England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
VAT AND DUTIES TRIBUNAL CENTRE

		Royal Courts of Justice Strand, London, WC2A 2LL
		23/02/2006

Mr. Justice Evans-Lombe :


 


1. In this case the Commissioners of Revenue and Customs ("the Commissioners") appeal the interlocutory order of Dr. A N Brice Chairman of the VAT and Duties Tribunal dated the 15^th June 2005. The appeal is confined to challenging paragraph (3) of the order which provided that it was ordered:-

"(3) That the appeal shall proceed on the basis that the Tribunal has jurisdiction to consider whether the seized goods were for the Appellant's personal use even though there have been no condemnation proceedings and condemnation has not been challenged…;"

2. The underlying facts of the case are set out at paragraphs 1 and 2 of the tribunal's reasons as follows:-

"1 [Mr Weller] was stopped at Dover on 11 July 2004. He had been a foot passenger and was carrying 1400 cigarettes, 1.5 kilograms of hand rolling tobacco and 3 litres of spirits. After interview [The Commissioners] concluded that the goods were held for commercial purposes and so they were seized. [Mr Weller] was given Notice 12A. [Mr Weller] took advice and wrote to [The Commissioners] on I August 2004 enclosing letter B which asked for his goods to be restored and making clear that his main argument was that he did not hold the goods for commercial purposes. He said that he did not want to involve the courts and he did not return letter A which asked for condemnation proceedings to be taken. Condemnation was deemed to have taken place on 11 August 2004.

2. [The Commissioners] replied to [Mr Weller's] letter of I August 2004 on 23 August 2004 and said that the goods would not be restored but that [Mr Weller] could ask for a review of that decision. [Mr Weller] wrote on 19 September 2004 in effect asking for a review; he raised a number of points including his previous point that the goods were not held for commercial purposes. The review decision was given on 26 October 2004. It confirmed the decision not to offer restoration of the goods and told [Mr Weller] that if he wished to contest that decision he should lodge an appeal with the Tribunal. He did lodge an appeal on 22 November 2004 and one of his grounds of appeal was that the initial seizure decision, that he had been carrying goods for commercial purposes, was incorrect as the goods were never intended for commercial purposes."

3. Duty and VAT are payable on certain types of goods including, relevantly, cigarettes tobacco and spirits which are imported for a "commercial purpose". By statutory provision, particularly the Excise Duties (Personal Reliefs) order 1992 various considerations have to taken into account. First there is exempt from duty any goods that are imported for the importers own use. Secondly, if goods are imported that are above certain guideline amounts, the question arises to whether they are indeed for a commercial purpose. It is common ground that the relevant guideline amounts in force at the material time were 3,200 cigarettes, 3 kilos of tobacco and 10 litres of spirits. It follows that the amount of cigarettes tobacco and spirits being imported by Mr Weller on the 11^th July 2004 were materially less than the guideline amounts above which there is an evidential burden on the traveller to explain how his goods are for his own use. It is common ground that the goods seized would have cost Mr Weller approximately £400 to buy and that the duty and VAT chargeable on those goods would have been rather less than £500.
4. In addition to powers to prosecute for fraudulent evasion of duty the Commissioners have statutory powers of forfeiture of goods unlawfully imported on which duty has not been paid. By section 49 of the Customs and Excise Management Act 1979 ("the 1979 Act") goods imported without the payment of duty are liable to forfeiture. Schedule 3 of the 1979 Act lays down the procedure by which goods on which duty has not been paid may be forfeited. The relevant paragraphs of schedule 3 are as follows:-

"1. (1) The Commissioners shall… give notice of the seizure of any thing as liable to forfeiture and of the grounds therefore to any person who to their knowledge was at the time of the seizure the owner or one of the owners thereof…

3. Any person claiming that any thing seized as liable to forfeiture is not so liable shall, within one month of the date of the notice of seizure or, where no such notice has been served on him, within one month of the date of the seizure, give notice of his claim in writing to the Commissioners at any office of Customs and Excise…

5. If on the expiration of the relevant period under paragraph 3 above for the giving of notice of claim in respect of any thing no such notice has been given to the Commissioners, or if, in the case of any such notice given, any requirement of paragraph 4 above is not complied with [not material] the thing in question shall be deemed to have been duly condemned as forfeited…

8. Proceedings for condemnation shall be civil proceedings and may be instituted -

(a) in England or Wales either in the High Court or in a magistrates' court…"

5. The procedure therefore is that the importer gives the notice of claim and it is for the Commissioners, when receiving such notice, then to initiate legal proceedings for condemnation, that is to say, for a decision as to whether the items are truly forfeit.
6. By section 152 (b) of the 1979 Act the Commissioners have a discretionary power to restore to the importer anything which has been forfeited under schedule 3. That section provides as follows:-

"The Commissioners may, as they see fit –

(b) restore, subject to such conditions (if any) as they think proper anything forfeited or seized…. "

7. Section 14 of the Finance Act 1994 ("the 1994 Act") provides for a review to be made by the Commissioners of any decision as to restoration. By sub-section (2) of the section:-

"(2) Any person who is—

(b)  a person in relation to whom, or on whose application, such a decision has been made may by notice in writing to the Commissioners require them to review that decision.

(3)  The Commissioners shall not be required under this section to review any decision unless the notice requiring the review is given before the end of the period of forty-five days beginning with the day on which written notification of the decision, or of the assessment containing the decision, was first given to the person requiring the review."

8. Section 15 of the 1994 Act confers on the Commissioners on such a review the power to confirm the decision or "withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate." Section 16 of the 1994 Act confers a right of appeal to a VAT and Duties Tribunal with respect to any decision on such a review. Sub-section (4) of section 16 provides:-

" (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 or 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."

9. By sub-section (8) and schedule 5 reviews of non-restoration decisions are to be treated as ancillary matters within sub-section (4).
10. It will be seen, therefore, that the procedure to challenge or seek the amelioration of forfeiture of goods by the Commissioners upon failure to pay duty is a twin track system, the first track, to challenge the lawfulness of the forfeiture to the Magistrates Court (challenges to the High Court are virtually unknown) with an appeal to the Crown Court and then to a Divisional Court of the High Court, the second track, seeking the return of the goods forfeited with an appeal to the VAT and Duties Tribunal and thereafter to the High Court. In Gascoyne v Customs and Excise Commissioners [2005] 2 WLR 222 at paragraph 5 Lord Justice Buxton said of this procedure "the procedure has a number of elements which appear to have grown up over the years and which do not always easily fit with each other."
11. In Gora v Customs and Excise Commissioners [2003] 3 WLR 160 at paragraph 58, under the heading of "jurisdiction in forfeiture" Lord Justice Pill said:-

"58 While the division of jurisdiction between the courts and the tribunal may arguably be curious, and is probably retained because of the long standing jurisdiction of the courts in proceedings for condemnation, the division is clear and it is not intended that the tribunal should have jurisdiction to reconsider the condemnation of goods as forfeited. Mr Cordara's submission that the tribunal should have jurisdiction to consider whether duty has been paid is no more than another way of claiming that the court's findings should be reopened. The tribunal's view would produce the surprising result that the person whose goods had been seized could make a choice of fact-finding tribunal. If he wanted the court to determine the issue he would serve a notice under paragraphs 3 and 4; if he wanted the tribunal he would do nothing. In my judgment, the statutory scheme does not produce that result. The application to the tribunal is for restoration under section 152. There is no breach of article 6 because the owner has recourse to the courts in the condemnation proceedings."

12. It is common ground that this passage in Lord Justice Pill's judgment in the Gora case was not necessary for the decision of the Court of Appeal in that case and is obiter. Lord Justice Pill's survey of forfeiture proceedings in the Gora case was reviewed in the later decision of the Court of Appeal in the Gascoyne case to which I have already referred, in particular, in the leading judgment of Lord Justice Buxton in that case. Again, it is common ground, that this review, as is plain from paragraph 40 of the judgment, was obiter. The material passage in Lord Justice Buxton's judgment is a s follows:-

"46 All that said, I shall now turn to express my view on what was said by Pill LJ. So far as domestic law is concerned I would respectfully say that the observations were clearly correct. I do not think it can have been intended that the importer before the tribunal would have a second bite at the cherry of lawfulness, having failed in the condemnation proceedings, or let them go by default

47 To the extent that it was argued that the literal provisions of section 152(b) are wide enough to allow such a second bite, I would agree that that is so, but the reason why the importer cannot have that liberty is not because of the terms of the statute, but because of the normal English law rules of res judicata or abuse of process.

48 As I have already said, that conclusion does not lead to the more severe conclusion, tentatively drawn by Lord Phillips MR in para 10 of the original judgment in this case, in that it does not cause the tribunal to be effectively functus even on issues of discretion.

49 I turn to the Convention. The forfeiture process interferes with Mr Gascoyne's rights to his property that are potentially protected by article 1 of the First Protocol to the Convention.

50 That is made clear in the judgment of this court in Lindsay v Customs and Excise Comrs [2002] 1 WLR 1766, 1784, para 52, to which I have already referred, in the leading judgment of Lord Phillips MR in that case. That being so, issues of proportionality, and indeed of due process in the arrangements made by this jurisdiction for dealing with issues of forfeiture, potentially arise.

51 As to those, in my view there is no Convention objection to holding that an actual finding in condemnation proceedings binds in a tribunal application, be it binding as to the decision as to lawfulness of seizure, or binding as to the underlying facts. In that respect, one can draw assistance, and the European Court of Human Rights has drawn assistance, from the parallel jurisprudence of article 6. If the importer has actually been in court, first of all he has had his day in court in front of a judicial body, and, secondly, as is well known, Convention jurisprudence permits a proportionate restriction on access to a court, provided the essential rights that are in contest from a Convention point of view are not thereby rendered nugatory. That was decided in Lithgow v United Kingdom (1986) 8 EHRR 329, incidentally a First Protocol case, at pp 393-394, para 194.

52 Secondly, however, that jurisprudence itself creates a great deal more difficulty in relation to the deeming provisions under paragraph 5 of Schedule 3. One's instincts, if no more, suggest that the extent to which it was held in Gora's case that those provisions necessarily prevent any further consideration of the legality of the seizure was an excessive limitation.

53 Miss Simler drew our attention in that connection to what was said by Lord Phillips MR in Lindsay's case, at p 1786, para 64, that the principle of proportionality requires that each case should be considered on its particular facts. Lord Phillips MR then went on to indicate the sort of facts that might be relevant.

54 As it seems to me, for an importer to be completely shut out in the only tribunal before which he has in fact appeared from ventilating the matters that are deemed to have been decided against him because of paragraph 5 of Schedule 3 does not adequately enable him to assert his Convention rights.

55 In my view, therefore, in a case where the deeming provisions under paragraph 5 are applied, the tribunal can reopen those issues: though the tribunal will always have very well in mind considerations of, or similar to, abuse of process in considering whether such issues should in fact be ventilated before it.

56 The mere fact that the applicant has not applied to the commissioners, and therefore there have been no condemnation proceedings, would not, in my view, be enough. But, in my judgment, it goes too far to say that the deeming provisions have always, in every case, got to be paramount.

57 I do not think that that issue was ever brought to the attention of this court in Gora's case. If it had been, I doubt whether the court would have expressed itself in quite the unqualified terms that it adopted.

"

13. It will be seen, therefore, that Lord Justice Buxton accepted what Lord Justice Pill had said in the Gora case in the passage I have quoted above as a correct description of the effect of the various provisions dealing with forfeiture so far as domestic law was concerned. However he took the view that where there had been a deemed forfeiture under paragraph 5 of schedule 3 (as has happened in the present case) it was a potential breach of the importer's rights under Article 6 and Article 1 of the first protocol of the Human Rights Convention to prevent him, in all circumstances, from seeking to reopen the issue of whether the original forfeiture was lawful as a reason, or one of the reasons, why his forfeited goods should be returned to him. Whether the Commissioners, and on appeal from them, the VAT and Duties Tribunal, should permit him to do so would depend on the application of the principle of proportionality to the particular facts of the case in question. Lord Justice Buxton did not seek to limit what sort of facts would be relevant to the decision beyond a recommendation that the Tribunal "will always have very well in mind considerations of, or similar to abuse of process…". It would not be enough "that the applicant has not applied to the commissioners" under paragraph 3 of schedule 3. Later in his judgment, commenting on a statement in the judgment being appealed that the importer "was still able to maintain a right to argue against the validity of the seizure" on the review under sections 14 and 15 to the commissioners and on appeal to the tribunal under section 16, he says, at paragraph 76, "in the light of Gora's case …what the judge says there is not correct, or at least not unequivocally correct. That is because failure to give a paragraph 3 notice will, in most cases, preclude subsequent challenge to the lawfulness of the seizure." He does not say in all cases.
14. In the Commissioners of Revenue and Customs v Smith, unreported, judgment 17^th November 2005, Mr Justice Lewison was dealing with a case where an importer was stopped at Dover by Customs officers with 2,000 litres of beer, 250 litres of wine and 4 litres of spirits on his Toyota Land Cruiser without having paid duty. He did not give a notice to the Commissioners under paragraph 3 of schedule 3 but sought to raise the validity of the seizure on appeal to the tribunal from the Commissioners' refusal to review its decision not to return the forfeited goods to him. The tribunal permitted him to do so. In the result Mr Justice Lewison set aside the tribunal's ruling.
15. At paragraph 22 of his judgment, having referred to Lord Justice Buxton's judgment in the Gascoyne case, and, in particular, to paragraph 76, Mr Justice Lewison says this:-

"22. It is, in my judgement, clear from that passage that in the run of the mill case where there has been a failure to give a paragraph 3 notice invoking the condemnation proceedings the deeming provision will operate against the applicant in any subsequent appeal to a Tribunal. The Tribunal's function, therefore, is analogous to a sentencing court once a defendant has been convicted. No matter that the defendant still protests his innocence of the charge against him, the function of a sentencing court is to accept mitigation but not to question the original conviction.

23. Lord Justice Buxton's reference to abuse of process or to considerations analogous to abuse of process are, in my view, references to the well-known principle that it may of an abuse of process to raise in one tribunal matters that could and should have been raised in another. So the relevant questions will always be, first, could the applicant have raised the question of lawfulness of forfeiture in other proceedings and, if the answer to that question is yes, why did he not do so? In the light of his reasons for not raising the matter in condemnation proceedings the Tribunal can then answer the question should he have done so and if they answer that question 'yes', then it will be, in most cases, an abuse of process for him to raise the question before the Tribunal."

16. I respectfully agree with Mr Justice Lewison's approach in this case, namely, that, whether or not an importer, having suffered a deemed forfeiture under paragraph 5 of schedule 3, is able to raise the validity of the forfeiture on a review by the Commissioners and on appeal from them to the Tribunal, depends on two questions, first, did the importer have a realistic opportunity to invoke the condemnation procedure and, secondly, if he did, are there nonetheless reasons, disclosed by the facts of the case which should persuade the Commissioners or the tribunal to permit him to reopen the question of the validity of the original seizure on a application for return of the goods. The first question will almost always be answered in the affirmative, since facts would have to be very unusual to base a conclusion that an importer was prevented, in the 30 days succeeding forfeiture, from giving notice to the Customs to initiate condemnation procedure in the Magistrates court.
17. It is apparent from the reasons given in the present case by the Tribunal for its ruling that an affirmative answer to the first question was assumed. The Tribunal gave an affirmative answer to the second question "in all the circumstances of this appeal" but gave no indication of the particular factors, in the material before it, which led to that conclusion. For the purpose of the appeal before me Mr Timson-Hunt who appeared for the Commissioners before the Tribunal made a witness statement in which, at paragraph 4, he sets out the contents of the contemporaneous note of the reasons given by the "representative" of Mr Weller for his failure to request the opening of condemnation proceedings. Those reasons are described as follows:-

"a) the risk of an award of £750 costs against Mr Weller, which the Commissioners are awarded in condemnation proceedings, and which are not awarded in the Tribunal

b) 'Letter A' (the requesting condemnation proceedings) was not completed because Public Notice 12A (2002) did not explain that a party would later be precluded from challenging the seizure and further guidance would have been helpful. Further, it did not mention that goods were not routinely restored, but only restored in exceptional circumstances; [I was shown a copy of the Notice 12 A which was given to Mr Weller which, in my view, clearly sets out the consequences of not applying for the initiation of condemnation proceedings]

c) 'over zealous' work by front-line staff, [it was common ground that this subparagraph meant that the officers had dealt brusquely with Mr Weller but had not physically mistreated him]

d) in respect of costs the risks, when weighed up, were overwhelming;

e) the Commissioners win in the vast majority of condemnation cases in the Magistrates Court; [The statistics are that in only one case out of 299 in the last recorded year did an importer succeed before the Magistrates].

f) requesting condemnation proceedings would have meant being away from work for long periods; and

g) to avoid stress;"

18. The witness statement concludes at paragraph 4 with the words "it was also confirmed that the decision not to request proceedings was a conscious decision by Mr Weller and he was not deprived of requesting such proceedings." It is not clear whether Mr Weller was given an opportunity to answer this witness statement before the appeal commenced. It was said by counsel appearing on his behalf that the final two sentences of paragraph 4 were not accepted. The Tribunal had before it Mr Weller's letter of 1^st August 2004 written well within the 30 day period from the seizure which took place on the 11^th July. It certainly seems that Mr Weller was suffering from some confusion at the time that this letter was written, I was told, with the assistance of a friend. If the letter is taken by itself it seems to be a invitation to the Commissioners to initiate condemnation proceedings. This appears particularly from the heading which reads "appeal against seizure under Section 139 of the Customs and Excise Management Act 1979" and from the concluding paragraph headed "next steps" where Mr Weller says "one option I am considering is to appeal further to a VAT and Duties Tribunal under the Finance Act 1994." However the form which Mr Weller completed and which is referred to in the second paragraph was a form provided with the Notice 12A by the Commissioners for the purpose of initiating a review. It seems, therefore, that at least it can be said that Mr Weller or his advisers were suffering from confusion at the time he is being taken to have decided not to ask the Commissioners to initiate condemnation proceedings.
19. In addition to this apparent confusion it is common ground that the Tribunal would have appreciated the relatively modest amount which Mr Weller had spent to buy the confiscated goods by comparison with the minimum costs of £750 (the amount appearing in the current Form 12A as an assessment of the likely minimum costs figure) which he would be required to pay if he failed in proceedings in the Magistrates Court. They would also have appreciated that the amount of the forfeited goods was substantially less than the Commissioners' guidelines for similar goods for assessing whether they were to be used for commercial purposes.
20. The Tribunal's direction under appeal was an interlocutory order made in accordance with a discretion conferred on the Tribunal. It follows that an appellate court should only disturb it if satisfied that it was unlawful, or, if lawful, that there was either no material before the Tribunal upon which, if properly advised, it could have made the challenged direction or, which amounts to the same thing, if the court is satisfied in all the circumstances no reasonable Tribunal, properly advised, could have made the order.
21. It was not submitted for the Commissioners that the third direction of the Tribunal was unlawful. In the light of the provisions of the legislation and the, admittedly not binding, authorities which I have set out above it was impossible so to contend. The Tribunal plainly had jurisdiction, on appeal from the Commissioners' refusal to review, to admit an argument in support of the appeal amounting to a challenge to the validity of the forfeiture.
22. The only remaining question, therefore, is whether it is possible to say that there was no material before the Tribunal upon which they could properly base a conclusion that, on all the particular facts of the case, Mr Weller should be entitled to contest the validity of the forfeiture. Although she does not expressly say so it is apparent from the witness statement of Mr Timson-Hunt that this very experienced chairman was directing herself to this question. I have come to the conclusion that I am not able to say, on the material before me, and applying the principles of proportionality to that material, that no reasonable Tribunal, properly advised, could have come to the conclusion which this Tribunal did. It follows that this appeal must be dismissed.
23. I would add this: the conclusions of the Tribunal which made the order under appeal and the conclusions which I have arrived at, on what amounts to the same material as was before that Tribunal, will not bind the Tribunal which hears the appeal. That Tribunal will be able to go into all the facts of the case, probably with more evidence before it than was before the Tribunal which made the order under appeal. That Tribunal may conclude, as a step in arriving at its decision that in all the circumstances Mr Weller should not be allowed to challenge the validity of the forfeiture. Though it is unlikely to do so if it was going on to allow Mr Weller's appeal.
24. Finally I respectfully echo the call by each of the judges of the Court of Appeal which heard the Gascoyne case that a statutory rationalisation of the procedure governing the forfeiture of goods by the Commissioners is urgently required. It seems to me that the present system is confusing to the public and pregnant with the possibility of substantial injustice.