United Kingdom VAT & Duties Tribunals (Excise) Decisions

Travaca NV v Revenue & Customs [2006] UKVAT(Excise) E00985 (06 September 2006)

E00985

EXCISE DUTY – Restoration – Reasonableness of decision to restore on payment of fee – Vehicle and trailer seized in course of smuggling goods into UK – Driver's guilt admitted – Customs' decision based on their conclusion that haulage company's standard of care was inadequate – Whether decision reasonable in all the circumstances – No – Appeal allowed

LONDON TRIBUNAL CENTRE

TRAVACA NV Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents Tribunal: STEPHEN OLIVER QC (Chairman) PRAFUL DAVDA FCA

Sitting in public in London on 16 August 2006

Mathew Sherratt, counsel, instructed by Betts Smith, Solicitors, for the Appellant

Matthew Barnes, counsel, instructed by the Acting General Counsel and Solicitor to the Commissioners of Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006
DECISION
1. Travaca, a company carrying on business in Belgium, appeals against a decision of the Respondents ("the Customs") to offer restoration of a Volvo FH12 motor vehicle ("the vehicle") and a trailer ("the trailer") upon payment of a restoration fee of £50,900 representing the trade value of the vehicle and trailer. The decision was given on a review and is dated 22 July 2005.

The Facts

2. The facts were in part common ground, in part derived from correspondence and in part supplied by the oral evidence of Heide Abeele, business management and employment administrator of Travaca, a haulage company.
3. On 16 May 2005, Mr Ulrich Verlee was driving the vehicle and towing the trailer when he was stopped by Customs officers at Dover Eastern Docks. The trailer was found to be carrying 540,000 Dorchester cigarettes and some wine. Mr Verlee was questioned by the Customs officers. He handed a "CMR" to them and indicated that the load was wine. Further, he informed them that he did not speak English, that he had not seen the trailer being loaded (which had been done at the supplier's premises), that he was delivering to the London City Bond and that he had worked for Travaca for six years. When asked if there were any cigarettes in the trailer, he twice failed to answer. On inspection, two pallets of brown taped boxes containing the cigarettes referred to above were found at the front of the trailer.
4. There was no evidence before the Customs officers that duty had been paid on the cigarettes. They seized them and the vehicle and the trailer as liable to forfeiture under Sections 139 and 140 of the Customs and Excise Management Act 1979. The wine was released in due course as it was a genuine load.
5. The seizure notice was issued to Mr Verlee who acknowledged receipt on 16 May.
6. On 17 May Travaca sent a fax to Customs at Dover requesting the "release" of the vehicle and the trailer. Customs' post-seizure unit at Plymouth wrote on 20 May. The letter is expressed as a response to a request for restoration of the vehicle and trailer. The letter says, among other things:

"When considering restoration of commercial vehicles seized because they are carrying goods liable to forfeiture, Customs will consider, among other factors, issues such as the involvement or otherwise of the owner/hauler, and the steps the hauler has taken to prevent their vehicles being used to carry smuggled goods.

This is your opportunity to bring to our attention anything you would like us to consider in support of a restoration request. You may wish to send us, for example, a copy of the terms and conditions of the driver's contract, copies of employment references from previous employers … details of any measures you take to prevent your vehicle being used for smuggling.

We are unable to make an informed decision in your case until we receive a reply."

Travaca's reply was faxed to Customs on 23 May. It reads:

"… please find below our further information. …

1 A copy of the driver's contract is enclosed.

2 We are his first employer in transport.

3 Proof of ownership included.

4 After the driver arrived in Belgium, on Tuesday 19 May, we informed the Belgium police and he confirmed to them that he has loaded the cigarettes on our truck. After we got this information we immediately discharged the driver.

May we ask you to release our truck and trailer as soon as possible, because our firm has nothing to do with the whole situation. If you need further information please don't hesitate to contact us."

Accompanying that letter was a translated copy of the "Fixed-Time Contract" (dated 31 December 1998) employing Mr Verlee as a driver. It says only:

"The Employer will employ the Employee as a driver with effect from 4 January 1999 until ….. at a gross salary of BEF 331.30 per hour.

This contract of employment is subject to a 14-day probationary period".

7. On 31 May the formal letter of dismissal was issued by Travaca to Mr Verlee recording his dismissal referred to in Travaca's earlier letter as having been effected on 17 May.
8. Customs, Law Enforcement, wrote back on 8 June stating that there were "no exceptional circumstances that would justify a departure from the Customs' policy". Pausing there, we take the Customs' statement of policy to have been summarised in the first sentence of their letter of 20 May. The writer concludes that –

"From the information available to me it is considered that insufficient steps were taken by your company to prevent your vehicles being used for smuggling".

The decision was that the vehicle and the trailer would be restored on payment of £50,900. The letter concludes with an invitation to have it reviewed.

9. The next day, 9 June, a letter from Belgium lawyers acting for Travaca was faxed to the Customs. It made the following, among other, points. First it was said that Travaca had been transporting goods for 25 years and that it employed over 25 people and sometimes had about 20 transports a week to and from the UK. It states that Travaca had no knowledge whatever of the transportation of such goods such as cigarettes and that the transportation of these had been on the sole initiative of the driver or others. The letter said that Travaca did not agree that "insufficient steps were taken" to prevent it being used for smuggling and it made the point that against such criminal behaviour by an employee what more could be done. Warnings had, it said, been given to employees.
10. The next day, 10 June, Customs responded by fax to the Belgium lawyers acknowledging the request for a review and stating that further information to be provided in support of the review should be sent to the review officer. No specific information was requested nor was any further information provided to the review officer.
11. The review letter was written on 22 July 2005. It recites that because Travaca had never challenged the legality of the seizure "the things are confirmed as seized lawfully and considered as forfeit to the Crown". (Nothing turns on this, but we note that Travaca never received any information about challenging the seizure. In particular the box on the seizure notice entitled "notice 12A received" is not ticked.)
12. The review letter sets out a full statement of the Customs' restoration policy for freight vehicles. This reads as follows:

"Commissioners' policy for the restoration of goods vehicles that have been used for smuggling excise goods is intended to tackle cross border smuggling and to disrupt the supply of excise goods to the elicit market. Each case is considered carefully on its individual merits so as to decide whether exceptions should be made ….

If the Commissioners conclude that the driver, but not the hauler, was involved or complicit in the smuggling attempt then restoration depends on whether or not the Commissioners are satisfied that the hauler took reasonable steps to prevent drivers smuggling.

•    If the hauler took reasonable steps then the vehicle will normally be restored free of charge:

Unless the same driver is involved (working for the same hauler) on a second or subsequent occasion when the vehicle will normally be restored for 100% of the revenue involved in the smuggling attempt (or the value of the vehicle if lower) accept that if the second or subsequent occasion occurs within six months of the first, the vehicle will not normally be restored.

•    Otherwise, on the first occasion the vehicle will normally be restored for 100% of the revenue involved (or the value of the vehicle if lower).

On a second or subsequent occasion the vehicle will not normally be restored."

13. The letter stresses that the writer has looked at all the circumstances surrounding the seizure (without considering the legality of the seizure). The letter then makes the following points:

(a) There was nothing casual about the concealment of the cigarettes; nor could they have been concealed without the driver's knowledge.

(b) The limited information available to the review officer led to the conclusion that Travaca had not made reasonable checks of the driver; see in particular the points in (c) to (g) below.

(c) The terms and conditions of the driver's contract did not show that smuggling by drivers is considered to be an act of gross misconduct and will lead automatically to dismissal or other strong sanction.

(d) There was no letter from Travaca to Mr Verlee, signed by Mr Verlee, which clearly stated that smuggling was considered to be an act of gross misconduct and would lead automatically to dismissal or other strong sanction.

(e) There was no evidence that Travaca had sought or obtained a copy of an employment reference from Mr Verlee's previous employers.

(f) There was no evidence that Travaca had made enquiries of Mr Verlee's previous employers to establish that Mr Verlee had had no previous dealings with Customs.

(g) There was no record of any interview with Mr Verlee confirming that he had no previous offence dealings with Customs.

(h) On 31 July 2002 a consignment of wine had been seized because of documentary errors. The vehicle and trailer had been restored to Travaca and the driver had been Mr Verlee.

(i) On 17 December 2004 a vehicle and a trailer of Travaca had been seized as being used to transport the illegal importation of cigarettes. Vehicle and trailer had been restored to Travaca.

(j) According to Glass' Guide the 2003 Volvo vehicle would be worth about £29,300 and the trailer about £21,600; in the circumstances of the case involving over £79,000 in revenue, it was, in the context of proportionality, proper to conclude that to offer to restore these vehicles for their trade value was reasonable.

The conclusion of the review officer was that the vehicle and the trailer should be returned for a fee.

The Law

14. Pursuant to Section 152(b) of the Customs and Excise Management Act 1979 the Customs may, as they see fit, restore, subject to such conditions (if any) as they think proper, anything forfeited or seized.
15. In deciding whether the exercise by the Customs of their discretion is unreasonable, we have to be satisfied that the Customs had acted in a way in which no reasonable panel of "Commissioners" could have acted, if they had taken into account some irrelevant matter or had disregarded something to which they should have given wait.

Conclusions

16. Travaca accept point (a) contained in the Review Letter. They challenge all the other points relied upon in support of the decision of the review officer.
17. Referring to point (h), Travaca say that a vehicle driven by Mr Verlee had indeed been seized on 31 July 2002; but the fault lay in the consignment documentation drawn up on the basis of information provided by the consignor as to the alcoholic strength of the wine being carried. The vehicle and trailer had been restored and it is not in dispute that no blame was attributable to Travaca or Mr Verlee. That, we think, is a good point. Travaca had not been complicit in a smuggling attempt on that occasion, nor had Mr Verlee. Both came away with clean bills of health. The July 2002 seizure should, we think, have had no bearing on the implementation of the Customs' policy; to the extent that the review officer took it into account it was, if not a irrelevant consideration, something on which little or no weight should have been placed.
18. Point (j) is based on the seizure on 17 December 2004. On 18 January 2005 Customs notified Travaca that the vehicle was to be restored free of charge. The vehicle, not driven by Mr Verlee, had been found to have been carrying an illegal cargo of cigarettes. It had been pointed out to Customs by letter from Travaca of 7 January 2005, that the driver had, despite his checks and his assistance in the course of the loading, been unaware that he was smuggling cigarettes. Here again we think that the review officer should of regarded this as an occasion when neither driver nor hauler had been involved or complicit in the smuggling attempt. To the extent that the review officer so took it into account, he was relying on an irrelevant consideration.
19. The most that can be said of those two incidents is that they should have put Travaca, even more so than they were already, on notice of the notorious fact that the United Kingdom is a target for smugglers of cigarettes.
20. Had Travaca failed to make reasonable checks of Mr Verlee? Here we quote from the review letter:

"As a matter of routine I would expect such a hauler to vet the drivers extremely carefully and to include extremely strict penalties in their contracts, ensuring that all drivers are covered by these arrangements. The reasonable checks in the Commissioners' policy are reproduced in Appendix D. Your client's contract with Mr Verlee, as provided to me, contains very little information: nothing about the consequences of gross misconduct …. I conclude therefore that your client has not made reasonable checks of the drivers to prevent smuggling."

(Appendix D covers points (c) to (i) referred to in the Review Letter.)

21. We address the point by looking at the particular steps that Travaca is said to have failed to have taken. In this connection we make one overriding point. The Customs say that Travaca did not take the opportunity of furnishing them with full enough information to enable them to make any decision other than the one they did make. Here it will be noted that Travaca replied by return of fax to all communications from the Customs. The inference must be that they needed the seized vehicle back straight away and, not having a full statement of Customs policy available to them, sought to give the Customs the information requested as succinctly and clearly as possible. And, we observe from Heide Abeele's evidence, she understood virtually no English; to judge from other letters from Travaca, the management were not English speakers.
22. Point (c) relied on by the review officer is that Mr Verlee's contract of employment said nothing to show that smuggling is a serious and dismissible offence. This is so. But could it and should it? The Customs provided no evidence of Belgium law on this point, nor indeed of English employment contracts. Mathew Sherratt, Travaca's counsel, made the point that "extremely strict penalties" in employment contracts might be unenforceable as a matter of EU law. The review officer gave no evidence to support his assertion. It seems to us to be so self-evidently obvious that a driver who uses his employer's lorry for smuggling puts his job at risk as to make it an unnecessary, if not offensive course to install a provision of the sort suggested by the review officer in a driver's contract of employment. And where, as here, the employee in question has already been employed for eight years under an open-ended contract, the practicalities of getting him to enter into a fresh agreement with more severe terms could be difficult. Much the same can be said of point (d), i.e. Travaca's failure to produce a letter signed by Mr Verlee stating that smuggling is a serious and dismissible offence.
23. Travaca observe in relation to both points (c) and (d) that warnings "were indeed given". This is stated in the Belgium lawyers' letter of 9 June produced in response to the Customs request for information or evidence. To the same effect was Heide Abeele's oral evidence. She stated that Travaca's management had 24 hour a day contact with their drivers who between them had been making some 20 transports a week to and from the UK. They had been warned, she said, "thousands of times" not to drink, not to smuggle and to keep the right resting hours; (we accept that evidence.) We regard the warnings in fact given to Mr Verlee, in common with those given to the other drivers, as just as effective, if not more so, than clauses found in employment contracts and as signed letters. This was quite a small business (having some 20 vehicles) and it seems to us that upfront oral communication is a better means of communicating important house rules than written notices. The review officer knew that Travaca claimed to have indeed given warnings: see the letter of 9 June from Travaca's lawyers to the Customs. That was not questioned and the evidence before us shows that it was a good claim on Travaca's part. It is reinforced by the fact that, as was told to the review officer, Mr Verlee had been dismissed the next day for criminal conduct. The fact of those warnings should have been taken into account by the review officer and greater weight should have been placed on the fact that they had been given.
24. It is correct that Travaca had not "vetted" Mr Verlee. Travaca had neither taken express references nor enquired of his previous employer (point (e)) as to whether he had had "previous dealings with Customs" (point (f)) nor could it produce any record of interview with Mr Verlee (point (g)). The review officer had however been told that Travaca was Mr Verlee's first employer in transport and the contract provided to the review officer showed employment with Travaca since 1998. The review officer knew, or should of known, that Mr Verlee had an eight year unblemished record of driving; this includes the circumstances of the seizure in 2002 of which the review officer must been taken to have been aware.
25. We accept Heide Abeele's evidence that Mr Verlee had not previously been employed in transport. He had been a bricklayer who had come to Travaca as his first driving job where he worked with more experienced drivers until proficient. He was, she said, a married homeowner.
26. So, would vetting of Mr Verlee have been a sensible and reasonable course for Travaca to have taken? It would, we think, have been pointless. Builders do not, as far as we are aware, employ people prone to smuggling. If Mr Travaca had asked of themselves, a small company, they would have found an unblemished record; and if there had been anything suspicious about Mr Verlee, it should have been known to them. In relying on points (e), (f) and (g), the review officer was we think giving undue weight to considerations that were in the circumstances irrelevant and misplaced.
27. Pausing at that stage, we express our view that Travaca's standard of care to prevent its vehicles being used for smuggling into the UK comes up the threshold demanded in the Customs' statement of policy.
28. We mention now two matters that were raised by Heide Abeele in evidence, but which do not, we think, have a bearing on the status of the review officer's decision. She referred to the "Verschaeve incident" of October 2004. Travaca had, because of the pressures on them, employed a Mr Verschaeve on the strength of one good and one not good reference. Once it got around that he was disruptive and unreliable with a propensity towards smuggling, he was fired. Customs suggested that this might indicate a lack of care on the part of Travaca; there might, unknown to Travaca, have been a smuggling ring operating among its drivers. Bearing in mind that Mr Verschaeve was dismissed very shortly after being employed and that he is still claiming compensation for wrongful dismissal, it seems to us to have been a sensible precaution and cannot be regarded as evidence of carelessness on the Travaca's part. It was then pointed out by Heide Abeele that, since the Verschaeve incident, Travaca had started to tighten up their contracts and introduce provisions that were more in line with those expected by the Customs (see for example, point (c) above). Precisely when Travaca started working on these contracts, we do not know for sure. We do not therefore find that feature as advancing Travaca's case. Finally it was said in this connection that Travaca had installed computerised tracking devices to enable them to determine whether their drivers were doing what they were told. These do not appear to have been installed until 2006; we cannot therefore place any reliance on the presence of these.
29. In all the circumstances we think that the decision to offer to restore the vehicle and the trailer in return for payment of £50,900 was neither reasonable nor proportionate. The vehicle and the trailer have lost nearly two years of their earning potential for Travaca. That we think is more than enough of a penalty. We therefore quash the decision and send it back for a further review. In making this further review our findings should be taken into account as should our recommendations that the vehicle and the trailer be released.
30. We allow the appeal. We award Travaca their costs of an amount to be agreed. If the amount cannot be agreed it should be referred back to the Tribunal (the chairman sitting alone) for further directions.
STEPHEN OLIVER QC CHAIRMAN RELEASED: 6 September 2006

LON/05/8113