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||Neutral Citation Number:  EWCA Civ 1653
||Case No: C1/2014/3351
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM High Court, QB, Administrative Court
His Honour Judge Keyser QC
Insert Lower Court NC Number Here
||Royal Courts of Justice
Strand, London, WC2A 2LL
||19th December 2014
B e f o r e :
LADY JUSTICE ARDEN
LORD JUSTICE LEWISON
LORD JUSTICE UNDERHILL
|| CC&C LIMITED
||- and -
||HER MAJESTY'S COMMISSIONERS OF REVENUE & CUSTOMS
(Transcript of the Handed Down Judgment of
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Geraint Jones QC and Charles Irvine (instructed by Rogers & Norton) for the Appellant
Timothy Brennan QC and Ms Marika Lemos (instructed by HM Revenue & Customs) for the Respondents
Hearing date: 13 November 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
Lord Justice Underhill :
- This appeal arises in the context of the regime which permits wholesale trading in alcoholic drinks and other dutiable goods which are held in, or moved between, excise warehouses without giving rise to an "excise duty point" and thus attracting liability for excise duty. Goods so traded are generally described as "duty-suspended goods". The regime is governed by both EU and domestic regulations. The Warehousekeepers and Owners of Warehoused Goods Regulations 1999 ("the Regulations" – also known as "WOWGR") provide for persons holding or buying duty-suspended goods to be approved and registered by Her Majesty's Revenue & Customs ("HMRC") as "registered owners". The regime is highly prescriptive as regards the procedures and paperwork to be employed, but there is a recognised problem of dishonest traders seeking to manipulate the system in order to evade duty, typically by so-called "duplicate loads" being moved under cover of paperwork generated for legitimate movements. Registered owners are expected to use all due diligence to prevent their legitimate trade being exploited to facilitate fraudulent transactions.
- The Appellant company was approved as a registered owner of duty-suspended goods in 2004. It is majority-owned by Mr Mark Feneron and his wife. Mr Feneron is a director and runs the business. 95% of its turnover is in duty-suspended goods. It employs nine people. Its most recent annual accounts showed a turnover of £9.5m.
- On 8 September 2014 Mr Geoff Germaney, a Higher Officer at HMRC, wrote to the Appellant notifying it that its registration had been revoked with immediate effect. The letter stated:
"Your registration has been revoked as you are no longer a fit and proper person (as required by Notice 196 paragraph 2), for the following reasons:
- You have failed to conduct reasonable due diligence checks with your customers, and failed to act on the findings of the due diligence carried out.
- In addition you have regularly traded with companies linked to alcohol diversion fraud, which has resulted in regular seizures of alcohol.
- An assessment for £2,0921.00 [sic] and a wrongdoing penalty WP for £7,322.00 has been issued to you following an irregular movement of duty suspended goods as described in the attached annex.
I have set out the information on which my decision is based and this is provided as an annex to this letter."
I summarise the information referred to in the annex at paras. 19-22 below. The letter continued:
"If you do not agree with my decision, you have three options. Within 30 days you can:
- send any further information you want me to consider;
- have your case reviewed by a different officer; or
- have your case heard by an independent tribunal."
The second and third of those options refer to statutory procedures for review and/or appeal which I describe at paras. 12 and 13 below. The first is a reference to an informal process offered by HMRC.
On 30 September 2014 the Appellant took the third of the options described in HMRC's letter by commencing an appeal in the First-tier Tribunal against the revocation decision. But the appeal before us arises from separate proceedings which it commenced in the Administrative Court the following day. The aim of the proceedings is not so much to challenge the revocation decision as to obtain interim relief pending the determination of the appeal to the Tribunal. Indeed section 3 of the Claim Form, which is supposed to identify the decision sought to be reviewed, is completed as follows:
"The Defendant must forthwith restore the Claimant's registration as a Registered Owner of Duty Suspended Goods under [the Regulations] and treat same as not having been cancelled in accordance with its letter of 08 September 2014."
That does not in fact identify a decision at all. The same formula is used in section 7, which is headed "Details of remedy (including any interim remedy) being sought". A separate application seeking urgent consideration and interim relief in the same terms was also lodged.
No prior notice of the proceedings had been given to HMRC. Foskett J ordered that they should lodge a statement indicating their position in relation to the application for interim relief and that that application be listed for hearing on 9 October. HMRC complied with that direction, and the matter came on before HH Judge Keyser QC, sitting as a Deputy High Court Judge, on the date directed. He refused relief and also refused permission to apply for judicial review. He did however give permission to appeal to this Court.
On 16 October 2014 the Appellant lodged an Appellant's Notice. There was regrettably some delay in obtaining a transcript of Judge Keyser's judgment – though in truth that could have been got round by submitting counsel's note – but eventually an order for expedition was made and we heard the appeal on 13 November. Mr Geraint Jones QC, leading Mr Charles Irvine, appeared for the Appellant. Mr Timothy Brennan QC appeared for HMRC, leading Ms Marika Lemos. On 14 November the parties were notified that the appeal would be dismissed, with reasons to follow. These are my reasons for that decision.
THE STATUTORY SCHEME FOR REGISTRATION
The Regulations are made under powers conferred by sections 100G and 100H of the Customs and Excise Management Act 1979. Section 100G reads (so far as material) as follows:
"(1) For the purpose of administering, collecting or protecting the revenues derived from duties of excise, the Commissioners may by regulations under this section (in this Act referred to as "registered excise dealers and shippers regulations")—
(a) confer or impose such powers, duties, privileges and liabilities as may be prescribed in the regulations upon any person who is or has been a registered excise dealer and shipper; and
(b) impose on persons other than registered excise dealers and shippers, or in respect of any goods of a class or description specified in the regulations, such requirements or restrictions as may by or under the regulations be prescribed with respect to registered excise dealers and shippers or any activities carried on by them.
(2) The Commissioners may approve, and enter in a register maintained by them for the purpose, any revenue trader who applies for registration under this section and who appears to them to satisfy such requirements for registration as they may think fit to impose.
(3) In the customs and excise Acts "registered excise dealer and shipper" means a revenue trader approved and registered by the Commissioners under this section.
(4) The Commissioners may approve and register a person under this section for such periods and subject to such conditions or restrictions as they may think fit or as they may by or under the regulations prescribe.
(5) The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval or registration of any person under this section.
Section 100H (1) reads (so far as material) as follows:
"Without prejudice to the generality of section 100G above, registered excise dealers and shippers regulations may, in particular, make provision –
(a) regulating the approval and registration of persons as registered excise dealers and shippers and the variation or revocation of any such approval or registration …
"Revenue trader" is elaborately defined in section 1(1) of the Act; so far as relevant, it includes "any person carrying on a trade or business subject to [the Act] which consists of or includes … the buying, selling, importation, exportation, dealing in or handling of [dutiable goods]".
The structure of the Regulations can be summarised for present purposes as follows:
(1) Parts II-III give power to HMRC to approve and register warehousekeepers (Part II) and "owners and duty representatives" (Part III) as registered excise dealers and shippers. Regulation 5 is headed "Registered owners" and reads as follows:
"(1) For the purposes of section 100G of the Act, the Commissioners may approve revenue traders who wish to deposit relevant goods that they own in an excise warehouse and register them as registered excise dealers and shippers in accordance with section 100G (2) of the Act.
(2) A revenue trader who has been so approved and registered shall be known as a registered owner."
(2) Part VI is headed "Privileges". Regulation 12 sets out the privileges of a registered owner, which are essentially to hold or buy dutiable goods in an excise warehouse.
(3) Part VII is headed "Conditions and Restrictions". Regulation 18 is headed "Conditions and restrictions that apply to registered owners". Paragraph (1) reads:
"The approval and registration of every registered owner shall be subject to the conditions and restrictions prescribed in a notice published by the Commissioners and not withdrawn by a further notice."
The notice published in accordance with regulation 18 (1) current at the date of the revocation of the Appellant's registration is Excise Notice 196. Section 2 of the notice states, inter alia:
"Only persons who can demonstrate that they are fit and proper to carry out an excise business will be authorised or registered."
I turn to the remedies available to a registered owner who wishes to challenge a decision to revoke his registration. Sections 13A-16 of the Finance Act 1994, which are headed "Customs and excise reviews and appeals", give rights to persons affected by "relevant decisions". That term is defined in section 13A (2). Heads (a)-(i) under that sub-section identify decisions about liability to duty or associated payments, but head (j) incorporates Schedule 5 of the Act, which covers a very wide variety of types of decision – described in section 16 (8) as decisions relating to "ancillary matters" – in the customs and excise field. Paragraph 2 of the Schedule lists decisions arising in connection with the 1979 Act: these are again very various in character, but they include, at sub-paragraph (1) (p), "any decision for the purposes of section 100G … as to whether or not … any person is to be, or to continue to be, approved and registered …".
Persons affected by relevant decisions are entitled to both (a) a "review" of the decision in question, under sections 15A-15F of the Act, and (b) an appeal to the First-tier Tribunal, under section 16. Those provisions are complex but I need for present purposes only draw attention to certain points. I take the review and appeal routes separately.
Review. Where HMRC notifies a person of a relevant decision it must at the same time offer them a review of the decision (section 15A). They may accept that offer within 30 days, unless they have in the meantime brought an appeal under section 16; and if they do so HMRC are obliged to conduct a review (section 15C). The nature and extent of the review "are to be such as appear appropriate to HMRC in the circumstances" (section 15F (2)), and it must be concluded within 45 days (section 15F (6)).
Appeal. An appeal against a relevant decision must be brought within 30 days of the notification (section 16 (1B)) or, if a review has been sought, within 30 days of the conclusion of the review (section 16 (1C)). The powers of the Tribunal differ according to whether the decision is as to "an ancillary matter", which, as noted above, covers – subject to a few immaterial exceptions – all decisions falling within the scope of Schedule 5 and thus the decision with which we are concerned in this case (section 16 (8)). As regards ancillary matters the relevant powers are as set out at section 16 (4), which reads as follows:
"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 review or further review as appropriate 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 review or further review as appropriate, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future."
Section 16 (5) reads:
I should make three points about the provisions of section 16 (4).
"In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal."
First, the Tribunal's powers are only exercisable where the decision is one which could not reasonably have been arrived at. I will refer to this by way of shorthand as the "unreasonableness test". That was described in the submissions before us as providing for a "quasi-judicial review" standard. That may be true in a sense, but it is capable of being misleading for reasons which will become apparent in due course. Whatever label is used, the fact that the criterion for the Tribunal's intervention is formulated in terms of unreasonableness reflects the fact that the management of the excise system is a matter for the administrative discretion of HMRC. The decision whether a registered owner remains a fit and proper person to trade in duty-suspended goods is a good example of the kind of decision which the HMRC are peculiarly well-fitted to judge, since it requires what is necessarily to some extent a subjective – albeit evidence-based – assessment of such matters as the attitude of the trader and its principal employees to due diligence issues and their sensitivity to the risk of becoming involved, albeit unintentionally, in unlawful activities.
Secondly, even where HMRC's decision is found to have been unreasonable, the Tribunal's powers are limited to taking one or more of the steps identified under heads (a)-(c). Those do not include a power to quash the original decision (though it may be that in some circumstances the power under head (a) would have much the same effect in practice). This is in contrast to the position where the decision relates to a "non-ancillary" matter – see section 16 (5). This careful calibration of the powers of the Tribunal plainly represents a deliberate balance between the HMRC's need to take effective management decisions in relation to excise matters and the interests of those affected by such decisions.
Thirdly, the Tribunal is given no power to suspend the effect of a challenged decision pending the outcome of the appeal. Nor, I should say, is any such power contained in the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.
THE GROUNDS FOR THE REVOCATION IN MORE DETAIL
We were not taken in any detail through the sequence of events leading to the revocation, but the broad outline seems to have been as follows. HMRC asked the Appellant for a number of files as part of a "due diligence check" on 28 May 2013. As part of that exercise they identified a suspect transaction which passed through the Appellant's account at Seabrook warehouse. That led to the making of a "Commissioners' Direction" restricting its dealings through that warehouse. Mr Feneron responded giving his side of the story and Mr Germaney considered matters further. The Direction was in due course lifted, but on 7 August 2013 Mr Germaney e-mailed Mr Feneron to tell him that he proposed to issue an assessment and impose a wrongdoing penalty. He added:
"Further to this incident I have also reviewed your WOWGR and will be putting up my recommendations for consideration to a central review team. You will be notified of the outcome in due course."
That prompted the Appellant to instruct solicitors, who wrote to Mr Germaney on its behalf on 19 August 2013. There was substantial further correspondence about the assessment, though not about the review. Formal pre-notification of the assessment was given on 24 October 2013, but the assessment itself was not issued until July 2014: it was in the sum of £20,921, together with a wrongdoing penalty of £7,322.
Notice of revocation was, as I have said, given by letter from HMRC dated 8 September 2014. The introduction to the annex, which gives the detailed reasons for the decision, reads as follows:
"The Commissioners of HM Revenue & Customs do not consider CC&C Ltd to be a fit and proper person to exercise the privileges of registration as an Owner under the Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR) 1999 because of its failure to manage the risks inherent in its trade in duty suspended alcohol.
The director of CC&C Ltd, Mr Mark Feneron, has been previously the director of another company registered as a WOWGR warehousekeeper and is familiar with the processes and procedures for the intra community movement of excise goods under duty suspension arrangements and the revenue risks attached to such transactions. The Commissioners of HM Revenue and Customs would expect this experience to reflect in the operation of CC&C Ltd and that the business was managed to minimise such risks. The Commissioners are not satisfied that this is the case.
Although CC&C Ltd maintains due diligence files on its suppliers and customers failings are evident in the due diligence processes undertaken by CC&C Ltd, which the Commissioners consider have facilitated the smuggling of alcohol product into the UK in order to evade payment of the UK excise duty due. For the avoidance of doubt it is not the Commissioner's case that CC&C Ltd actively participated in the smuggling activity, but it is their failure to conduct due diligence, react to irregularities and ensure the proper conduct of movements that has facilitated the attacks on the UK revenue.
Despite officers of HM Revenue & Customs repeatedly bringing these failings to the attention of CC&C Ltd; 30/06/10 – SI MTIC Officers visit, 21/10/11 – CITEX Officer John Boot visit, 27/10/12 – MTIC Officers visit, 22/2/12 My visit re FN Serviss, 06/03/12 – SI MTIC officers visit, 31/07/13 – SI MTIC Officers visit, there is no evidence of improvement or corrective action. This lack of control is contrary to the level of diligence and responsibility expected of a person registered or approved under s. 100G CEMA 1979. Further more, it is not the action of someone considered to be a fit and proper person as per Notice 196 section 2.
As a consequence of the continued risk to the UK revenue that the operation of CC&C Ltd presents the Commissioners have revoked the WOWGR Owner registration.
The specific instances that have led to this decision are detailed below."
The annex then goes on to identify those "instances" under three headings, which I will take in turn.
(1) "Due Diligence Failings". This begins:
"HMRC's examination of CC&C Ltd's due diligence files has discovered two companies with whom CC&C Ltd have entered a trading relationship where those companies have been fraudulently established using stolen or hijacked details."
In fact, details are given of three such companies – CPC Services Ltd, Tower Logistics Ltd and FN Serviss Ltd. I need not summarise those details here. The essential point made in relation to each is that if the Appellant had exercised due diligence it would have appreciated that the companies in question were not engaged in legitimate trade.
(2) "Movement Irregularities". This section begins:
"The Commissioners of HM Revenue & Customs consider that the failure to conduct proper due diligence checks by CC&C Ltd has facilitated the illegal importation or attempted illegal importation, of alcohol product into the UK without payment of the UK excise duty due.
HMRC has identified 23 instances where documentation, purporting to relate to duty suspended movements of alcohol product consigned to the account of CC&C Ltd in various UK excise warehouses, has been used to make multiple use of the ARC reference numbers to illegally, or attempt to illegally, import alcohol product into the UK without payment of the UK excise duty due.
In 5 instances the supplier is the same, or are associated companies."
Details of the importations in question are then given, with a commentary indicating the nature of the irregularities in the paperwork or the circumstances that it is said should have led the Appellant to treat the transaction as suspicious. The section concludes:
"It is CC&C Ltd's failure to conduct rigorous due diligence checks which has facilitated the abuse of movement paperwork to attack the UK Revenue, or exercise the proper controls to ensure compliance with movement requirements that demonstrates CC&C Ltd's unsuitability as a fit and proper person."
(3) "Errors in EMCS Declarations". This section criticises failures by the Appellant to require its suppliers to correct erroneous movement declarations made by them. It relies on the incident in March 2013 which gave rise to the assessment. The consignor in that case was Tower Logistics.
It is striking that the best part of eighteen months passed between the occurrence of the latest of the matters relied on in the annex (most in fact go back to 2011 and 2012) and the making, or in any event the notification, of HMRC's decision to revoke, and over a year from the date when Mr Germaney told the Appellant that he would be making recommendations to the "central review team". (The interval before the raising of the assessment is also only slightly shorter.) Mr Brennan was unable to offer any explanation for this delay; but since Mr Jones did not take any point on it as such I need not do more than register some surprise that it should have taken so long to reach a decision.
It is convenient to record at this point that the assessment which was finally issued on 24 July 2014 was withdrawn by HMRC on 10 October, the day following the hearing before Judge Keyser. We were not told the reason for the withdrawal; but Mr Jones suggested, without demur from Mr Brennan, that it was the result of a very recent decision of the First-tier Tribunal (Tax Chamber) which undermined the legal basis on which the assessment had been issued. Mr Jones said that HMRC must have been aware at the time of the hearing that the assessment was about to be withdrawn, and that Judge Keyser ought to have been so informed. On the face of it, there is some force in that criticism; but since it is not material to any of the issues which we have to decide we did not canvass it with Mr Brennan, and it would be wrong to express a view about it.
THE APPELLANT'S BROAD CASE
It is convenient to set out here the Appellant's case as to the approach which the Court should take to an application of this kind. I will deal later with how that approach should be applied on the particular facts of the case.
As regards the jurisdiction to grant relief of the kind sought, Mr Jones relied on the general jurisdiction of the High Court under section 37 (1) of the Senior Courts Act 1981 to grant injunctive relief "in all cases in which it appears to the court to be just and convenient to do so". He submitted that where a trader in duty-suspended goods has had his registration revoked that jurisdiction ought to be exercisable, in an appropriate case, so as to stay the effect of that decision until he has had the opportunity to exercise his options of review or appeal under the 1994 Act: that would necessarily involve requiring HMRC to restore the trader's registration (subject to such conditions as might be appropriate) pending the outcome of such review and/or appeal. Otherwise there was a real risk of serious injustice. Whether either option was taken or both, it would inevitably take many weeks, probably many months, to reach a conclusion. If the trader decides to seek a review first he may not get a decision for six weeks; and if that is unsatisfactory he then has to appeal. As for the appeal route, that depends on how quickly the Tribunal can arrange a hearing: in the present case the Appellant was initially told that that would take many months, though in the event it proved possible to fix a two-day hearing for December 9-10. But even a delay of three months is likely to be devastating, since the trader cannot continue to trade pending a decision; and it is no comfort to succeed on an appeal when the business has been ruined in the meantime. He might indeed not even be able to fund representation at the appeal if the business has become insolvent. There is no route by which the trader can be compensated for a wrong decision, save in the very exceptional case where he can prove misfeasance in public office.
The power to make an order for "interim re-registration" of the kind sought by the Appellant has been discussed in two recent cases in the High Court. In the first, R (Southern Drinks Ltd) v HM Revenue & Customs  EWHC 940 (Admin), Holman J was willing to assume that the Court had jurisdiction to make such an order; and in the second, R (San Marco Ltd) v HM Revenue & Customs  EWHC 3218 (Admin), Dingemans J explicitly accepted that it did – though in both cases relief was refused on the facts. I will return below to Dingemans J's approach to the exercise of the jurisdiction, which Mr Jones did not endorse; but he is entitled to rely on the San Marco case at least as clear authority at first instance that the Court has jurisdiction to grant relief of the kind sought here.
If the Court has jurisdiction, it is the Appellant's case that the Court should approach its exercise on an essentially Cyanamid basis – that is, by considering first whether the appeal to the Tribunal is arguable and then the balance of the risk of injustice as between the scenario in which relief is granted but the appeal fails and that in which relief is denied but the appeal succeeds: I will refer to this as the "balance of injustice" test. It makes no difference that the relief is mandatory in character: Mr Jones referred to Leisure Data v Bell  FSR 367, and in particular to the observations of Dillon LJ at p. 372 and of Neill LJ at pp. 375-6.
I will come back to the Appellant's case on the arguability of its appeal; but as regards the balance of injustice Mr Jones submitted that that was plainly in its favour. It is true that if an injunction is granted but the appeal fails, the result will be that the Appellant would have been permitted to trade in duty-suspended goods for a few more weeks or months, notwithstanding HMRC's ex hypothesi reasonable judgment that it was not a "fit and proper person" to conduct such trade; and there would accordingly be a risk that its inadequate attitude to due diligence might enable one or more fraudulent traders to evade duty during that period. But that was no more than a risk, and even if it occurred it would only be indirectly the responsibility of the Appellant, since it was no part of HMRC's case that it was itself knowingly involved in fraudulent trading. Such a loss was not remotely comparable to the damage that would be done to the Appellant's business if an injunction were wrongly withheld, for which – unlike in the case of an ordinary civil claim – it could not be compensated by an award of damages. The Appellant's evidence, in the form of an affidavit from Mr Feneron supported by its accounts for the year ending 31 March 2013, was that it could not survive several weeks' loss of trading. (It might have been expected that more up-to-date information would have been available, but in truth Mr Jones's argument does not depend on demonstrating that a prolonged period of de-registration would lead to insolvency: the injustice comes from the risk of substantial irrecoverable loss even if the trader is by one means or another enabled to survive.)
THE JUDGE'S REASONING
Judge Keyser directed himself in accordance with the judgment of Dingemans J in the San Marco case to which I have referred above. The argument in that case appears to have centred on whether it was right for the Court to order interim relief which was mandatory in character. As to that, Dingemans J applied the principles enunciated in Zockoll Group Ltd v Mercury Communications Ltd  EWCA Civ 237,  1 FSR 354. In that case Phillips LJ reviewed the case-law (including Leisure Data v Bell, to which Mr Jones attached particular weight) and endorsed the summary of the relevant principles given by Chadwick J in Nottingham Building Society v Eurodynamics Systems  FSR 468, at p. 474. This reads as follows:
"First, this being an interlocutory matter, the overriding consideration is which course is likely to involve the least risk of injustice if it turns out to be 'wrong' in the sense described by Hoffmann J. [in Films Rover Ltd v Cannon Film Sales Ltd  1 WLR 670, at p. 680].
Secondly, in considering whether to grant a mandatory injunction, the court must keep in mind that an order which requires a party to take some positive step at an interlocutory stage, may well carry a greater risk of injustice if it turns out to have been wrongly made than an order which merely prohibits action, thereby preserving the status quo.
Thirdly, it is legitimate, where a mandatory injunction is sought, to consider whether the court does feel a high degree of assurance that the plaintiff will be able to establish this right at a trial. That is because the greater the degree of assurance the plaintiff will ultimately establish his right, the less will be the risk of injustice if the injunction is granted.
But, finally, even where the court is unable to feel any high degree of assurance that the plaintiff will establish his right, there may still be circumstances in which it is appropriate to grant a mandatory injunction at an interlocutory stage. Those circumstances will exist where the risk of injustice if this injunction is refused sufficiently outweigh the risk of injustice if it is granted."
Judge Keyser recorded Mr Jones's submission that the approach taken by Dingemans J in San Marco was flawed because he appeared to have decided the case on the basis of the third of the principles enunciated in Zockoll and had failed to go on, in accordance with the fourth principle, to consider the balance of injustice; he had thus had failed to take into account the special considerations in a case of this kind, where the trader has no prospect of compensation for the damage done if his appeal is successful. As to that submission, Judge Keyser said this:
"17. Against this, however, is the fact – acknowledged expressly by Mr Justice Holman and, in my view, recognised implicitly in the judgment of Mr Justice Dingemans – that the court ought to be cautious before granting an injunction in a case such as the present. What is in issue is the exercise of statutory powers to grant and revoke registration. The power to approve a person and grant registration is given to HM Revenue & Customs, not the court. As Notice 196 makes clear, only persons who can demonstrate that they are fit and proper to carry out an excise business will be authorised or registered. The decision in that regard is the decision of HM Revenue & Customs. So too is the power of revocation. It is, as it seems to me, inherent in the nature of revocation that it is, in the words of Mr Justice Holman, "dramatic, instantaneous and ... draconian". That can only be understood as representing a judgment by Parliament that the protection of the public revenue requires such powers to revoke privileges to trade in duty-suspended goods as a registered owner, notwithstanding the effect on the person whose registration is revoked. The fact that, pending the determination of what may be an arguable appeal, the harm to the company in question or the registered person in question might be more obviously severe than harm to the public finance cannot in my view justify the grant of an interim injunction requiring the Commissioners to give a temporary registration to someone whom they deem to be unfit to be registered. To suppose otherwise would be to usurp the powers that Parliament have vested in the Commissioners and to undermine what is a draconian statutory scheme.
18. In my judgment, accordingly, the starting point should be principles generally applicable to the grant of an interim mandatory injunction, as summarised by Mr Justice Dingemans. But in general the court will not grant a mandatory injunction in these circumstances unless it has a high degree of assurance that the appeal will succeed, lest it improperly usurp the function of the Commissioners and undermine the statutory provisions that Parliament has thought it right to approve. That qualification is, I think, reflected at  in the judgment of Mr Justice Holman in the Southern Drinks case and at [12-17] in the judgment of Mr Justice Dingemans in the San Marco case and is, in my respectful view, right in principle. I should not for my part consider this qualification to be a rule of law, constituting a fetter on the power of the court to grant an injunction in a proper case, but as a recognition that, in the face of the statutory scheme, the court ought properly to exercise considerable caution before invoking the final of the four principles mentioned by Mr Justice Dingemans."
Judge Keyser then proceeded to review, albeit fairly briefly, the circumstances leading to the decision to revoke the Appellant's registration. He concluded, at para. 24 of his judgment:
"Although I think there are questions that might be asked of the defendant in respect of the significance and timing of some of the matters on which it has relied, I am very far from having a high degree of assurance that a tribunal exercising its powers on appeal would be satisfied that the decision was one that the Commissioners could not reasonably have arrived at. Of course, there are things to be said for the claimant and there are questions to be asked of the defendant; however, the case is a very far cry from one that presents any significant degree of assurance about the claimant's case. The power in the Commissioners is a wide power and not one for the court – or, indeed, the Tribunal – to usurp. The Tribunal's power is one of review upon conclusion that the decision was one that the Commissioners could not reasonably have arrived at."
Accordingly the third of the "Zockoll principles" was satisfied. He then went on, at paras. 26-27, to consider the fourth principle – that is, that even where the Court did not feel that high degree of assurance "it might still be right to grant a mandatory injunction where the risk of injustice if the injunction is refused outweighs the risk of injustice if it is granted". Consistently with the qualifications which he had expressed at paras. 17-18, he held that it would be inconsistent with the statutory scheme – "harsh though that scheme might be" – to apply what he described as a "numeric balancing act of prejudice" and repeated that:
"the court should exercise very considerable caution before deciding to require the Revenue to give even a temporary registration to somebody whom they have regarded and determined to be not a fit person to have a registration."
He concluded, at para. 27:
"If I felt serious qualms as to the bona fides of the defendant's conduct, I might very well have taken a different view as to the propriety of granting an injunction. But I can go no further than to recognise the possibility that there might be differences of opinion as to whether or not the revocation of the registration was reasonable. In those circumstances in my judgment it would be wrong to grant an interim order against the defendant."
I should say at this point that the Judge's reasoning, right or wrong, was impressively clear and thoughtful given that his judgment had to be delivered ex tempore immediately after the conclusion of the argument.
On the appeal Mr Jones advanced essentially the arguments that I have identified above. He submitted that the Judge should have applied the straightforward test of the balance of injustice without the qualifications which he introduced at paras. 17-18 of his judgment. On that basis, provided the Appellant had an arguable prospect of success on the appeal, the balance plainly favoured the grant of relief – again, for the reasons which I have already set out.
As regards the Appellant's prospects of success on the appeal, Mr Jones expressly disavowed any challenge based on procedural unfairness. Rather, his case was that the matters relied on by HMRC in the annex to the decision letter were, in the light of the explanations which they had already received, incapable of supporting a reasonable conclusion that the Appellant was not a fit and proper person. As regards the first of what he described as the three "pillars" of HMRC's grounds as stated in the annex, that case is elaborated in his skeleton argument (albeit not in great detail), but nothing is said about the second pillar. As regards the third pillar, the skeleton argument relies on HMRC's withdrawal of the assessment and penalty. Mr Jones repeated the latter point in his oral submissions. He also made a limited number of further points of, with respect, no great cogency, such as that Mr Feneron had delegated all responsibility for due diligence to another employee. But his eventual position was that he did not propose himself to articulate a challenge to HMRC's reasons: he threw down the forensic gauntlet to Mr Brennan to show the Court on what material the conclusions in the annex could be justified.
Mr Brennan did not dispute the existence of a jurisdiction of the kind recognised in the San Marco case. He also made it clear that he took no point on the mandatory character of the relief, and he accepted that the ultimate test in deciding whether such relief should be granted was the balance of injustice. But he submitted that that balance should only come down in favour of restoring a trader to the register on an interim basis where, as he put it in his skeleton argument, "there is a case of irrationality on the part of HMRC which is sufficiently strong to amount to capriciousness or bad faith [and] that case is at least strong enough to justify permission to apply for judicial review notwithstanding the availability of the statutory remedies". In his oral submissions he said that relief should only be granted where a claimant had shown an arguable case that HMRC had behaved so "outrageously" that the Administrative Court was entitled to grant a remedy which was not provided under the statutory scheme. Such an approach was consistent with the balance of injustice test because it was necessary in striking that balance to take into account the public interest and, more particularly, the fact that Parliament – for policy reasons which it was for it to judge but which were well understandable – had intended to give HMRC a power of summary revocation which could only be challenged to a limited extent. He submitted that no arguable case had been shown of any such egregious conduct on the part of HMRC as would justify this Court in intervening. He did not pick up the gauntlet thrown down by Mr Jones by taking us through the materials underlying the conclusions in the annex.
Mr Brennan also submitted in his skeleton argument that it should count against the grant of relief that the Appellant had not taken up the offer of an informal review made in the decision letter or activated the formal review procedures. I am bound to say that this submission misses the essential point of the Appellant's case: the injustice on which he relies consists in the risk of irreparable damage being done during the possibly lengthy period during which any review procedures – formal or informal – run their course. Mr Brennan did not pursue the submission in oral argument.
DISCUSSION AND CONCLUSION
I have no doubt that the Court has jurisdiction, in the formal sense, under section 37 (1) of the 1981 Act to make an order of the kind sought. Nor do I think that the fact that the order is mandatory in character is objectionable in principle: although this aspect featured heavily in the submissions in San Marco and before Judge Keyser in this case, I do not regard it as central to the issue which we have to decide. As I have said, Mr Brennan did not take issue on either point. The question, rather, is what approach the Court should take to the exercise of that jurisdiction.
The starting-point seems to me that Parliament has enacted a self-contained scheme for challenging "relevant decisions" by HMRC in relation to (broadly) excise management issues, which covers, inter alia, decisions to revoke the registration of registered excise shippers and dealers. It is trite law that where such a scheme exists it would normally be wrong for the High Court to permit decisions of the kind which it covers to be challenged by way of judicial review. The effect of the authorities is conveniently summarised in the judgment of the Privy Council, delivered by Lord Jauncey, in Harley Development Inc v Commissioner of Inland Revenue  1 WLR 727, at pp. 736-7:
"In Reg. v. Inland Revenue Commissioners, ex parte Preston  AC 835 Lord Scarman said, at p. 852:
"My fourth proposition is that a remedy by way of judicial review is not to be made available where an alternative remedy exists. This is a proposition of great importance. Judicial review is a collateral challenge: it is not an appeal. Where Parliament has provided by statute appeal procedures, as in the taxing statutes, it will only be very rarely that the courts will allow the collateral process of judicial review to be used to attack an appealable decision."
This proposition was elaborated in Inland Revenue Commissioners v. Aken  1 W.L.R. 1374, 1380, by Fox L.J. in the following passage:
"In In re Vandervell's Trusts  A.C. 912, 933, Viscount Dilhorne said: 'but where the correctness of an assessment, and so the liability to pay income tax or surtax, is challenged, that can only, in my opinion, be decided by the special or general commissioners.' I refer also to the speech of Lord Diplock in that case, at p. 944. That then is the true principle applicable in these cases, namely, that the statutory machinery is exclusive machinery for an appeal from a notice of assessment. There is normally no other. However, I do not say there are no cases in which, exceptionally, a challenge by way of judicial review or otherwise to a decision of the revenue would be possible. There may be cases where, for example, there has been some abuse of power or unfairness, which would justify the intervention of the court: see for example Reg. v. Inland Revenue Commissioners, ex parte Preston  A.C. 835. But that is exceptional. Normally the statutory machinery under the Taxes Management Act 1970 is the exclusive machinery for challenge to an assessment by a taxpayer. In my judgment there is nothing in the present case which comes near to such impropriety by the revenue as to justify departure from the normal procedure."
There are other dicta of high authority to the same effect. Their Lordships consider that, where a statute lays down a comprehensive system of appeals procedure against administrative decisions, it will only be in exceptional circumstances, typically an abuse of power, that the courts will entertain an application for judicial review of a decision which has not been appealed."
The authority to which Lord Jauncey refers first – R v Inland Revenue Commissioners, ex p Preston  AC 835 – contains at pp. 862-7 a full discussion by Lord Templeman of the concept of "fairness" in this context. I need not reproduce it here, but I should note that the context was allegations of conduct by the Commissioners "equivalent to a breach of contract or breach of representations".
Mr Jones submitted that although the Appellant had framed its claim as one for judicial review it had not in fact been necessary to do so: the claim could have been formulated as a free-standing claim for interim relief "in aid of the Tribunal proceedings". In so far as he was relying on the difference in the form of the proceedings, I do not think that this submission assists him. The principle identified above is not peculiar to claims for judicial review but applies to any claims in the High Court the effect of which is to usurp the role of a tribunal designated by statute to determine claims of the kind in question: see the long line of cases originating with Barraclough v Brown  AC 615 and culminating in Autologic Holdings plc v Inland Revenue Commissioners  UKHL 54,  1 AC 118.
However, I understand Mr Jones's real submission to be that what the Appellant is in substance seeking in these proceedings is not to challenge the revocation decision itself but only to obtain interim relief while the statutory appeal procedure operates: that is not, he says, going behind the procedure provided by Parliament but supplementing it. That point is more arguable, but I think it is wrong. Parliament could have provided for the First-tier Tribunal to have power to make suspensory orders pending the outcome of an appeal, but it did not do so. I do not think that it is open to the Court to provide remedies or procedures for which the statute does not provide – particularly so when, as I have pointed out above, care was obviously taken to specify precisely what the Tribunal could and could not do. Where it is intended that the powers of the Court, including the power to grant interim relief, may be deployed "in aid of" (to use Mr Jones's phrase) another tribunal, that is typically done by express provision: see for example section 44 of the Arbitration Act 1996.
The absence of any power under the statute to suspend the effect of a relevant decision pending appeal may be capable of operating harshly in the case of decisions to revoke the registration of registered excise dealers and shippers, but it is not incomprehensible. The statute describes the right to trade in duty-suspended goods as a "privilege", and the nature of the business is such that it is a privilege that should only be accorded to those whom HMRC believe they can trust. There would be an obvious awkwardness in the Tribunal, or indeed the Court, being able to require HMRC to continue, for an indefinite period pending the outcome of an appeal, to confer that privilege on traders who they have ceased to believe are fit and proper persons. Parliament could reasonably have regarded the loss of registration pending an appeal as simply a risk of the business which traders must accept.
I do not therefore believe that the Court is entitled to intervene to grant interim relief where the registration of a trader in duty-suspended goods is revoked simply on the basis that there is a pending appeal with a realistic chance of success. But it does not follow that there are no circumstances in which the Court may grant such relief; and, as noted above, HMRC do not in fact so contend. The correct principle seems to me to be this. If a "relevant decision" is challenged only on the basis that it is one to which HMRC could not reasonably have come the case falls squarely within section 16 of the Act, and the Court should not intervene. However, where the challenge to the decision is not simply that it is unreasonable but that it is unlawful on some other ground, then the case falls outside the statutory regime and there is nothing objectionable in the Court entertaining a claim for judicial review or, where appropriate, granting interim relief in connection with that claim. A precise definition of that additional element may be elusive and is unnecessary for present purposes. The authorities cited in Harley Development refer to "abuse of power", "impropriety" and "unfairness". Mr Brennan referred to cases where HMRC had behaved "capriciously" or "outrageously" or in bad faith. Those terms sufficiently indicate the territory that we are in, but I would sound a note of caution about "capricious" and "unfair". A decision is sometimes referred to rhetorically as "capricious" where all that is meant is that it is one which could not reasonably have been reached; but in this context that is not enough, since a challenge on that basis falls within the statutory regime. As for "unfair", I am not convinced that any allegation of procedural unfairness, however closely connected with the substantive unreasonableness alleged, will always be sufficient to justify the intervention of the Court: Mr Brennan submitted that cases of unfairness would fall within the statutory regime to the extent that the unfairness impugned the reasonableness of the decision. As I have noted above, the types of unfairness contemplated in Preston – which is the source of the use of the term in Harley Development – were of a fairly fundamental character. But since procedural unfairness is not relied on in this case I need not consider the point further.
In short, therefore, I believe that the Court may entertain a claim for judicial review of a decision to revoke the registration of a registered excise dealer and shipper, and may make an order for "interim re-registration" pending determination of that claim (subject, no doubt, to such conditions as it thinks fit), in cases where it is arguable that the decision was not simply unreasonable but was unlawful on one of the more fundamental bases identified above. Such cases will, of their nature, be exceptional. That approach may seem unfamiliar inasmuch as it involves making a distinction which it is not normally necessary to make between "mere" unreasonableness and other grounds of public law challenge of the type identified above: indeed there are plenty of observations in the authorities to the effect that the various ways of formulating such a challenge tend to blur into one another (including, famously, by Lord Greene MR in Wednesbury itself – see Associated Provincial Picture Houses Ltd v Wednesbury Corpn  1 KB 223, at p. 229). But I see no conceptual difficulty about making such a distinction where the circumstances call for it; and here it arises naturally from the way in which the jurisdiction of the Tribunal is defined in section 16 of the 1994 Act.
Applying that approach, the answer in this case seems to me to be clear. On the limited materials so far available, Judge Keyser may have been right to acknowledge that there is an arguable case that HMRC's decision was one to which they could not reasonably have come. But I see no basis whatever for an argument that it amounted to an abuse of power or that it was improper or taken in bad faith, and Mr Jones did not attempt to demonstrate that it did or was. Indeed, as I have explained, he did not in the end undertake in his oral submissions any particularised attack on the grounds for revocation set out in the annex; but even the points made in his skeleton argument go no further than alleging unreasonableness. The withdrawal of the assessment and wrongdoing penalty which were the main feature of HMRC's "third pillar" does not in itself raise an arguable case of abuse – still less if, as Mr Jones himself suggested, it was the result of a subsequent decision of the First-tier Tribunal which undermined the legal basis on which the assessment was raised. As Mr Brennan pointed out, the withdrawal of the assessment did not necessarily mean that the Appellant was not still at fault in failing to require its suppliers to correct erroneous movement declarations.
My detailed reasoning does not correspond to that of the Judge, or of Dingemans J in San Marco, on which he relied to a considerable extent. We have had the benefit of fuller argument and more time for consideration. But his insistence on a "high degree of caution" and on the absence of any evidence of bad faith shows that his judicial instincts led him in the right direction and, as I would hold, to the right decision.
It is for those reasons that I decided that this appeal should be dismissed. I should, however, like to add this. The view that I have taken of the law means that HMRC's power of revocation is indeed capable of operating harshly, essentially for the reasons advanced by Mr Jones: if they make an unreasonable decision, the trader affected by their mistake will almost certainly suffer serious uncompensatable loss, which may sometimes be fatal to his business, before it can be corrected through the review or appeal mechanisms. It is all the more important, therefore, that they take all possible care to ensure that any such decision is well-founded. The risk of error is obviously increased if the trader has not been given an opportunity to draw to HMRC's attention, before the decision is taken, factual or other matters which they may have overlooked or mis-appreciated in their assessment of the grounds for revocation. I do not see why it should not be normal practice for a trader whose registration HMRC is contemplating revoking to be given prior notice of the intended decision, and the grounds for it, in the form of a "show cause" or "minded to" letter, with a limited time for response, before a final decision is taken. (Or the decision could be notified, but on the basis that it would not take effect for a limited period during which representations could be made.) Mr Brennan was asked in the course of oral submissions whether there was any reason why such a procedure could not be followed, but he was unable to suggest any. I could understand a concern about over-complicating the process of revocation; but in fact such a procedure would be substantially the same as the process of informal review which is already offered – with the crucial difference that it would occur before, rather than after, the decision had taken effect. I can also understand that there may be particular cases where HMRC reasonably take the view that the public interest requires the registration to be revoked without prior notice and with immediate effect; but in the light of the time taken to reach a decision in the present case it would be hard for them to maintain that that will always be so. None of this is directly pertinent to the present case because, as I have said, no case of procedural unfairness was advanced; and I need not therefore consider whether a failure to give prior notice of an intention to revoke might in an appropriate case constitute a sufficient unfairness to justify the intervention of the Court. But I would encourage HMRC to give further thought to their procedures in this regard.
Lord Justice Lewison:
I agree with the reasoning and conclusions of Underhill LJ, whose judgment I have read in draft. I add a few observations of my own.
As Underhill LJ has explained Mr Brennan accepted that the court has jurisdiction to grant the injunction claimed. But "jurisdiction" is a slippery word. As long ago as 1915 Pickford LJ pointed out in Guaranty Trust Co of New York v Hannay & Co  2 KB 536, 563 (approved by the House of Lords in Fourie v Le Roux  UKHL 1,  1 WLR 320 at ):
"The first and, in my opinion, the only really correct sense of the expression that the Court has no jurisdiction is that it has no power to deal with and decide the dispute as to the subject matter before it, no matter in what form or by whom it is raised. But there is another sense in which it is often used, i.e., that, although the Court has power to decide the question it will not according to its settled practice do so except in a certain way and under certain circumstances."
Thus while I accept that the court has jurisdiction to grant the injunction in the first sense, the real question is whether the court's settled practice means that on the facts of this case it is inappropriate to exercise the power conferred upon it by section 37 (1) of the Senior Courts Act 1981. For the reasons given by Underhill LJ I am satisfied that it is. I too would dismiss the appeal.
Lady Justice Arden:
I agree with both judgments.
Note 1 There seems to have been a very similar delay in the San Marco case to which I refer at para. 27 below, about which Dingemans J likewise expressed concern: see para. 18 of his judgment.
Note 2 The decision was B&M Retail Ltd v HM Revenue & Customs  UKFTT 902 (TC), handed down on 16.9.14. In bare outline, the point appears to have been that the issue of the assessment depended on the proposition that there may be more than one “excise duty point”. The Tribunal’s decision in B&M Retail was that that is not possible in law. [Back]
Note 3 It might be thought that another possible route was via Article 1 of Protocol 1 to the European Convention of Human Rights and section 6 of the Human Rights Act 1998, as canvassed by Lord Scott in Jain v Trent Strategic Health Authority  UKHL 4,  1 AC 853. But Mr Jones said that it was doubtful whether registration would fall within the scope of the article: he may have had in mind R (New London College Ltd) v Secretary of State for the Home Department  EWCA Civ 51. [Back]
Note 4 It appears from the judgment in San Marco that relief was in fact granted in two cases of this kind in 2011, in one case by Ouseley J and in the other by Wyn Williams J. But we were told by Mr Jones that in both cases the relief was granted on an ex parte basis and no reasoned judgments are available. [Back]
Note 5 It may be that this explains the anomalous identification of the “decision to be judicially reviewed” in the claim form: see para. 4 above. [Back]
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