United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2003] UKVAT(Excise) E00511, [2003] UKVAT(Excise) E511

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Henryk v Customs & Excise [2003] UKVAT(Excise) E00511 (15 October 2003)

EXCISE – Practice Non-compliance – Direction for Review coupled with unless order – Failure by Customs to comply – Powers of Tribunal under Rule 19(4) – Whether direction allowing appeal must be combined with direction under s.16(4) – No – However on facts time for review directed earlier extended under Rule 19(1) – Indemnity costs awarded – FA 1994 s.16(4) – Trib Rules, r 19(1)(4)

LONDON TRIBUNAL CENTRE

BOCHENSKI HENRYK Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: THEODORE WALLACE (Chairman)

Sitting in public in London on 22 September 2003

The Appellant did not appear and was not represented

Richard Smith, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

This case concerns an appeal against the refusal to restore a tractor and trailer belonging to the Appellant, who lives in Poland; the seizure was on 11 October 2001.

The hearing followed an application by the Commissioners dated 17 July 2003 for a direction for a further review following their failure to comply with a Direction by Mr Angus Nicol, given orally on 6 March 2003 and released in writing on 11 March 2003, that unless a further review was completed and served by 20 March 2003 the appeal would be allowed without further hearing.

The Commissioners' application was initially listed by notice dated 25 July to be heard in London at 10.30am on 8 September 2003. On 20 August 2003 the Appellant wrote asking for a new date for the preliminary hearing so that he could attend. On 4 September 2003 the Tribunal directed that the hearing of the Commissioners' application be postponed to 22 September 2003 and should be in public. The Tribunal did not serve a notice of hearing for 22 September 2003 in the normal form but sent a copy of the direction of 4 September to the Commissioners with the manuscript addition "at 2.00pm". A copy of the direction was also received by the Appellant's solicitors. I find on the balance of probabilities that the time was also endorsed on their copy. Although it did not state that the postponed hearing was to be in London, it was implicit that it would be in the same place; it did state the date and time. It was posted to the Solicitors then acting and I conclude that it sufficed for service under Rule 23(1). The fact that the Solicitors when acknowledging the direction stated that they were no longer in receipt of instructions and asked for it to be served on the Appellant direct, does not alter their authority at the time the direction was served under Rule 32(2). I am satisfied that the Appellant will not be prejudiced by the Direction proposed, since in any event he can apply under Rule 26(3) for it to be set aside.

I turn now to consider the Commissioners' application. In the Statement of Case it was alleged that 220,800 cigarettes were concealed in the trailer which had been adapted. The Appellant effectively contends that he had nothing to do either with the smuggling or with the adaptation of the trailer both of which were wholly without his knowledge.

On 18 October 2002 the Commissioners applied to the Tribunal for a direction for a further review under section 16 of the Finance Act 1994 in the light of the decision of the Divisional Court in Regina (Hoverspeed Ltd) v Customs and Excise Commissioners [2002] 3 WLR 1219 as the appeal was by an owner who was not present at the seizure. The Appellant's solicitors consented and on 6 November 2002 the Tribunal released a direction for a further review to be carried out within 30 days. The Review was thus due by 6 December 2002.

The Review was not carried out and no application was made for an extension of time. On 2 February 2003 the Tribunal listed a directions hearing to consider the failure by the Commissioners to comply with the Direction. The non-compliance hearing came before Mr Nicol on 6 March in the absence of the Appellant. The Commissioners were represented by Mr A Khan, of their Solicitor's Office.

There is no record of any explanation being given for the non-compliance. Clearly the Tribunal took a serious view because a direction was given in the following terms:

"1. that UNLESS the Respondents shall have completed a further review of their decision to refuse to restore to the Appellant a tractor and trailer seized on 10 October 2001 in compliance with the Direction of the Tribunal released on 6 November 2002, save that the review shall be completed and served not later than 20 March 2003, the appeal will be allowed without further hearing.

that both parties shall be at liberty to apply."

The direction was given orally on 6 March when Mr Nicol specified 20 March 2003. The typed direction was released on 11 March 2003.

The Commissioners did not comply with the direction, did not apply for an extension of time and have not complied to this day although I was told at the hearing that a Review was carried out in July although not served.

On 23 June 2003 a Proper Officer wrote that "the direction has come fully with effect, and the appeal now stands allowed." This merely stated the result of the failure to comply with Mr Nicol's direction.

On 17 July 2003 the Commissioners applied for a direction for a further review within 30 days of the date of the Direction. The application notice contained the following passage,

"the jurisdiction of the Tribunal under section 16 of the Finance Act 1994 does not extend to allowing an appeal in the terms set out."

Before this hearing the Commissioners submitted a skeleton argument following a direction by the Tribunal. Paragraph 8 of the skeleton by Mr Smith accepted that the direction of 6 March 2003 was one which the Tribunal did have power to make under Rule 19(4).

That Rule provides:

"(4) If any party to an appeal or application or other person fails to comply with any direction of a tribunal, a tribunal may allow or dismiss the appeal or application."

There was no suggestion that the Tribunal could not make an "unless" order instead of allowing the appeal outright straightaway.

Mr Smith's skeleton however went on to contend that although the appeal had been allowed, it had not been concluded because the Tribunal had not also made a direction under one of paragraphs (a), (b) or (c) of section 16(4) of the 1994 Act.

Section 16(4) of the Finance Act 1994 provides as follows,

"(4) In relation to any decision as to an ancillary matter, or to 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 upon 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 the future."

Mr Smith submitted that although the Tribunal has power to allow the appeal by reason of the non-compliance with its direction, any direction under Rule 19(4) must be coupled with a direction under one of the sub-paragraphs of section 16(4). He said that the direction under Rule 19(4) disposed of the appeal and that section 16(4) provides exhaustively for the Tribunal's powers on allowing an appeal.

The purpose of section 16(4) is clearly to prevent the Tribunal from exercising for itself the discretionary powers in relation to ancillary matters which Parliament has conferred on the Commissioners. In relation to such matters the jurisdiction is supervisory being directed at ensuring that the decision is not legally defective. This was established in one of the earliest excise appeals Bowd v Commissioners of Customs and Excise [1995] V&DR 212. The powers under section 16(5) on the other hand include the power for the Tribunal to substitute its own decision.

Read literally, section 16(4) could be regarded as providing that an appeal tribunal on an appeal under section 16(4) has no powers whatsoever other than those set out in the subsection. Mr Smith accepted that a Tribunal must be able to dismiss an appeal if not satisfied that a decision is unreasonable. He also accepted that the Tribunal must be able to make directions under the Tribunals Rules. Section 7(5) of the Finance Act 1994 specifically refers to the generality of the power conferred under paragraph 9 of Schedule 12 to the VAT Act 1994.

The power under Rule 19(4) is in no sense dependent on the Tribunal being satisfied as provided in section 16(4). It is exercisable only on failure to comply with a direction. Here the non-compliance was failure to arrive at a decision on review. The non-compliance did not bring the powers in section 16(4) into play at all. In those circumstances I can find no basis for the proposition that allowing an appeal under Rule 19(4) necessitated a direction under section 16(4) or indeed permitted such a direction.

The application by the Commissioners would have the result that on the Commissioners failing to comply with the direction to carry out a Review any direction under Rule 19(4) allowing the appeal would have to be combined with a direction under paragraph (b) unless either paragraph (a) or (c) applied. It is clear from Lindsay v Customs and Excise Commissioners [2002] STC 588 that a direction under paragraph (a) is not appropriate in restoration appeals and I was informed that the original decision has not been acted upon so that paragraph (c) does not apply. If Mr Smith's submission was correct the Tribunal would be obliged to direct a further review. The result would be that there would be no effective sanction under Rule 19(4) in the event of non-compliance by the Commissioners, although an appeal could be dismissed in the event of an Appellant's non-compliance with the directive. Such a one-sided result is not in my view consistent with the right of an Appellant to a fair trial.

Mr Smith said that the Tribunal could award a penalty under Schedule 12, paragraph 10 of the VAT Act 1994 although he accepted that this would not help the Appellant. He also said that the Tribunal could make a costs order. I return to this but observe that in many cases costs are no effective sanction since most Appellants in non-restoration cases are unrepresented and incur few recoverable costs.

In my judgment the Tribunal was fully entitled to make the Direction which was made and released in March.

That is not however an end to the matter since Rule 19(1) enables the Tribunal either of its own motion or on the application of a party to extend the time within which a party is required to do anything, In Kett v Commissioners of Customs and excise (2003) E 386 the Tribunal concluded that this power can be used to extend the time within which a Review is directed even after the time limit in the direction has expired.

Mr Smith did not submit that the Tribunal should extend the time limit because his primary submission was that the direction of March was incomplete. Nor did he advance any valid excuse for the non-compliance. In my judgment it is a straight case of maladministration arising from the failure by the Commissioners to devote proper resources to appeals of this type. I suspect that when this legislation was being enacted no one thought it conceivable that the Commissioners who are responsible for enforcing the excise laws would themselves fail to comply with directions by the Tribunal under section 16(4)(b) except in the most unusual circumstances.

Where a party has failed to comply with a direction one of the main concerns of the Tribunal is to do justice to the other party. Mr Nicol's direction was designed to ensure early compliance with the direction for a Review by reinforcing it with the sanction of an unless order. If I leave matters as they are, it would be open to the Appellant to make a complaint to the Customs and Excise Adjudicator. The Appellant is however Polish and might not find that easy or convenient.

On 20 August 2003 the Appellant wrote to the Tribunal asking for a series of questions to be put to the original seizing officer. Many of those were not addressed either in that officer's witness statement or in any review. Indeed the earlier review gave no apparent consideration to the role of the Appellant at all.

I have concluded that it is in the interests of the Appellant that even at this late stage there should be a further review and that such review should address the matters raised in the letter of 20 August 2003.

In order to allow proper time for further inquiries I am directing that the time for carrying out the Review already directed be extended to 17 November 2003 which is eight weeks from this hearing and that the Review shall take account of the matters raised in the Appellant's letter of 20 August 2003 and of any further representations or material provided by 27 October 2003.

The Appellant received an invoice for £2,260 dated 7 August 2003 from his solicitors. It is not clear how far he has incurred other allowable costs. His letter of 20 August 2003 stated that at present he was unable to pay the costs of legal representation. He is clearly entitled to his costs. I direct that the Commissioners shall pay the Appellant's costs of the appeal and of this application on an indemnity basis. In the event of no agreement as to the amount of the costs the Appellant is at liberty to apply by 27 October 2003 for a direction under Rule 29.

In his letter the Appellant applied for an appointment of a legal aid lawyer. That is outside the jurisdiction of the Tribunal. He also raised other matters which are not relevant in view of this decision.

THEODORE WALLACE

CHAIRMAN

RELEASED:

LON/02/8084