QUEEN'S BENCH DIVISION
ON APPEAL FROM MAIDSTONE CROWN COURT
London, WC2A 2LL
B e f o r e :
MR JUSTICE MOSES
|THE COMMISSIONERS OF CUSTOMS AND EXCISE||Appellants|
|- and -|
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Jessica Simor (instructed by Nelson's Solicitors) for the Respondent
AS APPROVED BY THE COURT
Crown Copyright ©
Lady Justice Hale:
This is the judgment of the court.
(a) On 7 April 2001 Mr Newbury arrived in the UK travelling with three others, Mrs Reed, Mr Hodivalla, and Mrs Spink: between them they imported into the UK the following excise goods ("the goods"): 8 kg handrolling tobacco, 3200 cigarettes, 50 cigarillos, 25.2 litres of beer, 9 litres of wine, 1.2 litres of spirits.
(b) The goods were being carried in an Austin Montego car registration L402JNK.
(c) They were stopped and checked by Customs. The officer, Miss Levitt was unable to recall why the car had been stopped. We found that it was random stop.
(d) One of the fellow travellers, Mrs Reed, had purchased 30 pouches (1.5 kg) of the tobacco and 600 cigarettes, but they were not for her own use: she had been given the money to purchase them by her daughter and son-in-law, who had not travelled. She admitted this to the officers and we found this as a fact.
(e) No UK duty had been paid on the goods.
(f) The goods were valued at about £400 and the car was valued at some £3000.
The car belonged to Mr Newbury's wife. The court, as is clear from the judgment of HHJ Simpson, accepted that Mr Newbury had told his passengers that they could only buy goods for their own consumption or gifts.
"Whether excise goods are liable to forfeiture in a case where they are imported without payment of duty and the importer or holder of the goods holds them not for herself, but for others who have given her the money to buy them, in the context of paras 17 and 18 of the judgment in Lindsay v Customs and Excise Commissioners  1 WLR 1766."
The Crown Court held that they were not.
"Whether, notwithstanding the apparently mandatory terms of s 141 of and paragraph 6 of schedule 3 to the Customs and Excise Management Act 1979, the Court has a residual discretion not to order condemnation of a thing which is liable to forfeiture, if it considers it disproportionate to do so."
The Crown Court held that it had such a jurisdiction. It is also fairly plain from the transcript that they would have found forfeiture on the facts of this case disproportionate, although the ground of their decision was that the goods should not have been seized in the first place.
The statutory provisions
"(1) Where -
(a) except as provided by or under the Customs and Excise Acts 1979, any imported goods, being goods chargeable on their importation with customs or excise duty, are, without payment of duty -
(i) unshipped in any port, . . ..
those goods shall . . .. be liable to forfeiture."
Section 141(1) provides that (a) any vehicle used for the carriage of any thing liable to forfeiture, and (b) any other thing mixed, packed or found with the thing so liable, shall also be liable to forfeiture. Section 139(1) gives customs officers a discretion whether or not to seize any thing liable to forfeiture. Under schedule 3, para 3, if a thing is seized anyone claiming that the thing is not liable to forfeiture can give notice of his claim. Under para 6, the Commissioners then have to take proceedings for the condemnation of that thing by the court, and 'if the court finds that the thing was at the time of seizure liable to forfeiture the court shall condemn it as forfeited.' However, although the Commissioners must bring proceedings if the thing is to be forfeit, they also have power under section 152 (a) to stay or compound the proceedings, or (b) to restore subject to such conditions (if any) as they think proper, any thing forfeited or seized under the Act. Under section 14(1)(d) and schedule 5, para 2(1)(r) of the Finance Act 1994, a claimant can ask for a review if this is refused and under section 16 of the 1994 Act can challenge the review decision before the VAT Tribunal. The Tribunal's powers are defined by section 16(4):
"(4) 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, that is to say -
(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c) in the case of a decision which has already been acted on pr taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future."
The scope of the Tribunal's powers has been much debated before us but is currently the subject of a pending appeal to the Court of Appeal in the case of Gora v Commissioners of Customs and Excise  VAT and Duties Tribunal Reports 49.
Mr Newbury's goods
"As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired."
That is a directly effective right Community right. As such it takes precedence over any provision of domestic law which may conflict with it. Domestic courts have to give effect to that right: see European Communities Act 1972, s 2(1) and Amministrazione della Finanze dello Stato v Simmenthal  ECR 629. Hence even though the terms of paragraph 6 of schedule 3 to CEMA appear to give the court in forfeiture proceedings no choice but to condemn the goods if they are 'liable to forfeiture' under the Act, the court must refuse to do this if to do so would be in breach of Mr Newbury's rights under Community law: see Conegate Ltd v HM Customs and Excise  QB 254.
'They must, however, exercise that power in accordance with Community law and its general principles, and consequently with the principle of proportionality… The administrative measure or penalties must not go beyond what is strictly necessary for the objectives pursued and a penalty must not be so disproportionate to the gravity of the infringement that it becomes an obstacle to the freedoms enshrined in the treaty."
Mrs Newbury's car
"Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."
"The Commissioners' policy involves the deprivation of people's possessions. Under article 1 of the First Protocol to the Convention such deprivation will only be justified if it is in the public interest. More specifically, the deprivation can be justified if it is 'to secure the payment of taxes or other contributions or penalties'. The action taken must, however strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued: Sporrong and Lonrath v Sweden (1982) 5 EHRR 35, para 61 and Air Canada v United Kingdom (1995) 20 EHRR 150 I would accept [the] submission that one must consider the individual case to ensure that the penalty imposed is fair. However strong the public interest, it cannot justify subjecting an individual to an interference with his fundamental rights that is unconscionable."
Mrs Reed's import
" . . . any delivery, holding with a view to delivery or supply for the purposes of a trader carrying out an economic activity independently or for the purposes of a body governed by public law, taking place in a Member State other than that in which the product is released for consumption gives rise to chargeability of the excise duty in that other Member State;
. . . in the case of products subject to excise duty acquired by private individuals for their own use and transported by them, the duty must be charged in the country where they were acquired; . . ."
"'own use' includes use as a personal gift provided that if the person making the gift receives in consequences any money or money's worth (including any reimbursement of expenses in connection with obtaining the goods in question) his use shall not be regarded as own use for the purpose of this Order."
"There would be an odd lacuna (and indeed a considerably wider exception than article 8 permits) if goods transported by an individual not for his or her own personal use, but for supply to others (albeit for example on a purely reimbursement basis) fell outside the concept of 'product . . . held for commercial purposes in article 9."
"1. Does Directive 92/12/EEC and in particular Article 8 have the effect of precluding the charging of excise duty on goods in Member State A in circumstances where (ii) the goods were acquired for the use of a private individual in Member State A; (ii) they were acquired in Member State B by an agent acting on behalf of that private individual; (iii) transportation of the goods from Member State B to Member State A was arranged by the agent; and (iv) the individual did not himself travel with the goods from Member State B to Member State A?
2. Where a scheme has been commercially devised and marketed whereunder purchases made in Member State B for the personal use of a private individual in Member State A are made by an agent for that individual and those purchases are transported from Member State B to Member State A as a result of arrangements made by such an agent, does Directive 92/12/EEC have the effect of precluding the charging of excise duty on those purchases in Member State A?"
The first question might be said to fit the facts of Mrs Reed's import. The second fitted the facts of the commercial enterprise in arranging so-called personal imports which was allegedly involved in the EMU Tabac case. The Court answered in effect the second question in the negative. Ms Simor argues that it did not answer the first.
"The private individual must carry out sequentially a number of personal operations in order to benefit from the tax provisions in the Member State of purchase: . . . he must travel to that Member State and from there he, personally, must transport the goods acquired. It seems to me to follow logically from those requirements that the purchase, as such, should also be deemed to be limited to a purchase made by the buyer himself, not through an agent or middleman." (para 27)
The involvement of people other than the purchaser in the intra-Community movement of goods is carefully regulated by other provisions in the Directive, including the provision for distance selling in article 10. If it had been intended that the purchaser could have been reflected by any natural or legal person to whom he had given a power of attorney in order to benefit from article 8 of the Directive, it would have said so. The person doing the transporting must also be the private individual purchaser.
LADY JUSTICE HALE: For the reasons given in the judgment of the court, which is handed down today and copies of which are available to those who wish them, the answers are given to the questions raised in the case stated and, in the light of those answers, the appeal, in so far as it relates to Mr Newbury's goods and Mrs Newbury's car, is dismissed. PRIVATE
MR BARLING: Your Lordships know the representation. We have done our best, Miss Simor and myself, to try to agree an order and we have got quite a long way down the road. Can I tell you what the state of play is. It might be easier to do that if I hand up one version, which is the order according to us, with one minor thing which we have now agreed to put in. (Draft order handed to the court)
Your Lordships will see that, as far as questions 1, 2 and 3 are concerned, the first four paragraphs, that is all agreed and those reflect your Lordships' answers to the various questions. The only matter that remains for your Lordships to debate there is in paragraph 4. Paragraph 4 reflects almost, if not verbatim, the words in paragraph 35 of the judgment. The words there had "entitled", and my learned friend has raised the question whether "required" would be better. As far as we are concerned, it is really just a matter for your Lordships to decide which you would prefer to go in.
LADY JUSTICE HALE: I have a view.
MR BARLING: Shall I move on to the next point, paragraph 5?
LADY JUSTICE HALE: Yes.
MR BARLING: The claim was £161 in respect of the value of the goods seized from Mr Newbury - his tobacco and alcohol. An issue has arisen as to whether the court has power to award interest. Your Lordships may remember that, very much in passing, we glanced at some of the provisions of the schedule in relation to condemnation proceedings and so on. If I can put it this way, there is a big issue in relation to this. I may as well say at the outset that I am not in a position to do justice to the arguments as to that issue today. What we have simply done is to agree a value of the goods which included the claim for interest. That is, as it were, our position, because it effectively avoids that question.
My learned friend may take the view that she wants interest hived off and shown separately, in which case my submission to your Lordships will be please may that be argued in full on another day, because, although the amounts here are trivial, it is a matter of considerable importance to my clients that the answer is properly arrived at after full consideration, with skeletons and so on.
MR JUSTICE MOSES: But if you paid an amount that in fact includes interest in this particular case, without prejudice to the argument, then there is nothing left for Miss Simor to argue about. She is just worried about her next client.
MR BARLING: With respect, that was the aim of agreeing the value in that way.
MR JUSTICES MOSES: The whole thing become academic.
MR BARLING: Indeed. There is a similar issue, which you do not see from looking at my version, but my learned friend's version of the order has a claim for compensation - effectively what is a judgment for damages in respect of loss of use of Mrs Newbury's car. Similar issues arise, but, in a sense, with bells and whistles on, in relation to damages, because obviously there is great concern that, if this feeds back into the condemnation proceedings, one may have a position where in effect magistrates' courts are going to be able to award damages for loss of use if they find the goods are not liable to forfeiture. In our submission that cuts across, first of all, the statutory code which your Lordships saw in Schedule 3 to the Act. There is a whole code dealing with how the issue of returning goods are dealt with and also how claims might be dealt with.
LADY JUSTICE HALE: It obviously raises issues of law which we have not considered.
MR BARLING: No indeed, my Lady.
LADY JUSTICE HALE: They relate to the interpretation of section 8 of the Human Rights Act.
MR BARLING: Indeed they do. Can I say that what we have indicated to my learned friend is this. In the ordinary course, if goods were held not liable to forfeiture, as a matter of practice what is done is that any claim for compensation is considered on its merits. There was a claim after the Crown Court. The claim was put in after the Crown Court hearing. That then went into abeyance because of this appeal, and it is now revived. My clients have undertaken that they will make the appropriate offer of compensation, having considered all the facts, within 14 days. Presumably that offer would be to Mrs Newbury because it was her car. She of course is not a party to this appeal anyway. So for that reason, if for no other, we would submit that it would not be appropriate for this court to make an order for damages. It can only be made in Mr Newbury's favour because he is the only party, but it is not his car. It is not his claim, in effect, for damages, as opposed to the issue of the liability for forfeiture.
So we have given that undertaking, although I give it now again, to make the appropriate offer. I have also indicated that, if it would give my learned friend and her clients comfort, we have no objection to a seventh paragraph of the order saying, "Liberty to apply," unless your Lordships have any objection to it, obviously. So in a sense, if the matter was not resolved with Mrs Newbury in a way that is satisfactory to the defendant, we could come back and argue jurisdiction to award it and so on; or your Lordships might remit it to the single judge, or there would be all sorts of possibilities. But it is not an issue, in our submission, on which it would be appropriate to make any order today, and we anticipate that it will be dealt with and resolved in any event in the ordinary administrative way.
Finally, there is the question of costs. Your Lordships probably have a view on that anyway now, but you may have noted in our letter of correction that we indicated that, so far as the matters argued before your Lordships are concerned, in a rough and ready way, we won on one of the two issues and my learned friend's clients won on the other issue. So our submission is that a fifty/fifty split would be appropriate, particularly given that question 1 was already, as it were, abandoned by my learned friend, inevitably. That would also serve this useful purpose: that, as we understand it, Mr Newbury is whatever you now call legally aided; he has a full representation order for this appeal. So if there were an order for costs in his favour or, indeed, in our favour, it would just be a question of expending money deciding which public pot contributed to which other public pot. A fifty/fifty split, which could be reflected in no order as to costs, we submit, would save those administrative costs and would actually reflect the justice of the findings.
LADY JUSTICE HALE: So there would in any event have to be another bit in the order, which is a public funding assessment, which you have not yet provided for.
MR BARLING: I am sure your Ladyship is right about that.
LADY JUSTICE HALE: Yes, thank you, Mr Barling. Yes, Miss Simor.
MISS SIMOR: On the damages point, we have agreed before this hearing that, provided there was a liberty to apply provision, we are happy with that order. But we submit that we must be able to come back to this court, and it must be the proportionate approach to deal with all these matters together.
As regards the interest issue, there is one reason why interest does need to be in the order, and that is if payment is not immediate. If payment takes place in two or three months, the interest has to be an issue. In my submission it is a very simple point and it is something that this court should deal with.
LADY JUSTICE HALE: We are not going to deal with it today?
MISS SIMOR: There is no question that the court has power to award this interest. I was going to take your Lordships to the provision that makes it absolutely clear that you have power.
LADY JUSTICE HALE: Interest on what?
MISS SIMOR: On the goods. We wrote to Customs on 1st April. We asked them to refer us to the relevant provision which said that interest could not be awarded if there is any issue in this. If you go to section 28A of the Supreme Court Act in Volume II of the White Book, it says "... may make such other order in relation to the matter (including as to costs) ... Then if you go to rule 52.10, at 52.10(2)(d), it is clear that the appeal court may make an order as to interest.
This is not a question of assessing damages. It is accepted that the interest to date is £27 whatever. The value of the goods is accepted. There is no need for any assessment. It is simply the question of the court exercising its power to make an award for interest, which it can do under rule 52.10(2)(d) and section 28A of the Supreme Court Act. So those are our submissions on interest.
On the costs issue, in our submission this is an entirely unrealistic approach to this case. Had Customs given the goods back and the car back after the Crown Court case in August last year and appealed the commerciality point, it is unlikely there would have been a case. But that was not what happened. It was my professional duty to argue the commerciality point. The Legal Aid Board should not be without funds because of that argument. The appeal was brought by Customs. They lost and they should bear the costs of that. It is unrealistic, when the Legal Aid Board is so short of funds, to say that it is just a question of moving money between different Government bodies. Those are my submissions.
MR BARLING: Can I just say that my learned friend prefaced her remarks on the interest point with the worry that she has to deal with it because we might not be paying for a long time. I have taken instructions on that. We can pay the sum within fourteen days and are happy to undertake to do so. So in a sense that deals with her worry about it.
There is an issue also - this is part of the wider issue about interest - as to whether the CPR applies to condemnation proceedings. For the reasons I have already stated, it is basically an important matter of principle. It is not necessarily accepted that section 28A applies to interest. All those matters need to be gone into carefully because of the repercussions. I would just add that one of the factors, not least of all from my clients' perspective, is that there is effectively no appeal from your Lordships' decision on any of these matters anywhere, and therefore all the more reason that it is properly argued. So rather than doing it on the hoof, as it were, perhaps your Lordships would be minded to adopt our suggestion. It is an agreed amount in the sense that there is no argument as to the amount by my learned friend, and it will be paid within fourteen days, assuming the order is made. But if, beyond that, it was thought proper that the matter should be determined so that some of it should be characterised as interest, then we would ask you to adjourn and give directions for argument.
LADY JUSTICE HALE: For proper argument, yes.
MISS SIMOR: I forgot to hand up what was our version of the order. Perhaps I can just hand that up. (Draft order handed) I have removed the damages claim that was in the original order discussed, on the basis that there should be liberty to apply.
LADY JUSTICE HALE: All it is is adding in "liberty to apply". If one made the liberty to apply generally applicable, that would cater for the problem.
MR BARLING: It would theoretically cater for anything, as I understand it.
LADY JUSTICE HALE: Yes, I am very suspicious of generalised liberties to apply.
MR BARLING: The understanding would be that, if the matter had not been resolved with the car, that could come back and be argued. It is a matter for your Lordships as to whether you want to deal similarly with the interest point. If your Lordships are minded to give the liberty to apply, we would invite you to take our version.
LADY JUSTICE HALE: Yes, I appreciate that. (Their Lordships conferred)
If we take Mr Barling's draft, in paragraph 4 we will put "entitled" in the bottom line. There can be all sorts of reasons why the court was not "required" to do it. "Entitled" was what we said and "entitled" is what we meant.
We will take paragraph 5, without a separate reference, from Mr Barling's draft. However, we will insert a paragraph giving a general liberty to apply.
In our view, although of course costs may be approached on an issue by issue approach, in relation to what was actually at stake in these proceedings, which were the costs of Mr Newbury's goods and the car, Miss Simor won and in our view she should have her costs.
MR BARLING: You mentioned the word "general". Was that liberty to apply generally?
LADY JUSTICE HALE: It would apply obviously sub silentio to the question of compensation, but also to any question of interest.
MR BARLING: So probably the sensible thing is just to put "liberty to apply".
LADY JUSTICE HALE: Yes, that is what I was seeking to explain that I meant.
MR BARLING: I am grateful. Miss Simor will know whether she needs any special order for ---
LADY JUSTICE HALE: She probably needs an order for detailed public funding assessment.
MR JUSTICE MOSES: I am not sure you do when you have got your costs.
MISS SIMOR: I think it is to be assessed if not agreed.
LADY JUSTICE HALE: Supposing that the Customs and Excise go bust: you would still need to have your detailed public funding assessment, would you not? In my experience, even if you have got the Government on the other side, you make an order. It may not be a realistic thing, but nevertheless that is the general proposition. If you do not need it, there is no problem, but just in case you do, you can have it. Have we dealt with everything?
MR BARLING: I cannot think of anything else, my Lady. I am grateful.