United Kingdom VAT & Duties Tribunals (Excise) Decisions

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Cite as: [2005] UKVAT(Excise) E900, [2005] UKVAT(Excise) E00900

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Powell v Revenue & Customs [2005] UKVAT(Excise) E00900 (18 August 2005)

E00900

EXCISE – RESTORATION – Jurisdiction – Whether Tribunal can entertain appeal against review decision directed by Tribunal under FA 1994 s.16(4)(b) – Whether appellant "required the review" within s.16(2) – No – Whether exclusion compatible with Human Rights Convention – No – Held necessary to read in words under HRA 1998, s.3 – Alternatively exclusion incompatible with Community Law

Jurisdiction – Goods disposed of before original decision under CEMA 1979 s.152(b) to refuse restoration – Whether section 152(b) includes power to make payment when restoration in kind not possible – Yes – Power either implied or read in under HRA s.3 – Not covered by CEMA s.6(2) – Tribunal therefore has jurisdiction

Jurisdiction – Payment when restoration not possible – Whether Tribunal has jurisdiction as to amount – Meaning of "restored" in s.152(b) – Yes by implication or under HRA s.3

LONDON TRIBUNAL CENTRE

WILLIAM LEONARD POWELL Appellant

and –

HM REVENUE AND CUSTOMS Respondents

Tribunal: THEODORE WALLACE (Chairman)

MRS SHAHWAR SADEQUE MBCS

Sitting in public in London on 14 and 15 June 2005

The Appellant appeared in person

Christopher Mellor and Eleni Mitrophanous, instructed by the Acting Solicitor for Revenue and Customs, for the Respondents

David Ewart, instructed by the Treasury Solicitor, appeared as Advocate to the Court

© CROWN COPYRIGHT 2005

DECISION

This appeal raises preliminary questions as to the jurisdiction and powers of the Tribunal in circumstances where Customs have disposed of goods seized. It also involves the jurisdiction of the Tribunal as to an appeal against the decision on a further review directed by the Tribunal under section 16(4)(b) of the Finance Act 1994.

The cigarettes and tobacco were disposed of by Customs soon after seizure in 2001 before the initial decision refusing restoration in accordance with Customs' normal policy. The vehicle, a Kawasaki motor-cycle, was sold after the initial review decision but at a time when the restoration decisions were under appeal to the Tribunal.

The present appeal is against the decisions on a review required by a direction by the Tribunal under section 16(4)(b) released on 1 March 2004 on an appeal against an earlier review concerning the same goods and vehicle.

The latest review concluded that restoration would normally be offered subject to payment of a fee but that since restoration is not possible an ex gratia payment would be offered. The review did not specify the amount of the payment. An offer of £2,450 described as ex gratia has since been made by the post seizure unit.

Customs contend that the Tribunal has no jurisdiction in respect of the amount of compensation offered although it does have jurisdiction as to the decision that the vehicle should have been restored subject to conditions.

The legislation which governs the jurisdiction of the Tribunal is contained in sections 14 to 16 and Schedule 5 to the Finance Act 1994. The provisions relevant to the appeal are as follows.

Under section 14 a person, in relation to whom or on whose application a decision of a type specified in Schedule 5 is made, may by notice in writing require Customs to review that decision.

Section 15(1) provides that where Customs are required "in accordance with this Chapter" to review a decision it is their duty to do so and they may either confirm the decision or withdraw or vary it.

Section 16 is headed "Appeals to a tribunal." Under section 16(1) an appeal lies to a tribunal with respect to any decision on a review under section 15 including a deemed confirmation under section 15(2) when Customs fail to complete a review within 14 days. Section 16(2) provides

"An appeal under this section cannot be entertained unless the appellant is the person who required the review in question."

Section 16(4), which governs the Tribunal's powers in appeals as to an ancillary matter, reads as follows,

"(4) In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say—

(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;

(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and

(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable decisions arise in future."

Under section 16(6) it is for the Appellants to show that the grounds on which any such appeal is brought is established.

Schedule 5 specifies decisions as to an ancillary matter and paragraph 2(1) specifies certain decisions under the Customs and Excise Management Act 1979 ("CEMA 1979") including,

"(r) any decision under section 152(b) as to whether or not anything forfeited or seized under the customs and excise Acts is to be restored to any person or as to the conditions under which any such thing is so restored".

Section 152(b) of CEMA 1979 provides that:

"The Commissioners may, as they see fit—

…

(b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under those Acts; …"

Chronology

On 7 July 2001 Mr Powell's Kawasaki 600 motor-cycle was seized at Dover together with 3.5 kgs of tobacco and 4800 cigarettes. His request for restoration of the goods and vehicle was refused on 27 July. His letter of dissatisfaction on 1 August was treated as a request for a review and on 12 September the Review confirmed the refusal to restore the goods and the vehicle.

On 28 September Mr Powell appealed to the Tribunal for the first time.

On 15 January 2002 before the appeal was heard Customs sold the vehicle at auction for £2,300.

On 8 May 2002, following an application by Customs in the light of the decision of the Court of Appeal in Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766 to which the Appellant consented, without a hearing the Tribunal directed a further review under section 16(4)(b).

That review confirmed the refusal to restore and Mr Powell appealed for the second time.

On 26 January 2004 Customs applied for a direction for a further review in the light of the decision of the Court of Appeal R (Hoverspeed Ltd) v Customs and Excise Commissioners [2003] QB 1041; [2003] STC 1273 and of Customs' revised restoration policy. The Appellant did not object and in a direction released on 1 March 2004 the Tribunal directed a further review, again without a hearing.

That review decision, which was dated 5 March 2004, refused the restoration of the goods but varied the decision as to the motor cycle. The decision included the following:

"I have decided that the motor-cycle should have been restored to you for a fee equal to the revenue involved in the smuggling attempt – that is £1,000.

…

The motor-cycle would now normally be restored to you for a fee of £1,000.

Unfortunately the Commissioners of Customs and Excise no longer have the motor-cycle and are unable to restore it to you. Therefore the Commissioners are prepared to offer an ex-gratia payment for the value of the motor-cycle reduced by the fee of £1,000, instead of the motor-cycle as a means of settling the matter.

The making of any ex-gratia payment and the amount of that payment may not be appealed to a VAT and Duties Tribunal.

…

If you wish to contest my decision – that is not to restore the goods and to restore the motor-cycle for a fee of £1,000 you may now … lodge an appeal with a VAT and duties tribunal …"

A further letter dated 14 April 2004 from a member of the post seizure unit offered a payment of £2,450 on the basis that the value at the time of seizure was £3,450. The letter stated that the Tribunal could only consider the decision to restore and has no power to determine valuations of vehicles.

Mr Powell wrote to the Tribunal stating that he was confused asking whether he had to reapply to the Tribunal.

The Tribunal treated his letter as constituting an appeal and on 10 May 2004 directed Customs to serve a Statement of Case. Customs applied for particulars of the grounds of appeal contending that he could not appeal against the amount offered in respect of the motor-cycle.

Following receipt of Customs' Statement of Case the Tribunal directed a skeleton argument as to the jurisdiction of the Tribunal in relation to a decision within paragraph 2(1)(r) when restoration is not possible, as the meaning of "restored" in such circumstances, as to whether a review in the terms of the letter dated 5 March 2004 which fails to state the compensation offered is a full review decision as to whether the vehicle "is to be restored" or as to the conditions of restoration and specifying the legal remedy said to be open to the Appellant to dispute the value attributed to the vehicle.

On 9 November 2004, following receipt of the skeleton argument, the Tribunal requested the Attorney General to appoint an Advocate to the Tribunal in relation to the jurisdiction of the Tribunal in restoration appeals where compensation for things disposed of is in issue.

On 18 February 2005 the Tribunal was informed that the Solicitor General had agreed to the appointment of an Advocate to the Court. Mr Ewart was instructed by the Treasury Solicitor and provided a skeleton argument on 13 May. The Tribunal had directed a skeleton argument from Customs in response and received this on 8 June 2005.

Submissions for Customs

Mr Mellor said that an appeal lies to the Tribunal under section 16 of the Finance Act 1994 with respect to any decision on a review under section 15 required under section 14 or by the Tribunal under section 16(4)(b). The decision must be of a type specified in section 14(1) or Schedule 5. Here the decision in question was a decision under section 152(b) of CEMA as to whether any thing forfeited or seized is to be restored or as to the conditions of restoration. He said that the review subject to an appeal is the original section 152(b) decision and that the review considers whether that decision was right or wrong in the light of the material before the review officer, any changes in policy and any directions under section 16(4)(b).

He said that the review and the jurisdiction of the Tribunal are not affected by the fact that the thing seized can no longer be restored. The Tribunal should still consider whether the original decision was reasonable in the sense of Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1998] 1 KB 223. If the Tribunal decides that the decision was unreasonable and Customs decide on a further review that the thing seized should have been restored, Customs would make a payment in place of restoration using their powers of managing the revenues of customs and excise under section 6(2) of CEMA 1979. These powers are similar to those in relation to VAT considered by Lightman J in R (British Telecommunications Plc) v HMRC [2005] EWHC 1043 (Admin) citing Lord Hoffman in R (Wilkinson) v IRC [2005] 1 WLR 1718 at [21].

Mr Mellor said that the powers of Customs under section 152(b) do not cover payments of compensation in place of restoration. He said that Parliament expressly provided under Schedule 3, paragraph 17 for payments where forfeiture is not upheld: there is no equivalent in section 152(b). If section 152(b) was intended to cover compensation payments, there would have been a reference to such payments. He submitted that the power under section 6(2) was considered by Parliament to be sufficient.

He said that the starting point in interpreting section 152(b) is the natural and ordinary meaning of the words in their context, see per Lord Reid in Pinner v Everett [1969] 1 WLR 1266 at 1273, per Lawton LJ in McCormick v Horsepower Ltd [1981] 1 WLR 993 at 999 and Stock v Frank Jones (Tipton) Ltd [1978] 1 WLR 2131. The natural meaning of the words in section 152(b) is that Customs simply have power to restore the actual thing seized. It could not be said that such meaning leads to a result which cannot reasonably be supposed to have been intended by Parliament. He submitted that Parliament did not intend section 152(b) to include a power to compensate in lieu of restoration. Further, he said that it cannot reasonably be supposed that it was not the intention of Parliament that the Tribunal would not have jurisdiction over issues of compensation just as it has no jurisdiction as to the legality of seizure. While the value of the vehicle seized may be relevant in relation to proportionality on restoration, see Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766, the value was only relevant for that issue.

Mr Mellor said that the principle in Attorney General v Great Eastern Railway Co (1880) 5 App Cas 473, that a statutory power by implication carries all incidental powers necessary for its operation, is distinguishable because a power to compensate is not incidental or consequential to section 152(b). A power to restore is separate from a power to make a payment in lieu. No implication is needed because it is covered by the section 6(2) powers. Section 6(2) is widely drawn, whereas section 152(b) is not. He said that the implication of a power to make a payment in place of restoration goes far beyond the rule in Great Eastern Railway.

Mr Mellor said that section 3(1) of the Human Rights Act 1998 does not apply to cause section 152(b) to be interpreted to cover a payment in place of restoration. Section 3(1) applies only "so far as it is possible" and the words of section 152(b) are not capable of such an interpretation. Further, there is nothing in the natural and ordinary interpretation which is incompatible with the European Convention on Human Rights ("the Convention"). The first step in relation to section 3 is to consider whether the natural interpretation infringes Convention Rights, see Ghaidan v Godin-Mendoza [2004] 2 AC 557 at [8]. There is nothing incompatible in limiting section 152(b) to restoration of the thing seized. Customs do act proportionately in practice.

He accepted that, if no initial section 152(b) decision is possible because restoration is not possible at that point, then strictly no appeal to the Tribunal is possible. He said that in such circumstances reviews are carried out and appeals are heard. Furthermore, he said that there are other remedies. The legality of the seizure could be challenged in condemnation proceedings in which proportionality could be considered, see Customs and Excise Commissioners v Newbury [2003] 1 WLR 2131. He said that Customs could still carry out a non-statutory review and offer compensation.

He said that if goods are disposed of after the initial decision but before the Review, Customs can still decide that the goods should have been restored and offer compensation. In such circumstances he said that a dissatisfied appellant can bring an action for conversion or restitution in the County Court or claim under section 8 of the Human Rights Act. He said that an initial unreasonable decision can still be remedied by a direction for a new review under section 16(4)(b) rather than a declaration under section 16(4)(c). Since Customs do make payments under section 6(2), there is no need to imply such a power into section 152(b).

Mr Mellor said that in Mendoza [2004] 2 AC 557 Lord Rodger at [104] emphasised the limits to section 3(1) of the Human Rights Act and at [112] cited Lord Nicholls in Re S [2002] AC 291, 313 on the boundary between interpretation and amendment. He referred also to Lord Hoffman at [17]-[19] in Wilkinson [2005] 1 WLR 1718. He said that an interpretation of section 152(b) as giving power to make payments when the thing seized cannot be restored involves a new and separate power which is an amendment rather than interpretation. It would involve "far-reaching practical repercussions" (see Re S at [115]) in that the Tribunal would have jurisdiction as to the reasonableness of compensation offered.

He said that the Northern Ireland Tribunal in McKittrick v Customs and Excise Commissioners (2004) Decision E 802 had held that Customs cannot decide to restore something which they do not have and struck out the appeal on the basis that no appeal lies in such circumstances.

At the start of the second day, having taken instructions overnight on questions raised by the Tribunal as to the position under section 16(2), Mr Mellor said that it would be absurd if section 16(2) had the effect that the Appellant could not appeal against the Review decision directed by the Tribunal because that decision had been "required" by the Tribunal and not the Appellant. He said that such a result could not have been Parliament's intention. He submitted that in instigating an appeal the Appellant was seeking a new review, that being the best possible result, and that the Appellant therefore was the person who required the Review. He said that the implication of the word "original" before the word "review" in section 16(2) although possible is not necessary.

Mr Mellor accepted that it is probable that the Appellant's tobacco was destroyed before the original decision not to restore. We find that it was so destroyed. He confirmed on instructions that Customs contend that in such circumstances there can be no decision under section 152(b) and therefore no statutory review and that the Tribunal has no jurisdiction in relation to the tobacco. He said that in such circumstances Customs do still consider whether the goods would have been restored if they still had them and if appropriate offer a payment using their powers under section 6(2). He said that if Customs decide that the tobacco would have been restored if that had been possible, the Appellant would be able to make a claim for restitution in the County Court or claim under section 8 of the Human Rights Act 1998 although he accepted a potential difficulty in a claim for conversion. He said that claims are being made in other cases which Customs do not resist on the grounds that there is no cause of action. He said that he was unaware of any claim where judgment had been given. He said that it is sufficient to comply with Convention Rights that there is available some cause of action.

In answer to a question as to whether the availability of such cause of action would comply with the principle of effectiveness under which the exercise of Community Law rights cannot be excessively difficult, see Peter Gibson LJ at [25] in Re Claimants under Loss Relief GLO [2004] STC 1054, Mr Mellor said that an unrepresented appellant could make a restitutionary claim in the small claims track. He said that the fact the Appellant had to go to a different Tribunal to contest the amount of compensation was not different in principle from the fact that the magistrates determine forfeiture and the Tribunal considers restoration.

Mr Mellor said that CEMA 1979 specifically empowers Customs to dispose of perishable goods before condemnation, see Schedule 3, paragraph 16. The owner can challenge the forfeiture including the question of proportionality, see Customs and Excise Commissioners v Newbury [2003] 1 WLR 2131. He submitted that this arguably complies with Community Law and the Convention.

He submitted that Parliament did not intend Customs to be obliged under section 14 of the 1994 Act to consider compensation for goods no longer held, although Customs can do so under section 6(2) of CEMA.

Mr Mellor said that the subsequent disposal of goods does not affect the ability of Customs to review the initial decision not to restore and such disposal under CEMA s.139(5) does not halt the review and appeal process. He said that there was no suggestion in Lindsay that there could be no further review if the car had been disposed of.

As to the remedies available to the Appellant to contest the payment offered for goods which Customs have disposed of, Mr Mellor said that a claim lies for restitution based on unjust enrichment. Such claim does not depend on a proprietary right and Customs' title under CEMA 1979 is no defence. He said that Customs were enriched by the value of the goods, that this was at the expense of the Appellant and that a decision on re-review following a decision by the Tribunal that the non-restoration decision was unreasonable would mean that the enrichment was unjust.

He said that a finding by the Tribunal that the non-restoration decision was not proportionate and was thus unreasonable would mean that the decision was unlawful within section 6(1) of the Human Rights Act 1998 and in such circumstances an action for breach of Convention rights would lie under section 8.

He said that the last remedy available to the Appellant would be judicial review of the compensation offer. He accepted that this is unrealistic for 3.5kg of tobacco but said that it is still legally available. He said that it is difficult to see why judicial review is any less effective as a remedy than a Tribunal decision.

Mr Mellor concluded by submitting that the Tribunal's jurisdiction is unaffected by the disposal of the Appellant's vehicle; it can still consider the decision as to conditional restoration but has no jurisdiction to consider the payment or amount of compensation. "Restored" in section 152(b) does not include a payment in lieu. The re-review notified on 5 March 2004 was a full decision since the amount of compensation was an entirely separate matter. There are other legal remedies available. The fact that there may be difficulties if the Tribunal has no jurisdiction as to compensation and no jurisdiction when goods have been disposed of before the initial decision not to restore does not alter the fact that that is what the legislation provides. He submitted that the legislation does comply with EU law and with the Convention.

Submissions by Advocate to the Court

Mr Ewart started by looking at the structure of CEMA 1979. Excise goods on which the duty due is not paid are liable to forfeiture with the vehicles carrying them. Section 139(5) gives an unfettered power to sell or destroy goods which are forfeit. Section 152(b) gives power to restore goods seized or forfeit; restoration may be reasonable quite apart from the requirements of European law. If section 152(b) does not cover payments in place of restoration, the exercise of the power in section 139(5) has the effect of frustrating the power under section 152(b) to restore. He asked whether that could have been the intention of Parliament. Customs rely on the power under section 6(2) of CEMA to manage the revenues of customs and excise. He suggested that if a bystander looking at the scheme of the Act asked whether Parliament intended the power to "restore" in section 152(b) to cover making a payment if the thing had been sold or destroyed the answer might well be, "Yes". It would be surprising if the answer was "No, it is ex gratia under section 6(2)."

He said that it was doubtful whether the powers of care and management in section 6(2) cover such payments. In R (Wilkinson) v IRC [2005] 1 WLR 1718 Lord Hoffman considered the use of extra-statutory concessions at [21] : they were to deal pragmatically with minor or transitory anomalies or cases of hardship at the margin. The need for payments where goods can no longer be restored is a structural problem which on Customs' submissions was consciously intended by Parliament.

Mr Ewart said that read literally section 152(b) is limited to actual restoration of the thing. If it is to cover a payment instead words such as "or its value" would have to be added, either by applying the principle in Great Eastern Railway 5 App Cas 473 that a statutory power by implication carries with it all incidental powers necessary for its operation or by reading in words under section 3(1) of the Human Rights Act 1998.

He said that it is not possible to interpret section 152(b) by reference to the Finance Act 1994 enacted subsequently. However it might be relevant to ask what Parliament intended when referring to section 152(b) in Schedule 5 of the 1994 Act.

Mr Ewart said that the submission that there can be no original decision unless the goods are still held is questionable; it may be that non-restoration is the only possible decision. One problem is that an officer might make his decision in the mistaken belief that the goods are still held. This may make the decision a nullity. Customs say that an officer need not take account of the fact that the goods have been disposed of although he must take account of any other facts. He suggested that it would be more logical if the review officer could make a decision on payment in place of the goods disposed of and this would remove the artificiality. A review decision that goods should have been restored is academic in that there are no statutory consequences.

He said that the Customs approach to the jurisdiction is cumbersome. Where a review offers restoration on conditions when a vehicle has been sold and an Appellant wishes to challenge both the condition and the compensation offered in lieu of the vehicle, on Customs' argument he must appeal to the Tribunal as to the restoration condition and take a civil action in the court as to the compensation payment. The Tribunal might make findings as to the value of the vehicle on the proportionality of the condition however the court would not be bound by those findings.

Mr Ewart said that the need to consider proportionality in condemnation proceedings may have the effect that the condemnation procedure is sufficient in some cases. However forfeiture is "all or nothing" see Newbury at [23] and the proportionality requirement does not meet cases where conditional restoration might be appropriate.

He said that reliance on the powers under section 6(2) was said to meet Article 1 of the First Protocol to the Convention however the Article provided that no one should be deprived of his possessions except "subject to the conditions provided for by law." This meant legal provisions rather than the mere administrative practice of a state body.

Mr Ewart said that the leading case on the application of section 3(1) of the Human Rights Act is Mendoza [2004] 2 AC 557 in which the leading speech was that of Lord Nicholls. All legislation past, present and future must so far as possible be read in a way compatible with Convention rights. Sometimes legislation must be interpreted in a way which goes beyond the unambiguous meaning. Sometimes it is necessary to read in words which change the meaning so as to make it Convention compliant, see Lord Nicholls at [32]. The courts must not however "adopt a meaning inconsistent with a fundamental feature of legislation."

He said that the Court of Justice held in EC Commission v Luxembourg (Case C-151/94) [1995] ECR I-3685 that mere administrative practices do not suffice for the fulfilment of a Member State's obligations under Community Law. It is clear from Newbury at [9] that the Appellant has Community Law rights under Article 8 of the Excise Directive ((EEC) No.92/12).

Mr Ewart said that, if on a natural interpretation the legislation is incompatible with the principle of proportionality, the simplest answer lies in the principle in Great Eastern Railway or in section 3(1) of the HRA. He said that if the Tribunal concludes that a compatible interpretation is not possible by applying Great Eastern Railway or section 3(1), it is difficult to identify any provision relevant to this appeal which could be disapplied under Community Law.

Mr Ewart said that the suggestion of an action for conversion is unrealistic because title passes lawfully to Customs on forfeiture. A later decision as to restoration could not make the prior destruction of the tobacco unlawful.

He said that if the forfeiture was lawful there could be no action for restitution based on unjust enrichment which requires an unlawful action. Customs' decision that the goods should have been restored did not make the forfeiture unlawful.

He said that, if Customs are correct in saying that the statutory procedure complies with the Convention, it could not be said that following that procedure breached a Convention right so as to give rise to a claim under HRA s.8. Customs' argument appeared to be circular. A claim under section 8 has the further difficulty that it is a residual remedy and the court must be satisfied that an "award is necessary to afford just satisfaction." This is a complicated matter, see Lord Brown in Wilkinson.

He said that judicial review in the Administrative Court may be possible if Customs make a decision under section 6(2) on a compensation payment. There would be a problem if Customs refused to make a decision as to compensation so that there was no decision to challenge. Further, if there is a factual dispute as to the value of the thing, judicial review is not a satisfactory remedy because the High Court does not hear fresh evidence but examines the material before the decision maker.

Reply by Customs

Mr Mellor's initial submissions took until lunch on the second day and Mr Ewart's submissions occupied the remainder of the day. In those circumstances the Tribunal agreed to Customs' Reply being provided in writing by 1 July. An extensive Reply was submitted by Miss Mitrophanous and Mr Mellor on which Mr Ewart provided further brief observations.

Counsel submitted that Parliament had clearly decided to exclude a power to offer compensation from section 152(b) of CEMA. In R (Dixon) v Secretary of State Environment Food and Rural Affairs [2002] EWHC 831 (Admin) it was held at [21-22] that an implied power to burn carcasses on a farmer's land did not carry an implied power to compensate for temporary use of the land since compensation was provided for elsewhere. The meaning of "restore a thing" in section 152(b) could not be expanded on the reasonable reader test (see Lord Hoffman at [18] in Wilkinson) to include a power to make a payment in lieu of restoration. Such an interpretation would be an illegitimate amendment, see Lord Rodger in Mendoza at [112] and [115].

They submitted that a review or tribunal decision where goods have been disposed of after the initial section 152(b) decision has "the statutory consequence of being one basis for pursuing compensation pursuant to section 6(2) of CEMA."

Counsel submitted that if Customs dispose of goods before an initial section 152(b) decision, no such decision is possible so that there can be no review and no appeal to the Tribunal: a decision under section 152(b) is only possible if restoration is still possible.

They submitted that the general powers of management in section 6(2) are wide enough to include power to compensate when restoration is no longer possible and stated that this power is regularly exercised. A decision to offer compensation does not fall within section 152(b) and is thus not subject to review or to appeal to the Tribunal.

They submitted that a decision under section 6(2) as to compensation can be challenged by judicial review and may give rise to a claim under section 8 of the Human Rights Act 1998 if it involves an interference with Convention rights; furthermore there might be a claim in restitution. Counsel stated that Customs do not challenge claims in the County Court based on restitution or conversion as inappropriate.

Counsel submitted that the possibility of challenge by judicial review is sufficient to comply with the Convention and with EU law, citing Air Canada v United Kingdom (1995) 20 EHRR 150 at [44]-[46], where the Court of Human Rights held that the availability of judicial review satisfies the second paragraph of Article 1 of Protocol 1. It suffices that a judicial body can consider proportionality; it is not necessary that this body should be the Tribunal, see Neuberger J in Gascoyne v Customs and Excise Commissioners [2003] Ch 292.

They submitted that since proportionality must be considered in condemnation proceedings, see Customs and Excise Commissioners v Newbury [2003] 1 WLR 2131, there may be no issue of proportionality remaining to be decided following condemnation or deemed condemnation. If forfeiture of a thing is found to be lawful and proportionate, it is difficult to see how refusal to compensate for disposing of it could be disproportionate.

They submitted that the fact that a forfeiture decision is "all or nothing" does not mean that a forfeiture decision is not compliant. The lack of sensitivity in the powers of the court will always work in favour of an appellant since if conditional restoration is the proportionate response an appellant will always get full restoration under forfeiture proceedings. It followed that the proportionality of any interference with an appellant's rights under Article 1 of Protocol 1 is fully scrutinised in condemnation proceedings and if forfeiture is not ordered paragraph 17 of Schedule 3 provides for compensation for goods disposed of.

They submitted that the offer of compensation under the powers in section 6(2) is not a mere administrative practice but the exercise of the powers under that section. The exercise of the power to compensate is subject to judicial review notwithstanding that the power is implied. The failure to exercise an express power is judicially reviewable, see Ex parte Fire Brigades Union [1995] 2 AC 513; the same must be true of implied powers.

Counsel accepted that judicial review is more difficult to pursue than a tribunal appeal however AGOSI v United Kingdom (1987) 9 EHRR 1 showed that it is sufficient for Convention purposes. It does not matter whether a tribunal offers an easier and better remedy, the key consideration is whether judicial review suffices and in AGOSI and Air Canada it was held that it does. They said that it would not be a defence to a claim for judicial review for Customs to say that the power to restore is discretionary and that the disposal of the goods was lawful.

They submitted that section 3(1) of the Human Rights Act 1998 is not engaged for the interpretation of section 152(b) because the overall legislation complies with the Convention since (a) it allows for proportionality to be considered in condemnation proceedings and (b) if a power to compensate is necessary it is included in section 6(2). In any event section 3(1) does not permit section 152(b) to be read so as to include a power to make payment instead of restoration.

Conclusions

Section 16(2)

Although it was not the primary matter considered in this preliminary hearing, it is logical to start with the application or otherwise of section 16(2) in the present case where the appeal is against the decision on a further review directed by the Tribunal under section 16(4)(b) since if section 16(2) does apply this appeal cannot be entertained at all and the problems arising from the disposal of the goods do not arise..

A substantial proportion of the restoration appeals heard by the Tribunal are appeals against decisions on further reviews which have been directed by the Tribunal without a hearing following applications by Customs for such directions to which applications Appellants have not objected. Since the power of the Tribunal to direct a further review depends on the earlier decision having been unreasonable, an application by Customs for a new review involves an implied admission that the earlier decision was defective. The Tribunal has been willing in many cases where an appellant has not objected to accept such implied admission and to allow the appeal with costs directing a further review. That is what happened here.

The problem posed by the wording of section 16(2) has come to the attention of the Tribunal because of applications by Customs that appeals cannot be "entertained" and should be dismissed by reason of the grounds on which appellants have relied. These applications have caused the Tribunal to focus on the meaning of "entertained". An example is Smith v Customs and Excise Commissioners (2005) E. 896.

In the case now before the Tribunal Customs had applied for section 16(4)(b) directions not once but twice, the first time to take account of Lindsay [2002] 1 WLR 1766, the second time to take account of Hoverspeed [2003] QB 1041. Successive appeals have been allowed and further reviews have been directed on the basis that it was possible to appeal against the further review.

Section 16(4)(b) provides for the Tribunal "to require the Commissioners to conduct … a further review of the original decision." When the Tribunal makes a direction it is the Tribunal which requires the review and not the appellant. An Appellant requires a review under section 14(1); however section 15(1) covers a review "in accordance with this Chapter" which includes a requirement under section 16(4)(b). An appeal clearly lies against such review under the provisions of section 16(1), however section 16(2) on its literal meaning precludes the entertainment of such appeal by the Tribunal.

Mr Mellor submitted that section 16(2) does not apply in circumstances where the Tribunal has directed the further review saying that this would be absurd and cannot be intended by Parliament. He said that by appealing an appellant requires a review.

It is clear that section 16(2) cannot be intended to preclude an appeal against a review carried out following a late request, since that would render section 16(1)(b) nugatory. The word "required" in section 16(2) cannot therefore be limited to reviews which Customs are legally obliged to undertake and must include something of the flavour of a request. However to treat an appeal against a review decision as a requirement for a further review in our view does unacceptable violence to the words used in section 16(2). Furthermore it is unreal in fact since most Appellants are wholly taken aback to learn on appearing at the Tribunal that if their appeal succeeds Customs may on a further review adhere to their original decision. More importantly it disregards the fact that section 16(4)(b) provides in terms for the Tribunal to "require" a further review and for such review to be conducted "in accordance with the directions of the tribunal."

The question then arises (a) whether section 16(2) does not apply in a case such as this for the entirely different reason that the result would be incompatible with Article 1 of Protocol 1 to the Human Rights Convention with the result that it is necessary to read into section 16(2) the word "original" in accordance with section 3 of the Human Rights Act 1998, or, alternatively, (b) whether section 16(2) should be disapplied as incompatible with Community law being a disproportionate restriction on the right of appeal of a person seeking to exercise his Community law rights under Article 8 of the Excise Directive.

The submissions as to compatibility with the Convention were directed to the jurisdiction of the Tribunal when goods subject to a decision as to restoration have been sold or destroyed and thus cannot themselves be restored. The arguments are however essentially the same whether the issue is (a) whether an appeal cannot be entertained when the review has been directed by the Tribunal or (b) whether no appeal lies because the goods were destroyed before a decision was made under section 152(b).

If an appeal against the decision on a further review directed by the Tribunal cannot be entertained by reason of section 16(2), the question arises whether the Appellant is deprived of an effective judicial remedy. It is settled law that the Tribunal has no power to direct restoration, see Lindsay. In a case such as this the only remedy which the Tribunal can give to the Appellant is to require a further review in accordance with its direction which may include findings of fact. The discretion under section 152(b) remains with Customs and in many cases the original decision is confirmed on the further review. Here the further review confirmed the earlier review. If the further review cannot be challenged before the Tribunal it is necessary to consider whether the Appellant has any other effective judicial remedy to enforce his Convention rights, which in the present case involve an adequate payment in respect of his motor-cycle and a payment for his excise goods if their non-restoration was unreasonable.

Mr Mellor rightly abandoned the suggestion that the Appellant might have an action in conversion. Mr Ewart's submission at paragraph 55 is clearly correct. We also accept Mr Ewart's submission as to an action for restitution: if the forfeiture was lawful it cannot retrospectively become unlawful so as to give rise to a claim for unjust enrichment. We invited Mr Mellor to produce a precedent for a successful claim but none was forthcoming.

The next remedy suggested was a claim under section 8 of the Human Rights Act 1998. Such a claim however depends on a breach by a public authority of Convention rights. If the legislation itself deprives a person of his Convention rights it is far from clear that section 8 enables a claim to be made against the State. We do not consider that the State is a public authority within section 8. In any event the argument that legislation is not incompatible because section 8 gives a remedy for incompatibility is circular.

We consider that the only argument with any substance as to an alternative remedy if the Tribunal cannot entertain the appeal or has no jurisdiction is the availability of judicial review. We accept that the Appellant could apply for judicial review of the decisions in respect of the goods and the motor-cycle. Judicial review is also available in respect of the failure or refusal to exercise a power, see Ex parte Fire Brigades Union [1995] 2 AC 513.

Mr Mellor accepted that judicial review is more difficult than a Tribunal appeal. We regard that as an understatement. Given the legal complexity, the time involved and the cost of an application for judicial review, we regard it as wholly unrealistic to suggest that the availability of judicial review is an effective judicial remedy for the refusal to restore 3 kgs of tobacco and 4,800 cigarettes. Nor do we regard it as an effective remedy by which to dispute the payment of £2,450 offered for the motor-cycle.

Customs relied on AGOSI (1987) EHRR 1 and Air Canada (1995) 20 EHRR 150 as establishing that judicial review was both available and sufficient to satisfy the second paragraph of Article 1 of Protocol 1.

We do not regard those decisions of the Court of Human Rights on applications alleging violation of the Convention in the particular cases as establishing a general principle that judicial review is an available and effective remedy in a case such as the present. Unlike a reference to the Court of Justice the applications did not involve interpretation of European legislation or the compatibility of UK legislation with European legislation.

In AGOSI the application concerned the refusal by Customs to restore 1,500 krugerrands with a value in 1975 of £120,000. In Air Canada the application concerned a requirement to pay £50,000 for the restoration in 1987 of a Tristar passenger aircraft worth £60 million. It could hardly be said that judicial review was a disproportionate remedy in either case. The decision in AGOSI that judicial review satisfied the requirements of Article 1 of Protocol 1 was expressed at [60] to be "in the circumstances". It is to be noted that the decision in both cases was not unanimous and in Air Canada the Court was divided 5-4. Although we take account of those decisions as we are obliged to do under section 2(1) of the Human Rights Act 1998, we do not consider that they apply to a case such as that now before us.

In addition to Convention rights this case involves the Appellant's rights under Community law, just as the issue of restoration involved Community law rights in Lindsay [2002] 1 WLR 1766 and Newbury [2003] 1 WLR 2131. In our judgment if the effect of section 16(2) is that the only remedy available is judicial review, that renders the exercise of the Appellant's Community law rights excessively difficult, see Peter Gibson LJ in Re Claimants under Loss Relief GLO [2004] STC 1054 at [25]. The same applies if the interpretation of section 152(b) prevents the Appellant from appealing to the Tribunal at all in relation to the excise goods and from contesting the payment offered for the motor-cycle before the Tribunal.

We conclude that in order to render section 16(2) compatible with the Convention it is necessary to read into the subsection words which prevent it from applying to a review directed by the Tribunal. Alternatively we conclude that the subsection must be disapplied in respect of such review in respect of any appeal involving Community law rights. Either way we conclude that section 16(2) does not apply when a review has been directed by the Tribunal and that the Tribunal can therefore entertain the appeal.

The interpretation of section 152(b) when the "thing" has been disposed of

We now turn to the principal problem namely the jurisdiction of the Tribunal when the goods subject to a restoration decision have been sold or destroyed and cannot therefore themselves be restored. This depends on the interpretation of section 152(b).

Customs say that, provided actual restoration was possible at the time when the original decision was made, the Tribunal has jurisdiction to hear an appeal, but that if the goods in question were disposed of before the original decision there is no statutory review and therefore no right of appeal.

It is in fact the standard practice of Customs to dispose of alcohol and tobacco without delay following seizure. This is no secret but is stated in Notice 12A. If the submissions advanced in the present case are correct the Tribunal has heard and decided between several hundred appeals arising solely out of non-restoration of cigarettes and tobacco without any suggestion by Customs until now that it had no jurisdiction to do so. The Tribunal cannot be given jurisdiction by Customs; either it has jurisdiction under the law or it does not. If Customs are correct this is truly an extraordinary state of affairs. It was for this reason that after the first day the Tribunal asked Mr Mellor to confirm overnight that those were his considered instructions. This he did. If Customs are correct the Tribunal has no jurisdiction in the present case in respect of the cigarettes and tobacco.

Mr Mellor's proposition was not that Parliament did not intend Customs to have power to make payments when goods seized could not be restored but rather that Parliament intended such power to be covered by section 6(2) rather than by section 152(b).

The clear purpose of section 152(b) is to give Customs power to restore which have been forfeited or which have been seized as liable to forfeiture and to impose conditions for restoration. Non-restoration may well in some circumstances be unreasonable under domestic law quite apart from Community law. The power to restore accords with the need for proportionality under the Convention and Community law, see per Lord Phillips MR in Lindsay v Customs and Excise Commissioners [2002] STC 588 at [52]-[54].

Section 139(5) gives to Customs power to deal with things seized pending determination as to forfeiture and if condemned to dispose of them. It is this power which is used to auction cars which have been seized or forfeited. It is unclear whether it is this power or the power under Schedule 3, paragraph 16(b) in respect of perishable goods which was used in relation to Mr Powell's tobacco and cigarettes.

If the power under section 152(b) is confined to the restoration of the actual thing seized or forfeited, then the disposal of the thing whether under the power in section 139(5) or under Schedule 3, paragraph 16(b) prevents the subsequent exercise of that power.

Mr Mellor did not suggest that a power to make payments when restoration is not possible is not necessary. If there was no such power, the legislation would clearly be incompatible with the Convention. His submission was that Parliament did not intend section 152(b) to include payments where restoration is not possible but left such payments to be covered by section 6(2). Section 6(2) reads as follows:

"(2) In addition to the duties conferred on them by or under any other enactment, the Commissioners shall, subject to the general control of the Treasury, be charged with the duty of collecting and accounting for, and otherwise managing, the revenues of customs and excise."

There can be no doubt that the principle in Great Eastern Railway (1880) 5 App Cas 473 that a statutory power carries by implication all incidental powers necessary for its operation, also applies to a statutory duty so that although section 6(2) confers no express powers the necessary powers incidental to the duty to manage the revenues must be implied. It is clear that Revenue and Customs have similar powers under section 6(2) in relation to excise duty to those under section 1(1) of the Taxes Management Act 1970 in relation to income tax and those under Schedule 11, paragraph 1(1) of the VAT Act 1994 in relation to VAT. However, although wide, those powers have limits.

In Wilkinson [2005] 1 WLR 1718, the House of Lords considered the use of the powers of care and management in the Taxes Management Act to make statutory concessions. Lord Hoffman who gave the leading speech said this at [21], referring to the wide managerial discretion,

"This discretion enables the commissioners to formulate policy in the interstices of tax legislation, dealing pragmatically with minor or transitory anomalies, cases of hardship at the margin or cases in which a statutory rule is difficult to formulate or its enactment would take up a disproportionate amount of parliamentary time … It does not justify construing the power so widely as to enable the commissioners to concede, by extra-statutory concession, an allowance which Parliament could have granted did not grant, and on grounds of pragmatism in the collection of tax but of general equity …"

All of their Lordships agreed with this part of Lord Hoffman's speech.