England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(MR JUSTICE LADDIE)

		Royal Courts of Justice Strand London, WC2
		6th May 2005

1. LORD JUSTICE LLOYD: This is an appeal by Mrs Agnieszka Golobiewska against the dismissal by Laddie J of her appeal from a decision of the VAT and Duties Tribunal.
2. The issue arises from the seizure and subsequent forfeiture at Dover on 27th January 2000 of a Mercedes Benz car, owned by Mrs Golobiewska, which was being used to smuggle cigarettes into the United Kingdom. The driver was a friend of Mrs Golobiewska whose name is Piotr Terlecki. He was arrested at the time and the next day he pleaded guilty before Dover Magistrates to an offence of smuggling and was sentenced to four months in prison. Mrs Golobiewska was not in England at the time. She was in Poland where she lives. She had lent the car to Mr Terlecki and he had brought it to England, having loaded it up with cigarettes. The cigarettes and the car were seized and forfeited under the Customs and Excise Management Act 1979, section 139.
3. Mrs Golobiewska sought the return of her car. The Commissioners refused to exercise their power to restore the car under the Management Act, section 152, by a letter dated 18th February 2000. She then requested a review of that refusal under section 14 of the Finance Act 1994. Pursuant to that request, the matter was reconsidered and, in a letter of 16th May 2000, a Mr Devlin, the relevant review officer, confirmed the decision. Being dissatisfied with that decision, Mrs Golobiewska appealed to the VAT and Duties Tribunal under section 16 of the 1994 Act.
4. A hearing took place before the Tribunal over four days in February 2002 and February 2003. The decision was released on 20th May 2003. The Tribunal directed that a further review be conducted, because the reviewing officer had approached the question on the wrong basis. A second review officer reconsidered the matter but confirmed the decision by letter dated 30th May 2003.
5. The Tribunal had held that Mr Terlecki had used the car for smuggling and had borrowed the car for a purpose being, or including that of, using it for smuggling. None of that is controversial. However, the Tribunal also held that Mrs Golobiewska was aware that Mr Terlecki had borrowed it for that purpose, despite her denying that in evidence before the Tribunal. The second review proceeded on that basis.
6. Mrs Golobiewska appealed to the High Court to challenge the finding that she knew of Mr Terlecki's intention to use the car for smuggling. The appeal was under the Tribunals and Inquiries Act 1992, section 11. It came before Laddie J on 27th January last year and he dismissed the appeal.
7. In this court, permission to appeal was at first refused on paper by Neuberger LJ but eventually granted after an oral hearing on 25th August by Wall LJ and Neuberger LJ. Permission to appeal was, however, limited to: (a) the question of whether the Tribunal gave adequate reasons for its finding of fact that Mrs Golobiewska knew of the intention to use the car for smuggling; and (b) the related questions of the burden of proof and the standard of proof.
8. So the matter comes before us with Mrs Golobiewska represented, as she has been at both stages below, by Miss Calder, and the Commissioners by Mr Andrew O'Connor. In view of the number of different stages through which this matter has passed, it is desirable to set out the different statutory provisions relevant to each stage.
9. I start with the relevant provisions as to forfeiture, beginning with section 88 of the Customs and Excise Management Act 1979, the relevant part of which is in the following terms:

"Where --

(c) a vehicle is or has been within the limits of any port . . . .

while constructed, adapted, altered or fitted in any manner for the purpose of concealing goods, that . . . vehicle shall be liable to forfeiture."

Section 139(1) is also relevant:

"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."

The section goes on with ancillary and consequential provisions.

10. I should say that the car was found to be adapted for concealing goods in at least two respects. One was that it had been converted so as to run, at least in part, on liquid petroleum gas, which reduced the space needed for fuel, and made space available for other storage, and the other was that it had been adapted subsequently in a manner which might have been legitimate if it was intended to house skis, but the Commissioners clearly took the view on sound evidence that the purpose of the adaptation was to conceal contraband.
11. No question arises or has, as I understand it, ever arisen as to the validity of the seizure or forfeiture. When goods or vehicles have been forfeited, the Commissioners have a power to restore them. That arises under section 152 of the Management Act, the relevant provisions of which are these:

"The Commissioners may, as they see fit . . .

(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under those Acts [that is to say, the customs and excise Acts]."

That was the restoration that was sought by Mrs Golobiewska or on her behalf and refused by the letter of 18th February 2000.

12. The subsequent review, as I say, was under section 14 of the Finance Act 1994, taken with Schedule 5, and I read part of section 14 as follows:

"This section applies to the following decisions, not being decisions under this section or section 15 below, that is to say . . . .

(c) so much of any decision by the Commissioners that a person is liable to any penalty under any of the provisions of this Chapter, or as to the amount of his liability, as is contained in any assessment under section 13 above . . .

(d) any decision by the Commissioners or any officer which is of a description specified in Schedule 5 to this Act.

Schedule 5, paragraph 2(1)(r) brings within the ambit of that provision:

"any decision under section 152(b) as to whether or not anything forfeited or seized under the customs and excise Acts is to be restored to any person or as to the conditions subject to which any such thing is so restored."

Section 14(1), therefore, says to what decisions the provision applies. Subsection (2) gives the person affected by the decision the right to give notice in writing to the Commissioners requiring them to review the decision The section goes on with ancillary provisions as to such a review.

13. The review procedure itself is governed by section 15. Subsection 15(1) says:

"Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either --

(a) confirm the decision; or

(b) withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate."

It was on that basis that the first and, in due course, the second reviews were conducted.

14. The appeal to the Tribunal arose under section 16. Section 16(1)(a) is as follows:

"Subject to the following provisions of this section, an appeal shall lie to an appeal tribunal with respect to any of the following decisions, that is to say --

(a) any decision by the Commissioners on a review under section 15 above (including a deemed confirmation on under subsection (2) of that section) . . . "

Only the person who required the review is able to appeal.

15. The powers of the Tribunal are set out in section 16(4) as follows:

"In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following . . . "

They can direct that the decision is to cease to have effect, or require the Commissioners to conduct a further review, or to declare the decision to be unreasonable. An ancillary matter is explained by subsection (8) and the matter at issue in the present case is plainly an ancillary matter.

16. The legislation refers to an appeal to the appeal tribunal, but the proceedings before the appeal tribunal are not in the nature of an appeal of the same kind as, for example, comes before this court. The scope of the Tribunal's task under section 16(4) has recently been considered by the Tribunal itself, and by this court in Gora and Others v Customs and Excise Commissioners reported in the Tribunal at [2002] V&DR 49 (the decision being of Mr Stephen Oliver QC) and in this court [2003] EWCA Civ 525 and [2004] QB 93. In the course of his decision, Mr Oliver said (at paragraph 57):

"Whether the goods have been properly seized, and whether the particular appellant has or has not been innocent or acted with diligence, are all real and substantial considerations based on primary facts to be taken into account by the person taking the decision. The Tribunal cannot decide whether the decision qualifies as reasonable in the relevant sense unless it examines the facts asserted by both parties and substantiates whether those facts exist."

Later he says at paragraph 58:

"It follows from what I have said so far that if the hearing under section 16(4) of the Finance Act 1994 properly construed is to be Article 6 compliant, the Tribunal must have the capacity both to find all relevant primary facts and to determine the issue on reasonableness grounds. In this class of case there will usually, if not always, be both substantial elements of policy and substantial elements of primary fact involved in the decision-making process. I recognise Laws LJ's observation in paragraph 43 [that is to say of the case of Runa Begum v Tower Hamlets [2002] AER 668] that the statutory scheme in question is either compliant with Article 6 or it is not, and that its compliance or otherwise cannot vary case by case according to the degree of factual dispute arising. That, he said, would involve a wholly unsubstantiated departure from the principles of legal certainty.

However, it is in the nature of cases involving decisions under section 152(b) that most, if not all, involve both fact and policy. Thus, a decision that the Tribunal's jurisdiction is Article 6 compliant in restoration appeals because it has this dual capacity to waive a disputed decision on 'reasonableness grounds' and by reference to the accuracy of the underlying facts, will not compromise legal certainty."

He continued at paragraph 59:

"There is nothing in the wording of section 16(4) of the Finance Act 1994 which prevents the Tribunal from examining the underlying and primary facts. The Tribunal has been given a flexible procedure which enables it to do so . . . The Tribunal has in practice always been astute to examine all the relevant facts. It hears evidence from both sides, it satisfies itself that the primary facts upon which the Commissioners have based their decision are correct. The rules of the Tribunal and its procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals."

17. When the case got to the Court of Appeal, Pill LJ endorsed this by approving, at paragraphs 38 and 39, a statement put forward on behalf of the Commissioners as respondents to the appeal as to the jurisdiction of the Tribunal, including the following passages:

"If in any subsequent appeal against a further decision an issue arose as to whether the applicants were blameworthy, subject to the provision referred to below, the Tribunal's role would be as the Tribunal held in the Gora case: 'the Tribunal satisfies itself that the primary facts upon which the Commissioners have based their decision are correct. The rules for the Tribunal and procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals'. Strictly speaking, it appears that under section 16(4) of the 1994 Act the Tribunal would be limited to considering whether there was sufficient evidence to support the Commissioners' finding of blameworthiness. However, in practice, given the power of the Tribunal to carry out a fact-finding exercise, the Tribunal could decide for itself this primary fact. The Tribunal should then go on to decide whether, in the light of its findings of fact, the decision on restoration was reasonable."

That was a quotation from the Commissioners' document which was put before the court. Pill LJ at paragraph 39 accepted that, subject to a qualification which matters not. I should say that in the present case it is clear that the Tribunal knew of the Gora case because it is referred to in paragraph 53 of its decision.

18. That is by way of a digression on the nature of the appeal. The question of burden of proof which is of particular relevance to the case is dealt with by section 16(6) of the 1994 Act, relevantly in the following terms:

"On an appeal under this section the burden of proof as to --

(a) the matters mentioned in subsection (1)(a) and (b) of section 8 above ...

shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established."

Miss Calder submits that section 16(6)(a) applies to the present case because the matters mentioned in section 8(1)(a) and (b) are relevant, so I must read that section as follows:

"Subject to the following provisions of this section, in any case where --

(a) any person engages in any conduct for the purposes of evading any duty of excise; and

(b) his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person shall be liable to a penalty of an amount equal to the amount of duty evaded or, as the case may be, sought to be evaded."

19. No issue arises as to Mr Terlecki's conduct, and it is not suggested that the Tribunal were incorrect in finding that he was dishonestly engaged in conduct for the purposes of evading duty. But Miss Calder says that the finding that Mrs Golobiewska knew of Mr Terlecki's intention to use the car for the purposes of smuggling means that she is being accused of conduct within section 8(1). I will come back to that argument later.
20. The appeal to the High Court is governed by the Tribunals and Inquiries Act 1992, section 11, and the appeal, as one would expect, must be based on a point of law. The same section allows for an appeal to the Court of Appeal, subject to permission to appeal. By virtue of the limited permission granted in this case, the issues are now:

(a) whether the Tribunal's decision was wrong in law as regards --

(i) the burden of proof; or

(ii) the standard of proof; and

(b) whether the Tribunal failed to give adequate reasons for the finding of fact that Mrs Golobiewska knew of Mr Terlecki's intention to use the car for smuggling.

I should say that these points seem to have featured hardly, if at all, in argument before Laddie J.

21. Before I address the points taken on appeal, it is convenient to summarise the Tribunal's decision. The review letter had been based on limited information contained in correspondence from Mrs Golobiewska's Polish lawyers. The Tribunal, by contrast, held a hearing over four days, of which manuscript notes taken at the time were before Laddie J, including evidence taken through an interpreter from Mrs Golobiewska and Mr Terlecki. So far as the review letter is concerned, the finding as to the connection between Mrs Golobiewska and the offence, apart from her ownership of the car, was simply that she was a business associate of Mr Terlecki. The Tribunal was able to go into that question much more fully.
22. Having set out the undisputed background and their own jurisdiction, the Tribunal set out to consider five factual questions which are stated as follows in paragraph 29:

"(a) Whether or not Mr Terlecki used the vehicle for smuggling.

(b) If so, whether or not Mr Terlecki borrowed the car for the purpose being or including the purpose of using it for smuggling.

(c) If so, whether or not the appellant was aware that Mr Terlecki borrowed the car for such a purpose.

(d) Whether or not the purpose of the change to the petrol tank was to release space for smuggling.

(e) If so, whether or not the appellant was aware that such was the purpose of the change to the petrol tank."

In the end, the fourth and fifth points matter only in the sense that the Tribunal accepted Mrs Golobiewska's evidence that generally, so far as she was concerned, the purpose of the change to the petrol tank was not to release space for smuggling but because the conversion to use of liquid petroleum gas was a good idea in Poland, having regard to the relative cost of fuel.

23. The Tribunal does focus on the separate question of adaptation concerning the hole created in the panel behind the back seat of the car, which Mr Terlecki contended was a hole made by Mercedes to permit the carriage of skis. The Tribunal clearly refused to accept that, but held that it was created by Mr Terlecki without the appellant's knowledge. On those two points, the appellant established that she was entirely innocent, and indeed the principal adaptation of the car was made for an innocent purpose, albeit that the smaller change was not, but she was not a party to that.
24. The first and second points, although not accepted by Mr Terlecki, were not really seriously in dispute in the light of his conviction. The critical question is the third. In order to be able to put in context the submissions that were addressed to us on that, I must read paragraphs 35 and 36 of the decision:

"(35) The next issue (c) is whether or not the Appellant was aware that Mr Terlecki borrowed the car for such a purpose. In her evidence, the Appellant said that she did not know about the cigarettes, which Mr Terlecki brought into the United Kingdom. The had made one journey in the car to the United Kingdom before the journey on which the car was seized. That earlier journey had been in December 1999. On that occasion she, Mr Terlecki and another friend of Mr Terlecki (a Mr Geniek) had been in the car. The car had been stopped by Customs. She had known Mr Terlecki about 5 years. Although Mr Terlecki had described the Appellant in questioning on 27th January 2000 as 'my ladyfriend', she said in evidence that their friendship was due to the fact that Mr Terlecki was the business partner of a friend's husband. After the seizure of the car and cigarettes and the imprisonment of Mr Terlecki, the Appellant made two journeys to England to try to recover the car. On the second of these, as she states in her Witness Statement 'on 28th March 2000 I was permitted to take Peter [Mr Terlecki] from HMP Elmley' to a meeting with Customs officers at Dover.

(36) The conversion of the car to LPG was something which the Appellant decided to have done on Mr Terlecki's advice, and they were both involved in commissioning the works involved. As a result of the evidence, we are left with no clear idea of why the Appellant let Mr Terlecki take the car back to England (less than two months after the original journey and at a time when the conversion to LPG was only half complete). She said in evidence that she needed the car for her business (as a beautician or manicure artist). Mr Terlecki said that the Appellant 'knew that I was going on a short trip, as she told me that as she was going to attend a funeral, she would need the car and I would not have the car for any length of time'. However, the Appellant's evidence was that she attended the funeral on 28th January 2000, the day after the seizure of the car at Dover on the morning of 27th January 2000. We conclude on the basis of the evidence that the Appellant and Mr Terlecki were at the material time on terms of close friendship. On the balance of probabilities we conclude that the Appellant was aware that Mr Terlecki borrowed the car to use it for smuggling (either as his main, or a subsidiary, purpose)."

25. Having made findings of fact as set out in those paragraphs, the Tribunal considered the statutory provisions as to forfeiture, restoration, the terms of the review decision, and the European Convention on Human Rights. In this context, the Tribunal went on at paragraph 55 to say this:

"We have found that the car was adapted for smuggling, but by reason of the hole being made in the panel behind the back seat by Mr Terlecki, without the knowledge of the Appellant. However, we have also found that the Appellant lent her car to Mr Terlecki, being aware that he was borrowing it for the purpose of smuggling. We bear in mind that the Appellant (in the company of Mr Terlecki and Mr Gierek) had travelled to the United Kingdom in the car less than two months before the seizure and had on that occasion been stopped by Customs. In these circumstances, it seems to the Tribunal that the Appellant is almost in the same position as someone who deliberately uses her car to further a fraudulent venture in the knowledge that if she is caught, her car will be liable to forfeiture and who cannot reasonably be heard to complain if she loses her vehicle - see: Lindsay at paragraph 63."

The Tribunal's conclusion was that a further review was needed because the review officer should be considering, not whether the Commissioner's decision was or was not reasonable but whether or not it was right. But they directed that the review should be on the basis of facts which they set out at paragraph 59:

"(a) The car was used by Mr Terlecki for the purpose of smuggling;

(b) Mr Terlecki borrowed the car from the Appellant for that purpose;

(c) The Appellant was aware that Mr Terlecki borrowed the car for that purpose;

(d) The Appellant's purpose in commissioning the change to the petrol tank was not to conceal goods (ie, not for smuggling);

(e) But Mr Terlecki's purpose in making the hole through the panel behind the back seat of the car was to conceal goods (ie, for smuggling);

(f) Mr Terlecki made that hole without the Appellant's knowledge;

(g) The car was adapted for the purpose of smuggling at the time of its seizure."

26. Strictly speaking, Mrs Golobiewska should have appealed against the further review, but since the issue that she sought to take was with the first Tribunal decision (and it would have been almost inevitable that the second Tribunal would simply follow the first Tribunal's findings) it is understandable that the appeal to the High Court was against the original Tribunal decision even though, in theory, that was in favour of Mrs Golobiewska by ordering a further review.
27. Mrs Golobiewska's appeal to the High Court was against the finding that she knew of the intention to use the car for smuggling. Since the appeal lay only on a point of law, the appeal had to be put on the basis that there was no evidence which would justify that finding. Miss Calder's skeleton argument on the appeal to the High Court does not allude to the points now taken, but Laddie J at paragraph 17 of his judgment refers to her having presented an argument involving propositions that the burden of proof lay on the Commissioners and that the standard of proof was higher than the ordinary civil standard. The appellant's notice to the High Court refers to the question of whether the Tribunal gave adequate reasons for its finding. The judge did not mention that point, and that may have been because Miss Calder's skeleton argument in the High Court does not touch on it.

The judge's conclusion was, in essence, that he could not say that this was a perverse finding in the sense of one contrary to the evidence, especially given that the Tribunal had seen Mrs Golobiewska and Mr Terlecki give evidence.

Thus, the case has developed and changed in a number of ways in its course up to date. I will deal first with the related points now taken as to the burden and standard of proof, before coming on to the question of the adequacy of the Tribunal's reasoning.

The Tribunal expressly refers to the civil standard of proof in making its finding, as I have read, that Mrs Golobiewska was aware of the intended use of the car. It does not expressly indicate on whom it regarded the burden of proof as lying. It seems to me that the natural reading of the relevant passage in the decision is that it regarded the burden of proof as lying on the Commissioners. In the absence of an express reference, perhaps because the point may not have been argued, it may, however, be consistent with the tribunal having regarded Mrs Golobiewska as having the burden of proof, that is to say, as having to show on the balance of probabilities that she did not know of Mr Terlecki's intention to use the car for smuggling.

The question of burden of proof is governed by section 16(6) of the 1994 Act. Relevantly, the question before the Tribunal was whether the decision by Mr Devlin, the reviewing officer, was or was not one that he could reasonably have arrived at (see section 16(4)) and whether it was soundly based factually, for which purpose the Tribunal conducted its hearing at which evidence was given. Since the review decision was based, in part, on the proposition that she knew of the intended use of the car to smuggle, the Tribunal had to examine the facts as to that.

Miss Calder says that this contention amounts to saying that Mrs Golobiewska, by lending Mr Terlecki her car knowing that he intended to use it for smuggling, was engaged in conduct for the purpose of evading any duty of excise, and that conduct involved dishonesty. On that basis she says that the facts lie within the scope of section 8(1) of the 1994 Act concerned, as I have said, with the imposition of civil penalties, and that it follows under section 16(6)(a) that the burden of proof is on the Commissioners.

This point requires a brief examination of section 8 and of its place in the legislation. The section imposes liability to a civil penalty on a person who engages in conduct within its terms, even if there is no criminal conduct. The section contains a number of ancillary provisions, to one of which I will turn in a moment, but I note that under subsection (8) if a person is convicted of an offence by reason of conduct within subsection (1), that conduct does not give rise to a liability to a civil penalty. Section 13 provides for the Commissioners to assess the amount due by way of penalty where any person is liable to a penalty under section 8 or under certain other provisions including section 9. By virtue of section 14(1)(c), a decision of the Commissioners that a person is liable to a penalty, or as to the amount of the liability contained in an assessment under section 13, is subject to the review procedure under sections 14 and 15. In turn, any decision by the Commissioners on such a review is subject to appeal to the Tribunal under section 16.

Coming back to section 8, by subsection (4) if a person is liable to a penalty, the Commissioners or an Appeal Tribunal may reduce the penalty, even to nil, and if the penalty is reduced by the Commissioners the Tribunal may cancel all or part of the reduction. But of course the review and the eventual appeal may be as to liability to the penalty as well as in relation to its amount.

In that context, it seems to me that the natural reading of section 16(6)(a) is that the burden of proof lies on the Commissioners on the appeal to the Tribunal if, and only if, the appeal is as to liability to a penalty under section 8, so that the question whether the facts mentioned in section 8(1) are proved is directly in issue. It does not seem to me that it is proper to apply section 16(6)(a) to a case where the appeal does not concern liability to a penalty under section 8.

Mr O'Connor showed us that section 16(6)(b) and (c) relate to particular cases under other legislation in which liability to civil penalties may arise under section 9. That confirms the view that section 16(6)(a) is concerned (even though it does not in terms say so) only with appeals against penalties arising under section 8.

I therefore do not propose to consider whether, in any event, Mrs Golobiewska's conduct as found by the Tribunal does fall within section 8(1). I note that Mr Terlecki's conduct clearly did but that, having been convicted of an offence, section 8(1) would not apply to him in any event. I would therefore hold that the true effect of section 16(6) is that it was for Mrs Golobiewska to show that the grounds on which her appeal was sought to have been established, or in other words, the burden of proof lay on her. It seems to me that that is indeed a natural position. She was the applicant to the Commissioners for them to exercise their power of restoration under section 152(b). She sought to demonstrate to the Appeal Tribunal that their decision was wholly unreasonable. It therefore seems to me natural and appropriate that it should be for her to show why the car should have been restored.

A number of different issues might be relevant on such an appeal, as Mr Oliver indicated in the passage cited from his judgment in the Gora case. They may include the innocence of the owner of the vehicle. They may include questions of proportionality. They may include questions of hardship. Many, perhaps most, of those questions are likely to be matters within the knowledge of the appellant and it accordingly seems to me entirely appropriate that, subject to the particular exceptions made by section 16(6), the burden of proof should lie on the appellant.

The standard of proof applied by the Tribunal was the civil standard. If, as I consider, the burden lies on Mrs Golobiewska, there would be no issue as to the standard of proof required. What I say, therefore, as regards standard beyond that is unnecessary to the decision, but since both Miss Calder and Mr O'Connor have addressed us to some extent on the question of standard, I will say something about it, at the risk of lengthening this judgment unnecessarily.

If the Commissioners bore the burden of proof Miss Calder's submission is that the standard applied by the Tribunal is too low and the criminal standard applies. In Gora the Court of Appeal held that an appeal to the Tribunal in relation to a refusal by the Commissioners to restore forfeited goods did not involve a criminal charge. Miss Calder nevertheless submits that having regard to the serious and effectively penal consequences for the owner of the vehicle, the criminal standard should be applied. She sought to rely by analogy on R (McCann) v Manchester Crown Court [2002] UKHL 39, [2003] 1 AC 787, concerning antisocial behaviour orders. Proceedings for an ASBO were held to be civil by the House of Lords, both under domestic law and under the European Convention, but it was held that the conduct alleged should be proved to the criminal standard since it was in its nature criminal or quasi-criminal conduct. That seems to me to be a very different case from the present.

Miss Calder also relies on the words of Neuberger J (as he then was) in Gascoyne v Customs and Excise Commissioners [2003] EWHC 257, [2003] Ch 292, a case concerned with whether 10,000 cigarettes and 32 kilos of rolling tobacco were imported for personal use or not. In that case too the question was as to the Commissioners' refusal to restore a vehicle and the goods carried in it. Mr Gascoyne was the person importing the goods in the vehicle and he claimed that the goods were for his personal use, despite being way in excess of the guide level maximum. The personal reliefs order, then in force but since repealed, relieved the goods from duty if they were not held or used for a commercial purpose, but put the burden of showing that they were not so held or used on the person claiming the relief.

This allocation of the burden of proof had been held to be inconsistent with the relevant European directive by the Divisional Court in R (Hoverspeed Limited) v Customs and Excise Commissioners [2002] EWHC Admin 1630, [2003] QB 1041, a point not challenged on the appeal to this court. The Divisional Court in Hoverspeed and Neuberger J in Gascoyne pointed out that in many cases the question of burden would make no difference. If the importer has 20,000 cigarettes and gives no evidence that they were for his personal use, the Tribunal is likely to be able to infer that they were held or used for commercial purposes. If he does give evidence the question will depend on whether his evidence is believed.

In the present case the personal reliefs order is not relevant and it is not being suggested that section 16(6) is incompatible with European law the or European Convention. Instead, Miss Calder argues that on its true construction it casts the burden on the Commissioners. If, as I have held, that is wrong, there is no other basis for saying that it is for the Commissioners to disprove the factual basis of her appeal rather than for her to establish it. In those circumstances, the observations of Neuberger J in Gascoyne, at paragraphs 107 and 108 of that judgment, as to the burden of proof do not appear to be relevant to the present case and the same is true, consequently, as regards what he said in that passage about the standard of proof. If it is for Mrs Golobiewska to establish the necessary facts to the satisfaction of the Tribunal, it cannot be necessary for her to do so to a higher standard than the balance of probabilities. I should record that Mr O'Connor reserved the Commissioners' position as to the correctness of paragraphs 107 and 108 of Neuberger J's judgment in Gascoyne, quite apart from their relevance to the present case. I do not need to say anything more about that. I should also say that that point was not touched on in the subsequent appeal in Gascoyne to this court.

Mr O'Connor showed us two cases, one in this court and one very recently in the High Court in which it has been said that, even where the burden of proof does lie on the Commissioners by virtue of section 16(6)(a) or equivalent provisions in relation to Value Added Tax penalties, the standard of proof is the civil standard, albeit admitting the flexibility of that standard to the extent that if the allegation is of serious misconduct, the civil standard may require more cogent evidence than otherwise. Those cases are Han v Customs and Excise Commissioners [2001] EWCA Civ 1840, [2001] 1 WLR 2353 and the very recent decision of Hart J on 19th April, Khan v Customs and Excise Commissioners [2005] EWHC 653.

So I come to the third point in the appeal, that is to say whether the Tribunal failed in its duty to provide Mrs Golobiewska, and for that matter the Commissioners, with a fair hearing by not giving adequate reasons for its finding that she did know of Mr Terlecki's intention to use the car for smuggling. The point is based on English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, [2002] 1 WLR 2409. That case develops the principle on which a previous decision of this court was based, Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377. Lord Phillips MR giving the judgment of the court in English at paragraph 6 quoted from the judgment of Henry LJ in Flannery, a passage which is well worth bearing in mind and which I therefore myself quote:

"'(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties -- especially the losing party -- should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in Ex p Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not. (2) The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself. (3) The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases. (4) This is not to suggest that there is one rule for cases concerning the witnesses' truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise). The rule is the same: the judge must explain why he has reached his decision. The question is always, what is required of the judge to do so; and that will differ from case to case. Transparency should be the watchword.' (See [2000] 1 All ER 373 at 377-378, [2000] 1 WLR 377 at 381-382.)"

Lord Phillips MR went on to consider a number of decisions of the European Court of Human Rights and decisions of various common law jurisdictions and later he said this:

"(19) It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the judge reached his decision. This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the judge's conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, it may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon."

"(21) When giving reasons a judge will often need to refer to a piece of evidence or to a submission which he has accepted or rejected. Provided that the reference is clear, it may be unnecessary to detail, or even summarise, the evidence or submission in question. The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge's decision."

28. Mr O'Connor submitted that to examine the adequacy of the Tribunal's reasoning in the present case is curious, since the merits of their decision on the very factual issue has already been examined by Laddie J and found not to be wanting to the extent that there was evidence on which, in his judgment, the Tribunal's decision could legitimately be based and permission to appeal against that has been refused. So, he says, where is the need to examine the reasoning as a separate exercise? If the point is that the decision must enable the appellate court to understand why the Tribunal reached its decision, nothing more is needed because Laddie J felt no difficulty in undertaking his task on the first appeal.
29. I accept that this is an unusual case, but it seems to me that this, as it were, preliminary point of Mr O'Connor's is not a sufficient answer on this ground for appeal. I would have been more taken with the point if it were clear that the adequacy of the expression of the Tribunal's reasoning had been argued before Laddie J. But if it had been so argued it seems to me certain that that point would have formed part of his reasoning, which it does not. Accordingly, it seems to me that the fact that the point has been addressed and considered in favour of the respondent on a first appeal, does not discharge us of the duty to consider the adequacy of the Tribunal's expression of its reasons, notwithstanding the failure of Mrs Golobiewska's appeal to Laddie J which seems to have been put on a different basis.
30. I have already read the relevant parts of the Tribunal decision. In paragraph 35 the Tribunal refers to some of Mrs Golobiewska's evidence, including that she did not know of the cigarettes. There is also reference to the length of time and the basis of her friendship with Mr Terlecki. In paragraph 36 they refer to her statement that she let Mr Terlecki have the car for a short trip to England, needing the car herself shortly afterwards for a specific occasion. The Tribunal says that it is left with no clear answer for why she let him take the car back to England. It states that they were at the material time on terms of close friendship. The Tribunal then proceeds to conclude on balance of probabilities that she did know of his intention to use it for smuggling. Although as I said, clearly they were conscious of all these matters at the same time, they went on to conclude that she was wholly unaware of any intention on his part behind the adaptation of the vehicle to take advantage of that for the purposes of smuggling.
31. The conclusion that the Tribunal expressed at the end of paragraph 36 must involve their rejection of the evidence of Mrs Golobiewska who said that she had no idea of his criminal intention, and of the same evidence on the part of Mr Terlecki. So far as he is concerned, rejection of his evidence is not surprising, having regard to what he had done and what he had said about it. But the rejection of his evidence does not demonstrate that her evidence was also to be rejected.
32. So far as her evidence is concerned, the question is whether the reasoning is sufficient. This was not, of course, a case where there was a conflict between two witnesses, each saying the opposite of the other. Mrs Golobiewska asserted her entire innocence and if that was to be rejected it had to come from circumstantial evidence or inconsistency between her evidence and something that was credible or clear.
33. In Flannery, as I have read, there is an indication that on a question of disputed fact it may be enough for the judge or Tribunal to say that the evidence of X is preferred to that of Y. There are passages in English which indicate that something more than a bare statement may be appropriate or necessary and that some reason for preferring one witness to the other is, in some cases at any rate, necessary.
34. Mr O'Connor says that in this case the Tribunal must have proceeded on the basis that they could not accept Mrs Golobiewska's evidence as truthful. That must be right, but the Tribunal gives us no indication of why they came to that conclusion. In the relevant part of the decision there are a number of incomplete and contradictory indications. There are, for example, at paragraph 35 the references to the friendship between her and Mr Terlecki. There is a statement that she had known him for about five years. So far as I know, that is uncontroversial. Then there is a sentence which refers to Mr Terlecki as having described the appellant in the course of questioning by Customs on 27th January 2000 as "my lady friend." In contrast, in evidence before the Tribunal she was reported as saying that their friendship was due to the fact that Mr Terlecki was the business partner of a friend's husband. There is a reference to her having made a previous visit to the United Kingdom with Mr Terlecki in the car in December 1999, when the car was stopped by Customs but there was no question of smuggling. Then one comes to the fact that the car was lent to Mr Terlecki and the fact that they were, as the Tribunal said, at the material time on terms of close friendship.
35. It seems to me that that is, to say the very least, inadequate to explain why the balance of probabilities leads to the conclusion of her awareness. There is, at the least, an unsatisfactory element in the reference to "close friendship". The Tribunal does not say whether they place any particular reliance on the phrase "my lady friend". We do not know to what extent Mr Terlecki is fluent in English or what particular significance might have been attached to the phrase "my lady friend", and whether there was anything more to the friendship than that they knew each other because Mr Terlecki was the business partner of the husband of a friend of Mrs Golobiewska. That is one element in the process of reasoning so far as it goes.
36. We have at paragraph 36 the fact that they say that Mr Terlecki advised the appellant to convert the car to LPG and that they were both involved in commissioning the works. But in the light of the fact that they go on to acquit her of all knowledge that there might have been anything sinister to that exercise, it seems to me that that is not something that can fairly be added in the scales against Mrs Golobiewska's denial of her knowledge. Then we have the sentence that the evidence had left the Tribunal with no clear idea of why the appellant let him take the car back to England less than two months after the original journey and at a time when the conversion to petroleum gas was only half complete. One would have thought that if they were uncertain as to the reason why she allowed him to take the car back to England, that cannot have been consistent with her being aware that he was intending to use it for smuggling.
37. It may be that if they had been conscious of their duty to explain their reasons (they had of course some three months after the close of the hearing to put their reasons into writing) they would have said something that reconciled all this various disparate evidence in what they drew from the evidence. But it seems to me that what they do say is so inconsistent and incomplete and fragmented that, in a sense, what it amounts to is less than the "almost nothing" that Mr O'Connor submits to us that Flannery and English require in terms of the explanation to be given by a Tribunal for finding that a witness' evidence is not to be accepted. That seems to me to be particularly so in the case where, as the Tribunal recognised at paragraph 55, their finding amounts almost to holding that she was deliberately using her car in furtherance of a fraudulent venture.
38. So far as I am aware from my reading of the papers, it was not suggested that there was anything in this venture for Mrs Golobiewska. Given the conclusion, which is undoubtedly correct, that that was the result of their finding, it seems to me that the Tribunal's obligation as a matter of fair hearing to explain their reasoning required them to say something more specific -- maybe not very much but something specific and reasoned -- as to how they got from their state of uncertainty as to the purpose of letting him borrow the car to the finding, some 10 lines or so later, that on the balance of probabilities that was consciously to allow him to use it for smuggling.
39. In my judgment, therefore, the Tribunal did err in law, although in this one respect alone. I would allow the appeal for that reason, not on the grounds of either burden or standard of proof and if my Lords agree, I would invite submissions as to what order we should make. In principle, the matter presumably has to be remitted to the Tribunal but whether for a further hearing with new evidence after so long, and if so whether before a differently constituted Tribunal, may be for debate.
40. LORD JUSTICE JONATHAN PARKER: I agree with my Lord's reasoning and conclusions and with the form of order which he provisionally proposes.
41. LORD JUSTICE WARD: And so do I.

Order: Appeal allowed and remitted to differently constituted Tribunal. Appellant awarded 50% costs.