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||Neutral Citation Number:  EWHC 1106 (Admin)
||Case No: CO/7223/2011
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE ADMINISTRATIVE COURT
||Royal Courts of Justice
London WC2A 2LL
||27 March 2012
B e f o r e :
MR JUSTICE SINGH
|| THE QUEEN ON THE APPLICATION OF FIRST STOP WHOLESALE LTD
||COMMISSIONERS FOR HM REVENUE & CUSTOMS
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Mr Geraint Jones QC and Mr Mark Glover (instructed by Rainer Hughes) appeared on behalf of the Claimant
Mr James Puzey (instructed by HM Revenue & Customs) appeared on behalf of the Defendants
HTML VERSION OF JUDGMENT
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- MR JUSTICE SINGH:
- Between 22 June and 24 June 2011 quantities of alcohol were detained and removed by the defendants from the claimant's warehouse at Unit 15, Cousins Street, Wolverhampton and also six retail premises in the Wolverhampton and South Staffordshire area. The retail businesses are owned by the claimant's director Mr Tajinder Singh, trading as a sole proprietor.
- Also on 22 June 2011, fourteen bottles of spirits were seized as liable to forfeiture from two of the retail premises on Dudley Road, Wolverhampton, as the seizing officers found the UK Duty Paid stamps on them to be defective. On the same date a curtain-side lorry was found parked at the car park of a Sikh temple on Sedgley Street near the claimant's premises. The lorry is operated by the claimant in the course of its business. It was found to contain a full load of alcoholic goods as well as a document with goods and prices written on it. The lorry and the goods were seized and liable to forfeiture.
- My attention has been drawn at this hearing to two examples of the notices of goods retained which were issued by the defendants to the claimant at the material time (see bundle A, tab A, pages 1 and 3). Those notices state against the heading "Goods":
"Detained and removed from premises pending evidence of duty status (CEMA 1979, section 139) as detailed overleaf."
The second notice is in similar terms and states against the heading "Goods detained and removed pending duty status" -
- My attention was also specifically drawn to a witness statement which has been filed in these proceedings by Mr Simon Hewitt, a Higher Officer employed by the defendants, in particular paragraphs 6 to 9. At paragraph 9 of his witness statement, Mr Hewitt informs the court that -
"At 11.29 I informed Mr Singh that the goods ..... were being detained pending further inquiries into their duty status ..... "
- On 28 July 2011 the first notice of seizure was issued in respect of the goods detained by the defendants. Also on that date these proceedings for judicial review were commenced. On 16 October 2011 a position statement from the claimant was filed which maintained that the defendants had had more than reasonable time in which to make decisions and that there was no entitlement to detain the goods unless they are liable to forfeiture. On 18 October 2011 the defendants filed a statement of progress regarding detention of the goods which stated that by then 85.8 per cent of the goods detained from the warehouse had been seized. The remainder were restored to the claimant in November 2011. At the hearing before me I was informed by counsel for the defendants that there is one box of wine that should have been restored to the claimant but was not. This was simply a mistake by the contractors used by the defendants, and I was told that no issue of legal principle arose for the court to decide as a consequence of this.
- The warehoused goods comprised the majority of those originally detained. At that stage inquiries were continuing into the goods at the retail premises, although by then approximately 13 per cent of those goods had also been seized. All seizures had been appealed by notices of claim filed by the claimant's representative, save for goods on the lorry in respect of which a third party had claimed ownership. This seizure too has now been appealed.
- On 4 November 2011 Mr Justice Sales granted permission to bring this claim for judicial review in respect of those goods still detained and not seized as at the date of his order. He did so on the basis that in respect of such goods there was an arguable claim that a reasonable period for investigation into their duty position had lapsed and that it may also have been arguable that the goods were not lawfully detained if they were not in fact liable to forfeiture. That last issue was one which arose as a matter of statutory construction in Eastenders Cash & Carry Plc v HM Revenue & Customs in which Mr Justice Sales gave judgment on 4 November 2011. He gave judgment in favour of the defendants but granted permission to appeal. That case was subsequently decided in January 2012 by the Court of Appeal in favour of the claimants in that case.
- On 3 February 2012 a directions hearing took place in the present case before Mr Justice Cranston. This case was listed for a substantive hearing beginning today, 27 March 2012.
- The principal statute in this field is the Customs and Excise Management Act 1979 (the 1979 Act). Section 139 provides:
"(1) Any thing liable to forfeiture under the Customs & Excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard.
(5) Subject to sub-sections (3) and (4) above and to Schedule 3 to this Act, any thing seized or detained under the Customs and Excise Acts shall, pending the determination as to its forfeiture or disposal, be dealt with, and, if condemned or deemed to have been condemned or forfeited, shall be disposed of in such manner as the Commissioners may direct.
(6) Schedule 3 to this Act shall have effect for the purpose of forfeitures, and of proceedings for the condemnation of any thing as being forfeited, under the Customs and Excise Acts."
- Paragraphs 3, 6, 7 and 8 of Schedule 3 to the Act provide:
"3 Any person claiming that any thing seized as liable to forfeiture is not so liable shall, within one month of the date of the notice of seizure or, where no such notice has been served on him, within one month of the date of the seizure, give notice of his claim in writing to the Commissioners at any office of Customs and Excise.
6 Where notice of claim in respect of any thing is duly given in accordance with paragraphs 3 and 4 above, the Commissioners shall take proceedings for the condemnation of that thing by the court, and if the court finds that the thing was at the time of seizure liable to forfeiture the court shall condemn it as forfeited.
7 ..... the forfeiture shall have effect as from the date when the liability to forfeiture arose.
8 Proceedings for condemnation shall be civil proceedings and may be instituted -
(a) ..... either in the High Court or in a magistrates' court."
- I was informed that the usual forum for such proceedings is the Magistrates' Court. If a case involves a very high or large sum or raises complex issues of law or fact, the High Court might be approached. I was informed that the present case is one where the duty in issue which is said to have been lost to the public revenue, if the defendants are correct, is in the region of £26,000, not regarded by them as being a very large sum compared to other cases.
- Section 141 of the 1979 Act provides:
"(1) Without prejudice to any other provision of the Customs and Excise Acts 1979, where any thing has become liable to forfeiture under the Customs and Excise Acts -
(b) any other thing mixed, packed or found with the thing so liable,
shall also be liable to forfeiture."
- Section 144 of the 1979 Act provides:
"(1) Where, in any proceedings for the condemnation of any thing seized as liable to forfeiture under the Customs and Excise Acts, judgment is given for the claimant, the court may, if it sees fit, certify that there were reasonable grounds for the seizure.
(2) Where any proceedings, whether civil or criminal, are brought against the Commissioners, a law officer of the Crown or any person authorised by or under the Customs and Excise Acts 1979 to seize or detain any thing liable to forfeiture under the Customs and Excise Acts on account of the seizure or detention of any thing, and judgment is given for the plaintiff or prosecutor, then if either —
(a) a certificate relating to the seizure has been granted under sub-section (1) above; or
(b) the court is satisfied that there were reasonable grounds for seizing or detaining that thing under the Customs and Excise Acts,
the plaintiff or prosecutor shall not be entitled to recover any damages or costs and the defendant shall not be liable to any punishment."
The Eastenders case
- The issue as to the proper construction of Section 139 of the 1979 Act, and in particular whether it permits detention of goods merely on the basis that an investigation needs to take place in order to ascertain whether goods are liable to forfeiture and the defendants have reasonable grounds to suspect that they are so liable, was considered by the Court of Appeal in the recent case of Eastenders  EWCA Civ 15, in which judgment was given on 20 January 2012.
- Lord Justice Mummery dissented and would have dismissed the appeal by the claimants in that case. However the majority - Lord Justice Elias and Lord Justice Davis - allowed the appeal from the decision of Mr Justice Sales. At paragraph 78, Lord Justice Elias stated:
"78 ..... The inevitable inference from the way the section is drafted is that the conditions precedent to the lawful exercise of the power of detention must be precisely the same as those which will justify the lawful exercise of the power of seizure."
Lord Justice Elias noted that the consequence of the power of seizure being exercised is that the statutory procedure in Schedule 3, in particular paragraphs 3 and 6, is activated. This leads to the need for judicial proceedings in order to determine the question whether the goods are in fact liable to forfeiture. It is only if they are that they can be lawfully seized and condemned. As a consequence of his decision, it is only if they are so liable that they can be lawfully detained under Section 139.
- At paragraphs 83 to 84 of the judgment Lord Justice Elias observed that Section 144 would have no purpose if a seizure or detention on reasonable grounds were lawful. Section 144 confers an immunity in certain circumstances from legal liability where there were reasonable grounds for the seizure. Lord Justice Elias also drew attention to the difference in wording between Section 139 and Section 138. At paragraph 89 of his judgment he described that difference in language as "striking". Section 138 illustrated, in his view, how Parliament could have expressed a power in terms of reasonable grounds to suspect where that was its intention.
- At paragraph 88 Lord Justice Elias drew upon the principle of construction that:
"88 ..... before any such implication is made to widen the power of the state to interfere with private property rights, it must be very clear that Parliament intended to confer it."
At paragraph 92 Lord Justice Elias said:
"92 I accept that the effect of this analysis is that the Revenue will not know for sure until a determination by the court whether the seizure or detention was lawful or not. Legality is determined with hindsight. On the face of it, it is a surprising way to draft the legislation. But the potential difficulties are largely catered for by section 144. I accept that that section does not provide a full immunity from all potential legal consequences. As the judge pointed out, it does not for example prevent injunctions being sought. As to that, the only relevant injunction would be a mandatory interlocutory injunction requiring return of the goods (since if, following a trial, it was found by a court that goods were not liable to forfeiture, they would have to be returned in any event.) However, if HMRC satisfies a court that it has a reasonable grounds for believing that the law may be broken, and that restoring the goods pending trial may undermine its ability in the public interest to enforce payment of taxes due, it is difficult to think that the balance of convenience will lie with the taxpayer, unless at least he pays money into court equivalent to the disputed tax."
At paragraph 93 Lord Justice Elias added this:
"93 ..... my construction of section 139 may have certain advantages to HMRC. If reasonable suspicion that goods are liable for forfeiture is the test for determining the legality of detention, HMRC may be liable on the basis that any suspicions are not reasonable even though it turns out that the goods are in fact liable to forfeiture. Conversely, if the test is whether goods are in fact liable to forfeiture, detention will be lawful even if it was not in fact reasonable for HMRC to suspect that they were at the time of detention, and indeed even if HMRC justifies forfeiture on some basis not known at the time of detention."
- Lord Justice Davis delivered a judgment in similar terms to that of Lord Justice Elias. Particular reliance has been placed at the hearing before me on two passages to be found at paragraphs 105 and 108. At paragraph 105 Lord Justice Davis said:
"105 ..... detention with a view to investigation may well, in the event, establish that the goods detained were indeed liable to forfeiture. For another, even if it transpires that the goods or some of them (as apparently in the present case, although there may be an issue on this) were not in fact liable to forfeiture then HMRC have the protection of section 144 (2). It is certainly unacceptable, as I see it, that the power conferred by section 139 should or could be construed as empowering HMRC to detain without any reasonable grounds for doing so. It is not enough, as I see it, for HMRC to detain without any reasonable grounds for doing so. It is not enough, as I see it, for HMRC to detain the goods solely on the ground that they want to investigate further: they must first at least have some reasonable grounds for detaining in the first place and for wanting to investigate further."
At paragraph 108 Lord Justice Davis said:
"108 ..... even where goods have been returned by HMRC, they can – if proceedings are then brought against them – seek to say that the goods were in fact liable to forfeiture. Indeed, as I have said, there are wide ranging grounds for forfeiture in the legislation, not confined to non-payment of duty; and it would seem that HMRC could invoke any such ground, whether or not suspected at the time, when subsequently saying that the goods were (in fact) liable to forfeiture: quite apart from relying on the protection given in section 144."
At paragraph 112 Lord Justice Davis also said:
"112 ..... I do not think that the sky will fall in as a result of such a conclusion. HMRC have their power of seizure, which they can deploy as appropriate. They have their separate power of detention. They are also empowered to make restoral in the interim. If it turns out, in any subsequent proceedings, that the goods were not in fact liable to forfeiture then it will have been shown that HMRC had not had the power to detain the goods in question, (and likewise with cases of seizure). But, to repeat, HMRC then can invoke the protections provided under section 144 (2). If at the time of detention they acted on reasonable grounds they have nothing to fear in terms of liability. If they did not at the time of detention act on reasonable grounds why should they necessarily be protected? HMRC should thus be expected to have the courage of their convictions. That, in my view, on the true interpretation of the legislation, is what Parliament has designed."
- I have been informed recently that a further hearing took place before the Court of Appeal to consider consequential matters such as costs and permission to appeal to the Supreme Court. As yet, no decision has been issued by the Court of Appeal. I have been shown the written submissions of the parties in that case and certain draft orders which were placed before the court by each party. The draft order proposed by HM Revenue & Customs ("HMRC") in that case suggested that - so far as relevant - this should be contained in the court's order:
"It is declared that detention of the goods referred to in the claim for judicial review was unlawful."
It has been drawn to my attention, fairly, by counsel for the defendants that the goods in that case did not concern any goods that were subsequently seized. The draft order proposed by the claimants in Eastenders contained very similar wording so far as the suggested declaration was concerned.
- At the hearing before me I have been ably assisted by the submissions of all parties. In particular it has been possible to focus upon what remains in real dispute in the light of the decision by the Court of Appeal in Eastenders. It has also been possible to focus on what in practical terms needs to be addressed by the Administrative Court given that there are condemnation proceedings pending in the Magistrates' Court in respect of those goods which have been seized. Finally it has been possible to focus upon what issues need to be determined by the Administrative Court at this stage before any proceedings before the Magistrates' Court have been concluded.
- As I understood it, it was agreed common ground before me that the relevant goods could be placed into three categories. The first category is those goods which were seized before 4 November 2011; that is the date on which Mr Justice Sales granted permission in the case. It was also common ground before me that those goods are in fact not in issue in this court in these proceedings. They are not covered by the scope of the permission granted by Mr Justice Sales which applied only to those goods which had been detained but not seized by 4 November 2011.
- The second category of goods is one relating to goods which were detained but where no decision has yet been taken to seize or release those goods. In fact I was informed by counsel for the defendants that this is a category which has no content. This is because, save for the one mistake to which I have already referred, there are no goods which are not the subject of a decision to seize or return to the claimant.
- The third category of goods is those goods which were detained as at 4 November 2011 but which have been seized by the defendants subsequently. In respect of these, a notice has been issued by the claimants in relation to all of them pursuant to paragraph 3 of Schedule 3 to the 1979 Act. I was also informed by counsel for the defendants that although condemnation proceedings have not been commenced by the defendants under paragraph 6 of Schedule 3, in respect of all of them the intention is that that will occur.
- Accordingly, as I have indicated, the present procedural position is that the Magistrates' Court is seized of the relevant condemnation proceedings in relation to all the goods which fall into category 3 or will be seized of that issue. As I have already indicated, it is normal procedure for such proceedings to be dealt with in the Magistrates' Court. That court is well equipped to deal with disputed issues of fact and can hear live evidence and cross-examination as appropriate. Although it is not impossible for there to be such evidence and cross-examination in proceedings by way of judicial review, it is very rare, and normally the Administrative Court would deal with factual issues so far as they are necessary only on the basis of written evidence. Furthermore the Administrative Court exists to correct public law errors as a matter of last resort.
- The normal principle is - although the matter is one of discretion - that where there are other alternative remedies available they should be exhausted before judicial review is resorted to.
- On behalf of the defendants, it has been forcefully submitted before me that the decision of the Court of Appeal in Eastenders was not to say that detention for the purposes of investigation is unlawful. The defendants submit that what the Court of Appeal held is that the goods in fact have to be liable to forfeiture although that fact may not yet be known at the time.
- On behalf of the claimants, it has been submitted before me that the Court of Appeal decided two things. Certainly, the claimant submits, the court decided that the goods must be liable to forfeiture as a condition precedent for lawful detention. However the claimant goes on to submit that the Court of Appeal also decided that if the reason given for detaining goods is that this is pending investigations, that is not a lawful reason and that will not be a lawful exercise of the power of detention.
- The claimant submits that an analogy can be drawn with the well-known authorities in relation to the power of a police constable to arrest a person. The claimant submits that the passage in paragraph 93 [of Lord Justice Elias's judgment in Eastenders] which I have quoted was obiter. The claimant says that Lord Justice Davis had not necessarily agreed with it, and certainly did not do so in terms. The claimant also submits, finally, that the passage was per incuriam. I have been informed that it was not the subject of argument in Eastenders and that authorities - for example, in relation to the power of arrest - were not referred to the Court of Appeal.
- My attention has been drawn to the decision of the House of Lords in O'Hara v Chief Constable of the Royal Ulster Constabulary  AC 286. In particular my attention has been drawn to the opinion of Lord Hope of Craighead (page 298 C to E):
"This means that the point does not depend on whether the arresting officer himself thought at that time that they were reasonable. The question is whether a reasonable man would be of that opinion, having regard to the information which was in the mind of the arresting officer. It is the arresting officer's own account of the information which he had which matters, not what was observed by or known to anyone else. The information acted on by the arresting officer need not be based on his own observations, as he is entitled to form a suspicion based on what he has been told. His reasonable suspicion may be based on information which has been given to him anonymously or it may be based on information, perhaps in the course of an emergency, which turns out later to be wrong. As it is the information which is in his mind alone which is relevant however, it is not necessary to go on to prove what was known to his informant or that any facts on which he based his suspicion were in fact true. The question whether it provided reasonable grounds for the suspicion depends on the source of his information and its context, seen in the light of the whole surrounding circumstances."
- In essence, counsel for the claimant submits before me that it is clear that for the power of arrest to be exercised lawfully there are two conditions and both must be satisfied: one is that the officer subjectively has a suspicion that the person concerned has committed an offence; the second is that that subjective opinion must also be reasonable when considered as an objective matter. Counsel for the claimant submits that it would not suffice for there to be a lawful power of arrest - that in fact there are objective reasonable grounds - if in fact the officer never had the relevant subjective suspicion at all.
- In that respect, the claimant's submission derives some support from the well-known case of Christie v Leachinsky  AC 573 that was considered by the Supreme Court in Lumba, to which I will return in a moment. In Christie v Leachinsky, Viscount Simon explained that where an arrest was unlawful because it did not comply with the procedural requirements imposed by the common law - in that case communication of a true and good ground of arrest to the detainee - there would be a false imprisonment notwithstanding that the arrest could have been effected in a proper manner. At pages 588 to 589, Viscount Simon said:
"I entertain no doubt that in the present case the appellants are not exonerated from liability for false imprisonment by satisfying the judge that they had a reasonable suspicion that the respondent had been guilty of theft or of receiving stolen goods knowing they had been stolen, when they never told the respondent that this was the ground of his arrest. Instead of doing so, they gave a different ground which, as Christie admitted, was not a good excuse for arresting him at all."
- That passage in Christie v Leachinsky was recently referred to by Lord Dyson, giving the principal judgment in R (on Application of Lumba) v Secretary of State for the Home Department  2 WLR 671 paragraph 76. Earlier in his judgment (paragraphs 73 to 74), Lord Dyson referred to certain dicta of Lord Diplock in Holgate-Mohammed v Duke  AC 437. In those dicta, Lord Diplock made clear that the power of arrest by a constable includes a discretion and that such discretionary power must always be exercised in accordance with the well known Wednesbury principles. As Lord Dyson acknowledged, that passage in the opinion of Lord Diplock contained obiter dicta. Earlier in his judgment in Lumba, Lord Dyson said (paragraph 66):
"66 ..... A purported lawful authority to detain may be impugned either because the defendant acted in excess of jurisdiction (in the narrow sense of jurisdiction) or because such jurisdiction was wrongly exercised. Anisminic Ltd v Foreign Compensation Commission  2 AC 147 established that both species of error render an executive act ultra vires, unlawful and a nullity. In the present context, there is in principle no difference between (i) a detention which is unlawful because there was no statutory power to detain and (ii) a detention which is unlawful because the decision to detain, although authorised by statute, was made in breach of a rule of public law. For example, if the decision to detain is unreasonable in the Wednesbury sense, it is unlawful and a nullity. The importance of Anisminic is that it established that there was a single category of errors of law all of which rendered a decision ultra vires: see Boddington v British Transport Police  2 AC 143, 158D-E."
- Finally in the judgment, in the context of the tort of false imprisonment, Lord Dyson said (paragraph 71):
"71 ..... the ingredients of the tort are clear. There must be a detention and the absence of lawful authority to justify it. Where the detainer is a public authority, it must have the power to detain and the power must be lawfully exercised. Where the power has not been lawfully exercised, it is nothing to the point that it could have been lawfully exercised. If the power could and would have been lawfully exercised, that is a powerful reason for concluding that the detainee has suffered no loss and is entitled to no more than nominal damages. But that is not a reason for holding that the tort has not been committed."
- In the present context it seems to me that what the Court of Appeal has decided in Eastenders is that a condition precedent for the power to detain goods is that they are in fact liable to forfeiture, the same condition as for the power of seizure. But that is not necessarily a sufficient condition for the lawful exercise of the power to detain goods. Just as in the context of false imprisonment, either in the context of immigration detention which was considered in Lumba or in the context of the power of arrest which was considered in Christie v Leachinsky, the existence of a power does not necessarily mean that it must be exercised. It follows from well known principles of administrative law - Wednesbury principles as Lord Dyson referred to them in Lumba - that a discretionary power must be exercised lawfully. If it turns out that it was exercised unlawfully, as it seems to me, it would not matter, by way of analogy with false imprisonment cases, that the defendants could have exercised the power lawfully on some other basis.
- In the present case, in my judgment, the claimant has succeeded in establishing on the basis of the decision of the Court of Appeal in Eastenders that the purported exercise of the power to detain goods was flawed by an error of public law. And, in principle, it would be right that a declaration should be granted to reflect that success.
- I would emphasise however that what is not before me is the issue that may arise in due course under Section 144 of the 1979 Act. It may arise in the context of condemnation proceedings in the Magistrates' Court. In such proceedings Section 144 (1) will have relevance. It is not for me to anticipate what that court may hold if those circumstances arise. I make it clear that in my judgment I am not seeking to pre-empt what might or might not be found in the course of those proceedings and in particular whether a certificate ought to be granted or refused to reflect the terms of Section 144 (1).
- So far as Section 144 (2) is concerned, it seems to me that, strictly speaking, it does not arise - certainly in proceedings before me. Although it can readily be seen that judicial review proceedings can be categorised as being "civil proceedings", there is no claim for damages in the present proceedings before this court. All that is sought by the claimant at present is declaratory relief. An analogy can be drawn with the discretion to grant or refuse an injunction which was considered by Lord Justice Elias in paragraph 92 of Eastenders (which I have already quoted). As recognised in that passage, the terms of Section 144 would not prevent a court from granting an injunction but nevertheless if one was sought at an interim stage, since the matter is one of discretion for the court and since it is governed by well known American Cyanamid principles, the balance of convenience might well often be thought to lie in favour of the defendants rather than the premature release of the goods in question.
- Likewise, by way of analogy, in the context of declaratory relief, it can be seen that the matter is one of discretion for the court. But nevertheless, as counsel for the claimant forcefully submitted before me, in principle, if a claimant has succeeded in establishing that there has been an error of public law in the Administrative Court, normally, other things being equal, the court should reflect that in some form of declaratory relief. Justice would tend to suggest no less. That does not mean that I have in any way anticipated, still less pre-judged, any issue as to reasonable grounds which may arise on the facts of this case in due course under Section 144, either in the condemnation proceedings which are governed by Section 144 (1) or in any future claim for damages - if there were one to be made - which should be governed by Section 144 (2).
- Subject to submissions by counsel, it would seem appropriate for me to grant a declaration in concise terms as both parties had proposed to the Court of Appeal in Eastenders; in other words, a declaration that the detention of the goods referred to in the claim for judicial review was unlawful. That would be on the basis that the reason given in the notices for the detention of the goods in question was one which was flawed and erroneous as a matter of public law.
- Finally, I should deal with this procedural issue. An application was made last week by Tidechain Ltd to become an interested party in these proceedings. Yesterday, 26 March 2012, having considered the material in support of that application and the representation of the existing parties to the case, I refused that application. I will not lengthen this judgment unduly by repeating what I said in my written reasons for that decision. All concerned can see those reasons for themselves. Suffice it to say that, first, I was not persuaded that the applicant was, in the strict sense of the terms of CPR 54.1 (f), an interested party, in other words, a person directly affected by the claim for judicial review. In any event, I considered the application as being one to become an intervenor in these proceedings and exercised my discretion to refuse that application essentially because it seemed to me that it raised additional issues in these proceedings, was made late in the day and it would tend to lengthen the proceedings, if necessary, by way of cross-examination of live witnesses.
- In the event, Tidechain Ltd has not sought to request me to reconsider my earlier decision. I am grateful to counsel for Tidechain Ltd who has appeared briefly at the hearing before me. As he made clear - and fairly did so - he did not wish to pursue that application if, in the event, I were of the view that there was no need for there to be cross-examination of Mr Hewitt in the hearing before me. In view of the ruling which I have now given, it seems to me that it will be unnecessary and inappropriate for me to embark on an investigation of the facts in this case, still less will it be necessary for me to hear live evidence from Mr Hewitt or cross-examination of witnesses such as Mr Hewitt.
- For those reasons this claim is granted.
- I will hear counsel as to the appropriate relief.
- MR JONES: My Lord has already indicated the terms and declaration you have in mind. I do not propose to argue against the terms your Lordship proposes. I am content that they be adopted as you suggest. I do not know whether my friend dissents from that.
- MR PUZEY: If the declaration is simply that the ground stated for detention was unlawful I have nothing to observe on that. I do say if an application for costs is going to be made, then a Section 144 certificate should be granted and would be directly in point.
- MR JUSTICE SINGH: The terms that I propose are slightly different from that - similar to the one in Eastenders that the detention was unlawful. I hope that the judgment I have given will explain to anyone who wishes to know the reasons for that clearly the reason why.
- MR JONES: I have no doubt that the transcript will be obtained and will be reported.
- MR JUSTICE SINGH: In any event, what is usual practice in these sorts of cases is that if you can agree, after today's hearing, a form of order between you and submit it to my clerk for my approval and, if necessary, anything further can be - - - - -
- MR JONES: We will seek to do that.
- MR PUZEY: I do not know whether my friend is able now to indicate that he will agree a Section 144 certificate to be issued.
- MR JUSTICE SINGH: I will come to that. Some form of declaration in the case.
- MR JONES: We can agree the form of declaration in the terms that you accept. I suspect the latter point made by my friend was made more in hope than expectation because we apply for our costs of these judicial review proceedings. We say we are entitled to them and we say they should be granted following the event.
- MR JUSTICE SINGH: Does 144 have anything to do with this case?
- MR JONES: We say not. You have already indicated in your judgment why it does not.
- In fact there is another reason why it does not - which is what I will label the O'Hara reason - and that is the officer who detained the goods did so for an unlawful reason. There was no reason that he could formulate and say this was the reason given. Let me give you an example. We have a bottle of spirits with a Duty Paid stamp on it. The officer says, "I will detain that bottle of whiskey because I believe that the Duty Paid stamp is a forgery", and in fact he is wrong. Analysis demonstrates that the label is totally genuine. It may be that the person who undertakes the forensic test says, yes, actually the printing machine that had been used had a slight flaw; the ink was not as good as it used to be or the batch of ink that came from the printers. So the court might think that the officer had reasonable grounds to conclude that the stamp on the bottle was genuine. That might bring him into 144 (2). But where the reason given is totally that it is an unlawful reason per se, as the court has found, as the court in Eastenders found, you cannot say nonetheless I had reasonable grounds because it is not. You cannot say unlawful detention is based on reasonable grounds because the court ex hypothesi said it is unlawful. That which is unlawful cannot be reasonable.
- It is just a non sequitur.
- MR JUSTICE SINGH: I accept that 144 (2) does seem to say that costs should be awarded if no reasonable grounds.
- MR JONES: Yes. Reasonable grounds to undertake the detention. My Lord has found there was no lawful reason - - sorry, that the detention was not lawful. You cannot then turn around and say - - - - -
- MR JUSTICE SINGH: On a very limited basis. I said precisely I am not anticipating whether there were reasonable grounds or not. That is for the Magistrates' Court.
- MR JONES: They will decide whether there were grounds for seizure, not detention. That is the sole issue they will determine. If they decide there were grounds for forfeiture on some other basis, for example the mixed point my friend wants to run at the Magistrates' Court, that will not assist him on the O'Hara line of argument I take because that was not in the officer's mind at the time. You cannot convert an unlawful detention into one based on reasonable grounds if those grounds were not in the officer's mind at the time.
- MR JUSTICE SINGH: What slightly worries me about this submission is the question that, as I understand it, this is very much the kind of argument that has been had recently with the Court of Appeal in Eastenders and we do not know what that decision is going to be yet.
- MR JONES: That is right, but you are seised of the matter today. If we all go have to go away and come back on another day we incur more costs.
- MR JUSTICE SINGH: Your submission is a simple one that costs follow the event.
- MR JONES: I like to keep things simple.
- MR JUSTICE SINGH: If that is wrong then steps can be taken to interfere.
- MR JONES: Yes. Can I take instructions? My junior reminds me that in Eastenders we did not dispute that there were reasonable grounds. Here, that issue is very much in dispute and this court cannot decide it one way or the other. We say that is nothing to the point because you cannot rely upon reasonable grounds to convert a potential unlawful (?) detention into a lawful detention, as already found, because that is not the reason that is given at the time. Given that that has been found by the law, we say it follows as night follows day that Section 144 (2) can have no application in this case.
- I am quite happy to develop the statement point in a moment if you consider it necessary. My Lord may need to rule on that as well because it offends the sense of justice for any lawyer who looks at this case - at these current cases - that HMRC is in this protected and privileged position vis-a-vis citizens. So that if they act unlawfully, as the court has found, the party who has had to come to court to vindicate its position has to do so at its expense and deos not have its costs paid in the normal way. There are different ways of getting to that result. But I am certainly happy to go through stages if necessary.
- My primary position for the moment - and I reserve my statement position - is that, my Lord having found that the detention was unlawful, an unlawful detention cannot then be converted to a detention based on reasonable grounds even if, at a later time, the magistrates were to find that the goods were liable to seizure, not detention but liable to seizure, on perhaps some other basis, for example a mixed-with-other-goods basis, a reason not in the mind of the officer who undertook the detention.
- I ask you to go back to what Lord Hope said in O'Hara, that the test relates entirely to what was in the mind of the arresting officer when the power is exercised. I say, stopping there, one asks this question: were there reasonable grounds based on what was in the mind of the officer at the time the power was purportedly exercised. That is where my example about the stamp on the bottle of whiskey comes in. If he genuinely believes it is a forged stamp but investigation subsequently discloses in fact it is a genuine stamp, the court might then find he had reasonable grounds because he had a reasonable basis for believing it was forged notwithstanding as a matter of fact he was wrong.
- That is a completely different case where the officer gives a reason which is unlawful. But now my friend might seek to resist costs on the basis that may be some other reason could have been given albeit it was not given. There are two quite different scenarios that one has in mind. We say that looking at the passage from Lord Hope's judgment makes that clear, that if you are given an unlawful reason you cannot rescue the position, converting it to something lawful.
- MR JUSTICE SINGH: Let us assume, as a hypothetical basis for the scenario, that there were reasonable grounds for detaining goods - take that as a given objectively considered - but the fact of the matter is that the Customs officers turn up on a date unawares and say we do not like the colour of your hair or we do not like the colour of your skin or we do not like the fact you are a Jehovah Witness. You would say on elementary principles of public law we have established - I know it is not this case - the exercise of the power to detain was unlawful on first principles even though the power existed. And you would say, I suppose, that the words of Section 144 (2) cannot be sensibly construed as preventing the court in such an extreme case from awarding costs to a successful claimant.
- MR JONES: Yes, because you have to look at the fact that - I will widen it slightly - had this case started after the Eastender's decision it probably would have started in the Queen's Bench Division as a Torts (Interference with Goods) Act case. I do not accept that this is a sort of Customs & Excise case in this sense and/or that in this particular case we are really dealing with an issue of procedure in the broadest sense because the issue we are dealing with is whether a power given by statute has been lawfully exercised. It happens that that power relates to the procedural (?) detention of goods, but what Section 144 looks at is quite plainly detention or forfeiture under the Customs & Excise Act, that is sub-section (1). It is all designed around the provisions of that Act. If you are outside the Act and you enter your claim now you will (?) be an Eastenders case, simply as an action to a detention or unlawful interference with goods. We say 144 (2) could not arise in that kind of situation.
- MR JUSTICE SINGH: Is it also really designed to address the situation, and I bear in mind the basis of this Act and I also think I am right in saying this is a consolidation Act so there is probably longstanding legislation of this sort on the statute books - - - - -
- MR JONES: Yes.
- MR JUSTICE SINGH: - - - - - given that history and given judicial review is a relatively recent procedure from 1977, is it really directed to a damages claim? What I am saying is it is giving immunity to the relevant officials from entitlement to recover damages. Then what happens is the claimants still claim their costs in such cases. Do the words "or costs" have to take flavour from the company it keeps, a phrase "damages or costs"?
- MR JONES: That is one of the arguments I used at the Court of Appeal. These arguments are really quite interrelated. It is an argument that is interrelated with the Article 6 argument based on Stankiewicz because if one stands back and says this just offends every fibre of my body as a lawyer practising litigation, how do we make 144 (2) Convention compliant with Article 6 or Article 14? The answer is of course that you read it in precisely the way my Lord has just proposed, that the costs takes its flavour from the damages claim. One can test it in this way. If one has no prospect of striking down the immunity from damages because one can probably say that it is a marginal appreciation then one is not going to have a case or is unlikely to have a case where somebody pursues a claim for damages and actually incurs much by way of costs in any event, because if they are not going to recover substantial damages - only nominal damages - it is not worth the candle. They are not going to bring the proceedings.
- I am not seeking more submissions, but I say if we need to get to Article 6 and Article 14 these are all interrelated arguments. That is one way of reading down 144 (2), that is by reading damages or costs, costs being related to the damages claim. Whether the Court of Appeal will agree with that analysis remains to be seen. We do not know. They did not give much away that day. Sometimes they do, sometimes they do not, as my Lord knows. That day they played their cards very close to their chest. We do not know. I cannot take an informed guess.
- MR JUSTICE SINGH: What would be wrong with my adjourning this issue to be determined after the appeals? I did understand your point about further costs in the hearing. Is there any point in my expressing a view until I have the benefit of their learning?
- MR JONES: I would say, yes, my Lord should deal with it. You are now seised of it. The option would be that if my friend's side do not like the outcome, or if we do not like the outcome and we think we can do better on appeal because the Court of Appeal has said something different then we can deal with the matter that way. Either party would have to decide whether to contest and/or resist any appeal in the light of what the Court of Appeal has said. Whilst I can see the initial attraction of adjourning it pending that decision - - - - -
- MR JUSTICE SINGH: You say it is the case that an issue is before an appellate court and if we stop doing our business at first instance we do not decide anything.
- MR JONES: There was an argument before Mr Justice Cranston that he should not allow the judicial review proceedings to progress until it was known whether permission was going to be granted in Eastenders to go to the Supreme Court. He gave that short shrift and said you cannot just hold up proceedings for ever. That is my position.
- MR JUSTICE SINGH: I understand your application.
- MR JONES: I make my principal position on (1) and (2). I reserve my position on Stankiewicz and Article 1 - - Article 6 unless that should become necessary.
- I draw one further distinction in these 144 (2) provisions. In the analogy I gave about the duty stamp on the bottle, we analysed it in this way. It would normally be a lawful ground to detain or seize a bottle of spirits if there is a forged duty stamp. No doubt about that. In my example the officer has it wrong, but on a reasonable basis. He was reasonable in the view that he took but nonetheless he was actually wrong. This is in contra-distinction to a case where one acts unlawfully and it cannot be said that the unlawful reason was reasonable because I say ex hypothesi an unlawful reason cannot be reasonable. It is as simple as that.
- MR JUSTICE SINGH: Yes.
- MR PUZEY: The written arguments which you have before you from my friend on this point are exactly the same arguments that took place before the Court of Appeal. In my submission it would be unwise when awaiting the decision of the Court of Appeal on exactly the same issue to come to a decision in this matter, now in this issue. Those submissions were made two weeks ago at a disposal hearing. It cannot be anticipated that the answer from the Court of Appeal is going to be long delayed. As a matter of principle, in any event, with this exact same matter, exactly the same point being argued, would be - - - - -
- MR JUSTICE SINGH: As I understand it, they had the benefit of full argument including Stankiewicz.
- MR PUZEY: Yes. They did.
- MR JUSTICE SINGH: Which I have not so far in this matter.
- MR PUZEY: No, you have not. I am prepared to address you tomorrow at length, if necessary, on that subject. I would still say even then it would be appropriate to await the decision of the Court of Appeal on this matter.
- MR JUSTICE SINGH: I am either likely to say the same as them in which case it will be otiose or I will say something different in which case it will be wrong.
- MR PUZEY: The idea that this can be sorted out on appeal at some later date is storing up trouble. This court is knowing that issue is before the Court of Appeal.
- MR JUSTICE SINGH: What is before the Court of Appeal,what actually is being argued, is awaiting a decision.
- MR PUZEY: Yes. I say that your Lordship should wait.
- MR JUSTICE SINGH: If I were to accept your argument would you agree that one way of minimising further costs is to restrict further submissions to legal points so I can deal with costs on the papers?
- MR PUZEY: It might be better to await the decision of the Court of Appeal.
- MR JUSTICE SINGH: I can certainly give that indication.
- MR PUZEY: This is going to be a fairly strongly contested application for costs, 144 or otherwise. You will have seen from the papers the vast quantity of paper, the extensive nature of the issues. You have decided the case today on one issue, with respect. My friend's grounds of permission did not raise that issue - - the application for permission did not raise that issue. It was not raised until November. Even yesterday we had a list of issues from my friend, including items on Section 154 (sic), things that nobody raised. So costs are going to be very bitterly contested in this matter.
- MR JUSTICE SINGH: I have your main submission that I should await the decision of the Court of Appeal in Eastenders.
- MR PUZEY: Yes. Should you wish to hear me, I have some observations of my own on Section 144. If you do not want to hear me on this point now I will sit down.
- MR JUSTICE SINGH: I do not think I do.
- Mr Jones, I do see the force of the point that in the particular circumstances of this case and where we have reached now I should await the reasons of the Court of Appeal on this issue - costs - in Eastenders.
- MR JONES: There is a difficulty which is this. I can tell you this because I was there. I will come to that. There are three points. First, in the judgment you have delivered you have said Section 144 (2) does not apply, certainly so far as the damages point is concerned.
- MR JUSTICE SINGH: Let me make it clear: I meant the damages - - - - -
- MR JONES: I am not trying to extend it further. If one reads the words of my Lord "damages or costs" - "costs" being related to damages claims - then the issue is really out on a limb.
- MR JUSTICE SINGH: That was one of your submissions at the Court of Appeal.
- MR JONES: That is one of my submissions. So far as the practical points are concerned - and I can tell you this - at the disposal hearing the claimant applied for permission to appeal to the Supreme Court on the main issue, that is the construction of Section 139. We were applying for our costs and they were resisting. The arguments went hither and dither. The O'Hara point was not in fact raised through an omission on my part. That point was not raised, nor was that dictum from Lord Hope cited from the Court of Appeal. More importantly perhaps, their Lordships indicated towards the end that if - they gave nothing away, it was on an "if" basis - they granted HMRC permission to appeal to the Supreme Court and if they refused our application for costs then it was likely everybody would get permission to go to the Supreme Court on both issues or nobody would get permission to go to the Supreme Court on either issue. They tended to that route.
- My objection is this. If my Lord puts it off and if permission is granted to go to the Supreme Court this may go off for eighteen months.
- MR JUSTICE SINGH: No. I would be adjourning it pending the Court of Appeal's decision on costs to see what it says. If it does not say anything helpful at the end of the day then we will have to have this decided and you will come back.
- MR JONES: Yes. But if what the Court of Appeal says does not suit my friend or it does not suit me, either one of us is going to be saying you did grant leave to the Supreme Court therefore you should not deal with it now but after the Supreme Court.
- MR JUSTICE SINGH: That is a possibility but it is analogous, as I understand it, to what was argued before Mr Justice Cranston. I might well not be sympathetic at that stage. I might; I do not know. I have not heard the application. I am not envisaging at the moment delaying this for eighteen months. I am envisaging delaying it by a few weeks until I know what the Court of Appeal says.
- MR JONES: I can see the immediate attraction. I can understand that. I do not think we can do without further oral argument unless the Court of Appeal are very trenchant.
- My primary position is that we would deal with what is before you today despite the attraction to say perhaps we can wait to see what the Court of Appeal says because one of the points is the O'Hara point. Whilst I can easily understand why my Lord thinks it may be practical, at the end of the day you are seised of this matter.
- MR JUSTICE SINGH: What I am going to do in the exercise of my discretion is to adjourn consideration of the claimant's application for costs in this case. It seems to me that in the particular circumstances we have now arrived at that would be a sensible course to take.
- I have been informed that a couple of weeks ago the Court of Appeal heard very full argument in Eastenders, including argument on human rights issues as to the compatibility of Section 144 (2) with the Human Rights Convention and whether it might be necessary to read its language down in order to render it compatible with the Convention right pursuant to Section 3 of the Human Rights Act 1998. I have also been informed that the arguments in this case are likely to be fiercely contested in any event. In those circumstances it seems to me that the most practical - and I hope cost-effective - way of dealing with this application is for me not to seek to pre-empt what the Court of Appeal may say on what will at least to some extent be overlapping issues.
- So I would like to be kept informed through my clerk of the outcome of the Court of Appeal's ruling on this as soon as possible, and at that stage arrangements will have to be made for the re-listing of this case.
- MR JONES: I wonder would your Lordship be minded to say the first available date after the Court of Appeal decision has been made public in consultation with counsel's clerks.
- MR JUSTICE SINGH: Yes, unless there is any objection to that. That seems sensible to me.
- MR JONES: I am happy with that - first available date.
- MR JUSTICE SINGH: The only thing, as a practical matter, I should alert you to is that I am going on circuit after Easter and sitting in the Administrative Court at Birmingham and after that in Cardiff. I am doing Administrative Court work there so it may be possible to fit this in. You may want to wait until I am back in London.
- MR PUZEY: I have one further application and that is for permission to appeal on the main decision. CPR 52.3 (7), criteria for granting permission: permission may be given only where (a) the appeal appears to have a real prospect of success - - - - -
- MR JUSTICE SINGH: I do not want to interrupt you unduly but would it be sensible for me to deal with that when I deal with the issue of costs? Otherwise is there not a danger that this case is going to go up in bits to the Court of Appeal essentially or there is a risk of that?
- MR PUZEY: If you were to grant permission to appeal now we would know where we stood.
- MR JUSTICE SINGH: You have to launch that appeal if I gave permission now.
- MR PUZEY: Notice could be filed and then it could also be notified that the costs matter is still awaiting decision.
- There are two bases advanced as to why there is every prospect of success for any appeal. The first is that your Lordship is bound by a decision in Eastenders and the concluded view of their Lordships that the legality of a detention could be determined retrospectively. I rely on that - not only on the passage at paragraph 93 but also the passage at paragraph 108, Lord Justice Davis' decision, and the phrase:
" ..... it would seem that HMRC could invoke any such ground, whether or not suspected at the time when subsequently saying that the goods were (in fact) liable to forfeiture: quite apart from relying on the protection given in section 144."
In my submission that is a clear agreement by Lord Justice Davis with Lord Justice Elias and that binds your Lordship.
- MR JUSTICE SINGH: I understand that argument.
- MR PUZEY: The second ground is this. It was not advanced before today on behalf of the claimant that the reason given was unlawful on public law grounds in the sense that it could not disclose reasonable grounds - or lawful grounds - for the seizure, for the detention. What was said was that there had to be reasonable grounds for suspicion. You have taken that and used the analogy of the false imprisonment and wrongful arrest cases. However the defendants would point out that you have before you evidence of the actual reasons which the officer was acting on which I referred you to in the statement. The fact that a reason was endorsed on the detention notices does not mean that there was not a lawful reason in the officer's mind at the time.
- What is said in O'Hara is not that the lawful reason has to be given. I go back to O'Hara, page 298C:
"It is the arresting officer's own account of the information which he had which matters."
- You have the officer's account of the information he acted upon. It is set out in clear terms. He established who the goods were supplied by. He established who the supplier to that supplier was and he acted on his knowledge of that supplier. The Commissioners would say there was a perfectly lawful reason for the detention of these goods. Whether or not it was stated on the notice does not matter. O'Hara does not say that it should do. In fact in the arrest cases it is a requirement that a reason for arrest is given. It is a statutory requirement that reason for arrest is given. You have to say why you are being arrested. It is not just a public law requirement. What we have here is not that situation. It is a quite different statutory regime. The Commissioners say there is a real prospect of success.
- MR JONES: It is a common law requirement as far as I recollect.
- The passage my friend referred to in O'Hara at page 298C takes the matter out of context. Your Lordship knows, dealing with the issue of whether or not reasonable cause to believe or reasonable cause to suspect can be based upon information provided by a third party, where it says "the arresting officer's own account of the information which he had which matters, not what was observed by or known by anyone else" makes it plain that the officer can form suspicion on the basis of information provided by others. The point my friend seeks to make is to say if I give reason A but secretly had reason B in mind I can subsequently spring reason B on an applicant when that person says you exercised your power unlawfully. It only has to be stated in that way to see how nonsensical such an argument is as a matter of public law.
- The argument put forward that permission should be granted for that and the other reason related to my friend's reading of Eastenders does not address the point of whether it is obiter or per incuriam.
- In our respectful submission given that this is a pure point of law my friend should ask the Court of Appeal for permission if he wishes to persist in that application. I should add that my junior points out that the other reason in the officer's mind, even if correct and even if it can be relied upon, would still not be a lawful ground for detention of goods.
- MR JUSTICE SINGH: I am going to grant you permission to appeal. I do so on the first of your proposed grounds, which I do think is arguable, which is that it is arguable that Eastenders - - in particular the passages at paragraph 93 of the judgment of Lord Justice Elias read with paragraphs 105 and 108 in the judgment of Lord Justice Davis do contain arguably part of the ratio of that case and would therefore be binding upon me. In any event, it seems to me that this is clearly a relatively new and developing area of the law in which there has been recently a division of judicial opinion both from this court as compared with the Court of Appeal but also amongst the members of the Court of Appeal in Eastenders.
- In those circumstances it seems to me the issue being raised as to the legal effect of these issues is one which the Court of Appeal should have the opportunity to consider again.
- MR JONES: I think we ought to address the issue as to whether or not an order should be drawn up and sealed now or left over until a possible appeal has been decided. The consequence of that is my friend's time for appealing will not run until the order is sealed and he has to serve it. He has to send a copy of the sealed order with it in any event. So he will run into trouble on appeal on the sealed order.
- MR JUSTICE SINGH: It does seem to me that subject to anything you might say the sensible thing would be for me to finalise the order so it is sealed once I have made all the decisions that arise, including costs.
- MR PUZEY: Certainly.
- MR JUSTICE SINGH: Unless there is anything else?
- MR PUZEY: No.
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