United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2004] UKVAT(Excise) E773, [2004] UKVAT(Excise) E00773

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Rogers (t/a LJR Transport) v Customs and Excise [2004] UK E00773 (29 July 2004)

E00773

EXCISE DUTY – Appeal under s.16 FA 1994 against review decisions to offer restoration of three freight tractor units and trailers on payment of restoration fees equal to the trade value of the unit in one case and to 20% of the duty at risk in the other cases – Appellant owner of haulage firm and drivers of units not knowingly involved in smuggling excise goods but carrying illicit loads – Failure to make basic reasonable checks which would have identified the illicit loads – whether the decisions reasonably proportionate to the aim of deterring illicit importations – whether the Commissioners took into account irrelevant matters or failed to take into account relevant matters in arriving at the decision – held the decisions were made without regard to relevant matters – Appeal allowed – A further review directed under s.16(4)(b) FA 1994 – Commissioners directed to pay one half of the Appellant's costs

LONDON TRIBUNAL CENTRE

DESMOND ROGERS (trading as LJR TRANSPORT) Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MR JOHN WALTERS QC (Chairman)

PRAFUL DAVDA, F.C.A.

Sitting in public in London on 11th, 12th and 13th May, 2004

David Southern, of Counsel, instructed by Hepburns, Solicitors, for the Appellant

Sarabjit Singh, of Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

DECISION

There are four appeals before the Tribunal (under reference numbers LON/02/8283, LON/02/8284, LON/02/8339 and LON/03/8095). Appeal 02/8283 is against a decision to offer restoration of the vehicle RK51 WNM and trailer RT006 against payment of a restoration fee. Appeal 02/8284 is against a similar decision in relation to vehicle RK51 WNN and trailer DT9606: at an earlier stage a re-review of that decision was directed, due to the long-term sickness of the original Review Officer; that re-review has given rise to appeal 03/8095. Appeal 02/8339 is against a similar decision in relation to vehicle T874 REU and trailer AV6 (139487).

The Commissioners' reasons for requiring a restoration fee and fixing the amount of it are the same in all the cases; as are the Appellant's grounds of appeal. The restoration fees required total £74,335.

We turn straightaway to the facts. We admitted witness statements from the Appellant (Mr. Desmond Rodgers), Mr. Stephen Wells, and 12 Customs Officers. Mr. Rodgers and Mr. Wells gave oral evidence. The following Customs Officers gave oral evidence: Mr. Graham Crouch (Review Officer), Mr. Richard Truscott (Review Officer), Mr. Ian McEntee (Review Officer), Mr. Leslie Smith (senior policy adviser to the Commissioners). (Messrs. Crouch, Truscott and McEntee had also made witness statements.)

The Facts

The Appellant carries on a well-established haulage business based in Wiltshire. Traditionally the business is based on agricultural haulage in the summer and autumn, and aggregates haulage in the winter and spring. 2001 was a difficult period for the business: the agricultural haulage side was severely affected by the foot-and-mouth disease outbreak. In January 2002, the Appellant himself was diagnosed with a severe and progressive illness, and a new transport manager (Mr. Wells) was in post. Mr. Wells had been appointed (in December 2001) with the specific task of trying to find European work, because of his previous experience as an HGV driver in Europe over 18 years.

Mr. Rodgers hires most or all of the lorries used by LJR Transport. Monthly lease payments on a tractor are £1,654, and £866 on a trailer. Wages for drivers are £550 per week, plus national insurance contributions.

In the haulage industry all work is done on credit and payment is for work performed. LJR Transport finances its business by factoring. It has a facility with the Royal Bank of Scotland for £800,000. Mr. Rodgers knows all the business's UK customers and only he can approve a credit account for a new customer. It is very unusual for the business to deal with a customer not known by Mr. Rodgers or Mr. Wells. It happened in the case of George Evans's customers because the business was entering a new market (European haulage) and was looking for work.

Unlike many haulage firms, LJR Transport has managed to negotiate and retain several stable, long-term written contracts with customers. This has been possible because a high priority is placed on reliability as regards customers. This entails having a reliable and stable workforce. The business has always sought to employ drivers long-term. The economics of the industry make it essential to find return loads. "Empty running" makes it impossible to use lorries and drivers economically.

All drivers have mobile phones and they are used to being redirected by the transport manager (Mr. Wells) and by customers at short notice. Customers always require the mobile phone number of the drivers of their loads, so that they can contact them directly.

Before 22^nd January 2002, the Appellant had not engaged in the haulage of excise goods. Mr. Rodgers knew about the "bond to bond" requirement for moving alcohol products. So, in general terms, did Mr. Wells. However neither had (at any time before the detentions in issue) any specific notice of the current policy of the Commissioners with regard to hauliers involved in the smuggling of tobacco or alcohol. On 22^nd January 2002, Mr. Wells received a telephone call from a man giving his name as George Evans, who enquired about European haulage. He said he had a customer who traded as Freemantle Ltd. and asked if the Appellant's business, LJR Transport, would be interested in doing some work for Freemantle from Spain, Italy, France and Portugal. Mr. Wells expressed interest and sent him a fax of LJR Transport's rates on the same day.

George Evans also asked Mr. Wells if LJR Transport was short of drivers for European work. It happened that Mr. Wells was looking for another driver for European work and he expressed interest and was recommended a driver called Tony Sweed who, according to George Evans, was experienced and knew his (George Evans's) customers. Tony Sweed contacted Mr. Wells. He was obviously experienced and he knew a lot of the people that Mr. Wells knew in the business. He confirmed that he was experienced in working for George Evans's clients and Mr. Wells engaged him. In his own words he did not "check him out", he relied on the fact that George Evans had spoken very highly of him. He also needed a driver who knew about George Evans's work if LJR Transport was going to do it. Mr. Wells said that in his experience written references about drivers were not worth anything.

About a week later George Evans telephoned to say he had two loads in Spain to be brought to the UK. Mr. Wells had a truck in Spain (driven by Tony Sweed) with no return load booked, and another one with a return load booked. George Evans encouraged Mr. Wells to rearrange that return load in order to impress his (George Evans's) customers. Mr. Wells asked what the loads were, and he was told "wine". Mr. Wells knew that special documentation was needed for moving spirits and wine. After rearranging the pre-booked return load, Mr. Wells said he could take the two loads. Mr. Rodgers agreed to open a credit account for Freemantle. He said he did not know the details of the contracts and that this was quite unusual for him. He had already started to suffer from ill-health and he said that this was affecting his grip on the business. He had an arrangement with Royal Bank of Scotland whereby he could give a new customer immediate credit of up to £5,000 which would be underwritten by the bank. This would give time for both Mr. Rodgers and the bank to carry out checks on the new customer. He allowed Mr. Wells to take on work from Freemantle Ltd. up to the usual £5,000 credit limit for new customers. He did not check Renaissance Trading UK Limited – Freemantle Ltd.'s client. He did not know that Freemantle Ltd. was acting on behalf of Renaissance Trading Limited.

A few days later George Evans called in at LJR Transport's headquarters and introduced himself to Mr. Wells and Mr. Rodgers. Mr. Wells then realised that he knew him from the time when he (George Evans) was a transport manager at Taylor Barnard Shipping.

George Evans faxed Mr. Wells with a collection address for the two loads. It was Destilerias Yoar, which Mr. Wells knew was near Pamplona in Spain. He sent both lorries to load on 13^th February 2002. It was Mr. Rodgers's policy that drivers should telephone the headquarters office when they had loaded. When one of the drivers (not Tony Sweed) telephoned, he said he had loaded with spirits and had been given the appropriate documents by the warehouse, for delivery at Barking. Mr. Wells checked with George Evans, raising with him the point that the arrangement had been that the lorries were going to carry wine. George Evans replied, "I did tell you that spirits were involved as well as wine". As Mr. Wells commented in his Witness Statement, this was not true, but Mr. Wells did not argue with George Evans.

It is now accepted by Mr. Rodgers that the loads (or the bulk of them) were not in fact collected from Destilerias Yoar, but from another address nearby to which the lorries were redirected from Destilerias Yoar. Thus the loads were not collected from the consignment address (Destilerias Yoar) indicated on the Accompanying Administrative Documents ("AADs"). However Mr. Rodgers was not aware of this at the time. He only became aware of it after he started his own investigations (after 2^nd March 2002). He said in evidence that there was nothing unusual about redirections of this kind and that he had not specially instructed his drivers on the importance of collecting excise goods from the address

Tony Sweed telephoned to say he had delivered the load. Mr. Wells asked him where, he replied that he had delivered in an overspill warehouse "just round the corner in Barking". The other driver (Brian Wheeler) telephoned to say he had delivered at a warehouse in Leominster, and was in Tewkesbury. Mr. Wells was surprised, he did not know that Brian Wheeler had been diverted from Barking, and had to direct him back to the headquarters empty. On the morning of 16^th February Mr. Wells telephoned George Evans to say he was going to add £250 to the rate because he had had to bring the lorry back empty from Tewkesbury. George Evans told him not to do anything yet because he might have work for him the next week.

That day Mr. Wells asked Toney Sweed to take a load to Italy. He said he would not because (according to Mr. Wells's Witness Statement) "Italy made him uncomfortable. He'd rather go to Spain." As there was a load to Spain available, Mr. Wells put him on to that and he went out on 17^th February. He delivered the load in Madrid on 19^th February. On 20^th February, George Evans sent a fax order for a return load of vodka to Rangefield Import/Export, Barking, Essex, from Destilerias Yoar. Mr. Wells gave that job to Tony Sweed, who loaded on 21^st February. On 23^rd February, Tony Sweed telephoned Mr. Rodgers and Mr. Wells to say that he had been stopped by Customs at Dover.

Mr. Wells telephoned George Evans on 23^rd February to tell him that Customs had stopped the lorry at Dover saying that there was incorrect paperwork and no tax had been paid on the load. George Evans reassured Mr. Wells, promising to sort it out. "In the next breath" (according to Mr. Wells's Witness Statement) he asked Mr. Wells what vehicles he had for the next week to load. Mr. Wells told him there were four trailers, which might be free. George Evans asked for all four to load home. Mr. Wells at this point asked him: "Is this legal, what you're doing? Is this all above board?" He replied: "100% legit." Mr. Wells then accepted a booking for two of the trailers. On 25^th February, George Evans telephoned again, asking to book another two trailers. Mr. Wells said he had no other vehicles in Spain. George Evans replied (according to Mr. Wells's Witness Statement): "I feel you're letting me down. Have you got any trailers in the UK that are empty?" Mr. Wells replied that he had two. George Evans asked: "Can you ship?" Mr. Wells replied, "You'll have to talk on price". George Evans replied: "Don't worry about price, we need those trailers to load". Mr. Wells said he would consult Mr. Rodgers. Mr. Rodgers asked Mr. Wells if he was happy about it, effectively delegating the decision to him. Mr. Wells agreed to send the trailers out empty provided George Evans's client would pay the price – he could find no alternative use for the trailers at such short notice.

The two drivers who went out to Spain were Garry Dunne and Brian Wheeler, both responsible and trusted drivers. Mr. Wells warned them to be "just a little bit nosey" when loading and not to take any directions from George Evans without contacting him.

Gary Dunne went to Spain on 24^th February. Mr. Wells got instructions by fax from George Evans for him to load at Destilerias Yoar. He loaded on 27^th February and was stopped by Customs at Dover on 1^st March. He telephoned Mr. Rodgers and Mr. Wells from there.

Brian Wheeler went to Spain on the same date (24^th February). He loaded on 26^th February. He was stopped on the night of 1^st/2^nd March at Dover.

Mr. Rodgers decided that the business would stop all European work. Mr. Wells stood down the other two drivers in Spain down from the jobs for George Evans's customers. With some difficulty he made contact with George Evans to tell him he now had three lorries detained by Customs at Dover saying that tax had not been paid on the loads and that he would not load any more until this had been sorted out and LJR Transport had been paid. George Evans promised to investigate. In the meantime Mr. Wells tried to check on Freemantle Ltd. but without success.

Mr. Rodgers had some contact with a Mrs. Overy of Customs and Excise, who appeared to suggest that the lorries would be returned quickly. She did not give evidence to the Tribunal. However, she apparently advised Mr. Rodgers not to appeal to the magistrates against the seizures, but to apply for restoration as that course would lead to a quicker resolution of the matter. But the vehicles were not restored.

Mr. Rodgers employed a private investigator to find out about Freemantle, but it could not be traced. The firm received no payment for the loads.

Mr. Rodgers says that the seizures in Dover "are a big cloud on the business's reputation". There has been a continuing loss of business, together with the obligation to continue paying the lease payments on the seized vehicles. The worry and anxiety caused has brought a further sharp deterioration in Mr. Rodgers's health.

Mr. Crouch's decision on review is contained in a letter dated 7^th September 2002. This decision relates to vehicle RK51 WNM hauling trailer RT006 (see: Appeal 02/8283) driven by Brian Wheeler. Mr. Crouch records that a search of the trailer, when it was stopped on 1^st March 2002, confirmed the load as shown on the accompanying documentation (AAD and International Consignment Note ("CMR")). Mr. Wheeler told the Customs Officer questioning him that he had brought one load in to the UK already from Destilerias Yoar, which he had delivered to Leominster, not the Barking address in the documentation. He also told him that the load had (on both occasions) been collected from a distillery near to Destilerias Yoar (San Fermin), not Destilerias Yoar itself.

Customs investigations revealed that although Destilerias Yoar and Rangefield, Barking were both authorised warehouses, Destilerias San Fermin was not, and had had its authorisation withdrawn on 3^rd January 2000.

The load and vehicle were detained and, as a result of Customs enquiries, seized for breach of regulation 9 of the Excise Goods (Holding, Movement, Warehousing and REDs) Regulations 1992 ("the REDs Regulations") regarding the movement of excise goods in duty suspension. Application was made by Mr. Rodgers for restoration.

The Commissioners' policy concerning the restoration of heavy goods vehicles is designed to tackle rigorously cross border smuggling and significantly disrupt the supply of excise goods to the illicit market. The current policy has been effective since 16^th July 2001. Where the Commissioners are not satisfied that the driver or haulier has carried out what they consider to be basic reasonable checks, which would have identified the illicit load, on the first occasion the vehicle may be seized and restoration offered for a fee equal to 20% of the revenue involved or the trade value of the vehicle, whichever is the lower. On the second detection, the vehicle may be seized and not returned. ("Vehicle" in this context includes the trailer.) The document by which the policy was circulated within the Customs and Excise was produced to the Tribunal.

Mr. Crouch considered whether the goods were appropriately seized in the first place and decided that they were.

He went on to consider the fee set for restoration of the vehicle. He criticised Mr. Rodgers for not having applied "basic credit checks" to ascertain the bona fides of Freemantle Ltd. before setting up a new account in its name. He also criticised Mr. Rodgers for not checking the VAT registration number quoted by Renaissance Trading UK Limited on their invoice. Such a check would have revealed that that company had de-registered from VAT on 31^st July 2000. He criticised the driver (and, by inference, Mr. Rodgers, for lack of supervision) for collecting from an address not shown on the AAD, noting that a previous consignment had been diverted en route to Rangefield. In these circumstances he confirmed the contested decision to offer restoration of the vehicle on payment of £23,922.66, being 20% of the excise duty on the improperly imported excise goods, in application of the Commissioners' policy.

Mr. Truscott's decision on review is contained in a letter dated 5^th March 2003. This decision relates to vehicle RK51 WNN hauling trailer DT9606 (see: Appeal 03/8095). He makes the same point about breach of Regulation 9 of the REDs Regulations giving rise to liability to forfeiture. In relation to Mr. Rodgers's contesting the restoration fee of £25,173, Mr. Truscott invokes section 152(b) Customs and Excise Management Act 1979 which gives the Commissioners discretion to "restore, subject to such conditions as they think proper, anything forfeited or seized". Mr. Truscott states that the Commissioners are not satisfied that the driver or the haulier have carried out what Customs consider to be basic checks, which would have identified the illicit load. He goes on: "Whilst I do not take the view that [Mr. Rodgers] was knowingly involved in this illicit importation, neither do I take the view that [he was] wholly innocent and blameless". In particular complaint is made that no basic checks were undertaken to ascertain the authenticity of Freemantle Ltd., or Renaissance Trading UK Ltd., and that inadequate instruction was given to drivers of the "bond to bond" requirements. In application of the Commissioners' policy a restoration fee of £25,173 was set, being 20% of the duty involved, and a sum less than the trade value of the vehicle.

Mr. McEntee's decision on review is contained in a letter dated 18^th October 2002. This decision relates to vehicle T874 REU hauling trailer AV6 (139487) (see: Appeal 02/8339). Again, the evidence reviewed indicated that although the AAD with the load showed the consignor and consignee as authorised warehouses, the load had in fact not been picked up from the stated consignor, Destilerias Yoar, but a distillery a short distance away, which was not an authorised warehouse. Also, the evidence reviewed showed that the Appellant was unable to vouch for the genuineness of its customer, Freemantle Ltd., or their client Renaissance Trading UK Ltd. Customs' enquiries had shown that the address given for Freemantle Ltd. was an accommodation address and that Renaissance Trading UK Ltd. was not an existing company. Customs had decided to forfeit the load and the vehicle. Mr. McEntee reviewed the decision to allow restoration on payment of a fee of £24,700. He stated the Commissioners' policy for restoration (as above). He concluded that Mr. Rodgers had failed to carry out even the most basic checks before agreeing to carry out at least three continental trips for Freemantle. The fee was set at the basic value of the vehicle and trailer, which was less than 20% of the duty due on the load.

The Appellant's Submissions

The grounds of appeal stated in the Notice of Appeal relating to appeal 02/8339 – which we understand to be common to all the appeals are as follows:

1. The interpretation and application of CEMA s.141 [Forfeiture of vehicles used in connection with goods liable to forfeiture] adopted by the Commissioners is no longer correct in law, having regard to the principles of the free movement of goods under EC Treaty, art. 23, the principle of proportionality and the Human Rights Act 1998.

2. In particular, the forfeiture of the Appellant's lorry and trailer, their continued detention and the offer to restore them only against a restoration fee are in breach of the Appellant's convention rights under Human Rights Act 1998, s.1 (1), namely,

(a) article 6 – right not to incriminate oneself

(b) article 7 – no punishment without law, and

(c) First Protocol, article 1 – peaceful enjoyment of possessions.
3. The Appellant's lorry was stopped at random, and the Commissioners had no specific intelligence which would have justified stopping the Appellant's lorry.

4. The excise duty point under REDS reg. 4 has not been identified. In the absence of an excise duty point there was no power to forfeit the load; in the absence of seizure of the load, there was not power to forfeit the lorry and trailer.

5. The decision confirming the requirement for a restoration fee was a quasi-judicial act, was a decision the Commissioners were not entitled to make and was unreasonable.

6. In essence the unreasonableness consists in making the haulier answerable for the shortcomings of his customers, when the haulier himself has committed no offence.

7. In the premises the Commissioners' forfeiture and continued detention of the Appellant's lorry and trailer, and demand for a restoration fee, are unlawful and in breach of Community law.

In Mr. Southern's skeleton argument produced for the hearing he persisted in challenging the legality of the decision to seize and retain the vehicles, as well as the decision to impose a restoration fee (and the amount of the restoration fee). In that document (at paragraph 38(7)) he summarised his submissions, saying that these decisions were "void in law" because they were made "without an adequate legal basis" and "in a manner which is disproportionate and in breach of art 7 and First protocol art 1 of ECHR".

The Commissioners' Submissions

Mr. Singh submitted that the Tribunal has no jurisdiction to look at the validity of the seizure or the decision to retain the vehicles, even in a case (such as this) where no condemnation proceedings have taken place and the goods are deemed to be forfeit. He cited Gora and others v Commissioners of Customs and Excise [2004] QB 93, at paragraphs 54-58. He submitted that the sole issue for consideration in this appeal is the reasonableness of the Commissioners' decisions to offer restoration of the vehicles for the specified restoration fees. The Tribunal accepts these submissions. The judgment of Pill LJ (with whom Chadwick and Longmore LJJ agreed) in Gora at the paragraphs cited is clear on the point. The seizure (and detention) could have been challenged in condemnation proceedings. As Pill LJ said (ibid. at paragraph 58): "The application to the Tribunal is for restoration under section 152 [CEMA]. There is no breach of Article 6 because the owner has recourse to the courts in condemnation proceedings."

Therefore, of the grounds of appeal cited above, the Tribunal can only consider those points raised in grounds 2, 5 and 6, which relate to the alleged unreasonableness of the decisions confirming the requirement for restoration fees (and the amounts of the required fees).

Mr. Singh submitted that the Commissioners had a statutory discretion under section 152(b) of CEMA to "if they see fit, restore subject to such conditions (if any) as they think proper, any thing forfeited or seized under the Customs and Excise Acts". He submitted that it was central to the Commissioners' decisions that they had concluded that Mr. Rodgers and those working for him, for whom he was responsible, had failed to carry out basic reasonable checks which would have prevented the illicit transportations.

The failure to carry out basic reasonable checks alleged by Mr. Singh were particularised as follows:

1. Failure to perform basic checks on the bona fides of George Evans and Freemantle for example by checking the legitimacy of Freemantle's address, which would have confirmed that the address was false and that no-one there had heard of Evans or Freemantle. The failure was more surprising, and culpable, because Mr. Rodgers had never dealt with George Evans or Freemantle before.

2. Mr. Rodgers did not carry out any kind of credit checks on Freemantle before agreeing to do work for them.

3. Failure to react to the discovery that the loads collected on 13^th February 2002 were spirits, when George Evans had told Mr. Wells that they would be wine.

4. Failure to react to the knowledge that the first two loads brought back for George Evans/Freemantle had been diverted from the destination indicated by the accompanying paperwork, the bonded warehouse at Rangefield, Barking.

5. Failure to react to the detention of the first vehicle on 23^rd February 2002 by immediately suspending its transactions with George Evans/Freemantle.

6. Failure to react to the intimations by George Evans that the cost of transportation of these subsequent transactions would not be an issue, and the evident preparedness of George Evans/Freemantle to pay for trailers to travel to the Continent empty.

7. Failure to alert the Commissioners to any potential problems (particularly in the light of the first detention) before 1^st March 2002.

Mr. Singh submitted that Mr. Rodgers, as a person carrying on a haulage business, had the capacity to bring into the United Kingdom a large quantity of excise goods, and therefore had the responsibility to ensure that he did not increase the risk of illicit transportations of large quantities of excise goods. This imposed on him a responsibility to make basic reasonable checks, and Mr. Singh submitted that the need and responsibility to do so was sufficiently publicised.

As to publicity, the Commissioners relied on a notice which was widely circulated with a boldly printed message: "Turn a blind eye to tobacco smuggling … … and you could lose your lorry!" Overleaf the notice stated:

"Lorry Drivers: think very carefully before you turn a blind eye to tobacco and alcohol smuggling. You could lose your vehicle PERMANENTLY. Tobacco smuggling is a major league crime carried out by highly organised gangs. The vast majority of illicit cigarettes are not smuggled in cars or vans but by the freight-load. Customs are cracking down hard on those involved in tobacco smuggling. From July 2001, anybody who uses a Heavy Goods Vehicle (tractor unit and/or trailer) to smuggle tobacco or alcohol risks losing it. To avoid this risk Customs are asking all responsible drivers to make sensible checks to ensure they are not being used for smuggling. So before you enter the UK make sure:

You make reasonable physical checks to ensure the goods in your vehicle match those described on the accompanying paperwork

The collection and delivery points are sensible for that load

You check that collection and delivery points are the same as on the accompanying paperwork

You contact the delivery address if you are hauling alcohol to check they are expecting you

If these checks or anything else makes you suspicious about the load you are carrying contact Customs."

Mr. Singh further submitted that the decision to offer the vehicles for restoration for the stated fees was a straightforward application of the Commissioners' policy and was reasonable and proportionate.

He drew the Tribunal's attention to the fact that illicit smuggling has a massive adverse effect on legitimate trade and the protection of the revenue and submitted that the Commissioners are entitled to operate a policy to minimise that effect, which inevitably includes the seizure of vehicles used to transport illicit goods. He reminded the Tribunal that in this case three separate trailers full of illicit goods had been seized, in relation to which the excise duty due ran into hundreds of thousands of pounds. The vehicles were offered for restoration for only a small fraction of the duty involved.

He submitted that the aim of the policy was to tackle the amount of revenue being evaded and therefore he submitted a policy which geared the restoration fee to the amount of revenue being evaded was proportionate.

He further submitted that the policy was fair to the negligent haulier because in no case could the restoration fee exceed the trade value of the vehicle. He submitted that the trade value is lower than the retail value and that it cannot be said that restoration upon payment of the trade value of the vehicle was equivalent to non-restoration. He cited the decision of the Belfast Tribunal (Chairman: Mr. A.F.W. Devlin) in Crilly v The Commissioners of Customs and Excise (Tribunal Reference E/00452) as "confirm[ing]" the legality of the Commissioners' policy. The relevant passage from the decision in Crilly seems to be from paragraph 20 and is as follows:

"Furthermore, it seems to us that part [sic] of its legitimate aims in the public interest, the State is able to impose by means of a restoration policy obligations of vigilance on drivers and hauliers, providing that the burdens imposed as a result are not excessive so as to enable the relationship of proportionality to remain as between the means employed and the aim sought to be realised. The Commissioners' policy in the instant case seems to us to satisfy these requirements."

Mr. Singh emphasised that "the policy is not set in stone and is flexible. It does not act as a straightjacket for Review Officers but merely as a starting point. The Review Officers have a wide discretion when applying the policy and consider each case on its merits, adjusting the policy to ensure that a proportionate decision is reached in each case."

He submitted that the Tribunal should not follow the London Tribunal's (later) decision in H & S Handel und Transport GmbH v The Commissioners of Customs and Excise (Tribunal reference E00695) that the policy was flawed and the decision under appeal in that case therefore unreasonable. Mr. Singh sought to distinguish this case from Handel on the facts that the carelessness shown in this case was more serious than the carelessness found by the Tribunal in Handel. He submitted that "nothing in Lindsay or elsewhere indicates that the [Commissioners'] decisions were disproportionate".

Decision

As we have already indicated (see: paragraph 36 above), we consider that the issue for us to decide is whether or not the decisions confirming the requirement for restoration fees in the amounts stated were reasonable. We bear in mind in particular Mr. Southern's submission that the decisions were unreasonable and that the unreasonableness consists in making the haulier answerable for the shortcomings of his customers, when the haulier himself has committed no offence.

This is a submission which (if correct) would debar the Commissioners from imposing any disincentive on the honest but negligent haulier and we consider, for the reasons stated by the Tribunal in Crilly (referred to at paragraph 44 above), that the Commissioners are entitled to impose by means of a restoration policy obligations of vigilance on drivers and hauliers, provided that the burdens imposed as a result are not disproportionate.

The issue in this case is the reasonableness of the decisions requiring the restoration fees, in particular their proportionality having regard to their amount. As Lord Phillips MR said in Lindsay v Commissioners of Customs and Excise [2002] STC 588, at paragraph 40: "Since the coming into force of the Human Rights Act 1998, there can be no doubt that if the commissioners are to arrive reasonably at a decision, their decision must comply with the [Human Rights Convention]. Quite apart from this, the commissioners will not arrive reasonably at a decision if they take into account irrelevant matters, or fail to take into account all relevant matters – see Customs and Excise Commissioners v J.H. Corbitt (Numismatists) Ltd. [1980] STC 231 at 239, [1981] AC 22 at 60 per Lord Lane." The requirement that there must be a reasonable relationship of proportionality between the means employed and the aim pursued is an ingredient of compliance with the Convention (Air Canada v United Kingdom (1995) 20 EHHR 150).

The aspect of the case, that Mr. Rodgers, although innocent of any offence, faces deprivation of his property (cf. article 1 of the First Protocol to the Convention on Human Rights) arises in the first instance on the forfeiture, rather than on the conditions imposed for restoration. It is in relation to forfeiture rather than restoration that article 7 of the Convention (no punishment without law) is engaged. Although it is not a matter for this Tribunal to rule on, we say in passing that it seems highly improbable us that Mr. Rodgers's Convention rights were infringed by the forfeiture (cf. Allgemeine Gold- und Siverscheideanstalt v United Kingdom (1986) 9 EHRR 1).

We find that Mr. Rodgers (and Mr. Wells and the drivers, for which Mr. Rodgers is responsible) failed to carry out basic reasonable checks, which would have prevented the importation of the illegitimate loads which were seized, as particularised by Mr. Singh (see: paragraph 38 above). The reason for this failure, we find, was understandable reluctance to discourage a new and apparently promising customer contact (George Evans). Although this is an explanation, it is not an excuse or in any sense a matter which was relevant to the application of the Commissioners' policy.

The Commissioners were entitled and (given their policy) obliged to have regard to the aspects in which there was a failure to carry out basic reasonable checks in the process of reaching their decisions – these were plainly relevant matters. They did so, and to that extent we do not criticise the decisions.

However we must go on to consider whether there were other relevant matters to which the Review Officers failed to have regard, and also the proportionality of the policy itself.

Lord Phillips MR in Lindsay, at paragraph 64, considered the requirements of the principle of proportionality in a case where the importation (by the driver of a private car) was not for the purpose of making a profit. This case is analogous to that case because although the importations under consideration were made by Mr. Rodgers for the purpose of earning a haulage profit, he was ignorant of the attempted excise fraud by George Evans and those he represented – he was not, as the Commissioners accept, himself knowingly involved in any excise fraud.

In that paragraph Lord Phillips said that he considered that each case should be considered on its particular facts, "which will include the scale of importation, whether it is a "first offence", whether there was an attempt at concealment or dissimulation, the value of the vehicle and the degree of hardship that will be caused by the forfeiture".

Clearly the cases in issue were considered on their particular facts. However, we have concluded that there were relevant facts which were not taken into account. We find that Mr. Rodgers and Mr. Wells had not received any adequate notice of the Commissioners' policy as it might apply to them. LJR Transport is not a member of the Road Haulage Association, which the Commissioners consulted specially on the policy. The notice on which the Commissioners placed reliance (see: paragraph 40 above) had probably not been seen by Mr. Rodgers or Mr. Wells and in any case was primarily and most obviously directed at those involved in tobacco smuggling, and made only incidental references to the haulage of alcohol. More significantly, it made no specific reference to the checks which the Commissioners now complain that Mr. Rodgers did not carry out, and the physical checks to which specific reference is made seem to have been carried out. As Mr. Southern was at such pains to point out, Mr. Rodgers has transgressed the Commissioners' policy, rather than any provision of law. Thus the maxim that ignorance of the law is no excuse is not applicable here. If the Commissioners wish to rely on a policy which has potentially such damaging effects on individual hauliers, they ought to put the hauliers likely to be affected on sufficient notice of the policy. By "sufficient notice" in this context we mean such effective and specific (detailed) notice as it was practical to give to those likely to be affected by the policy. This was not done in this case. Mr. Rodgers was not put on sufficient notice of the Commissioners' policy – it was clear that the detentions came as a complete surprise to him. Making a similar point, Lord Phillips MR adverted to the importance of the giving of prior notice in Lindsay at paragraph 62. This is a relevant fact – a mitigating factor – which should have been considered by the Review Officers and which ought in our view to be reflected in the amount of restoration fees demanded.

Importantly, we consider that no attention was given – as it should have been – to the fact that (as we find) there was no attempt at concealment or dissimulation. In particular the drivers appear to have been very forthcoming when questioned by Customs Officers and immediately gave information about the earlier loads brought in for George Evans, which had been diverted. This again is a mitigating factor which in our view should have been reflected in the amount of the restoration fee demanded.

The scale of the importations and the values of the vehicles were taken into account in the application of the policy, although we have concerns (which we expand upon below) that the overall proportionality of the policy in its application in the particular case was not adequately considered.

As to the degree of hardship suffered by Mr. Rodgers, we are satisfied that this was very considerable and that no or no sufficient regard was had to it by the Reviewing Officers. The financial hardship of three leased lorries and trailers being detained for upwards of two years (although the amount of the losses suffered and the reasons why the detentions have been so long protracted were matters not adequately proved before the Tribunal) was very considerable (and continues) and further enquiry should be made into this aspect.

As a separate relevant matter of special hardship, the Tribunal considers that Mr. Rodgers's state of health must be taken into consideration. We accept (and find) that the instant dispute caused him very considerable anxiety which is very likely to have had a serious adverse impact on his continuing state of health. We recall the observation of Lord Wilberforce in Vestey v IRC [1980] STC 10 at page 19, made, admittedly, in a very different tax context, when talking of the Inland Revenue Commissioners' obligation to "act with administrative common sense". He said, "no one is going to complain if they bring humanity to bear in hard cases". We consider that this is another mitigating factor which ought to be taken into account by the Review Officers.

We now turn to a consideration of the proportionality of the policy generally. Concern has already been expressed in these Tribunals that the wording of the formula provided for by the policy, in a case where the Commissioners are not satisfied that the driver or haulier has carried out basic reasonable checks, produces a result that bears no relation to the culpability of the haulier (H&S Handel und Transport GmbH v Commissioners of Customs and Excise - Chairman: The President of these Tribunals). We agree with the President's approach in that case, whilst acknowledging that the carelessness shown in this case was more serious than the carelessness found in H&S Handel.

In the Tribunal's judgment, the policy is not "fine tuned" to give a proportionate penalty in cases where the driver or haulier is to be taken as guilty of nothing worse than naivety or carelessness, but nevertheless – unbeknown to them – the revenue sought to be evaded is substantially greater than the value of the vehicle.

The Tribunal respectfully adopts the same approach to the proportionality issue in this case as that expressed by Simon Brown LJ in R. (on the application of International Transport Roth GmbH) v Secretary of State for the Home Department [2002] EWCA Civ 158; [2002] HRLR 31. Simon Brown LJ (who was in the majority) said this at paragraph [53]:

"Even acknowledging, as I do, the great importance of the social goal which the scheme seeks to promote, there are nevertheless limits to how far the state is entitled to go in imposing obligations of vigilance on drivers (and vicarious liability on employers and hirers) to achieve it and in penalising any breach. Obviously, were the penalty heavier still and the discouragement of carelessness correspondingly greater, the scheme would be yet more effective and the policy objective fulfilled to an even higher degree. There comes a point, however, when what is achieved is achieved only at the cost of basic fairness. The price in Convention terms becomes just too high. That in my judgment is the position here."

Roth was a case concerning a statutory scheme under which owners, hirers, drivers or operators of vehicles were subject to a fixed penalty of £2,000 if they intentionally or negligently allowed a person to gain illicit entry into the UK by concealing him or herself in a vehicle of theirs. Although the scheme in this case does not involve a fixed monetary penalty, it does, in the class of case of which this is one, involve the economic equivalent (or near-equivalent) of non-restoration of the vehicle and it is not, in the Tribunal's judgment, compliant with article 1 of the First Protocol of the Convention, by reason of lack of the necessary proportionality.

We consider that the policy is inherently liable to produce a figure for a restoration fee which is disproportionate in a case where the haulier is not implicated in any attempted excise fraud, and this fact is relevant to be borne in mind by the Review Officers in exercising their residuary discretion under the policy. The Review Officers in this case did not take this fact into account – indeed it was strongly argued on behalf of the Commissioners that the policy did indeed produce a proportionate result in all cases. We disagree. The Review Officers, once they have determined a figure provisionally for a restoration fee, should "stand back" to consider whether, overall, it is proportional in Roth terms, and adjust it, if necessary, so that the figure finally determined is fair.

The Tribunal's decision is therefore to allow the appeal and direct a further review of each of the decisions on restoration, which will take into account the findings and conclusions expressed in this Decision. Mr. Rodgers should provide to the Commissioners such additional information as he wishes them to take into account to clarify further the matters referred to at paragraph 59 above within 14 days of the release date of this Decision and the further review should be conducted within 45 days after the expiry of that 14 day period.

Mr. Southern made an application for costs in the event that his client was successful. As we have found in favour of the Commissioners that Mr. Rodgers and those for whom he is responsible failed to make reasonable basic checks which, if made, would have prevented the illicit importation, and that that fact is relevant to be taken into account by the Commissioners in considering the question of restoration, it would not in our judgment be appropriate to direct that the Commissioners pay all Mr. Rodgers's costs. We will direct that the Commissioners pay one half of the Appellant's costs, to be taxed pursuant to rule 29(1)(b) of the VAT Tribunals Rules 1986 if not agreed.

JOHN WALTERS QC

CHAIRMAN

RELEASED:29/07/2004

LON/2003/8095