COMMISSIONERS OF CUSTOMS AND EXCISE v (1) EVERWINE LIMITED [2002] EWCA Civ 1631

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE HOLMAN
(sitting as a deputy High Court judge))
[2002] EWCA Civ 1631Case No A2/2002/1561Venue Royal Courts of Justice, Strand, London, WC2, Friday, 25th October 2002
Between
COMMISSIONERS OF CUSTOMS AND EXCISEClaimant/Respondent(1) EVERWINE LIMITEDFirstDefendant/Applicant(2) G101 OFF SALES LIMITED(3) GRANTELY VINTNERS LIMITED(4) MALCOLM CELLDefendants
Before
Lord Justice ChadwickLord Justice LongmoreMR P MARTIN (instructed by Messrs Needleman Treon, London W1H 5QJ) appeared on behalf of the ApplicantMR R ANDERSON (instructed by Commissioners of Customs & Excise, Solicitors Office Corporate, Legal Services Group (Litigation Division), 6th Floor East, New Kings Beam House, 32 Upper Grounds, London SE1 9PJ) Appeared on behalf of the RespondentDate 25 October 2002

LORD JUSTICE CHADWICK:

This

[1]is a renewed application for permission to appeal from an order made on 12th July 2002 by His Honour Judge Holman, sitting as judge of the High Court, in proceedings brought by Customs and Excise against the applicant, Everwine Ltd, and others, for condemnation of goods under paragraph 1(6) of Schedule 3 to the Customs and Excise Management Act 1979.[2]It is, I think, convenient to set out in summary the structure of that Act so far as it relates to the powers of Customs and Excise to seize, detain and forfeit goods. Section 139(1) provides that:
"Anything 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."
The requirement, therefore, is that the thing seized or detained should be a thing liable to forfeiture. Section 167 provides that:
"If a person knowingly or recklessly makes a declaration to the Commissioners, or any statement in answer to any question put to him, which is untrue in any material particular, he is guilty of an offence and any goods in relation to which the document or statement was made shall be liable to forfeiture."
Section 170B provides that:
"If any person is knowingly concerned in the taking of any steps with a view to the fraudulent evasion, whether by himself or another, of any duty of excise on any goods, he is liable on conviction to a penalty or imprisonment."
Subsection (2) of that section provides that:
"If a person is guilty of an offence, the goods in respect of which the offence was committed shall be liable to forfeiture."
[3]Section 140B of the Act addressed the situation where the goods liable to forfeiture by reason of some offence -- in particular the offences to which I have just referred -- are no longer capable of being seized or detained. In that situation, where the goods are spirits, the Commissioners may seize an equivalent quantity of other spirits in the stock of the trader.[4]Section 139(6) provides that Schedule 3 has effect for the purposes of forfeiture and proceedings for the condemnation of any thing as being forfeited. The structure of the Schedule is this. Paragraph 1(1) requires the Commissioners to give notice of seizure of anything liable to forfeiture to any person who to their knowledge was the owner at the time of the seizure. Paragraph 3 enables a person claiming that a thing seized as liable to forfeiture is not so liable to give notice of his claim within a month of the notice of seizure. Paragraph 5 provides that if that notice is not given, then the thing in question shall be deemed to have been duly condemned as forfeited without further proceedings. Paragraph 6 -- which is the paragraph under which proceedings were taken in this case -- provides that, where a notice of claim is given under paragraph 3, the Commissioners shall take proceedings for 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.[5]It was under those provisions that Customs and Excise seized and detained the goods in question in this case; and subsequently commenced proceedings for condemnation.[6]The goods in question had been seized or detained by Customs and Excise following an investigation into suspected excise duty fraud carried on at, amongst other places, a bonded warehouse known as Fort Patrick in Ipswich. The applicant, Everwine Ltd, was an in-bond trader at Fort Patrick. It is not alleged that the applicant or its directors were directly involved in the primary fraud under section 170B, although it is said that Everwine, by its director Mr Prakash Thakrar, had been guilty of an offence under section 167(1) of the 1979 Act; by knowingly or recklessly providing on 3rd October 1997 a list of goods in which Everwine claimed ownership.[7]The goods now in issue fall into two groups. Group A comprises goods on the list of 3rd October 1997 which, having been seized by Customs and Excise in the course of their entry into the Fort Patrick warehouse on 30th September 1997, were subsequently released to Everwine on the basis of the claim made in the list of 3rd October; and thereafter were removed by Everwine to another bonded warehouse, London City Bond. Following the discovery by Customs and Excise that, as they contend, the list of 3rd October was unreliable and that Everwine had no claim to ownership of certain of the listed goods, those goods were re-detained at London City Bond in December 1997. The power to detain those goods, on which Customs and Excise rely, is the power conferred by section 139, read in conjunction with offences committed, not by Everwine but by others, under section 170B.[8]Group B comprises goods which, it is accepted, belong to Everwine and which are not themselves on the list of 3rd October. Those goods were seized or detained under section 140B in substitution for goods which had been on the list of 3rd October; which had been released to Everwine on the basis of that list; but which could not themselves be re-detained in December, or at all, because they had been sold on. The power to detain those goods, on which Customs and Excise rely, is that conferred by section 139, in conjunction with section 140B and section 167(1) of the Act.[9]The judge described the method of in-bond trading in some detail, at paragraphs 8 and 9 of his judgment. Put shortly, goods held in bond for a particular trader at Fort Patrick were identified in a stock list maintained by Fort Patrick for that trader; and were transferred to other traders, not by physical movement or appropriation of the goods within the warehouse, but by amendments made on paper to the stock lists of the transferor and transferee respectively. The transfer was said to be effected by a release note sent by the transferor, by fax, to Fort Patrick.[10]In respect of some, but not all, of the goods on the list of 3rd October, Customs and Excise were able to identify documents from the applicant instructing Fort Patrick to release or transfer the goods in question and sent by fax between 17.18 and 18.24 on 29th September 1997. Customs and Excise raided Fort Patrick very early in the morning of 30th September 1997. In those circumstances, the primary contention of Customs and Excise was that the applicant was not the owner of goods which were the subject of those release notes, notwithstanding that they appeared on the list of 3rd October, at the time when they were detained; because -- on that hypothesis that the transfer was effected by sending the release note -- title had already been transferred to the transferees named in the release notes.[11]On that basis it was said that Everwine had no interest in respect of which it could oppose condemnation proceedings in relation to the group A goods; and that by submitting a list which was untrue, it had committed an offence under section 167 in relation to the group B goods.[12]The point turns on whether or not there was a transfer of title effected by the sending of the release notes, coupled, perhapes, with whatever action Fort Patrick took on receipt of those notes in relation to its stock records. There is nothing in the judgment to suggest that the judge found that any physical appropriation of the goods had taken place; or that the goods the subject of the release note were identified in any way other than by an entry in a stock list.[13]If the judge were wrong to conlcude, as he did, that title passed under the release notes, then, as it seems to me, it is arguable, first, that he was wrong to hold that the list of 3rd October 1997 was untrue in a material respect, so undermining his conclusion in relation to the group B goods that there was an offence under section 167(1); and second, that he was wrong to reach the conclusion that there was any defence to Everwine's counterclaim for damages for wrongful detention of the goods that had been in its possession at London City Bond in December 1997.[14]Customs and Excise's defence to the seizure of goods in Everwine's possession in December had to be that the goods were liable to forfeiture. That is the condition upon which the statutory power to detain us exercisable under section 139. The basis upon which the group A goods were said to be liable to forfeiture was that they were goods which fell within section 170B. If they were goods which had at all times been owned by Everwine, then they were not goods of a person knowingly concerned in the taking of steps with a view to fraudulent evasion of duty; and so could not fall within section 170B. It would follow that there would be no defence to a claim for wrongful detention. There was no defence raised in relation to group A goods, on the basis that they, too, were goods within the list which had been untrue in material particulars; but the same point would undermine that defence in relation to group A goods as well as in relation to group B goods.[15]The judge's conclusion was based on his understanding of a short passage in the judgment of His Honour Judge Paul Baker QC in In re Stapylton Fletcher Ltd [1994] 1 WLR 1181, at page 1199G-H. In my view, it is arguable that the judge misunderstood the effect of that passage. I am satisfied that there is a real prospect of a successful appeal on the ground that he misdirected himself in law in holding that there had been a transfer of title from Everwine on 29th September 1999 on the basis of the facts which he found.[16]I would give permission to appeal limited to the question which is identified in the grounds of appeal at ground 5, read in conjunction with ground 2. I would confine the permission to that point; stated in ground 2 as the judge having misunderstood the case of Stapylton Fletcher .[17]The only other point that had troubled me was whether Customs and Excise had satisfied the judge that, if they were right on the transfer of title point, the persons to whom title had been transferred were themselves persons knowingly concerned in the taking of steps with a view to the fraudulent evasion of duty, so as to bring them within section 170B; which, as I have indicated, is, in my view, the necessary foundation to a defence of lawful detention under section 139. The answer to that point, in my view, is to be found in paragraph 26 of the judge's judgment; in which he refers to uncontradicted evidence about the other companies all being involved in the scam. That evidence, uncontradicted and accepted by the judge, seems to me to justify the finding which he made, by implication at least, that section 170B was engaged in this case if the title in the relevant goods had passed from Everwine to the other companies he there refers to.[18]Other grounds of appeal have been canvassed; but those seem to me to turn on findings of fact made by the judge after hearing evidence from Mr Thakrar, which he rejected in its entirety.[19]For those reasons, I would grant permission to appeal, but limited as I have indicated.

LORD JUSTICE LONGMORE: I agree.

ORDER

Application for permission to appeal granted on a limited basis; costs reserved. (Order not part of approved judgment)

Cited in 1 later judgment