JUDGMENT
R (On the application of Eastenders Cash and
Carry plc and others (Respondents) v The
Commissioners for Her Majesty’s Revenue and
Customs (Appellant)
R (on the application of First Stop Wholesale
Limited) (Appellant) v The Commissioners of Her
Majesty’s Revenue and Customs (Respondent)
before
Lord Neuberger, President
Lord Mance
Lord Sumption
Lord Reed
Lord Carnwath
JUDGMENT GIVEN ON
11 June 2014
Heard on 27 and 28 November 2013
Appellant Respondent
Jonathan Swift QC Geraint Jones QC
Neil Sheldon
James Puzey
Marc Glover
Niraj Modha
(Instructed by HMRC
Solicitors Office
)
(Instructed by Rainer
Hughes Solicitors
)
Appellant Respondent
James Pickup QC Jonathan Swift QC
Marc Glover
Niraj Modha
Neil Sheldon
James Puzey
(Instructed by Rainer
Hughes Solicitors
)
(Instructed by HMRC
Solicitors Office
)
LORD SUMPTION AND LORD REED (with whom Lord Neuberger, Lord
Mance and Lord Carnwath agree)
1. Indirect taxes have always posed particular problems of enforcement, which
account for the wide powers of investigation and seizure conferred by statute on the
Commissioners charged with their collection. The exercise of these powers has
given rise to dispute ever since Johnson’s Dictionary offered its famous definition
of excise in 1755 (“a hateful tax, levied by wretches”), and its author was threatened
by the Commissioners with a libel action. The powers of the Commissioners of
Customs and Excise were originally contained in a large number of enactments
dealing with different aspects of an exceedingly complex legal scheme. The first
modern consolidation was the Customs and Excise Act 1952 (“the 1952 Act”). The
system is currently administered by Her Majesty’s Commissioners of Revenue and
Customs under the Customs and Excise Management Act 1979 (“the 1979 Act”),
which re-enacts much of the 1952 Act, with substantial amendments. Some
significant amendments have been made to the Act by the Finance Act 2013, but
these were not in force at the relevant times, and we therefore refer throughout this
judgment to the Act as it stood before they were made.
2. These two appeals are about the circumstances and the manner in which
customs officers are empowered to detain goods on which duty has not been paid,
or may not have been paid.
The Eastenders appeal
3. In the Eastenders appeal, customs officers entered Eastenders’ warehouses
and inspected consignments of alcoholic goods found there. They were acting under
section 118C(2) of the 1979 Act, which authorises customs officers to enter and
inspect business premises which they have reasonable cause to believe are being
used in connection with the supply, importation or exportation of goods chargeable
with excise duty and to inspect any goods found there. Section 118C(2) was repealed
by the Finance (No 3) Act 2010 and replaced by other provisions, but we refer to
the Act as it stood at the material time. Under section 118B, the officers may also
require the production of documents. Eastenders’ employees were unable to provide
documentary evidence, such as purchase invoices, demonstrating that duty had been
paid on the goods. Inspection of such documents as were produced indicated that
duty might not have been paid. The officers decided to detain the goods pending the
outcome of further enquiries into the question whether the appropriate duties had
been paid: in particular, enquiries into the supply chains relating to the goods. The
goods remained on Eastenders’ premises pending the outcome of those enquiries but
Page 2
were subject to a direction given under section 139(5) of the 1979 Act, in terms of
which the Commissioners can direct the manner in which any thing detained under
the customs and excise Acts must be dealt with pending the determination as to its
forfeiture or disposal. In subsequent correspondence, the Commissioners stated that
the goods had been detained under section 139, subsection (1) of which empowers
the Commissioners or their officers to seize or detain “any thing liable to forfeiture
under the customs and excise Acts”. By virtue of section 49, things liable to
forfeiture include any dutiable goods imported without payment of duty.
4. Following their enquiries, the Commissioners seized most of the detained
goods and returned the remainder. All of the seized goods were subsequently
condemned as forfeited, and no issue arises about those. The present appeal relates
to the goods which were detained but were subsequently returned, the officers’
enquiries having proved inconclusive.
5. Eastenders applied, as the owners of the goods in question, for judicial
review of the decision to detain them. The judge, Sales J, found that the officers had
reasonable grounds to suspect that duty had not been paid on the goods that were
detained. It was also found that the detention of the goods had not exceeded a
reasonable period of time. Those findings were not challenged on appeal.
6. In these circumstances, Sales J held that the Commissioners had acted
lawfully in detaining the goods, on the basis that they had the power to detain goods
for a reasonable time, pending enquiries as to whether duty had been paid, where
they had reasonable grounds to suspect that the goods might be liable to forfeiture.
Sales J considered that that power was conferred by section 139(1) of the 1979 Act.
No other possible source of the power had been suggested. The application for
judicial review was therefore dismissed: [2010] EWHC 2797 (Admin); [2011] 1
WLR 488.
7. The Court of Appeal by a majority (Elias and Davis LJJ, Mummery LJ
dissenting) reversed that decision. They held that section 139(1) applied only where
goods were actually liable to forfeiture, and it had not been established that the goods
in question were so liable. A declaration was accordingly granted that the goods not
liable to forfeiture were unlawfully detained: [2012] EWCA Civ 15; [2012] 1 WLR
2067. There was again no contention that the power to detain goods on suspicion
might be derived from any source other than section 139(1). It was subsequently
decided that Eastenders could not be awarded costs, by reason of section 144(2) of
the 1979 Act, which provides, in substance, that where a court holds that a seizure
or detention was unlawful, no award of damages or costs may be made against the
Commissioners if the court is satisfied that they acted on reasonable grounds: [2012]
EWCA Civ 689; [2012] 1 WLR 2912. The Commissioners appeal to this court
against the first decision. Eastenders were refused permission to appeal against the
Page 3
second decision. The point in relation to costs has however been argued in the First
Stop appeal, as we shall explain, and whatever we decide about it must necessarily
apply in both appeals.
The First Stop appeal
8. In the First Stop appeal, customs officers entered a warehouse and retail
premises used by First Stop. They were acting under section 112(1) of the 1979 Act,
which authorises customs officers to enter the premises of “revenue traders” as
defined in section 1 of the Act (in substance, persons who deal in goods liable to
excise duty) and to search for and examine any goods or materials connected with
that trade. Under section 112A, inserted by the Finance (No 3) Act 2010, that power
includes the power to examine documents. At the retail premises, the officers seized
a small quantity of spirits on the ground that the “duty paid” stamps on them were
defective. They also detained a much larger quantity of alcoholic drinks, whose
provenance was unclear, while enquiries were made into the question whether duty
had been paid. One of the directors of First Stop was informed by an officer that the
goods were being detained pending further enquiries into their duty status. Written
notices were provided stating that the goods had been detained “pending evidence
of duty status (CEMA 1979, section 139)”. Most of the detained goods were
subsequently seized. The remainder were returned to First Stop. Condemnation
proceedings in respect of the seized goods remained pending at the time of the
hearing of these appeals.
9. First Stop were granted permission to apply for judicial review of the
detention of those goods which were still detained, pending the outcome of
enquiries, about four months after their initial detention. By the time the application
was heard, all of those goods had been seized. The application came before Singh J
after the decision of the Court of Appeal in Eastenders. The judge gave a total of
three judgments on different issues which arose from the application. In the first, he
held that the detention of the goods had been unlawful, since the reason given for
the detention was the need for investigation, and it followed in his view from the
decision of the Court of Appeal in Eastenders that goods could not lawfully be
detained under section 139(1) of the 1979 Act for that purpose. That was so even if
the goods might subsequently be found to be liable to forfeiture: in his view, goods
could not lawfully be detained under section 139(1) for the purpose of ascertaining
whether the power to detain them had been conferred by that provision: [2012]
EWHC 1106 (Admin).
10. In a second judgment, Singh J held that section 144(2) did not protect the
Commissioners against an award of costs, on the basis that the reason given for
detaining the goods, being unlawful, could not amount to “reasonable grounds”
within the meaning of that provision: [2012] EWHC 2191 (Admin).
Page 4
11. In his third judgment, Singh J was concerned with the seizure notices. The
question was whether a statement in the notices that “no evidence of UK duty
payment has been provided” was a sufficient statement of the grounds for seizing
the goods as “liable to forfeiture”. The judge held that it was: [2012] EWHC 2975
(Admin).
12. All three judgments were appealed to the Court of Appeal. They allowed the
Commissioners’ appeal against the first two judgments. Beatson LJ, in a judgment
with which Lewison and Jackson LJJ agreed, accepted that the judge’s view that the
power to detain under section 139(1) must not only exist, but must be exercised for
the purpose intended by Parliament, gained powerful support from general
principles of public law, but concluded that it was inconsistent with the judgments
of the majority of the court in the first judgment in the Eastenders case. The court
also considered that it followed from the first judgment in the Eastenders case that
there was no duty to give reasons for the detention of goods under section 139(1).
In their view, the effect of the Eastenders decision was that if the goods were in fact
“liable to forfeiture”, detention for a reasonable time was lawful under section
139(1) irrespective of any reason that might have been given. The appeal against
Singh J’s second judgment, relating to section 144(2), was allowed on the ground
that the judge’s decision was inconsistent with the decision of the Court of Appeal
in its second judgment in the Eastenders case: [2013] EWCA Civ 183. First Stop
appeal to this court against both decisions. The Court of Appeal upheld Singh J’s
third judgment, and no appeal on the adequacy of the notice of seizure is before us.
It follows that in this case, as in Eastenders, we are directly concerned only with the
power of detention.
The statutory scheme
13. We have referred to the provisions of the 1979 Act that were central to the
judgments below, namely sections 139(1) and 144(2). Before considering the effect
of these provisions, it is necessary to say something more about them, and about the
broader statutory scheme of which they are part.
14. The 1979 Act confers extensive powers on the Commissioners. These include
the express power to examine goods and documents relating to goods, or to require
information about them. This power is conferred by many provisions of the 1979
Act, the relevant provision depending on the location of the goods and sometimes
their type. In particular, section 112(1) confers on customs officers a power to enter
the premises of revenue traders, such as First Stop, and to inspect the premises and
search for, examine and take account of any goods or materials belonging to or in
any way connected with that trade. By virtue of section 112A, the power conferred
by section 112 includes power to inspect any business documents that are on the
premises. Section 118C(2) applies where an officer has reasonable cause to believe
Page 5
that any premises are used in connection with the supply, importation or exportation
of dutiable goods and that such goods are on the premises. It confers on the officer
the power, exercised in the Eastenders case, to enter and inspect the premises and
inspect any goods found on them.
15. A number of the powers conferred by the 1979 Act are expressly exercisable
when the relevant officer has reasonable grounds for believing or suspecting
something. Section 118C(2) is an example. There are many others. Thus under
section 84, which is concerned with unlawful signals to smugglers, an officer may
board a ship, aircraft or vehicle or enter a place from which he has “reasonable
grounds for suspecting” that a signal is being or is about to be sent; under section
113, officers are empowered to break open premises where they have “reasonable
grounds to suspect” that secret pipes or other conveyances are being used for goods
subject to excise duty; under section 138, a person may be detained if there are
“reasonable grounds to suspect that he has committed [an] offence under the
customs and excise Acts”; under section 161, an officer may enter and search any
place where there are “reasonable grounds to suspect” that property liable to
forfeiture is being kept or concealed; and under sections 163 and 164 there are
corresponding powers to stop and search vehicles, vessels or persons suspected of
being involved in breaches of the customs and excise legislation.
16. The 1979 Act contains many sections providing for the forfeiture of property,
including property whose importation is prohibited, property in respect of which
duty has been evaded, or property (such as vehicles or vessels) which have been
used for the purpose of infringements of various kinds. For present purposes, the
relevant power of forfeiture is conferred by section 49, which can be treated as the
paradigm case. It provides, among other things, that “goods chargeable upon their
importation with customs or excise duty” which are imported without payment of
that duty shall, subject to specified exceptions, be “liable to forfeiture”.
17. Section 139 of the 1979 Act contains provisions relating to the detention and
seizure of goods. Section 139(1) provides:
“Any thing liable to forfeiture under the customs and excise Acts may
be seized or detained by any officer or constable or any member of
Her Majesty’s armed forces or coastguard.”
It can be seen that section 139(1) confers two distinct powers on the Commissioners,
a power of seizure and a power of detention. Neither power is expressly said to be
exercisable on the basis of reasonable grounds for suspicion or belief. In this respect
they differ from some of the other powers to which we have referred.
Page 6
18. The effect of seizure is apparent from other provisions of the 1979 Act. It is
the first stage of a statutory process leading to forfeiture. The process is governed
by Schedule 3, to which effect is given by section 139(6). Paragraph 1 of Schedule
3 requires the Commissioners to give notice of “the seizure of any thing as liable to
forfeiture”, and of the grounds for it, except in cases governed by paragraph 2. The
exceptional cases are broadly speaking those in which the seizure was carried out in
the presence of the relevant interested party. Under paragraph 3, the owner of the
goods has one month from the date of the notice (or the date of seizure in a case
within paragraph 2) in which to serve a notice claiming that “anything seized as
liable to forfeiture is not so liable”. If no notice is served within that period, then the
seized goods are deemed to have been duly condemned as forfeited (paragraph 5).
If, on the other hand, a notice is served, the Commissioners must take proceedings
for condemnation in the High Court or a magistrates’ 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” (paragraph 6). If the court holds that the goods were not liable to
forfeiture, paragraph 17 provides for the Commissioners to tender to the owner a
sum representing their value. The owner may then accept the tender, in which case
“he shall not be entitled to maintain any action on account of the seizure, detention,
sale or destruction of the thing”. Or he may reject it, in which case the assumption
is that such a right of action will remain available.
19. There are no corresponding provisions relating to the power to detain goods.
Indeed, until the Act was amended in 2013, it contained no provisions at all dealing
with the procedure for detaining property or its consequences. There can, however,
be little doubt about what detention involved, even before the amendment. Detention
is a temporary assertion of control over the goods, which does not necessarily
involve any seizure with a view to ultimate forfeiture. What is the purpose of
detaining goods without seizing them? The obvious answer is to enable the goods to
be examined, or secured pending investigations which might lead to their seizure
later. This was the view of the Court of Common Pleas in Jacobsohn v Blake and
Compton (1844) 6 Man. & G 919; 13 LJ CP 89, a case to which we shall return, and
of the majority of the Court of Appeal in Gora v Customs and Excise Commissioners
[2003] EWCA Civ 525; [2004] QB 93.
20. In his judgment in the Eastenders case, at para 30, Sales J said this:
“It does not require much imagination to see that there may be many
cases in which there is uncertainty when HMRC officers inspect goods
whether duty has been paid on them or not, and to see that in such
cases the effective and fair implementation of the relevant tax and its
associated enforcement regime will require that goods are held for a
period while investigations are carried out in an effort to remove that
uncertainty. In general (and without seeking to level criticism against
the claimants in the present cases), Parliament cannot have intended
Page 7
that an owner of goods should be able, just by obfuscating and creating
uncertainty at the point of inspection in relation to his supply chain
and whether duty has or has not been paid, to avoid the full rigour of
the machinery for the enforcement of payment of taxes, including by
forfeiture of goods on which duty has not been paid.”
We agree.
21. We have already pointed out that neither the power of seizure nor the power
of detention conferred by section 139(1) is expressly said to be exercisable on the
basis of reasonable grounds for suspicion or belief. However, the reasonableness of
the exercise of those powers does come into it by virtue of section 144, which
provides:
“144.—(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
subsection(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.”
Where an officer detains property under section 139(1) because he reasonably
considers that it is “liable to forfeiture”, section 144(2) assumes that that he may be
liable if he turns out to be wrong about that, but protects him against an order for
financial relief.
Page 8
“Liable to forfeiture”
22. The first question on these appeals concerns the condition for the exercise of
the power of seizure or detention under section 139(1), that the property should be
“liable to forfeiture”. Does this mean that it must actually be liable to forfeiture? Or
is it enough that the relevant officer believed or suspected that it was liable to
forfeiture? Or that he wished to investigate whether it was or not?
23. We consider that the answer to this is straightforward. The right to seize or
detain property under section 139(1) is dependent on that property actually being
liable to forfeiture under one of the various forfeiture provisions of the Act. This
turns on the objectively ascertained facts, and not on the beliefs or suspicions of the
Commissioners or their officers, however reasonable. Our reasons are as follows:
(1) Throughout the 1979 Act, the draftsman has said in terms when
statutory powers may be exercised on the basis of suspicion or belief
rather than objective fact. A particularly striking example is section
138, which is the power corresponding to section 139 relating to the
detention of persons who are “liable to be detained” under the
Customs and Excise Acts. The power of detention is exercisable if
there are “reasonable grounds to suspect” that the person has
committed an offence. The omission of any such language from
section 139 must have been deliberate.
(2) The expression “liable to forfeiture” is used in no less than thirty
sections of the 1979 Act. It would be wearisome to go through them
all to make exactly the same point, which is that they are almost all
sections providing that property is liable to forfeiture in defined
circumstances, or in some cases providing that it is not to be liable to
forfeiture in defined circumstances when it otherwise would be. In
these sections, the words can only refer to actual liability to forfeiture.
In all of the other sections in which the expression is used, with the
possible exception of sections 139(1) and 144(2), it is equally clear
that the reference is to an actual liability to forfeiture.
(3) In section 139(1) it is a precondition for both seizure and detention
that the goods should be “liable to forfeiture”. There is no difference
in the way that the precondition applies to the two measures. In
relation to seizure, the expression must mean actually liable to
forfeiture, since seizure puts in train the procedural provisions of
Schedule 3, which is wholly concerned with the condemnation of
property as forfeit. On the face of it, therefore, the expression must
mean the same when applied to detention. The same point can be made
Page 9
about the use of the expression in relation to both seizure and detention
in section 144(2).
(4) More generally, if “liable to forfeiture” does not mean actually liable
to forfeiture, it is difficult to discern what it can sensibly be thought to
mean. The Commissioners’ submission is that it refers to goods of a
kind legally capable of being forfeited. This would mean that all
dutiable goods were “liable to forfeiture”. While that is a linguistically
possible meaning of the words, it is hardly the natural one. Its adoption
would have the effect of conferring on customs officers a power to
detain any goods which were in law dutiable, subject to no restrictions
whatever other than those arising from the general principles of public
law. So far as the 1979 Act is concerned, it would not even be
necessary for the Commissioners to show that there were reasonable
grounds for suspicion or belief.
(5) Section 144(2), as we have pointed out, assumes that where property
has been detained which turns out not to be actually liable to forfeiture,
the Commissioners or their officers may be held liable in an action in
tort. It confers an immunity in that event from an award of damages
and costs if they acted reasonably. If the Commissioners or their
officers were entitled to detain goods under section 139(1) on
reasonable suspicion, the situation envisaged in this provision could
not arise. The action would fail on liability and no immunity from
damages and costs would be required.
Some difficulties
24. This interpretation of section 139(1), although in our opinion correct, would
nevertheless have troubling implications if the Commissioners and their officers had
no other power to detain goods. The resultant difficulties include the following:
(1) As we have explained, and as Sales J recognised in the passage
which we have cited, it is obviously essential to the effective
implementation of the laws governing customs and excise that
customs officers should be able to detain goods so as to enable them
to be examined and secured pending investigations which might lead
to their subsequent seizure. Sales J at first instance and Mummery LJ
in the Court of Appeal inferred from that practical necessity (i) that
Parliament must have intended that customs officers should have the
power to detain goods where they reasonably suspect that the goods
may be liable to forfeiture and require to make further inquiries, and
(ii) that Parliament must therefore have intended section 139(1) to be
construed as conferring such a power. The second proposition must be
Page 10
rejected; but the argument in support of the first proposition remains
a powerful one.
(2) On the hypothesis that the only power of detention is that conferred
by section 139(1), and if that provision is interpreted as we consider it
must be, it follows that the detention of goods is unlawful whenever
the goods are not in fact liable to forfeiture. If that is so, then the
detention of goods on the basis of suspicion is unlawful in all cases
where the suspicion turns out to be unfounded. In the nature of things,
that will be the position in a proportion of cases, even where
reasonable grounds for suspicion exist. The customs officers may then
be liable in damages for their interference with rights of property
unless they can bring themselves within the scope of section 144(2).
Even where section 144(2) applies, it only protects the officers against
financial relief.
(3) A further difficulty with an approach based upon an acceptance
that customs officers will behave unlawfully, but will be protected
from liability by section 144(2), concerns its compatibility with EU
law and the Human Rights Act 1998. Under EU law, the detention of
goods by customs officers may require to be justifiable as an
interference with the free movement of goods: something which
would scarcely be possible if the interference was unauthorised by
law, or if that law failed to comply with the EU principle of legal
certainty.
(4) In relation to the Human Rights Act, the detention of goods by
customs officers is an interference with the peaceful enjoyment of
possessions within the meaning of article 1 of Protocol No 1 to the
European Convention for the Protection of Human Rights and
Fundamental Freedoms: see for example Islamic Republic of Iran
Shipping Lines v Turkey (2007) 47 EHRR 573. As such, it must be in
accordance with law, and must therefore be authorised by domestic
law. Furthermore, the domestic law must meet the requirement of
legal certainty. If customs officers are not authorised to detain goods
which are not actually liable to forfeiture, or to detain goods for the
purpose of investigation into whether they are liable to forfeiture, it
follows that their doing so is unlawful by virtue of the Human Rights
Act as well as under the common law.
(5) The proposition that the only power of detention possessed by
customs officers is that conferred by section 139(1) also raises a
further difficulty. As we shall explain, there was no statutory provision
in respect of detention, corresponding to section 139(1), until 1952.
Can it possibly have been the position, prior to 1952, that the
Commissioners and their officers had no power to secure goods, where
Page 11
there were reasonable grounds to suspect that they were liable to
forfeiture and investigations had to be carried out, other than by preempting the outcome of such investigations by seizing the goods and
setting condemnation proceedings in train, at the risk of behaving
unlawfully and incurring a liability in damages? As we have
explained, the contrary was the view of the Court of Common Pleas
in Jacobsohn v Blake and Compton.
25. In view of these difficulties, it appears to us to be necessary to consider the
legislative background, and some relevant authorities, in greater detail.
The background to the 1979 Act
26. Statutory regimes providing for the appointment of customs officers and
vesting them with powers have existed for centuries. A thoroughgoing reform of the
statute book was carried out in 1825, when almost all the statutes regulating the
administration of customs and excise which were then in force, going back to the
reign of Richard II, were repealed by the Act 6 Geo IV c 105, and new provisions
were enacted in their place by several Acts, including the Acts 6 Geo IV c 107 and
c 108. A further consolidation took place in 1833, when the 1825 legislation was
repealed and replaced by a number of Acts, including the Acts 3 and 4 Will IV c 52
(“An Act for the General Regulation of the Customs”) and c 53 (“An Act for the
Prevention of Smuggling”).
27. This legislation, like that of 1825, made provision for the “detention” of
persons: see the Act 3 and 4 Will IV c 53, sections 48-53. It also made provision for
the “seizure” of goods which were “liable to forfeiture”: see the Act 3 and 4 Will IV
c 53, section 32, which is a predecessor of section 139(1) of the 1979 Act. Provision
was also made in respect of proceedings brought by the owners of goods which had
been seized. In particular, the defendant was protected from liability in damages or
costs if there had been probable cause for the seizure: see the Act 3 and 4 Will IV c
53, section 102, which is a predecessor of section 144(2) of the 1979 Act.
28. The only statutory reference to the “detention” of goods at that time was made
in a different context. The Act 3 and 4 Will IV c 52 required importers of goods to
deliver a bill of entry of the goods, containing specified information about them.
Goods which were not properly described in the bill were forfeited: section 20.
Where the duty payable depended on the value of the goods, that also had to be
stated. Section 22 provided that “if upon examination it shall appear to the officers
of the customs that such goods are not valued according to the true value thereof, it
shall be lawful for such officers to detain and secure such goods, and … to take such
goods for the use of the Crown”, the importer being paid compensation based upon
Page 12
his own valuation. Section 133 distinguished between goods being “seized as
forfeited, or detained as under-valued”. Then as now, the legislation conferred
extensive powers upon customs officers, including a plethora of powers of entry,
search and examination.
29. The 1833 legislation was in force at the time of the case of Jacobsohn v Blake
and Compton (1844) 6 Man & G 919; 13 LJ CP 89, which is one of the few reported
decisions in this area of the law, and the only one which contains a detailed
consideration of the relevant principles. The case was brought by the owner of a
consignment of cutlery against two customs officers. The officers had examined the
goods when they were landed in order to determine the duty payable (the precise
statutory power under which they did so is not stated in the report: there are a number
of possibilities), and had then decided to detain them, because of a suspicion that
they contravened a statutory prohibition on the importation of cutlery of foreign
manufacture bearing the names of British manufacturers resident in the United
Kingdom, and were therefore liable to forfeiture. The officers refused to release the
goods until the matter had been considered by the Commissioners. After a period of
about five months, the Commissioners agreed to release the goods on payment of
the duty, and the goods were duly released. An action for damages was then brought,
on the basis that the detention had been unlawful. There was no express statutory
basis for the detention of the goods, since they were not detained as under-valued.
30. The jury was directed to return a verdict for the defendants, and that direction
was upheld by the Court of Common Pleas. Tindal CJ is reported at pp 925-926 of
Manning and Granger’s report as stating:
“[T]he defendants merely took possession of the goods, in the
execution of their duty as custom-house officers, for the purpose of
examination. When the goods were examined certain marks were
found upon them, which induced the defendants to think they were
prohibited; and they said they must detain them; and then, on a
subsequent application on the part of the plaintiff for the delivery of
the goods, the answer was that they were detained and would be
prosecuted as seizures. It appears, therefore, that the defendants
originally detained the goods under a real and honest doubt that they
were subject to forfeiture: whether that doubt was well grounded, is
not now the question. … There has been no abuse of authority on their
part. The goods remained, during the whole time of the examination,
in the same custody in which they were, in the first instance, legally
detained.”
The latter part of that passage is reported slightly differently in the Law Journal
report at p 90:
Page 13
“There has been no abuse of the process which the defendants had to
execute, and things remain in the same position during the whole time
the goods were under examination.”
The implication, in both reports of the judgment, is that the process of examination
was not completed until the necessary enquiries had been carried out. His Lordship
left open the question whether an action might have been brought if the goods had
been detained for an unreasonable time.
31. The other judgments similarly emphasized that the officers had been acting
within their authority. Coltman J stated at p 926:
“The defendants were custom-house officers acting under an authority
given them by law. It was their duty to examine the goods in question,
in order to ascertain to what duty they were liable, or whether or not
they were subject to forfeiture. If the goods had been afterwards
detained by them for a time more than reasonable for the examination,
that might have been an abuse of their authority so as to render them
liable in another form of action. But it appears to me there is no ground
for saying they did more than detain the goods for a reasonable time,
in order that the question as to the liability of the goods to forfeiture
might be submitted to the proper authorities.”
(In relation to the second sentence in that passage, Coltman J is reported in the Law
Journal report as saying that the officers were acting under an authority given them
by law to examine the goods to see whether they were liable to duty, and that “I
think they had also a right to examine them, to see whether they were liable to
forfeiture or not”).
32. Cresswell J’s judgment at pp 927-928 was to the same effect:
“The goods were taken by the plaintiff’s agent to the proper place for
the examination of them by the defendants in the regular discharge of
their duty as custom-house officers. Upon their examination, all that
the defendants did was, to detain them, till it could be ascertained
whether or not they were liable to forfeiture. … Here, there was no act
of trespass, either actually, or impliedly from any subsequent abuse of
authority.”
33. In the present appeals, it was argued on behalf of Eastenders and First Stop
that the ratio of the Jacobsohn case was confined to the situation where imported
Page 14
goods had been taken to a customs warehouse: the officers were entitled to decline
to allow the goods to leave the warehouse until the appropriate duty had been paid.
So understood, it was argued, the case had no application to cases such as the present
appeals, where goods which were inside the country might be liable to forfeiture.
The argument that the plaintiff could not insist upon the delivery of imported goods
from a customs warehouse, so long as the duty remained unpaid, was indeed one of
the arguments advanced on behalf of the officers at the trial of the case, but it does
not appear to have been argued on appeal, and only the judgment of Erskine J at p
927 adverts to the point:
“The goods were landed and taken possession of by the defendants in
the discharge of their duty, for the purpose of their being examined.
Upon their being partially examined there appeared to be sufficient
ground for the defendants to doubt whether they were authorised to
receive the duty upon them. All that the defendants did was merely to
decline to receive the duty upon them. The subsequent declaration
made by them was not a declaration that what they had done amounted
to a seizure, but merely a statement that, the matter being under the
consideration of the commissioners, the goods could not be given up
to the plaintiff.”
Erskine J’s reference to the goods being “partially examined”, prior to the making
of enquiries of the Commissioners, is consistent with the approach adopted in the
other judgments. In any event, in the light of the other judgments, the ratio of the
decision cannot be said to have been based on the non-payment of duty on imported
goods.
34. In a related submission, it was argued on behalf of Eastenders and First Stop
that the decision in Jacobsohn was based on a technical aspect of the law of trespass:
since the officers had lawful possession of the goods initially for the purpose of
examination, their subsequent detention of the goods did not involve any transfer of
possession, and therefore could not amount to trespass. This argument also was
advanced on behalf of the officers at the trial of the case, but it was not accepted.
The court recognised that possession which was initially lawful might be rendered
unlawful by an abuse of the authority under which possession had been taken,
following the Six Carpenters’ Case (1610) 8 Co Rep 146. Hence the emphasis laid
in the judgments upon the absence of any abuse of authority: as Cresswell J said,
there was no trespass, “either actually, or impliedly from any subsequent abuse of
authority”.
35. As is clear from the passages in the judgments which we have cited, the
majority of the court accepted that the detention of the goods was lawful because
there had been no abuse of authority on the part of the officers; and there had been
Page 15
no such abuse because their authority to examine the goods in order to determine
the duty payable, or (by implication) whether the goods were liable to forfeiture,
carried with it, by necessary implication, an authority to detain the goods for such
time as was reasonably necessary in order to make that determination. Where the
determination required the making of enquiries, going beyond an inspection of the
goods themselves, it was lawful to detain the goods for such time as was reasonably
necessary to make those enquiries.
36. The practical importance, and good sense, of the approach adopted in the
Jacobsohn case to the scope of an examination of goods can be illustrated both by
the facts of that case and by the facts of the present appeals. In that case, as we have
explained, the statutory prohibition was on the importation of cutlery of foreign
manufacture bearing the names or marks of British manufacturers resident in the
United Kingdom. Some of the cutlery in question was impressed with the words
“Watson, Barbican, Norton Folgate”, and some with the words “Daniel Lutter, extrapatent silver steel”. A visual examination alone could not enable the officers to know
where the cutlery had been manufactured, or whether Watson and Lutter were
British manufacturers resident in the United Kingdom. In the present appeals, as
counsel for Eastenders submitted, the question whether beer or wine is liable to
forfeiture as not duty-paid will not be resolved by gazing at the goods, for whatever
length of time. It will only be resolved by examining the paper trail back to the point
of duty payment.
37. As we have explained, the power of detention which was held to exist in
Jacobsohn was not expressly conferred by the customs and excise legislation, but
arose by necessary implication from the officers’ statutory power to examine goods
for the purpose of determining the duty payable or whether they were liable to
forfeiture. It was not conditional upon the goods’ being liable to forfeiture: as Tindal
CJ observed, whether the officers’ suspicions were well grounded was not the
question. It was sufficient, in order for the power of detention to be lawfully
exercised, that the officers should have, in the words of Tindal CJ, a real and honest
doubt that the goods were liable to forfeiture. The protection from liability in
damages or costs which was conferred on customs officers where goods had been
mistakenly seized as liable to forfeiture had nothing to do with such detention, and
did not feature in the case: since the detention of the cutlery was impliedly
authorised by statute, it could not constitute a tort.
38. The approach adopted in the case of Jacobsohn is consistent with the
approach to a statutory power of examination which was taken more recently in the
case of R v Secretary of State for the Home Department, Ex p Labiche [1991] Imm
AR 263, a decision of the Court of Appeal concerned with immigration. The
immigration legislation gave immigration officers the power to examine any person
entering the United Kingdom, and required that a person examined by an
immigration officer should be given notice, granting or refusing leave to enter the
Page 16
United Kingdom, not later than 12 hours after the conclusion of his examination.
The appellant had been given a notice refusing leave more than 12 hours after being
interviewed by an immigration officer, and argued that the notice was out of time.
The Court of Appeal disagreed. Fox LJ, with whom Butler-Sloss LJ and Sir
Roualeyn Cumming-Bruce agreed, said at p 268 that the examination “cannot
terminate until (a) necessary inquiries by the immigration officer or the Secretary of
State have been completed and (b) the immigration officer has received the
directions of the Secretary of State”. The approach adopted to the concept of
examination in this context was the same, mutatis mutandis, as that adopted in
Jacobsohn.
39. It is also relevant to note the earlier customs case of Irving v Wilson (1791) 4
Durn & E 485. That action was brought in the Court of King’s Bench for the
recovery of money had and received by customs officers. The officers had stopped
a cart containing goods which required a permit, without which they were liable to
forfeiture. The carrier did not have a permit, but told the officers that the goods
formed part of a larger consignment, and that a permit for the entire consignment
was with the remainder of the consignment, some miles behind. The officers waited
some time, but the remainder of the consignment did not appear. The officers then
seized the goods. When the remainder of the consignment eventually arrived, and
the permit was produced, those goods also were seized. The officers then refused to
restore the goods until a payment had been made by the owner. He succeeded in his
action for the recovery of the payment. The significance of the case in the present
context arises not from that decision, but from some of the observations made.
Ashurst J noted at p 486 that “the goods were not liable to seizure”, but also stated
at pp 486-487 that “the defendants acted right in stopping the goods at first; but
when the permit came up, there was no pretence to detain them”. The implication
appears to be that it was lawful to detain the goods while there were reasonable
grounds for suspecting that they might be liable to forfeiture. Lord Kenyon CJ
similarly distinguished at p 486 between the initial detention and the subsequent
seizure, stating that “whatever ground of probability there was for stopping the first
cart, yet after the matter was cleared up, there was no pretence for making a seizure”.
40. Returning to the history of the legislation, following the 1833 consolidation
a further consolidation took place in 1845, when generally similar provision was
made by the Act 8 and 9 Vict c 86 and the Act 8 and 9 Vict c 87.
41. The next consolidation, in the Customs Consolidation Act 1853,
amalgamated in a single Act the provisions formerly contained in separate statutes
dealing with the regulation of customs and the prevention of smuggling. It also
amalgamated, in section 223, the previously separate provisions in respect of the
seizure of goods liable to forfeiture, on the one hand, and the detention of suspected
offenders, on the other hand. The consequence was that a reference to detention
appeared for the first time in a provision dealing with the seizure of goods.
Page 17
42. Generally similar provisions were contained in the next consolidation statute,
namely the Customs Consolidation Act 1876. Section 202 again dealt in a single
provision with the seizure of goods liable to forfeiture and the detention of persons.
The provisions dealing with legal proceedings were drafted, as previously, on the
basis that claims would be brought by the owners of goods which had been seized
as liable to forfeiture; and section 267, protecting officers from liability, applied only
where the goods had been seized.
43. The final consolidation prior to the 1979 Act was effected by the Customs
and Excise Act 1952. Like the earlier legislation, the 1952 Act conferred on customs
officers extensive powers of investigation. The Act reverted to the separate
treatment of the detention of persons, in section 274, and the seizure of goods, in
section 275. Section 275(1) however retained the reference to detention which had
appeared in section 223 of the 1853 Act and section 202 of the 1876 Act, and
provided in subsection (1) that “any thing liable to forfeiture under the customs or
excise Acts may be seized or detained by any officer or constable or any member of
Her Majesty’s armed forces or coastguard”. That provision is almost identical to
section 139(1) of the 1979 Act. The 1952 Act also extended the scope of the
protection from liability given to customs officers, by providing in section 280(2)
that there should be no civil or criminal liability on account of the seizure or
detention of any thing liable to forfeiture if the court were satisfied that there were
reasonable grounds for seizing or detaining that thing. That provision is almost
identical to section 144(2) of the 1979 Act.
44. The effect of section 275(1) of the 1952 Act was to create an express statutory
power to detain goods which were liable to forfeiture. Such a power is clearly
distinct from the power to detain as part of the process of examination, and has a
different purpose and different legal consequences. It was and is available only
where goods are liable to forfeiture, whereas the power of detention discussed in the
case of Jacobsohn is available where there are reasonable grounds for suspecting
that goods are so liable. The power of detention conferred by section 275(1) of the
1952 Act, and now contained in section 139(1) of the 1979 Act, is an alternative to
the seizure of the goods in question, but differs from seizure in that it is temporary
in nature and does not trigger the commencement of proceedings for the
condemnation of the goods. As Elias LJ suggested in the Eastenders case, there
could be circumstances in which goods were considered to be liable to forfeiture but
in which the Commissioners might not wish to embark at once upon a procedure
leading to the condemnation of the goods, for example where the breach of the law
was capable of correction. Detention under section 139(1), unlike detention for the
purpose of investigation, would require, and would attract, the protection afforded
by section 144(2).
45. The important question for present purposes is whether, when Parliament
created the power to detain goods liable to forfeiture, it by implication abolished the
Page 18
power of detention which had previously been held to arise by necessary implication
from statutory powers of examination. In our view no such implication follows, for
several reasons.
(1) Temporally, the powers are distinct: the process of examination
precedes the reaching of a conclusion whether goods are liable to
forfeiture. In terms of purpose, the powers are equally distinct. The
purpose for which the power to detain, as an incident of examination,
may be exercised is to enable the officers to retain control over the
goods temporarily until they have arrived at a conclusion as to the duty
payable or as to whether the goods are liable to forfeiture. The purpose
for which goods may be detained after such a conclusion has been
reached is plainly different, and would appear to be as Elias LJ
suggested. There is therefore no necessary implication that the
enactment of a power to detain goods liable to forfeiture entailed the
abrogation of the existing power to detain as part of the process of
examination.
(2) It is difficult to conceive why Parliament should have conferred
upon the Commissioners and their officers a wider range of intrusive
investigatory powers than any other public body, but should at the
same time have chosen to deprive them of a means of preventing
goods from being disposed of until they have completed their
examination and decided whether the goods should be seized. Why
depart from an approach long approved by the courts? Why,
moreover, should Parliament have conferred on the Commissioners
more extensive powers to detain persons (in section 138 of the 1979
Act) than to detain goods?
(3) The 1952 Act was a consolidation Act with amendments. There is
nothing in the report of the Committee reporting on the Bill (Report
of the Committee on the Draft Customs and Excise Bill (1951), Cmd
8453), or in the notes on clauses prepared by Parliamentary counsel,
included as an appendix to the report, to indicate that Parliament
intended the 1952 Act to have the effect of restricting the existing
powers of detention possessed by customs officers.
46. We turn now to consider the present appeals in the light of these general
observations.
The Eastenders case
47. In the Eastenders case, there is no dispute that the officers were entitled to
inspect the goods in question in accordance with section 118C(2) of the 1979 Act,
Page 19
and to require the production of documents under section 118B. It is also not in
dispute that, as Sales J found, the officers had reasonable grounds to suspect that
duty had not been paid on the goods. The officers were unable to fulfil the object of
the inspection, by determining whether the appropriate duties had been paid, without
making further enquiries into the provenance of the goods. They detained the goods
while those enquiries were made. It is not in dispute that the period during which
the goods were detained did not exceed a reasonable period of time.
48. In the present appeal, counsel for the Commissioners submitted that section
118C(2) of the 1979 Act authorised the detention of the goods until the statutory
inspection had been completed, and further submitted, in the light of the Jacobsohn
case, that there was, and had always been, a power to detain goods pending
determination of whether or not they were liable to forfeiture. It was however their
primary contention that the inspection of the goods came to an end when the goods
had been visually examined, and that their subsequent detention must therefore be
justified under section 139(1). For the reasons we have explained at paras 35-37, we
consider that that approach is based upon an unduly narrow understanding of what
may be involved in an inspection in such circumstances.
49. As we have explained at para 23, we consider that the majority of the Court
of Appeal were correct in their construction of section 139(1). They were therefore
correct to hold that, since the goods were not in fact liable to forfeiture, their
detention did not fall within the scope of section 139(1). It does not however follow
that the officers had no power to detain the goods for the purpose of investigating
their duty status. Since the officers were carrying out a lawful inspection of the
goods for the purpose of determining whether the appropriate duties had been paid,
and had reasonable grounds to suspect that duty had not been paid, they were in our
view entitled by virtue of section 118C(2) to detain the goods for a reasonable period
in order to complete the enquiries necessary to make their determination.
The First Stop Case
50. In the First Stop case, there is no dispute that the officers were entitled to
examine the goods in question in accordance with section 112 of the 1979 Act, and
to require the production of documents under section 112A. The officers were
unable to fulfil the object of the examination, by determining whether the
appropriate duties had been paid, without making further enquiries into the
provenance of the goods. They detained the goods while those enquiries were made.
They appear to have had reasonable grounds for suspicion that duty had not been
paid, and the contrary has not been argued. It has not been argued that the period
during which the goods were detained exceeded a reasonable period of time.
Page 20
51. As in the Eastenders appeal, it was submitted on behalf of the Commissioners
that the power of examination conferred by section 112 permitted the
Commissioners to detain the goods for the purpose of their examination, and that
there was a power to detain the goods pending determination of whether or not they
were liable to forfeiture. These were again, however, conceived to be distinct
powers, on the assumption that the examination of the goods came to an end when
they had been visually inspected. It was therefore the Commissioners’ primary
contention that the power to detain the goods after that point must have some other
source, section 139(1) being the only candidate. As in the Eastenders appeal, we
consider however that the examination was not completed until the necessary
enquiries had been made, and that the power of examination impliedly included an
ancillary power of detention for a reasonable time while those enquiries were made.
52. Counsel for First Stop submitted that this approach to the case was not open
to the Commissioners, since they had expressly referred to section 139(1) as the
legal basis of the detention of the goods: see para 8 above. We are unable to accept
that submission. The lawfulness of the detention of the goods depends upon whether
the Commissioners possessed the power to detain them, not on whether they
accurately identified the statutory source of that power. The reasons given to First
Stop for the detention of the goods (“pending further enquiries into their duty
status”), although certainly not expansive, were sufficient to enable them to exercise
their rights, as indeed they did.
Costs
53. As we have explained, section 144(2) of the 1979 Act confers a protection
against liability in damages or costs. It applies “where any proceedings … are
brought against the Commissioners, a law officer of the Crown or any person
authorised by or under the [1979 Act] 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”.
54. In the circumstances of the Eastenders and First Stop cases, judgment should
not have been given for the claimants: on a proper understanding, the detention of
their goods had been lawful, and their applications for judicial review should
therefore have been dismissed. Section 144(2) was therefore not applicable. The
court should have exercised its ordinary discretion in relation to the costs of the
proceedings. It is unnecessary to decide whether, in any event, section 144(2) applies
where goods are detained otherwise than under section 139(1).
55. It follows that the points that were raised by First Stop (and which Eastenders
also sought to raise) in relation to the compatibility of section 144(2) with
Page 21
Convention rights do not arise. It also follows, however, that the decisions on costs
in both cases were made on a mistaken basis. No court has been addressed on the
issue of costs in these cases on the basis that the court possessed its ordinary
discretion. In the circumstances, it is appropriate that the decisions on costs should
be set aside and the matter re-considered by this court on the proper basis.
Disposition
56. For these reasons, we would allow the Commissioners’ appeal in the
Eastenders case, and dismiss the first of the appeals brought by First Stop. The
appeal in relation to costs should be allowed. The decision of the Court of Appeal
in relation to costs in the Eastenders case should also be set aside. The parties should
be invited to make submissions on the issue of costs in this court and the courts
below.
Page 22
