QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| THE QUEEN on the application of COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
|- and -
|RAYMOND MACHELL QC
|(1) JOHN CHARLES PARSONS
|(2) FRANCES OWEN KING
|(3) ROBERT CUSITER
|(4) AUSTIN HENDERSON
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)
Ingrid Simler (instructed by the Treasury Solicitor) as Advocate to the Court.
Crown Copyright ©
Mr Justice Stanley Burnton :
The background and relevant facts
The applicable statutory provisions
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.
It is implicit in Article 8 that duty paid products acquired by private individuals for their own use in one Member State and transported by them to another Member State are not dutiable in the latter State.
In the case of tobacco products acquired by a person in another member State for his own use and transported by him to the United Kingdom, the excise duty point is the time when those products are held or used for a commercial purpose by any person.
"Own use" includes use as a personal gift: regulation 12(1B)(b). Paragraph (1B)(c) is as follows:
(c) if the tobacco products in question are—
(i) transferred to another person for money or money's worth (including any reimbursement of expenses incurred in connection with obtaining them), or
(ii) the person holding them intends to make such a transfer,
those products are to be regarded as being held for a commercial purpose, …
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.
(3) Nothing in subsection (2) above shall affect any right of any person to the return of the thing seized or detained or to compensation in respect of any damage to the thing or in respect of the destruction thereof.
16. Where any thing has been seized as liable to forfeiture the Commissioners may at any time if they see fit and notwithstanding that the thing has not yet been condemned, or is not yet deemed to have been condemned, as forfeited—
(a) deliver it up to any claimant upon his paying to the Commissioners such sum as they think proper, being a sum not exceeding that which in their opinion represents the value of the thing, including any duty or tax chargeable thereon which has not been paid;
(b) if the thing seized is a living creature or is in the opinion of the Commissioners of a perishable nature, sell or destroy it.
17.—(1) If, where any thing is delivered up, sold or destroyed under paragraph 16 above, it is held in proceedings taken under this Schedule that the thing was not liable to forfeiture at the time of its seizure, the Commissioners shall, subject to any deduction allowed under sub-paragraph (2) below, on demand by the claimant tender to him—
(a) an amount equal to any sum paid by him under sub-paragraph (a) of that paragraph; or
(b) where they have sold the thing, an amount equal to the proceeds of sale; or
(c) where they have destroyed the thing, an amount equal to the market value of the thing at the time of its seizure.
(2) Where the amount to be tendered under sub-paragraph (1)(a), (b) or (c) above includes any sum on account of any duty or tax chargeable on the thing which had not been paid before its seizure the Commissioners may deduct so much of that amount as represents that duty or tax.
(3) If the claimant accepts any amount tendered to him under subparagraph (1) above, he shall not be entitled to maintain any action on account of the seizure, detention, sale or destruction of the thing.
(4) For the purposes of sub-paragraph (1)(c) above, the market value of any thing at the time of its seizure shall be taken to be such amount as the Commissioners and the claimant may agree or, in default of agreement, as may be determined by a referee appointed by the Lord Chancellor (not being an official of any government department), whose decision shall be final and conclusive; and the procedure on any reference to a referee shall be such as may be determined by the referee.
The decisions of the referees
… the approach taken by the common law authorities dealing with the core loss recoverable for the tort of conversion provide a strong indication of the approach to be taken when construing this part of CEMA.
He referred to the decision of the Court of Appeal in J & E Hall Ltd v Barclay  3 All ER 620, and to the speech of Lord Porter in Caxton Publishing v Sutherland Publishing  AC 178, and stated:
In my judgment, these authorities justify the following conclusions:
(a) the rationale behind the market price measure of damages is that, by this means, if there is a market, a claimant can replace the goods;
(b) in the absence of a market, market value must be assessed by other means, such as cost of replacement;
(c) market value is a notional value, rather than the price at which the goods in question could have been sold, in reality.
The question is not one of the price which the Claimants could have obtained by sale of the goods (nil, because illegal), but rather the cost to them of purchasing similar goods in replacement.
"For the purposes of this legislation, the market value of an item is, in my judgment, the price which can be obtained for it by offering it for sale in a manner which is likely to bring its availability to the attention of a reasonable number of potential buyers. I consider that the notional sale on which the value is based must be lawful, in the sense that it must not be a crime.
Like Mr Machell, he considered that it was not possible to include travelling costs as a component of market value. Because a sale in the UK of the goods acquired by the importer would be illegal, he concluded that the market value of the goods in question was their market value where purchased.
The issues before me
(a) Should judicial review of Mr Machell's determination of 17 January 2005 be granted, in view of the provision of paragraph 17(4) of Schedule 3 to CEMA that the decision of a referee "shall be final and conclusive"?
(b) Did Mr Machell have jurisdiction to determine the market value of the spirits that were destroyed in error?
(c) What is the basis of the determination of "the market value of the thing at the time of its seizure"?
The contentions before me
(a) The provision in paragraph 17(4) of Schedule 3 to CEMA that a decision of a referee is "final and conclusive" does not exclude judicial review.
(b) A referee's jurisdiction under paragraph 17 is restricted to goods seized by Customs and destroyed by them pursuant to paragraph 16(b).
(c) Paragraph 17 of Schedule 3 to CEMA falls to be construed by reference to common law principles as to the quantification of the market value of goods. That quantification arises, in particular, in claims based on the tort of wrongful interference with goods. He submitted alternatively that common law principles are to be departed from only for good reason.
(d) The market value of goods for the purposes of paragraph 17(1)(c) is its cost in the country of purchase plus the reasonable travel costs of the importer to that country and back.
(a) In circumstances where a question of law of general significance has repeatedly arisen and been answered differently by different CEMA referees, and Customs seek declaratory relief only, the decision of a referee is amenable to judicial review.
(b) Mr Machell was not entitled to assess the market value of spirits destroyed by Customs in error because those goods had not been in the opinion of the Commissioners of a perishable nature. The statutory restriction on the importer's remedies is restricted to goods that have been lawfully seized and lawfully destroyed by Customs; and they have no power under paragraph 16 to destroy goods that are not in their opinion perishable.
(c) Common law principles for the assessment of damages are inapplicable to the determination of market value under paragraph 17. The issue for the Court and for referees is essentially one of statutory interpretation and the application of the statute correctly interpreted to the facts.
(d) There are arguments to support the decision of Mr Machell that market value in this context means UK value. Paragraph 17(1)(c) is naturally read as referring to market value at the place, as well as the time, of seizure. The importer was entitled to import the goods into the UK: the goods were lawfully in this country. Similar goods are available in this country for retail purchase.
(e) Cost of travel cannot be included in market value.
(f) An award of cost of purchase in the EU without travel costs would not adequately compensate an importer who has been wrongfully deprived of his goods, and would undermine the scheme of the 1992 Directive.
Should judicial review be granted?
The jurisdiction of a referee over goods destroyed in error
… it follows that the value of the Liesbosch to the appellants, capitalized as at the date of the loss, must be assessed by taking into account: (1.) the market price of a comparable dredger in substitution; (2.) costs of adaptation, transport, insurance, etc., to Patras; (3.) compensation for disturbance and loss in carrying out their contract over the period of delay between the loss of the Liesbosch and the time at which the substituted dredger could reasonably have been available for use in Patras, including in that loss such items as overhead charges, expenses of staff and equipment, and so forth thrown away, but neglecting any special loss due to the appellants' financial position.
(a) The market value for the purposes of paragraph 17(1)(c) of Schedule 3 to CEMA of tobacco goods personally imported into the UK for the own use of the importer and seized and destroyed by HMRC pursuant to paragraph 16(b) of that Schedule is to be taken as the retail price at the time of the seizure of such goods in the country of purchase.
(b) A referee appointed under paragraph 17(4) of Schedule 3 to CEMA has no jurisdiction to determine the market value of goods (other than a living creature) seized under CEMA and destroyed which were not, in the opinion of Her Majesty's Commissioners of Customs and Excise (now the Commissioners for Her Majesty's Revenue and Customs), of a perishable nature.