to forfeiture". There is no difference in the way that the precondition applies to the two measures. In relation to seizure, the expression must mean actually liable to forfeiture, since seizure puts in train the procedural provisions of Schedule 3, which is wholly concerned with the condemnation of property as forfeit. On the face of it, therefore, the expression must mean the same when applied to detention. The same point can be made about the use of the expression in relation to both seizure and detention in section 144(2).
(4) More generally, if "liable to forfeiture" does not mean actually liable to forfeiture, it is difficult to discern what it can sensibly be thought to mean. The Commissioners' submission is that it refers to goods of a kind legally capable of being forfeited. This would mean that all dutiable goods were "liable to forfeiture". While that is a linguistically possible meaning of the words, it is hardly the natural one. Its adoption would have the effect of conferring on customs officers a power to detain any goods which were in law dutiable, subject to no restrictions whatever other than those arising from the general principles of public law. So far as the 1979 Act is concerned, it would not even be necessary for the Commissioners to show that there were reasonable grounds for suspicion or belief.
(5) Section 144(2), as we have pointed out, assumes that where property has been detained which turns out not to be actually liable to forfeiture, the Commissioners or their officers may be held liable in an action in tort. It confers an immunity in that event from an award of damages and costs if they acted reasonably. If the Commissioners or their officers were entitled to detain goods under section 139(1) on reasonable suspicion, the situation envisaged in this provision could not arise. The action would fail on liability and no immunity from damages and costs would be required.
(1) As we have explained, and as Sales J recognised in the passage which we have cited, it is obviously essential to the effective implementation of the laws governing customs and excise that customs officers should be able to detain goods so as to enable them to be examined and secured pending investigations which might lead to their subsequent seizure. Sales J at first instance and Mummery LJ in the Court of Appeal inferred from that practical necessity (i) that Parliament must have intended that customs officers should have the power to detain goods where they reasonably suspect that the goods may be liable to forfeiture and require to make further inquiries, and (ii) that Parliament must therefore have intended section 139(1) to be construed as conferring such a power. The second proposition must be rejected; but the argument in support of the first proposition remains a powerful one.
(2) On the hypothesis that the only power of detention is that conferred by section 139(1), and if that provision is interpreted as we consider it must be, it follows that the detention of goods is unlawful whenever the goods are not in fact liable to forfeiture. If that is so, then the detention of goods on the basis of suspicion is unlawful in all cases where the suspicion turns out to be unfounded. In the nature of things, that will be the position in a proportion of cases, even where reasonable grounds for suspicion exist. The customs officers may then be liable in damages for their interference with rights of property unless they can bring themselves within the scope of section 144(2). Even where section 144(2) applies, it only protects the officers against financial relief.
(3) A further difficulty with an approach based upon an acceptance that customs officers will behave unlawfully, but will be protected from liability by section 144(2), concerns its compatibility with EU law and the Human Rights Act 1998. Under EU law, the detention of goods by customs officers may require to be justifiable as an interference with the free movement of goods: something which would scarcely be possible if the interference was unauthorised by law, or if that law failed to comply with the EU principle of legal certainty.
(4) In relation to the Human Rights Act, the detention of goods by customs officers is an interference with the peaceful enjoyment of possessions within the meaning of article 1 of Protocol No 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms: see for example Islamic Republic of Iran Shipping Lines v Turkey (2008) 47 EHRR 24. As such, it must be in accordance with law, and must therefore be authorised by domestic law. Furthermore, the domestic law must meet the requirement of legal certainty. If customs officers are not authorised to detain goods which are not actually liable to forfeiture, or to detain goods for the purpose of investigation into whether they are liable to forfeiture, it follows that their doing so is unlawful by virtue of the Human Rights Act as well as under the common law.
(5) The proposition that the only power of detention possessed by customs officers is that conferred by section 139(1) also raises a further difficulty. As we shall explain, there was no statutory provision in respect of detention, corresponding to section 139(1), until 1952. Can it possibly have been the position, prior to 1952, that the Commissioners and their officers had no power to secure goods, where there were reasonable grounds to suspect that they were liable to forfeiture and investigations had to be carried out, other than by pre-empting the outcome of such investigations by seizing the goods and setting condemnation proceedings in train, at the risk of behaving unlawfully and incurring a liability in damages? As we have explained, the contrary was the view of the Court of Common Pleas in Jacobsohn v Blake and Compton.
The background to the 1979 Act
"[T]he defendants merely took possession of the goods, in the execution of their duty as custom-house officers, for the purpose of examination. When the goods were examined certain marks were found upon them, which induced the defendants to think they were prohibited; and they said they must detain them; and then, on a subsequent application on the part of the plaintiff for the delivery of the goods, the answer was that they were detained and would be prosecuted as seizures. It appears, therefore, that the defendants originally detained the goods under a real and honest doubt that they were subject to forfeiture: whether that doubt was well grounded, is not now the question. … There has been no abuse of authority on their part. The goods remained, during the whole time of the examination, in the same custody in which they were, in the first instance, legally detained."
The latter part of that passage is reported slightly differently in the Law Journal report at p 90:
"There has been no abuse of the process which the defendants had to execute, and things remain in the same position during the whole time the goods were under examination."
The implication, in both reports of the judgment, is that the process of examination was not completed until the necessary enquiries had been carried out. His Lordship left open the question whether an action might have been brought if the goods had been detained for an unreasonable time.
"The defendants were custom-house officers acting under an authority given them by law. It was their duty to examine the goods in question, in order to ascertain to what duty they were liable, or whether or not they were subject to forfeiture. If the goods had been afterwards detained by them for a time more than reasonable for the examination, that might have been an abuse of their authority so as to render them liable in another form of action. But it appears to me there is no ground for saying they did more than detain the goods for a reasonable time, in order that the question as to the liability of the goods to forfeiture might be submitted to the proper authorities."
(In relation to the second sentence in that passage, Coltman J is reported in the Law Journal report as saying that the officers were acting under an authority given them by law to examine the goods to see whether they were liable to duty, and that "I think they had also a right to examine them, to see whether they were liable to forfeiture or not").
"The goods were taken by the plaintiff's agent to the proper place for the examination of them by the defendants in the regular discharge of their duty as custom-house officers. Upon their examination, all that the defendants did was, to detain them, till it could be ascertained whether or not they were liable to forfeiture. … Here, there was no act of trespass, either actually, or impliedly from any subsequent abuse of authority."
"The goods were landed and taken possession of by the defendants in the discharge of their duty, for the purpose of their being examined. Upon their being partially examined there appeared to be sufficient ground for the defendants to doubt whether they were authorised to receive the duty upon them. All that the defendants did was merely to decline to receive the duty upon them. The subsequent declaration made by them was not a declaration that what they had done amounted to a seizure, but merely a statement that, the matter being under the consideration of the commissioners, the goods could not be given up to the plaintiff."
Erskine J's reference to the goods being "partially examined", prior to the making of enquiries of the Commissioners, is consistent with the approach adopted in the other judgments. In any event, in the light of the other judgments, the ratio of the decision cannot be said to have been based on the non-payment of duty on imported goods.
(1) Temporally, the powers are distinct: the process of examination precedes the reaching of a conclusion whether goods are liable to forfeiture. In terms of purpose, the powers are equally distinct. The purpose for which the power to detain, as an incident of examination, may be exercised is to enable the officers to retain control over the goods temporarily until they have arrived at a conclusion as to the duty payable or as to whether the goods are liable to forfeiture. The purpose for which goods may be detained after such a conclusion has been reached is plainly different, and would appear to be as Elias LJ suggested. There is therefore no necessary implication that the enactment of a power to detain goods liable to forfeiture entailed the abrogation of the existing power to detain as part of the process of examination.
(2) It is difficult to conceive why Parliament should have conferred upon the Commissioners and their officers a wider range of intrusive investigatory powers than any other public body, but should at the same time have chosen to deprive them of a means of preventing goods from being disposed of until they have completed their examination and decided whether the goods should be seized. Why depart from an approach long approved by the courts? Why, moreover, should Parliament have conferred on the Commissioners more extensive powers to detain persons (in section 138 of the 1979 Act) than to detain goods?
(3) The 1952 Act was a consolidation Act with amendments. There is nothing in the report of the Committee reporting on the Bill (Report of the Committee on the Draft Customs and Excise Bill (1951), Cmd 8453), or in the notes on clauses prepared by Parliamentary counsel, included as an appendix to the report, to indicate that Parliament intended the 1952 Act to have the effect of restricting the existing powers of detention possessed by customs officers.
The Eastenders case
The First Stop Case