United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E449, [2003] UKVAT(Excise) E00449

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Kirkali v Customs & Excise [2003] UKVAT(Excise) E00449 (22 July 2003)

Excise duty – seizure of vehicle – whether owner aware of trip abroad or use for smuggling – whether conclusions drawn by review officer reasonable on facts – policy not spelt out in review letter

LONDON TRIBUNAL CENTRE

CEMALIYE KIRKALI Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: JOHN CLARK (Chairman)

PRAFUL DAVDA

Sitting in public in London on 6 June 2003

Ms Ruby Hamid of counsel, instructed by Vahib & Co, Solicitors, for the Appellant

Ms Katrine Sawyer of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

Mrs Cemaliye Kirkali ("the Appellant") appeals against a decision on review by the Commissioners in their letter dated 6 September 2002 not to restore a Mercedes E250 car seized on 21 June 2002 at Dover.

The law

The provisions in question in this appeal are sections 15 and 16 of and Schedule 5 to the Finance Act 1994, and Article 1 of the First Protocol to the European Convention on Human Rights ("ECHR"). As these provisions have been widely cited in previous decisions of these tribunals, we do not reproduce them in full.

The facts

The evidence before us consisted of the Commissioners' bundle of documents; in addition, the Appellant gave oral evidence with some assistance from her aunt Mrs Connie Ibrahim as interpreter. Oral evidence was also given by the Appellant's son Volkan Kirkali (to whom we refer in this decision as "Volkan" to distinguish him from his father, Ozkan Kirkali, referred to as "Mr Kirkali"). For the Commissioners, Mr David Harris, the Review Officer, gave oral evidence. We first consider the part of the evidence consisting of the correspondence, which we find as fact as set out below. We then review the further evidence given at the hearing, on which we set out our findings of fact later in this decision, in order to deal with conflicts between the evidence given by different parties.

The correspondence

At about 8.40 a.m. on 21 June 2002 Volkan and Mr Kirkali were stopped by Custom officers at Dover Docks. Volkan told the officer that they had been to Calais, and that they had travelled out at 1 a.m. that morning. The officer's notes do not specifically record which of them was driving, but in response to the officer's question "Do you own the car?" Volkan responded "Yes". In response to further questions, Volkan declared that he had purchased one box of tobacco. Further checks by the officer revealed that the total excise goods within the car were 17.5 kilograms of hand rolling tobacco and 50 cigarillos. (As the Appellant did not challenge the seizure of the goods or the car, we do not set out the facts of the seizure in greater detail, although at the hearing Volkan was cross-examined on the detail of the events of 21 June 2002. The purpose was to question his credibility as a witness.) The goods and the vehicle were seized. The officer issued a form SEE 004C relating to the seizure of the vehicle, which states: "If the vehicle does not belong to you then you must pass this form on to the owner of the vehicle as soon as possible."

The Appellant did not learn what had happened to the car until she asked him for the car keys on the following Sunday. (21 June 2002 was a Friday.) On 24 June 2002 (with the assistance of Mrs Ibrahim) she wrote to the Commissioners to explain that she had known nothing about these exploits. She said that on the day in question her son had asked to borrow her car to take his girl friend to Southend. As she was separated from her husband, she now knew why Volkan had not told her where he was going. The truth had come out when she asked Volkan for the keys; she had been very upset, as she did not talk to her husband, and she had lost her car. Following the Commissioners' acknowledgement dated 27 July 2002, she wrote again (this time with the assistance of Volkan's girl friend, Ceyda). She explained that the car was used to take her disabled mother to hospital and doctors for her checks, so the car was a requirement both for the Appellant's life and that of her mother. She asked whether there was any way of speeding up the process, such as a face to face meeting, because of the importance of the vehicle, which had been taken away from her due to her son's mistake.

Mr Matthews of the Commissioners' Post Seizure Unit replied on 11 July 2002. The Commissioners' policy applying at the time of the seizure was the following. Private vehicles seized as a result of their use in the improper importation of excise goods would not be restored even on the first occasion on which they were so used unless the owner could clearly demonstrate exceptional circumstances that would warrant a departure from the policy. Mr Matthews set out four reasons relating to the actions of Volkan and Mr Kirkali. He referred to the objectives towards which the Department's efforts were directed. To encourage compliance, the normal policy in these cases was to refuse to restore vehicles. He had seen no evidence of exceptional circumstances in this case which would justify a departure from this policy. He explained that the Appellant had 45 days from the date of his letter to ask for a review to be conducted.

On behalf of Mrs Kirkali, Vahib & Co, Solicitors, wrote to the Post Seizure Unit on 16 July 2002. They referred to her statement in her letter dated 24 June 2002 that Volkan had borrowed the car in order to take his girl friend to Southend. They continued:

" . . . however, our client informs us that we [sic] did not inform you of the real circumstances as she did not want to get her son in to [sic] trouble. She has been told that this is technically a criminal matter.

Our client is also aware of the fact that in order to get the car back, she may have to report the incident to the Police in order to gain a Crime Reference Number. Although she has yet to do this, and by doing so will get her son into trouble with the Police, our client states that if this remains the last resort in order to get her car back, then she will do so."

They referred to the importance of the vehicle to transport the Appellant's elderly disabled mother, Mrs Dervish, to various destinations, due to Mrs Dervish's inability to use public transport, and explained that because of Mrs Dervish's particularly bad state of health she had "constant appointments" at Chase Farm Hospital. Without the Appellant's car, Mrs Dervish would find it impossible to attend the appointments.

Later in their letter they said:

"Our client is also aware that she may have to pay some kind of restoration fee in order to get her vehicle back, our client states that she is more than willing to do so and again states that, although she accepts that you had a right to seize her car, it is clear that the offence committed was not her fault and she feels that she should not be punished for the mistake of her son."

The Post Seizure Unit responded on 18 July 2002 to the effect that they were unable to consider further facts, and that the next option would be for the Appellant to request a review of the decision. A request for a review could involve the Appellant being called for a third party interview so that the review officer could establish further information. They asked for confirmation if the Appellant did wish the matter to be referred to the Review Team and whether she would be willing to attend for an interview if required. However, before any response was made to that letter, Mr Lewis of the Commissioners' Review Team wrote to Vahib & Co on 26 July 2002 thanking them for their letter asking for a formal review. As the letter had been received on 26 July 2002, the Department had a maximum of 45 days from that date to conduct the formal review and notify Vahib & Co of the outcome.

Mr David Harris, the Review Officer, wrote to Vahib & Co on 6 September 2002 setting out the results of his review. He set out the details of the seizure. (Although the letter mentioned that Volkan had told the Customs Officer that he owned the car, it contained no comment on this in the light of the subsequent information concerning its ownership.) Mr Harris reviewed the correspondence, and set out the legislation. He stated the restoration policy for vehicles:

"With effect from 14 July 2000 the Commissioners [sic] normal policy regarding privately owned vehicles used for the improper importation of excise goods is that they will not be restored. However, as from the 18^th April 2002, vehicles will be considered for restoration where the traveller can demonstrate that the goods were to be supplied at purchase price and not for profit. These policies applied at the time of the seizure of the vehicle. However each case is considered to determine whether the affected party has substantiated that restoration should exceptionally be allowed."

He explained that he was taking a fresh look at the decision that the Appellant was contesting. He reviewed the circumstances and concluded that the goods were properly seized, and that the vehicle being used to transport them was equally liable to forfeiture by virtue of section 141 Customs and Excise Management Act 1979 ("CEMA"). He was not aware of any appeal to the Magistrates Court challenging the seizure of the goods and vehicle, and therefore they were condemned as forfeit to the Crown by the passage of time. This left the question of restoration. The policy stated that the vehicle should not be restored. He examined whether a case had been made out for disapplying that policy. He referred to the Appellant's reasons for giving the deciding officer an entirely fictitious account of how Volkan and Mr Kirkali came to be in possession of the vehicle. He had no reason to doubt that the Appellant would not want to get her son into trouble with the authorities. However, with a change of account the Appellant's credibility was thrown into doubt. He therefore explored the other aspects of the Appellant's accounts to check their veracity. As far as he was aware the Appellant had not reported the vehicle stolen, and therefore the review had to proceed on that basis.

It had been confirmed that Volkan did live with the Appellant. Mr Harris had contacted Vahib & Co to find out where Mr Kirkali lived. They had contacted the Appellant through Volkan. They had then informed Mr Harris that no-one knew of Mr Kirkali's current address and that if it was necessary to contact him, they had a mobile phone number to call. Mr Harris had therefore carried out some enquiries to establish Mr Kirkali's current address. Departmental records showed that Mr Kirkali had been stopped by Customs at Stansted Airport on 27 March 2002. On that occasion 39.5 kilos of hand rolling tobacco had been seized from him. He had given the same address as that of the Appellant, as he had done when stopped on 21 June 2002. In addition, at the time of Mr Harris' review, Mr Kirkali was registered to vote at that address, and had been so registered for the previous five years. Mr Kirkali's address as notified to the Inland Revenue was the same. Mr Kirkali had two vehicles registered to him at that address. The Appellant was unable to give any other address for her allegedly estranged husband, nor could Volkan do so. Mr Harris stated that he was not persuaded that the Appellant was telling the truth when she said that she was separated and not talking to her husband. It seemed to Mr Harris that on the evidence, they had been living at the same address for at least the previous five years. In his view, the Appellant was once again not telling the truth. He was not persuaded by her subsequent account of events and did not believe that the vehicle was indeed taken without her consent.

The Appellant's claim to exceptional hardship was that she needed the vehicle restored in order to transport her disabled mother. He referred to the two other vehicles registered in the name of Mr Kirkali at her address, and did not see why these vehicles should not be used to transport her mother to her various destinations. There were no exceptional circumstances that would warrant Mr Harris departing from departmental policy. He concluded that the decision of 11 July was equitable in that it treated the Appellant no more harshly or leniently than anyone else in her circumstances. He could not conclude that it was a decision which a reasonable body of Commissioners could not have reached. He therefore confirmed the contested decision not to offer restoration of the goods and the vehicle.

Additional evidence

The evidence related to four issues. These were the use of the car and whether (and for what) Volkan had consent to use it, the extent of any contact between the Appellant and Mr Kirkali, the hardship caused by the seizure and non-restoration of the car, and the basis on which the review had been carried out.

Use of the car

The Appellant's evidence at the hearing was that she usually used the car, but occasionally Volkan did so. The keys were normally left on the staircase at home, so if they were not there, she assumed that Volkan was using the car. At some stage before the car was taken to France, Volkan had mentioned that he was planning to use it to take his girl friend to Southend. (The precise timing of this conversation was disputed; we return to this later.) When on 21 June 2002 the Appellant discovered that the car keys were not there, she assumed that Volkan had gone to Southend. The Appellant said that she did not know that the car was to be used to go to France, nor that it was to be used to carry tobacco. Had she known, she would not have permitted it to be used for these purposes. Her explanation of the reference in Vahib & Co's letter to the vehicle being taken without consent was that on this occasion Volkan had not asked to take the car. When she discovered the truth on 21 June, she was very angry.

In cross-examination she explained that she did not necessarily use the car every day. Sometimes there might be two or three days between uses, sometimes it might be used every other day. She did allow Volkan to use it if she was not doing so. She accepted that if she needed the car, she would have to know that it was available. The day before, Volkan had asked her whether she needed the car, as he wanted to take his girl friend to Southend. Ms Sawyer challenged her on the timing of this conversation, as earlier she had said that it did not take place on 20 June. The Appellant's reply was that Volkan had mentioned it the night before; he did not actually ask on that day. He had not said for how long he needed the car, and she had not asked him. He would not stay away overnight, except with his girl friend.

She explained the reference in Vahib & Co's letter to not informing the Commissioners of the real circumstances. She said that they had written this incorrectly. She had phoned Dover, and the person (whose name she did not have) had told her that she could report the car as stolen and pick it up. She did not do so. Her evidence was that she knew that Volkan had gone away with the car, but she did not know that he had gone to France. She had not changed her story. She had thought that he had gone to Southend.

She had owned the car for two years, and had bought it from a dealer in London. The price was £13,000. She did not pay cash; there was an agreement under which she paid £320 monthly, over a period of four or five years. The Commissioners had informed the finance company of the seizure.

Volkan's evidence on the general use of the car was that the Appellant allowed him to use it. He was still a student at university, living at home, so this use was occasional. If the Appellant was at home, he would tell her that he was taking the car; if she was not, he would take the car, if the keys were there. On 20 June the Appellant had not been at home. Before that date he had spoken to her about going to Southend, but had not given any specific time. He had gone to meet up with Mr Kirkali at Highbury. They had gone to lunch. Mr Kirkali had explained that he had a friend in Calais with tobacco to pick up. Because of the situation between his parents, Volkan had not told the Appellant. He had used a "fib" to be able to use the car. He knew that if he had given her the real information when he asked her, her response would have been a definite "no".

Contact with Mr Kirkali

On the extent of contact between the Appellant and Mr Kirkali, the Appellant's evidence was that they were not together. They had been separated for five or six years. (In the bundle of documents was a copy of a statutory declaration made by the Appellant and dated 29 September 1998 stating that they had lived separately and apart since in or about late 1985 or early 1986. Apart from the question whether the dates should have been 1995 and 1996, we note that this document had not been produced to the Commissioners before the review took place.) Mr Kirkali did not live with her. She did not know exactly where he did live, whether Cyprus, Turkey or in the UK. She did not speak to him. They were not still friends. She was asked why the records showed that he was still registered to vote and that he had registered vehicles at that address. Her explanation was that when they had been together, the house had been registered in both names; she had not bothered to change anything, and had not stopped Volkan from having contact with his father. She did not know whether Mr Kirkali had a new address. She knew that when he stayed in the UK he stayed with Mrs Ibrahim, but Mrs Ibrahim did not tell her about it. Volkan had told her that Mr Kirkali bought cars and buses and sold them to buyers in Cyprus. She knew nothing about either of the two vehicles mentioned in Mr Harris' letter; she only knew what Volkan told her. Neither vehicle was at her house. She had not been aware before Mr Harris' letter that Mr Kirkali had been stopped at Stansted and that tobacco had been seized from him.

Volkan's information about Mr Kirkali was that he had moved to Cyprus. He had family there and in Turkey. Volkan was not sure whether the move was temporary or permanent. Mr Kirkali stayed in Cyprus rather than Turkey. He spent eight months a year in Cyprus. Volkan did know Mr Kirkali's address. If Volkan went to Cyprus, he saw Mr Kirkali there. They were in contact once a month. If Mr Kirkali was in London, he had no definite address. He could be found in the Turkish community, but Volkan did not know where exactly Mr Kirkali stayed.

The hardship issue

The Appellant gave evidence concerning her mother's health. Mrs Dervish, aged 66, was paralysed on her left side, due to a stroke, and had high blood pressure. She could not walk very far. She did not use a wheelchair. She had to have medical attention at a hospital; it took 15 to 30 minutes to drive there. Appointments were between three and six months apart. She also had to attend the general practitioner every two months. She had a disabled badge for the car. At present, help to take Mrs Dervish to her hospital appointments was being provided by Mrs Ibrahim or Volkan's girl friend Ceyda. (The Appellant also gave evidence relating to her own state of health; we comment on this issue later in this decision.)

The review

Mr Harris explained the Commissioners' policy where vehicles were owned by third parties. There were three basic categories of case. The first was where the owner was entirely innocent, had not given consent, and had no knowledge of the purpose to which the vehicle was to be put. The second was where the owner was "innocent but blameworthy", for example where the owner knew that the vehicle was to be taken to France to obtain tobacco but did not know that it was going to be used for smuggling. The third was where the owner was complicit, and knew that the vehicle was to be used for smuggling. In the first category, the Commissioners would restore the vehicle free of charge. In the second, they would restore the vehicle in return for a payment equal to the revenue evaded. In the third case, their policy was not to restore. He acknowledged that the policy had not been mentioned in the letter, but explained that he had had it in mind in carrying out the review. He also explained that although the review letter contained the previously standard wording relating to the decision not being one which a reasonable body of Commissioners could not have reached, he had in fact carried out the review on the basis of taking a fresh look at all the circumstances. (This standard wording had subsequently been discontinued.)

He had been satisfied that the vehicle had been used for smuggling and that therefore the seizure was proper. On the question of non-restoration of the vehicle, his view had been that the owner was not entirely innocent. This was based on the reference in the solicitors' letter to giving a false impression to the deciding officer. On Mr Kirkali's whereabouts, as the solicitors had informed him that the only means of contact was by a mobile telephone number, he had carried out other checks. He had checked the Commissioners' own records, which showed the seizure at Southend, and involved Mr Kirkali giving the same address as that of the Appellant. He had checked the electoral roll, and had also used the reciprocal arrangement between the Commissioners and the Inland Revenue to check the latter's records. He had also checked vehicle registration details. In relation to one of the vehicles, certain further documentation carrying the registration number of that vehicle was put to him at the hearing. The documentation showed that the vehicle was a 20 seater bus. The first was a sales invoice dated 20 June 2002 showing Mr Kirkali as the purchaser and giving his address as the same as that of the Appellant. The next was a certificate of permanent export dated 24 June 2002 giving the notified date of export as 10 July 2002. The final document was a bill of lading dated 19 August 2002. On the basis of this documentation, he accepted that the vehicle was no longer in the UK. The other vehicle registered to Mr Kirkali at that address had continued to be so registered up to the date of the hearing. (No details were given in evidence as to what type of vehicle this was.)

The results of his checks had led Mr Harris to his view of the Appellant's story. He had not been persuaded that the Appellant was telling the truth when she had said that she was separated and not talking to Mr Kirkali. Within the policy, on the evidence in front of Mr Harris, the Appellant was not telling the truth. Mr Kirkali was registered with the Inland Revenue and on the electoral roll. Mr Harris had not been persuaded that Mr Kirkali was not resident at the same address. Mr Harris was not persuaded that the Appellant was a third party; if Mr Kirkali was so resident, the car would be shared property, and her husband or son would have told her about the smuggling. Mr Harris explained that he had reached his conclusions not on just one element of the information but on a "mosaic". On the question whether there was an inconsistency between the Appellant's original letter, stating that Volkan had had permission to take the car to Southend, and the solicitors' letter, saying that Volkan had taken the vehicle without consent, Mr Harris said that he had relied on the solicitors' letter. This had mentioned a lie; he therefore assumed that this second version of events was correct. Mr Kirkali had used the same address on a number of occasions, so Mr Harris had given much weight to this. He thought that it would be surprising after absence for five years from an address to receive correspondence there from an official source. If no-one had bothered to change the electoral roll entries, what would have happened to the voting slips?

On the review of the details concerning Mrs Dervish, Mr Harris had not dismissed anything out of hand. The question was whether the Appellant had demonstrated exceptional circumstances. Mr Harris had not made checks beyond the information given in the solicitors' letter, which had contained a copy of the disabled permit and other information relating to Mrs Dervish. He was not sure what else he could have done. He had not thought that he should ignore the availability of other vehicles that would be sufficient for transporting Mrs Dervish. He had not made a separate check as to their availability, but did check with the DVLA. The checks failed to show that one vehicle had been permanently exported. They did reveal that this was a 20 seater bus. He did not see why this vehicle should not be available. The DVLA check would have showed whether the vehicles were off the road. He accepted that the position could have been the same for the other vehicle, but he had had to carry out his review on the basis of the facts in front of him at the time. As there were two vehicles at the Appellant's address, he had considered them to be available. This had excluded the Appellant from the category of exceptional hardship. He confirmed that the amount evaded had been £1,761, and that the Appellant's car was still at the Queen's Warehouse.

Arguments for the Appellant

Ms Hamid contended that the decision was one that the Commissioners "could not reasonably have arrived at" within the meaning of section 16(4) Finance Act 1994. They took into account irrelevant matters and disregarded relevant matters, or failed to give such maters sufficient weight. The Appellant had not known that the excursion was taking place, nor had she been aware that her car would be used for the importation of tobacco. She was wholly innocent. When she had discovered what had happened, she had been very angry. Volkan had been allowed to use her car; the keys had been left on the stairs. He had mentioned Southend: when the Appellant had seen that the keys had gone, she had assumed that this was where he had gone. She had been completely unaware of any intention to travel to France. Ms Hamid argued that Volkan had not asked permission for the trip, which was a "spur of the moment" one. Ms Hamid invited a finding that the Appellant did not know about the trip, nor about the tobacco, and was thus an innocent third party. At no time had she doubted the legality of the seizure. She was merely seeking the restoration of her vehicle because she was an innocent third party. Her third party standing had not been believed by the Commissioners and had therefore not been properly considered. Ms Hamid argued that on this basis the amount of tobacco imported, the conduct of the car's occupants, and the circumstances surrounding the seizure were irrelevant. She cited Aykut Ates v Commissioners of Customs and Excise (Excise Decision E00188):

"Once it is accepted that the Appellant is innocent in that he did not know that the car would be used for bringing alcohol into the country, the amount of alcohol that was brought in and any other circumstances relating to the driver must be irrelevant. These circumstances should not have been taken into account in deciding whether to restore the car to the Appellant."

She argued that the relevant matters were the Appellant's ownership of the vehicle, her innocence, and the hardship she had suffered as a result of the seizure. The dependency of the Appellant's mother was particularly relevant. Ms Hamid submitted that Mr Harris had not taken these matters into account, or that he had given them insufficient weight.

Ms Hamid argued that the decision to deprive the Appellant of her vehicle interfered with her right to the peaceful enjoyment of her possessions, as protected by Article 1 of Protocol 1, and was therefore only justified if it was in the public interest. The decision should be made on the principle of proportionality, demonstrating a fair balance between the interests of the public and the circumstances of the individual. She submitted that the decision was not proportionate and therefore was not reasonable. She cited the judgment of Lord Phillips MR in Lindsay v Commissioners of Customs and Excise [2002] STC 588 at [40] and [52]. She argued that in the Appellant's case the punishment did not fit the crime. The purpose of the seizure policy was to punish duty-evading importers and to deter them from further wrongdoing. The Appellant had not participated in or condoned the wrongdoing. The sole effect of the sanction was to punish an innocent third party. Ms Hamid cited Air Canada v United Kingdom 20 EHRR 150 at paragraph 36, Aykut Ates at paragraph 20, and Hopping v Commissioners of Customs and Excise (Excise Decision E00170) at paragraph 28. She further argued that the Appellant's circumstances had not been taken properly into account when the decision was made, thereby offending the principle of proportionality as considered in Lindsay at [52]. The hardship suffered by the Appellant and her mother had not been taken into consideration. Mrs Dervish had to attend hospital every three to six months, and had to attend her General Practitioner more often. The lack of the vehicle had resulted in greater dependence on friends and family to help Mrs Dervish keep these medical appointments. Ms Hamid argued that very little consideration of Mrs Dervish's disabled status and her suffering as a result of the Commissioners' decision had been given in the review letter. Continued forfeiture was not a fair and appropriate decision having regard to the Appellant's personal circumstances. Ms Hamid argued that it was unreasonable and disproportionate to refuse restoration of the vehicle, because the Appellant had not been involved in the evasion of duty, and cited Commissioners of Customs and Excise v Alzitrans SL [2003] EWHC 75 (Ch), which she contended was decided on similar facts, at [42] and [46]. Even if it were held that the Appellant was aware that the vehicle was to be taken to France, she should be considered innocent in the light of that case.

Ms Hamid made an additional point in the course of argument. The amount of duty evaded had been £1,671. The Appellant had bought the car, an E class Mercedes, within the previous two years, the price being between £13,000 and £14,000. The value of the car was therefore disproportionate to the amount of duty.

Ms Hamid contended that whether the review decision was or was not reasonable, the Appellant had exceptional circumstances which entitled her to the restoration of her vehicle. Her disabled mother depended on her for transportation. This was something which had been made known to the Commissioners and constituted exceptional circumstances.

Arguments for the Commissioners

Ms Sawyer emphasised the supervisory nature of the Tribunal's jurisdiction under section 16(4) Finance Act 1994. That provision did not give the tribunal jurisdiction to substitute its own decision for that of the Commissioners; she cited Lindsay at [68] and [69]. She acknowledged that the Appellant was not challenging the original seizure decision nor the facts upon which that decision was based.

The Commissioners contended that the decision not to restore the Appellant's car was reasonable within the meaning of section 16(4) Finance Act 1994. The original seizure of the goods and the car had been lawful. She set out in detail the reasons for the view that it had been lawful; as the Appellant did not challenge the original seizure of the vehicle, we do not reproduce these reasons here. She then set out a detailed consideration of whether the Commissioners had acted reasonably in deciding on both occasions not to restore the vehicle. (Although some reference was made to the restoration of the goods, that is not in issue in this appeal.) She referred to the Commissioners' policy that took effect from 14 July 2000 and had been amended as from 18 April 2002. Under that policy, vehicles used for the importation of excise goods for a commercial purpose without paying excise duty would not be restored, even on the first occasion that they were used for that purpose. Consideration would be given to restoration on payment of a fee, where the goods were imported to be distributed amongst family or friends either for free or at cost price. Consideration was also to be given to any exceptional circumstance in a particular case. The aim of the policy was to deter the importation of excise goods for commercial purposes without payment of the applicable duty, and to encourage compliance with the legislation for the importation of goods liable to excise duties, and also to have the advantage of consistency in decision-making. The policy itself was not unreasonable; it pursued a legitimate aim and the policy was appropriate to achieve that aim. (For details of the policy and its underlying aim, she referred to the witness statement of Mr Dolan. However, no such witness statement was included with the documents produced to us for the hearing. Although the Tribunal is familiar with statements given by a Mr Dolan and produced in a number of previous appeals to the Tribunal, we do not think it would be proper to take any of these into account in the present appeal.)

Ms Sawyer acknowledged that a decision not to restore the vehicle would not be reasonable if it amounted to a breach of the Appellant's right to property. Under Article 1 of the First Protocol to the ECHR, deprivation of people's possessions would only be justified if it was in the public interest. 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. In support of this, she referred to Air Canada at paragraph 36. She explained that in Lindsay, the Court of Appeal had considered the same policy introduced in July 2000 as had been applied in the present case (but without the amendment made in April 2002 following the Court of Appeal's decision). The Court of Appeal had held that the policy pursued a legitimate aim under the Convention. The central issue had been whether the policy was liable to result in the imposition of a penalty in the individual case that was disproportionate having regard to the legitimate aim in Mr Lindsay's particular case (Lord Phillips MR at [55].) She cited Lord Phillips' judgment at [60] – [62]. The Court of Appeal had had regard to the scale of the evil against which the Commissioners' policy was directed. It had also had regard to the fact that the free movement of persons within the internal market greatly facilitated the illicit importation of excise goods into the UK. It also bore in mind that notice was given to travellers that they were only entitled to bring back excise goods duty free if they were for their own use and that smuggling could lead to the forfeiture of their vessels. (We take this to be an error, and assume that Lord Phillips MR was intending to refer to vehicles.) Anyone who used his car for smuggling was likely to be taking a calculated risk. Lord Phillips had gone on (at [63 – [64]) to deal with the distinction between commercial smuggling and the driver importing goods for social distribution to family and friends in circumstances where there was no attempt to make a profit; in the latter case proportionality required each case to be considered on its own particular facts, of which he had given various examples to be taken into account.

Ms Sawyer argued that if the Commissioners' interpretation of the facts of the present case were upheld (that the goods had been smuggled in for a commercial purpose), the circumstances of the Appellant's son and husband fell within the category of those smugglers who "deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be liable to forfeiture" and that as such, according to the Court of Appeal's ruling in Lindsay at [63], they "cannot reasonably be heard to complain if they lose those vehicles". Ms Sawyer argued that in such circumstances Lord Phillips had said that the value of the car used need not be taken into consideration as "those circumstances will normally take the case beyond the threshold where that factor can carry significant weight in the balance".

Ms Sawyer acknowledged that the Appellant had not been present on the occasion of the smuggling and it had been the Appellant and not the smugglers themselves who had been deprived of the vehicle. Ms Sawyer submitted that the reasonableness of the decision not to restore the vehicle to the Appellant turned upon whether the Appellant had been truly ignorant of the use to which her vehicle had been put. Ms Sawyer cited the decision of the Manchester Tribunal in John Clarke v Commissioners of Customs and Excise (Excise Decision No. E00242). In that case a vehicle had been seized by the Commissioners under section 141 CEMA because it contained excise goods held for a commercial purpose and seized under section 139 CEMA. The vehicle was being used by the Appellant's father without the Appellant's knowledge. The Tribunal had held that it was disproportionate and unreasonable for the Commissioners to refuse to restore the vehicle to the son who owned the vehicle and who was truly ignorant of the use to which the vehicle had been put. Ms Sawyer referred to passages in paragraphs 72 to 75 of the decision (as renumbered on correction), which showed that the natural presumption must be that the borrower of a car has possession of it with the informed consent of the owner and that it is for the owner to displace that presumption.

Ms Sawyer argued that the Appellant's credibility must be in doubt. She had admitted to having lied in her first letter to the Commissioners in order to protect her son. In view of that lack of credibility, Ms Sawyer submitted that it was likely that the Appellant had indeed known that her vehicle was to be used for a cross-Channel trip, and that the Appellant had been likely to know that her son and husband intended to return with excise goods.

If those contentions were correct, then Ms Sawyer submitted that the decision not to restore the vehicle was reasonable and proportionate, subject only to the Appellant being able to show that she had suffered exceptional hardship as a result of the seizure of her vehicle. It appeared that the Appellant could have the use of a vehicle because her husband had two vehicles registered at her address. Thus there could not be exceptional circumstances that would require a different decision.

Ms Sawyer submitted that the decision not to restore the vehicle was therefore neither disproportionate so as to amount to a breach of the Appellant's Convention rights, nor unreasonable within the meaning of section 16(4) Finance Act 1994.

In the light of these submissions Ms Sawyer reviewed the evidence. Volkan said that he had taken the car without his mother's consent. He had lied to the Commissioners. He had changed his story. He could not say whether the trip had been planned in advance. His evidence on whether he had been with his father the whole time while outside the UK had been unclear, to say the least. His credibility was in serious doubt. It was inconceivable that the crossing could be carried out without some advance planning. The view for the Commissioners was that he borrowed the car for that purpose.

The Appellant's evidence lacked credibility. In her Notice of Appeal she had actually said that she had lied at the beginning. The conflict between her letter of 24 June 2002 and Vahib & Co's letter dated 16 July 2002 put her credibility in doubt. In her evidence the Appellant had said that she had not given permission to Volkan to use the car, but in cross-examination, she had said that she did. It followed that her evidence was not credible, and thus it was difficult to give substantial weight to her evidence that she did not know about the proposed use.

On the question of Mr Kirkali's address, Ms Sawyer emphasised the continuing links. The documents produced at the hearing concerning the export of the bus all showed Mr Kirkali's address as being that of the Appellant. These documents were all contemporary to the events under review. Ms Sawyer argued that in the absence of clear evidence, one could not say that there was no connection.

It followed that the Appellant had to displace the natural presumption that Volkan had her informed consent to use the car. If she could not, the appeal against refusal of restoration must fail. If so, the remaining question was that of exceptional hardship, and whether the conclusion on this question in the review had been reasonable. Even if this were not so, the evidence was that Mrs Dervish had to attend the hospital every three to six months, and that members of the family were available to help, so there were no exceptional circumstances.

Findings on the evidence

On the first issue, the use of the car, we conclude that there was a lack of clarity in the Appellant's mind as to what exactly was meant by the questions put. It is clear in general terms that Volkan regularly had permission to use the car, and that if the Appellant was at home when he wished to take it, this would be mentioned. However, it is implied by the raising of the question of the suggested trip to Southend that this permission was not total and unrestricted. This suggests to us that for any longer trip, Volkan would have to let the Appellant know that he wanted to use the car, rather than merely taking it without notice. We accept the Appellant's evidence that she was unaware of any proposal to take the car to France or to use it to carry tobacco, and that when she saw that the keys had been taken, she assumed that Volkan had gone to Southend. We think that the Appellant did not understand what was meant by the reference to taking the car without her consent. She had been told that she could report the car as having been stolen and pick it up. We consider that she saw this as a simple basis for recovering the car, and that in taking advice from her solicitors she laid stress on the fact that Volkan had taken the keys when she was out. Pursuing this contention meant that her solicitors had to explain the reason for the difference between her account in her first letter and the account as set out in their letter. The Appellant said that their letter was wrong. We did not have any evidence from the solicitors, but it appears to us that the inconsistency is the result of a lack of understanding. From the Appellant's evidence, Volkan was not prohibited from taking and driving the car; instead, he took it for one purported purpose, and used it for another purpose for which the Appellant would never have given permission had she been asked. We do not know whether there would have been any language difficulties as between the Appellant and her solicitors, but we are aware from the hearing that the Appellant's understanding of technical matters in the English language is at least a little impaired by her incomplete expertise in the use of English.

On the question of the timing of Volkan's request to use the car for the trip to Southend, we conclude from the evidence that this request was not made on the evening of 20 June 2002. The question Ms Sawyer attempted to put in cross-examination to the Appellant was whether Volkan had asked on that day for permission to take the car. Due to the difficulties both in the interpretation and in her understanding, the Appellant did not answer this question, which Ms Sawyer then replaced by the question when was the first time that the Appellant had found that the car had been taken to France. We do not derive any assistance from Volkan's evidence; it does not help to show the Appellant's own perception, which is the matter directly in question, and in any event we did not find Volkan an entirely credible witness. We do regard it as within character for him to mislead the Appellant to avoid her becoming aware of the truth, because he knew that if she had known, she would not have agreed to Volkan's use of the car to go with Mr Kirkali to France. We conclude that the request had been put at some time before 20 June 2002, without Volkan specifying the exact timing, and that on that date the Appellant had interpreted the absence of the keys as an indication that he had taken the car to Southend as proposed.

On the second issue, that of contact between the Appellant and Mr Kirkali, our view on the evidence is that there was none. In taking this view, we do not take account of the statutory declaration, as this was not contemporaneous, and as already mentioned there is a question as to the dates specified. The failure to change the house ownership details appears to us to be a matter of inertia, encouraged by Volkan, who wanted to keep contact with Mr Kirkali despite the Appellant's wish to have no contact. The Appellant said that some letters did arrive for Mr Kirkali, but that she had no address to which to pass them on. However, it did appear that Volkan was in a position to intercept letters, and that (despite his original denial in response to the solicitors' enquiry as to any knowledge of a contact address for Mr Kirkali) he did have details of Mr Kirkali's address and was aware of at least some of Mr Kirkali's business activities. We were unconvinced by Volkan's evidence as to lack of knowledge of Mr Kirkali's whereabouts when in the UK. Thus we conclude that any contact was between Volkan and Mr Kirkali rather than between the Appellant and Mr Kirkali. Volkan was quite happy to keep the Appellant "in the dark" on anything to do with Mr Kirkali. We are prepared to accept Volkan's evidence as to Mr Kirkali being based in Cyprus for eight months a year, despite our reservations about Volkan's evidence on Mr Kirkali's movements in the UK.

On the third issue, hardship, we accept that Mrs Dervish is disabled and that she does need to attend medical appointments both at the hospital and with her general practitioner. The former appointments are between three and six months apart, and the latter every two months. The Appellant said in evidence that the car journey to the hospital takes between fifteen and thirty minutes. The length of the journey to the general practitioner was not mentioned, but it was in the same area north of London as the hospital. However, we also take into account that (albeit with some difficulty) the Appellant has been able to make other arrangements for Mrs Dervish to attend these appointments. We do not think that the Appellant's own medical condition can be taken into account, as this was not a matter raised as part of the review.

The evidence on the fourth issue, the review, needs to be considered as part of our conclusions.

Conclusions

The statutory limitations on our jurisdiction are as referred to at paragraph 29 above. For the Appellant to succeed, she must satisfy us that the Commissioners could not reasonably have arrived at the review decision. To show unreasonableness, it must be demonstrated that the Commissioners reached a decision which no reasonable body of Commissioners could have made, or that the Commissioners did not take into account all relevant considerations, or that they did not leave out of account all irrelevant considerations. This follows from JT Bowd v Customs and Excise Commissioners [1995] V&DR 212 at 224, cited in Aykut Ates. As Ms Sawyer indicated, section 16(4) Finance Act 1994 does not give the tribunal jurisdiction to substitute its own decision for that of the Commissioners. Thus our conclusions on the evidence, as set out above, can only become relevant if we conclude that the decision arrived at on review was unreasonable, and that a further review is necessary.

We examine the conclusions set out by Mr Harris in his review letter, taking into account his comments in that letter and in his evidence as to the basis on which he arrived at those conclusions.

That letter was in response to the solicitors' letter dated 16 July 2002, which was treated as a request for a review. The opportunity to seek an interview with the Appellant, mentioned in previous correspondence, was not taken up. This is unfortunate, as it meant that the Commissioners did not become aware that the Appellant's knowledge of English was such that it might require the use of an interpreter. It would also have given the Commissioners an opportunity to review with the Appellant the discrepancy between her explanation in her original letter and that given in the solicitors' letter. However, we do not go as far as to describe the absence of an interview as unreasonable, even though it would have been strongly desirable.

A major problem with the review letter is that it did not spell out the policy on restoration of seized vehicles belonging to third parties. Mr Harris explained in evidence that he had taken this policy into account in arriving at his decision. However, we do not think that it is acceptable to apply the policy without explanation. In Alzitrans SL, Blackburne J said at [53]—

"I add one further note. It is a matter I have touched on earlier. Although the 1994 Act does not require the Commissioners to give reasons, it is axiomatic, if the complainant is to have any ground for challenging a review in other than the plainest case, that he be told the reasons for the review decision. In Anthony Hendy v Commissioners of Customs and Excise (a decision of the VAT and Duties Tribunal of 11 January 2002), the view was expressed that a determination on a review without reasons was not a proper compliance with section 15 of the 1994 Act and that, having regard to Articles [sic] 6(1) and Article 1 of the Protocol 1 to the Convention, it must be implicit that reasons for the decision under review are adequately stated. I agree."

We are aware that that case concerned the complete absence (for mistaken procedural reasons) of any decision. In the Appellant's case the review letter did contain the decision, but omitted to mention the policy on the basis of which the review had been carried out. We feel that this omission did put the Appellant at a disadvantage. The policy approach referred to in the review letter was more consistent with the treatment of owners directly implicated in smuggling. We accept that the letter did go on (relatively briefly) to consider the Appellant's position as third party owner, but there was no explanation of how that position affected the decision on review.

This could be put more graphically by saying that for such cases, not only should the review officer take the policy into account, but he or she should be seen to be taking the policy into account. We hope that the Commissioners will take note of these comments in future reviews concerning third party vehicle owners.

When Mr Harris turned (on the penultimate page of his letter) to consider the matter of restoration, he was immediately swayed by the inconsistency between the Appellant's original explanation of how Volkan and Mr Kirkali came to be in possession of the vehicle, and the account in the solicitors' letter. (It was not suggested to us that Mr Kirkali had at any time been in possession of the vehicle, so we assume that this was an error.) Mr Harris accepted that the Appellant would not want to get Volkan into trouble with the authorities. We have already set out our conclusions on the Appellant's evidence, and we feel that Mr Harris should have made further enquiries about this discrepancy before concluding that the Appellant's original account had been untrue. We note that in John Clarke the appellant had asserted that he was finding it very difficult to get to work without his vehicle; this was not true but was an embellishment to his story designed (as he and his mother thought) to improve his chances of recovering his car. The Tribunal found that this was "a foolish overstatement made by a man understandably distressed about the loss of his car when, as he perceived the matter, he had done nothing to warrant it." It held that the lie was regrettable but that it was not sufficient to cast doubt upon its overall impression that the appellant in that case was telling the truth. Our conclusions in the present case are broadly similar; the Appellant was very anxious to have her car returned as soon as possible, and thought that changing her story would assist.

Although we consider that Mr Harris's conclusion on the change in the Appellant's story failed to take into account relevant considerations because he should have investigated it further, we do accept that it was reasonable for him to carry out further enquiries. His conclusions on Mr Kirkali's address showed a further discrepancy, this time between the statement in the solicitors' letter that the Appellant and Mr Kirkali were separated and no longer spoke, and the information showing Mr Kirkali's notification of the same address for a number of purposes. Although Mr Harris had accepted without further question the solicitors' account indicating that the Appellant had changed her story about the use of the car, he did not accept the account in their letter concerning the separation. This was another matter on which interviewing the Appellant could have assisted in finding evidence to resolve the conflict. His further investigations showed that Mr Kirkali had given the same address to various authorities for various purposes. He concluded that he was not persuaded that the Appellant was telling the truth when she said that she was separated and not talking to Mr Kirkali. However, in arriving at this conclusion Mr Harris was equating the use of an address for official purposes with actually living at that address. We do not think that it was reasonable for him to conclude, without having made further enquiries as to Mr Kirkali's actual whereabouts, that Mr Kirkali was actually living at the same address as the Appellant. This conclusion coloured his view of the Appellant's subsequent account of events, so the reasonableness of his decision on the restoration is also compromised.

The remaining matter covered by the review was that of the claim to exceptional hardship. Mr Harris concluded, on the basis that there were two other vehicles registered to Mr Kirkali at her address, that he did not see why these vehicles could not be used to transport Mrs Dervish to her various destinations. This decision suffers from the same defect as that on restoration. The mere registration of a vehicle at an address says nothing as to where that vehicle may be located. Mr Harris assumed that as the vehicles were registered there, they would be available there. Without further evidence as to their location and availability, that conclusion was based on faulty logic. His decision on exceptional hardship was therefore unreasonable.

In addition, Mr Harris accepted in evidence that he knew at the time of the review that one of the vehicles was a 20 seater bus. His decision indicates that he considered this vehicle to be available for transporting Mrs Dervish. Apart from apparently failing to consider the practicalities (or rather, impracticalities) of the use of a vehicle of this size for this purpose, he made no enquiries as to whether the Appellant would have been qualified to drive a vehicle of this type. If he was assuming that Mr Kirkali would be available to drive it, Mr Harris mentioned nothing of this in his review or in his evidence. We consider this aspect of his review also to have been unreasonable.

On the question of the other vehicle, there was no evidence of what type this was, although we assume that Mr Harris would have been aware of this from the registration details available to him and his enquiries of the DVLA. We are therefore unable to comment on whether this vehicle, if it had actually been available at the Appellant's address, would have been suitable. The unreasonableness of the decision relating specifically to this vehicle is that Mr Harris gave no explanation of why he considered it to be suitable.

The result of the review decision is that the Appellant has been deprived of her vehicle. As the review letter makes no mention of the three categories of third party owner cases, we consider whether it was reasonable for Mr Harris (by implication, rather than expressly stating this in the review letter) to place the Appellant in the third category mentioned at paragraph 21 above, rather than in either the first or the second category. As acknowledged in John Clarke (at paragraph 71 in the corrected version), the position of the owner of the car seized from its borrower was not considered in Lindsay since it did not arise in that case. We accept the Tribunal's comments in the following paragraph of its decision concerning the need for the Commissioners to justify a policy of depriving the owner of his car when he was truly ignorant of the purpose to which it was to be put. The Tribunal continued:

"Without that, it seems to me that the refusal to restore the cars of absent owners, who are truly ignorant of the borrower's activities, is a pure penalty and is not justified by art 1 of the First Protocol.

[73] I should make it plain that I consider that the word "ignorant" should be interpreted with some caution. The burden of proof is on the appellant – that is, the owner of the car: see CEMA s 154(2) and Finance Act 1994, s 16(6). It cannot be unreasonable for the Commissioners to require him to show, to their reasonable satisfaction, that he was ignorant of the borrower's intention. The natural presumption must be that the borrower of a car has possession of it with the informed consent of the owner and it is for the owner to displace that presumption; on this, the comments of Lord Woolf in Goldsmith v Commissioners of Customs and Excise [2001] WLR 1673, especially at pages 1679-1680, are very much in point.

[The Tribunal cited Lord Woolf's judgment, and continued at [75]:]

It would not be sufficient, in my view, to say that the vehicle had been lent for a cross-Channel trip but on the understanding that only modest quantities of excise goods, strictly for personal use, were to be bought. In such a case I think that the Commissioners are right in saying that the owner takes the risk that his generosity will be abused, and if it is his recourse is against the borrower. It seems to me that, in order to succeed, the owner would have to show that he was unaware that the vehicle was to be used for a cross-Channel trip at all, and that there was no reason to suppose that it might be used for such a purpose. Thus it would not, I think, be sufficient to say that the car had been lent for one purpose but used for another; the owner would have to go somewhat further and show that it was not reasonably foreseeable that the car would be used for smuggling. Closing his eyes to the obvious would not assist the owner. Geographical proximity to the Channel ports might be a factor to be considered. Evidence of previous trips could well be a difficult hurdle to overcome."

Applying these tests to the evidence as we have found it concerning the Appellant's state of knowledge about the use of the car, we are satisfied that the Appellant has overcome the hurdles set out in the above quotation. She was unaware either that the car was to be taken to France, or that it was to be used for transporting excise goods. We have already found that the review decision was unreasonable in failing to take account of relevant considerations concerning the discrepancy between the two accounts as to the presence or absence of permission for Volkan to use the car. We also find that it was unreasonable in putting the Appellant into the third category without examining the evidence as to the basis on which Volkan came to be in a position to be driving the car. If it had been the case that Volkan was driving the car without her consent, the test for the first category would have been met. We do not understand the necessity referred to in the review letter for the car to have been reported as stolen. It is quite possible for a car to be taken without the owner's consent, for example by a relative, where there is no intention on that driver's part to retain the vehicle for any significant period. We accept that in such a case there is a hurdle to be overcome in terms of the burden of proof, as there is no simple external verification in the form of a police report. However, if that hurdle can be overcome, we can see no reason why that case should not fall within the first category. If instead the Appellant's original explanation had been accepted, that Volkan was driving the car to a destination and for a purpose for which the Appellant had not given permission, it would have been appropriate to test whether the case fell either within the first or the second category. We think that Mr Harris was too ready to assume the Appellant's complicity with the activities of Volkan and Mr Kirkali and so put her into the third category, and that as a result Mr Harris did not properly consider whether the Appellant might fall within either of the two other categories, despite the fact that on either of the differing accounts given by the Appellant, her case might well have fallen within the first, or at least the second. We consider that this aspect of Mr Harris's decision is also unreasonable.

In the light of our various findings as to the unreasonableness of the review decision, we allow the appeal. The powers that we can exercise under section 16(4) Finance Act 1994 are limited. Pursuant to that sub-section, we direct:

(1) That the review decision, so far as it remains in force, is to cease to have effect as from the date of release of this decision;

(2) That within 42 days of the release of this decision, the Commissioners carry out a further review of the decision not to restore the vehicle;

(3) That the further review shall be carried out by an officer who has had no previous connection with this matter;

(4) That the review shall take into account the findings on the evidence set out in this decision;

(5) That a copy of the Commissioners' letter setting out such review shall be served on the Tribunal within 2 working days of the completion of that further review;

(6) That in the event of the further review being adverse to the Appellant, that will be a decision from which a further appeal to the Tribunal will lie.

Having regard to our decision to allow the appeal, we award costs to the Appellant, to be assessed, if they cannot be agreed, by the chairman sitting alone, on the application of either party.

JOHN CLARK

CHAIRMAN

RELEASED:

LON/2002/8276