United Kingdom VAT & Duties Tribunals (Excise) Decisions

Richard Alan Transport v Revenue & Customs [2006] UKVAT(Excise) E01001 (20 November 2006)

E01001

EXCISE DUTY – restoration of tractor unit and trailer carrying illicit load of cigarettes – whether haulier took reasonable steps to verify the credibility of his consignment – no – was the Commissioners' decision to restore on terms reasonable – yes – appeal dismissed

MANCHESTER TRIBUNAL CENTRE

RICHARD ALAN TRANSPORT Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Lady Mitting (Chairman)

Marjorie Kostick BA FCA CTA (Member)

Sitting in public in Manchester on 26 October 2006

Mr R C Smith, counsel, for the Appellant

Miss J Bluwitt, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1. The decision under appeal is that of the Commissioners, taken on review and notified to the Appellant by letter dated 3 May 2006, to restore to the Appellant on payment of a restoration fees of £18,950 a Mercedes tractor unit W607WCA and a refrigerated trailer.
2. On behalf of the Appellant we heard oral evidence from Mr Allen Richard Sable, the sole proprietor of the Appellant firm, and Mr Leonard Arthur Killgallon who had been one of the two drivers travelling in the vehicle when it was intercepted. Mr Raymond Brenton, the reviewing officer, gave evidence for the Commissioners. The Commissioners had prepared for us a bundle of documents which contained transcripts of interviews with Mr Sable dated 22 December 2005; with Mr Peck, the co-driver, dated 8 December 2005 and with Mr Killgallon, also dated 8 December 2005. Neither party made any reference to the interviews with Mr Killgallon or Mr Peck and only extremely limited reference was made to the interview with Mr Sable . Neither party asked us to read the interviews and, apart from the limited extracts referred to, we take no account of the interviews within this decision.

Background to the Appeal

3. On 8 December 2005, Customs Officers at Dover Eastern Docks intercepted the tractor unit and trailer which belonged to Mr Sable. The trailer was fully sealed and when the seals were removed it was searched and found to contain 2,089,400 cigarettes concealed within boxes of apples, the vehicle's stated load. Mr Killgallon and Mr Peck were arrested and interviewed but released when Customs Officers accepted that they were ignorant of the illicit load. The goods and vehicle were seized.
4. Mr Sable requested restoration by letter dated 25 January 2006. Further correspondence followed with Mr Sable providing additional information and documentation requested by the Commissioners. By letter dated 22 February 2006, the Commissioners offered conditional restoration on payment of £18, 950, the trade value of the vehicle, the reason for this decision being that insufficient steps were taken by the Appellant to prevent the vehicle being used for smuggling.
5. Mr Sable requested a further review of that decision, a review which was carried out by Mr Brenton and notified by letter dated 3 May 2006. Mr Brenton had access to the seizure documentation, the correspondence passing between the parties, the documentation carried in the vehicle at the time of interception and transcripts of the interviews. In his letter, Mr Brenton summarises the Commissioners' policy on restoration in the following terms:

"If the Commissioners are satisfied that neither the driver nor the haulier were involved or complicit in the smuggling attempt, then restoration depends on whether or not the Commissioners are satisfied that both the driver and haulier carried out basic reasonable checks (including conforming with the CMR Convention) to confirm the legitimacy of the load and to detect any illicit load.

If reasonable checks were made then the vehicle will normally be restored free of charge.

Otherwise, then on the first occasion the vehicle will be normally restored for 20% of the revenue involved in the smuggling attempt (or for the trade value of the vehicle if lower). "

6. Mr Brenton also enclosed within his letter a copy of a document headed "Reasonable Checks to be undertaken by Hauliers/Drivers to prevent smuggling in the Load". In his oral evidence, Mr Brenton said that these checks were not definitive but were merely guidelines and indeed the checks listed are prefaced as being "common indicators that suggest the haulier/driver has not conducted those checks but could reasonably have been expected to reveal the illicit nature of the load." In the text of the checks, Mr Brenton had highlighted two specific bullet points namely :-

"Haulier has taken no steps to establish the credibility of the load being carried, the details of the owner of the goods nor the credibility of the destination to which the load is destined (e.g. is the driver offering a credible story as to where the goods were picked up from or are to be delivered to)

Driver and/or haulier have made no attempt to check that the destination for the goods is expecting them (particularly relevant for bonded warehouses in the context of diversion fraud)"

7. Mr Brenton summarised the chronology of events. He referred to a number of specific points to which we refer in greater detail below and concluded that the earlier decision to restore on terms should be upheld on the basis that the haulier had taken no steps to establish the credibility of the load being carried, the details of the owner of the goods nor the credibility of the destination to which the load was destined and neither had he made any attempt to check that the destination for the goods was expecting them.

The Evidence

8. Mr Sable told us that he had been in the haulage business since 1994. He is registered as an international haulier but has done very little international work, only some 6 or 7 trips in the main to Spain, France and Italy. He operates three tractor units and five trailers.
9. In November 2005, we were told, a Dutch Shipping Agent, Damco, with whom Mr Sable had previously dealt on a couple of occasions offered Mr Sable a load from Yorkshire to Antwerp, a job which Mr Sable accepted. The rate for the job to be £1,100 plus the ferry ticket. Whilst setting this job up, Mr Sable received a phone call from a gentleman who purported to be from MGB Metro, a large international company based in Poland with whom Mr Sable had never previously dealt but of whom he was aware because of their size and having seen their vehicles on the road. Mr Sable was asked if he could transport a load from Wrocklaw in Poland to Geest in Sittingbourne, Kent, the load having to be collected on 5 or 6 December. Mr Sable saw the opportunity to carry this as a return load for the Damco job and quoted a rate of £1,200 plus the ferry fare. There appears to have been an exchange of faxes between MGB Metro and Mr Sable of which one was produced to us. There was some doubt as to whether this was the first or second fax from MGB to Mr Sable but we do not see that much hangs on this. The fax is headed with MGB's name and address and is signed off by one Lukaszewicz Adam. The fax describes the load as 24 pallets of fresh apples to be delivered to Sittingbourne, Kent and to be collected on 6 December 2005 from 05-870 Wrocklaw Ul. Szkolna 120. The price is given as £1,200. The fax address from which the fax appears to have originated is shown as PPHIU. Dombud.Sp.200 Bar 'Fina'
10. Mr Sable told us that he carried out no checks as to the credibility of the consignor, consignee or load because he saw no need to. Both MGB and Geest were large international companies and he had dealt with Geest in Normanton on several occasions previously. Although he had never dealt with MGB before he had spoken to a man whom he believed to be from there on the phone, had received faxes from them and had no reason to believe anything was wrong. He had never before felt the need to check on the credibility of a load. Even when he had first started working for Damco, he had never checked them out. He also explained to us the difficulty of making such a check when he would have no order number and Geest would probably be expecting to take delivery at their various depots of something in the region of 2,000 loads of fruit a day.
11. Unfortunately, the outgoing Damco load fell through and Mr Sable therefore had to send his vehicle out to Poland unladen which would render the whole job unprofitable but he felt himself contractually bound to MGB and would not therefore contemplate cancelling the job and he also hoped that it would lead to further good contracts from the same source.
12. Once Mr Killgallon and Mr Peck had left for the Continent, Mr Sable's only other involvement with the job was when he received a phone call from Mr Killgallon to say that they could not find the address for loading. Mr Sable telephoned his contact number and was told that they would phone Mr Killgallon direct which they did. Mr Sable heard nothing further until contacted by Customs the following day.
13. Mr Killgallon told us he was a self-employed driver and had been in the haulage industry for over 30 years, running his own business for some 12 years. He had made thousands of foreign deliveries but never previously to Poland. The day before he had left England, he had received a text from Mr Sable on his mobile phone giving him a fuller loading address. This was the same address as given on the fax but with greater detail. On arrival in Szkolna, which was some 40 kms outside Wrocklaw, they could not find the address to which they had to go. They tried to ask directions but without success given the language difficulties and Mr Killgallon therefore telephoned Mr Sable and asked if he could arrange for someone from MGB to contact him or to come and find them and lead them in. This, we were told, is very common when collecting in foreign countries. Mr Sable said he would and some hours later, Mr Killgallon was collected and led to the loading address. He confirmed the loading address was the address given on the fax. It was a vast area and he backed his lorry into a bay where loading took some 20 to 30 minutes. Mr Killgallon and Mr Peck were not permitted to be present when the vehicle was loaded and after loading, he pulled away from the bay, walked around to the back of the vehicle to check the load was secure and then sealed it. A man, who Mr Killgallon believed to be from Customs, then came out and fixed the customs seals and Mr Killgallon left. He told us that he had found nothing unusual about the loading of the vehicle or the manner in which the vehicle was sealed. He was given the CMR, of which we were shown a copy. It appeared to be a perfectly genuine document and was signed off in the normal way.
14. Mr Killgallon and Mr Peck then set off on the journey home, the journey being unexceptional until they were intercepted at Dover.
15. Mr Brenton, in his evidence, explained to us the Commissioners' policy. He was satisfied that neither Mr Sable nor either of the drivers were in any way complicit in the illegal importation and that none of them had any knowledge of the true nature of the load. His decision was based on his view that any responsible haulier would and should have taken steps to verify the credibility of the load and to have checked with the consignee that that load was expected. If Mr Sable had carried out all necessary checks and they had for some reason not revealed the illicit nature of the load then he would, not withstanding this, have received unconditional restoration of the vehicle
16. Mr Smith took Mr Brenton in some detail through his review letter, making reference to a number of points which he believed had been incorrectly stated or misinterpreted by Mr Brenton. First, Mr Brenton had stated that Mr Sable had made no checks on the legitimacy of either the Polish Company or the Receiving Company and that had he done so he would have found out "that neither company knew of this consignment". Mr Brenton accepted that on the face of it both consignor and consignee were legitimate and well known companies. He also accepted that the issue was not whether Geest was expecting a load of cigarettes, which clearly they were not but whether they were expecting a load of apples. He accepted that his quoted sentence was badly worded and agreed it could be struck out.
17. Secondly, Mr Brenton appeared to make much of the fact that this load was unprofitable but, as Mr Smith pointed out, it would not have been unprofitable had not the outgoing load fallen through. Mr Brenton accepted this.
18. Thirdly, Mr Brenton refers to the fact that the drivers could not find the address to which they were directed and that arrangements had to be made for someone to come and collect them. Mr Brenton found this "suspicious".
19. Fourthly, Mr Brenton referred to it having been "ascertained that the fax number he was given was a bar in Poland". Mr Smith pointed out and indeed it was accepted by Mr Brenton that this in fact had not been ascertained at all. No one appeared to know whether or not the word "bar" meant the same in Poland as in England and whether or not it was proper to make this assumption. Mr Brenton stated however in answer to Mr Smith that Mr Sable had confirmed in his interview that the fax had originated from a bar in Poland. This in fact is incorrect, as was accepted by Mr Brenton. It was the interviewing officer who suggested that this was the origin of the fax to which Mr Sable is recorded as replying "oh dear, I had no idea".

Submissions

20. Ms Bluwitt dismissed as red herrings the various points which had been taken up by Mr Smith on the review letter. The Commissioners' case was quite simply that Mr Sable had not carried out any checks to establish the credibility of his load. The burden of proof was on Mr Sable to show that Mr Brenton's decision was unreasonable and that burden had not been discharged.
21. Mr Smith argued that Mr Brenton had based his decision on a number of incorrect facts and any decision so reached could not therefore be reasonable. He argued that the presence in Mr Brenton's letter of these additional factors means that he must have taken them into account when reaching his decision, otherwise why mention them. If they were irrelevant then the decision is equally flawed because he took into account irrelevancies. Mr Smith also contended that when considering what checks it was reasonable to make one had to consider how reasonably such checks could be made. Whilst it would be very easy to check with a small shop in Manchester that they were expecting a load, it was substantially more difficult to check with a company as large as Geest and it would not be possible to do so without first ascertaining from MGB an order number which in itself would prove difficult. To Mr Sable, he was dealing with two internationally renowned companies and as such he had no reason whatsoever to believe there could be anything suspect about the load and any further checks were therefore not only going to be very difficult but, in Mr Sable's view, unnecessary.

Conclusions

22. Our jurisdiction is limited to considering the reasonableness of Mr Brenton's decision. Only if we find his decision is one which no reasonable body of Commissioners could have reached can we allow this appeal. In considering the reasonableness of the decision, we have to be satisfied that Mr Brenton took into account all relevant matters and none that were irrelevant and that he attached sufficient weight to such matters and that he made no error of law.
23. Mr Smith did not seek to argue that the Commissioners' policy, per se, was unreasonable. The policy is clear and should be well known to hauliers. The Commissioners expect hauliers to take all reasonable steps to verify the credibility of any load they are carrying. This can be done by verifying the legitimacy of the consignor and/or the consignee and/or the nature of the load being carried and/or the destination to which it is being delivered.
24. Mr Brenton in his letter certainly sets out a number of points, some of which may not be entirely accurate or may be capable of misinterpretation. It has, for example, not been established that the fax was sent out from a bar. The trip would not have been unprofitable had the outward load not fallen through. These matters are however totally peripheral to the central issue. Mr Brenton's conclusion is that Mr Sable took no steps to satisfy himself that this was a legitimate venture. He took no steps to establish the credibility of the load or the credibility of the destination to which it was destined or that the stated destination was expecting the load. This is the crux of the case and is the crux of Mr Brenton's decision. It is not in dispute that Mr Sable did none of these things. It is no excuse for him to say that they would have been time-consuming or difficult in practical terms. If the credibility of a load has to be verified then a haulier has to take whatever steps he needs to verify it. If Mr Sable had made basic checks to verify the legitimacy of the load, he should have found out the true nature of the proposed transaction. Even if those checks had not revealed its illicit nature then he would still have been entitled to unconditional restoration of his vehicle because he made the checks. He is offered only conditional restoration for the simple reason that he carried out no checks.
25. We consider Mr Brenton's view to be perfectly reasonable. His decision is not, in our view, rendered materially flawed by the peripheral matters raised in his letter. They are quite clearly not central to the issue and nowhere in his letter does Mr Brenton indicate that they were. Indeed his letter reads to the contrary because he concludes by stressing repeatedly that Mr Sable made no effort to check the legitimacy of the load or that this was a legitimate venture. It was, he writes "on that basis" that his decision was made.
26. For all these reasons we believe that Mr Brenton's decision was not one which no reasonable body of Commissioners could have reached and we dismiss the appeal. The Commissioners made no application for costs and no order is made.

LADY MITTING

CHAIRMAN
Release Date: 20 November 2006

MAN/06/8025