COMMISSIONERS OF CUSTOMS AND EXCISE v THE QUEEN ON THE APPLICATION OF HOVERSPEED LIMITED AND OTHERS [2002] EWCA Civ 1804

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE DIVISIONAL COURT

(BROOKE LJ & BELL J.)

[2002] EWCA Civ 1804

Case No Case No: C/2002/1743

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Between

COMMISSIONERS OF CUSTOMS AND EXCISEAppellant

THE QUEEN ON THE APPLICATION OF HOVERSPEED LIMITED AND OTHERSRespondent

Before

The Master of the Rolls

Lord Justice Mance

Lord Justice Latham

Mr Gerald Barling QC, Mr David Anderson QC and Mr Andrew Bird (instructed by the Solicitor to Customs and Excise) for the Appellant

Mr Rabinder Singh QC & Miss Jessica Simor (instructed by Richards Butler) for the Respondent

Hearing dates : 5th and 6th November 2002

Date 10 December 2002

Lord Justice Mance:

Introduction

[1]This is the judgment of the court in an appeal by the Commissioners of Customs and Excise ("the Commissioners") against relatively limited aspects of a judgment of the Divisional Court (Brooke LJ and Bell J) dated 31st July 2002:

[2002] EWHC 1630 (Admin)

; reported at

[2002] 3 WLR 1219

. The respondents are Hoverspeed Limited ("Hoverspeed") and four individuals, Mr and Mrs Andrews, Mr Wilkinson and Miss Andrews (Mr Andrews' sister). The first three individuals had on 22 nd August 2001 used a car borrowed from the fourth together with Hoverspeed's cross-Channel services for a day-trip from Cheshire to France, during which they bought cigarettes, tobacco and alcohol. On their return to England at Dover, they were the subject of Customs' checks and Customs then seized the cigarettes, tobacco and alcohol, as well as the car.

[2]In the course of its wide-ranging judgment given by Brooke LJ, the Divisional Court concluded that the Excise Duty (Personal Reliefs) Order 1992 (SI 1992 No. 3155) (the "PRO") is incompatible with Council Directive 92/12/EEC of 25 February 1992 ("the 1992 Directive") and article 28 of the EC Treaty in two respects. These were, specifically, in so far as:(i) it makes excise goods imported from another member state (where excise duty has been paid) additionally chargeable to UK excise duty without it being established that the goods are imported into the UK for commercial purposes; and

(ii) it places a persuasive burden of proof on the individual to prove that the goods are not held for commercial purposes, where such goods are held in excess of the minimum indicative levels laid down in the 1992 Directive and in the Schedule in the PRO. There is no appeal in either regard.

[3]The present appeal is against further decisions made quashing Customs' decisions on 22 nd August 2001(a) to carry out checks on the three individuals (by stopping them and searching goods they had with them and the car they were in),

(b) to seize the goods they had bought in France and

(c) to seize the car. A respondents' notice has been served seeking if necessary to uphold the Divisional Court's decisions in these respects on additional grounds. One ground relates to the erroneous approach to dutiability said to have been applied by Customs as a consequence of the PRO's failure to comply with the 1992 Directive in the respects identified in paragraph 2. A second relates to a further error said to have been made by Customs with regard to the scope of the concept of "commercial purposes". Although it is, as the Commissioners submit, difficult on the facts of this case to see the relevance of the second point, even if there was such an error, both sides are agreed that it would assist if we consider it as a matter of principle.

[4]The process of reasoning by which the Divisional Court quashed Customs' decision to check was that it was for the Commissioners to justify their conduct:

"192. In our judgment they have failed to do so. We do not know why they stopped the car which Mr Andrews was driving and required its three occupants to explain themselves. Mr Smith (Customs' "anti-smuggling manager" who explained Customs' practices and the position, so far as it could be recalled, in relation to the stopping of the individuals on 22 nd August 2001) merely states that they were stopped. He does not explain why they were stopped. In his fourth statement he explains Customs' general policy, which is to refrain from giving passengers the reasons why they are stopping them. He suggests, however, that the reasons "might include testing smuggling risk, or that the route you have travelled matches a known smuggling profile 193. Mr Anderson (leading counsel for the Commissioners) appeared to have some difficulty in explaining to us what this language meant, or how his clients could rely on these reasons for stopping individual passengers where there were no reasonable grounds for suspecting them as individuals. It seems to us that the mindset of those who were responsible for determining these policies has not embraced the world of an internal market where excise goods can move freely across internal frontiers subject only to checks made when there are reasonable grounds for suspecting that an individual traveller holds alcohol or tobacco for a commercial purpose, and not for his own use"

The Commissioners challenge this reasoning and conclusion.

[5]As to the quashing of the decisions to seize, the Divisional Court said simply (para. 194):

"We would therefore hold that because the Commissioners have not proved that there were reasonable grounds for stopping this car and questioning its occupants, the goods in it should not have been seized. Nor should the car."

The Commissioners submit that, even if the Divisional Court was right to quash the decisions to check, it does not follow that the decisions to seize were invalid or fell to be quashed. This is, we were told, a point of general importance both in relation to other outstanding cases and for Hoverspeed, because of the impact on its customers and trade. It may have diminished practical significance for Mr and Mrs Andrews, since the Customs have, after further internal deliberation, paid to them a monetary sum in lieu of delivery up of their goods.

[6]For completeness, we mention that the Divisional Court also quashed Customs' further decisions on 18 th October and 22 nd November 2001 to refuse to return her car to Miss Andrews. It said:

"Furthermore, and quite independently, we consider that the Commissioners' refusal to return the car to Miss Andrews, without even considering whether it might be restored to her on payment of an appropriately proportionate sum (given all the circumstances of the case), represented a response which was just as disproportionate as their similar response in the case of Mr Lindsay (see the principles set out in National and Provincial Building Society v. UK (1998) 25 EHRR 127 at [80]). To equate her position with the position of a car owner who incurs a parking fine when his car, borrowed by a third party, is found illegally parked is to rely on an utterly untenable analogy."

There is no appeal against that aspect of the Divisional Court's reasoning and conclusions. Miss Andrews' car has accordingly been returned to her. The legal framework

[7]We turn to the relevant legal framework. This is examined in depth in the Divisional Court's judgment at paragraphs 72 to 129, and elsewhere (particularly for present purposes 159-161 and 174-183). Only certain aspects are of present relevance. We start with a fundamental principle of the modern common market, identified in the EC Treaty in Part One, Principles, in both articles 2 and 14 (ex 7A). The latter article provides that the Community "shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992" which "shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty". This enshrines an objective; it does not itself have direct effect in creating an internal market: see e.g. Echirolles Distribution SA v. Association de Dauphiné

[2000] ECR I-8207

, per Advocate General Alber, paragraphs 30-34 and also paragraph 40 in Wisjenbeek [1999] I-6207, analysed below (paragraph 33).

[8]Part Two, Citizenship of the Union, article 18 (ex 8a) also provides for the free movement of persons: "Every citizen of the Union [that is every person holding the nationality of a member state] shall have the right to move and reside freely within the territory of the member states, subject to the limitations and conditions laid down in this Treaty and the measures adopted to give effect to it".

[9]Two important early Council Directives, 64/221/EEC and 73/148/EEC, were identified by the Divisional Court as giving specific effect to these provisions. Both were considered in this court in Gough v Chief Constable of Derbyshire Constabulary

[2002] EWCA Civ 351

; QB 1213. Directive 73/148/EEC, which had as its forerunner an earlier Directive 64/220/EEC, abolishes restrictions on the movement and residence within the Community of "(a) nationals of member states who are established or wish to establish themselves in another member state in order to pursue activities as self-employed persons, or who wish to provide services in that state; (b) nationals of members states wishing to go to another member state as recipients of services". It grants such persons the right to leave member states, exercisable "simply on production of a valid identity card or passport". Article 46 of the EC Treaty contemplates specifically that member states may nonetheless introduce provisions for special treatment for foreign nationals on grounds of public policy, public security or public health. Directive 64/221/EEC provides in this context that "Measures taken on grounds of public policy or of public security shall be based exclusively on the personal conduct of the individual concerned". Gough shows that article 46 does not exclude the taking of measures on similar grounds with regard to a member state's own nationals. In Gough the measures were football banning orders under the Football Spectators Act 1989, as amended by the Football (Disorder) Act 2000, preventing the appellants leaving England and Wales when certain matches were taking place abroad.

[10]Part Three Title I in the EC Treaty contains further provisions under the heading "Free Movement of Goods". These include in article 23 (ex 9) the general statement that the Community "shall be based upon a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect"; and in article 25 (ex 12) a positive prohibition of all such duties and charges. Articles 28 and 29 (ex 30 and 34) also contain positive prohibitions of quantitative restrictions on imports and quantitative prohibitions on exports, and all measures having equivalent effect, between member states. Articles 28 and 29 have direct effect, conferring on individuals rights enforceable before the courts of a member state: see e.g. Apple and Pear Development Council v. K. J. Lewis Ltd. [1983] ECR 4083, 4125-6 paras. 36-42. However, article 30 (ex 36) provides:

"The provisions of articles 28 and 29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health …. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between member states."

Excise duties are obviously capable of having an effect on intra-Community trade. Article 93 (ex 99) supplements the objective in article 14 by providing that the Council shall, acting unanimously on a proposal from the Commission, adopt provisions for the harmonisation of inter alia excise duties "to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market within the time limit laid down in article 14".

[11]The 1992 Directive harmonises "chargeability" (i.e. conditions for charging) without harmonising the levels of excise duty that individual states may charge. Thus, United Kingdom rates may, and do in fact, remain substantially higher than those in say France. Hence, the origin of the present case (as well as other litigation in a different context: see R v. Commissioners of Customs and Excise ex p. Shepherd Neame

[1999] 1 CMLR 1274

). Under the scheme of the 1992 Directive the crossing of an internal frontier is no longer in principle a chargeable event for excise duty purposes. Putting on one side products moving under "suspension arrangements" (not here relevant), the chargeable events are now(i) manufacture within a member state;

(ii) importation into a member state from outside the Community; and

(iii) "holding for commercial purposes" within a member state (cf article 9). Articles 8, 9 and 10 provide, so far as material:

"Article 8 As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired. Article 9 1. Without prejudice to Articles 6, 7 and 8, excise duty shall become chargeable where products for consumption in a Member State are held for commercial purposes in another Member State. In this case, the duty shall be due in the Member State in whose territory the products are and shall become chargeable to the holder of the products. 2. To establish that the products referred to in Article 8 are intended for commercial purposes, Member States must take account, inter alia , of the following: - the commercial status of the holder of the products and his reasons for holding them, - the place where the products are located or, if appropriate. the mode of transport used, - any document relating to the products, - the nature of the products, - the quantity of the products. For the purposes of applying the content of the fifth indent of the first subparagraph, Member States may lay down guide levels, solely as a form of evidence. These guide levels may not be lower than: (a) Tobacco products Cigarettes 800 items Cigarillos (cigars weighing not more than 3g each 400 items Cigars 200 items Smoking tobacco 1.0 kg (b) Alcoholic beverages Spirit wines 10 litres Intermediate products 20 litres Wines (including a maximum of 60 litres of sparking wines) 90 litres Beers 110 litres …. 3. Member States may also provide that excise duty shall become chargeable in the Member State of consumption on the acquisition of mineral oils already released for consumption in another Member State if such products are transported using atypical modes of transport by private individuals or on their behalf. Atypical transport shall mean the transport of fuels other than in the tanks of vehicles or in appropriate reserve fuel canisters and the transport of liquid heating products other than by means of tankers used on behalf of professional traders. Article 10 1. Products subject to excise duty purchased by persons who are not authorized warehousekeepers or registered or non-registered traders and dispatched or transported directly or indirectly by the vendor or on his behalf shall be liable to excise duty in the Member State of destination…"

We make this observation. Although crossing an internal frontier is no longer in principle a chargeable event, the terms of the Directive do mean that chargeability in a particular Member State can depend upon the purpose for which and transport by which goods are moved between Member States (cf e.g. article 8, 9(2) and (3)). Although not expressly provided for by the Directive, some form of proportionate checking must be permissible, if States are to operate the Directive according to its scheme and their own legitimate interests in recovering excise duty chargeable according to its terms.

[12]We turn to the United Kingdom legislation. The basic statute is the Customs and Excise Management Act 1979 ("CEMA"), but certain of its provisions have been restricted in application by later legislation designed to give effect to the 1992 Directive; and, to the extent that such legislation fails to do this, the Divisional Court held the 1992 Directive to be directly applicable, a conclusion not challenged on this appeal.

[13]Checking powers: The starting point is s. 78(2) of CEMA, which provides:

"Any person entering or leaving the United Kingdom shall answer such questions as the proper officer may put to him with respect to his baggage and any thing contained therein or carried with him, and shall, if required by the proper officer, produce that baggage and any such thing for examination at such place as the Commissioners may direct."

The application of s.78 to intra-Community passengers is now limited by the Finance Act (No. 2) Act 1992, to which we shall come (in paragraph 14). S.159, containing power to examine and take account of goods, is generally only used in relation to freight. S.163 allows the searching of vehicles or vessels, in these terms:

"(1) Without prejudice to any other power conferred by the Customs and Excise Acts 1979, where there are reasonable grounds to suspect that any vehicle or vessel is or may be carrying any goods which are— (a) chargeable with any duty which has not been paid or secured; or (b) in the course of being unlawfully removed from or to any place; or (c) otherwise liable to forfeiture under the customs and excise Acts, any officer or constable or member of Her Majesty's armed forces or coast-guard may stop and search that vehicle or vessel."

Excise goods in respect of which duty has not been paid are "liable to forfeiture" under The Excise Goods (Holding, Movement, Warehousing and REDS) Regulations 1992 (SI 1992 No. 3135), where duty has not been paid on or before an excise point (regs. 6 and 16). Under regulation 4(1), the excise duty point in the present context was "the time when the goods [were] chargeable with duty at importation". The effect of these provisions is that duty became payable as soon as goods are imported into the United Kingdom, even though no customs entry has been or is made in respect of them under s.43 of the 1979 Act: see R v. Smith

[2001] UKHL 68

, para.13. S.164 also provides a power to search any person, where there are reasonable grounds to suspect that he or she is carrying any article chargeable with duty or in respect of which the importation or exportation is prohibited or restricted. However, dutiable goods are generally of a bulk which makes that power irrelevant.

[14]S. 4(1) of the Finance (No. 2) Act 1992 provides that the powers contained in ss. 78 and 164 shall not, except in certain cases listed in s.4(2):

"be exercisable in relation to any person or thing entering or leaving the United Kingdom so as to prevent, restrict or delay the movement of that person or thing between different member States"

. The cases listed in s.4(2) are "those where it appears to the person on whom the power is conferred that there are reasonable grounds for believing that the movement in question is not in fact between member States or that it is necessary to exercise the power" for specified purposes. These purposes include "the enforcement of any prohibition or restriction" with respect to, inter alia, the importation or exportation of goods into or out of the United Kingdom. But they do not include the detection of goods being smuggled with a view to avoiding paying excise duty due in the United Kingdom or any other country. Prohibited or restricted goods in relation to which the powers in ss. 78 and 164 remain unaffected include controlled drugs, obscene material, offensive weapons, firearms and explosives, endangered species and certain animals susceptible to rabies.

[15]S. 163 of CEMA, containing a power exercisable throughout the United Kingdom, remains unaffected by the Finance (No. 2) Act 1992. The Finance Act 2000 s.26, in force since 28 th July 2000, introduces a new section, s.163A, also exercisable throughout the United Kingdom. Where there are reasonable grounds to suspect that a person in the United Kingdom has with him, or at the place where he is, any dutiable alcohol, or tobacco products, which are chargeable with duty of excise and liable to forfeiture under the customs and excise Acts, an officer may "require the suspect to permit a search of any article that he has with him at that place, and if the suspect is not under arrest, detain him (and any such article) for so long as may be necessary to carry out the search". The retention unaltered of section 163 and the introduction of section 163A, both containing powers exercisable throughout the United Kingdom, marries with the view of the Commission in its communication of May 8, 1992 (COM (92) 877 final, para.7) as to what would continue to be permissible once measures to implement the then article 7A (now 14) were in place. It said that that article:

"establishes a clear and simple objective that allows no margin of discretion. But the abolition of border controls does not deprive the competent authorities of their power to act throughout their territory and up to the frontier of that territory. However as the crossing of the border may no longer give rise to controls, such intervention must form part of the internal monitoring arrangements covering the whole of the territory. Powers to impose controls or penalties which were exercised only on the occasion of, or in connection with, the crossing of an internal frontier would, therefore, be contrary to Article [7A]"

. So it is under ss.163 and 163A that Custom's power to check falls to be examined in relation to the present case; and, under their provisions, such power only arose if there were reasonable grounds to suspect one of the matters mentioned in such provisions.

[16]Summary of position on checking: i) Excise duty is payable on alcohol or tobacco products on or before an excise point, which corresponds here with the point of importation (paragraph 13). ii) Goods on which excise duty is payable and has not been paid are liable to forfeiture (paragraph 13). iii) Where there are reasonable grounds to suspect that a person has with him, or at the place where he is, goods which are liable to forfeiture, a customs officer may search any article that the person has with him (s.163 of CEMA - paragraph 15 above). iv) Where there are reasonable grounds to suspect that any vehicle or vessel is or may be carrying any such goods, a customs officer may stop and search that vehicle or vessel (s.163A of CEMA – paragraph 15).

[17]Seizure and forfeiture: By s.49(1)(a) of CEMA:

"Where …. any imported goods, being goods chargeable on their importation with …. excise duty, are, without payment of that duty, (i) unshipped in any port,…. those goods shall [subject to presently immaterial exceptions] be liable to forfeiture"

. We note in passing that s.49(1)(a) provides the same power of forfeiture in relation to "any goods the importation of which is for the time being prohibited or restricted by or under any enactment". We have already given examples of prohibited or restricted goods (paragraph 14). By s.141(1) any vehicle used for the carriage of, and any other thing "mixed, packed or found with, the thing so liable" shall also be liable to forfeiture. By s.139(1):

"Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer"

. S.139(6) provides for Schedule 3 to have effect for the purpose of forfeiture and of proceedings for condemnation of any thing as being forfeited. Under Schedule 3, paras. 3 and 4 a person may within one month of the notice or, if there is no notice, date of seizure give notice of a claim "that any thing seized as liable to forfeiture is not so liable"; under para.5, if no such notice is given, the thing in question shall be deemed to have been duly condemned as forfeited; and under para.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".

[18]The stringency of this regime is potentially mitigated in several ways: i) First, para.16(a) of Schedule 3 provides that the Commissioners may at any time if they see fit and notwithstanding that the thing has not yet been condemned as forfeited "deliver it up to any claimant upon his paying …. such sum as they think proper, being a sum not exceeding that which in their opinion represents the value of the thing". ii) Second, if in proceedings under Schedule 3 to CEMA, the condemnation court finds that the thing was not liable to forfeiture at the time of its seizure, the Commissioners are obliged, on demand by the claimant, to tender to him an amount equal to any sum paid by him under para.16(a), or, where they have sold the thing an amount equal to the proceeds, or, where they have destroyed the thing, an amount equal to its market value at the time of seizure (less any duty or tax chargeable on the thing and unpaid before the seizure). If a claimant accepts any amount so tendered, he is not then entitled to maintain any action on account of the seizure, detention, sale or destruction of the thing. iii) Third, under s.152(b) of CEMA the Commissioners may, if they see fit, "restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized" under the customs and excise Acts. iv) Fourth, s.14 read with Schedule 5 para. 2(1)(r) of the Finance Act 1994 confers on a person, in relation to whom a decision has been made under s.152(b) whether or not to restore and subject to what conditions, the right to require the Commissioners to review such decision; while s.16 gives a further right to appeal to the VAT and Duties Tribunal with respect to any decision by the Commissioners following such a review. S.16(4) provides that the relevant power of the Tribunal "shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say-(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;

(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and

(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future." We note that in its decision in B S Gora and Others v. The Commissioners of Customs and Excise (2lst January 2002), not directly relevant to the issues before us, the VAT and Duties Tribunal considered the compatibility of this procedure with

article 6 of the European Convention on Human Rights

. The Tribunal took the view that, for the hearing before it to be article 6 compliant, it must have the capacity both to find all the primary facts and to determine the issue of reasonableness in their light.

(s) to check

[19]Paragraph 4 above sets out the Divisional Court's reasoning. We detect two strands to this reasoning: i) The Commissioners could not give any specific reason for checking in respect of the three individuals or their vehicle - it was at the time not their policy either to give to individual travellers or to record for their own purposes any reason which existed. ii) Mr Smith's evidence showed that the reasons why Customs undertook checks included reasons which were not legitimate - the mantra adopted was that the reasons "might include testing smuggling risk, or that the route you have travelled matches a known smuggling profile". This strand raises a question as to the extent to which Customs can use profiles and trends, when deciding whether to check in individual cases.

[20]The question arises whether the Divisional Court regarded both limbs of its above reasoning as essential to its decision. Mr Rabinder Singh QC, representing Hoverspeed and the four individuals, submits that the first limb is by itself sufficient to justify the conclusion that the checks were unlawful. Against this, Mr Barling QC for the Commissioners submits that the first limb cannot stand by itself. If on the evidence the Commissioners' practice was only to take into account appropriate considerations when deciding whether to check, then in Mr Barling's submission, although they cannot now identify particular reasons, it is to be inferred that they had - or at any rate Hoverspeed and the individuals cannot show that they did not have - valid reasons. But Mr Barling, rightly, does not suggest that the vague mantra, used at that time by Customs to respond to enquiries about the reasons for any check, constituted or threw light on any actual reasons.

[21]The suggested inference of reasonable grounds to suspect: Mr Barling's submission raises the question whether the fact that Customs decided to check certain individuals combined with the fact that at least one of the individuals checked was found in possession of cigarettes, tobacco and alcohol in excess of the quantities mentioned in Article 9 of the 1992 Directive and the Schedule to the PRO gives rise to the inference that Customs had reasonable ground to suspect that they had, or in the case of their vehicle, might have with them goods liable to forfeiture.

[22]We do not consider that it does. First, the burden of proof rests on Customs to show reasonable grounds to suspect. When claiming to interfere with an individual's person or property, Customs are "bound to shew by way of justification, that some positive law has empowered or excused" them: see Entick v. Carrington (1765) 19 St Tr 1030 , 1066, per Lord Camden CJCP; Ghani v. Jones

[1970] 1 QB 693

; and O'Hara v.Chief Constable of R.U.C.

[1997] AC 286

, 290B per Lord Steyn and 295F per Lord Hope (although the language of the statute there differentiated it in other respects from the provisions regarding reasonable grounds, with which we are concerned, as the Divisional Court observed at paragraph 160). Second, it is a matter of experience that, although a person with authority or responsibility may assert that he or she has always applied proper principles and procedures, departures and errors in particular cases still occur. We do not consider that it would be appropriate to take on trust, as Customs invite, their application of a proper approach in the three individual cases, in circumstances where it was Customs' choice and responsibility that no proper information exists. It is important that the law should be transparent not merely in its terms, but in their operation. As Customs themselves now appear to accept (since they have changed their procedures following the Divisional Court's decision), it is not appropriate to have a system whereby reasons are neither given nor recorded, and cannot therefore be ascertained or verified after the event. Such a system offers insufficient safeguards against unjustified stopping, and may even tend to abuse. Further, the bare fact that cigarettes, tobacco and alcohol in excess of the guideline quantities were found (on the subsequent search) does not throw any real light on the reasons for suspicion. Customs themselves assert that suspicions in one direction, leading to a search, not uncommonly lead to discoveries of a quite different nature. We therefore agree with the first limb of the Divisional Court's reasoning. It is in our view an independent limb, and on that basis the appeal against the order quashing the checks in respect of Mr and Mrs Andrews and Mr Wilkinson fails.

[23]Summary regarding the quashing of the checks because of Customs' failure to give any reason justifying them: i) It is for Customs to show "reasonable grounds to suspect" justifying any check made under s. 163 or 163A of CEMA (paragraph 21). ii) In circumstances where Customs cannot now provide any positive reason for suspicion, the fact that Customs decided to check a particular individual who, on checking, proved to be in possession of cigarettes, tobacco and alcohol in excess of the quantities mentioned in Article 9 of the Directive and the Schedule to the PRO does not give rise to an inference that Customs had reasonable grounds to suspect that the individual had, or in the case of the vehicle in which he was travelling, might have with him goods liable to forfeiture (paragraph 22). iii) The Divisional Court was therefore correct to quash the checks made in respect of the four individuals (paragraph 22).

[24]The use of profiles and trends: We turn to the second limb, on which both parties wish for guidance and which raises for consideration the extent to which Customs may use profiles and trends, when deciding whether to check in individual cases. There are two aspects to this problem. The first is the extent to which European Community law permits Customs checks by way of stop and search. The second concerns the proper construction of the domestic legislation. Only if the domestic legislation purports to confer checking powers which are not permissible under European Community law will it be invalid and unenforceable.

[25]The Divisional Court's reasoning: The Divisional Court did not clearly distinguish between these two aspects, but was heavily influenced in its construction of the domestic legislation by its analysis of the principles of European Community law. The Divisional Court concluded, in paragraphs 95-98, 159-161 and 174-183 of its judgment, that, for Customs officers to have power to stop and search under s.163 or 163A of CEMA, there must be reasonable grounds for suspecting the person to be stopped and searched "on an individualised basis". In paragraph 160, the Divisional Court said:

"But the reasonable suspicion …. must be that the particular individual whom he is searching is in possession of chargeable goods, and not merely that he falls into the typical "profile" of people who have [been] found to be in possession of such goods in the past"

. It supported this in paragraph 161 with reference to EC law:

"Systematic checking, on the other hand, or questioning in the absence of justification in each individual case under EC law is not permissible …."

In paragraph 180, the Divisional Court summarised the position as follows: "They are not entitled to rely on generalities or trends: there must be reasonable grounds to suspect the person(s) whom they are checking. In the absence of such suspicion on an individualised basis, they have no right to impede Community travellers' movement at the frontier for purposes connected with the collection of excise duty. The powers they use at a frontier must be the same powers as they would use anywhere else within the state for the purpose of ensuring that duty is paid on excise goods chargeable within that territory".

[26]These conclusions were reached against a background of evidence about the Customs' approach. In his first statement, Mr Smith said:

"30. …. In an ideal world, Customs would have specific information warning of all major smuggling attempts and would be able to easily identify those attempts. However, in reality there are comparatively few importations where specific intelligence is available to enable officers to readily identify and select major smuggling attempts."

The Divisional Court set out the position in paragraphs 25 to 29 of its judgment as follows:

"25. Identifying the risk of smuggling among Hoverspeed passengers still leaves Customs officers with the task of identifying the actual smugglers. Mr Leslie Smith, the anti-smuggling manager covering the Dover Hoverport, calls this "targeting to risk"

. He says that it is "not a precise science". In reality there is specific intelligence of comparatively few smuggling attempts. What Mr Smith calls "trend intelligence" is used much more often to assist in the selection of travellers who may be of interest to Customs. Such information may be general and historic. For example, experience on the Dover-Calais route has identified trends in smuggling. For instance, the use of a recently acquired vehicle is relatively common among smugglers, presumably because they do not wish their movements to be tracked. The use of hire cars (after the tightening in Customs' policies on vehicle seizure), frequent trips abroad for short stays or, conversely, frequent short trips to the UK made by overseas residents, are among the factors which are of use in deciding which vehicles to intercept. 26. Intelligence may be more focussed. Prior knowledge from manifest intelligence of who is about to arrive on a particular ship is an important aid in the selection of travellers as a result of both specific and trend intelligence. Checks can be made by Customs against the NEDS database and recent intelligence reports. Research of this kind allows officers to try to identify patterns of travel, for instance a traveller who has made a day trip five times in the last month, or other factors which appear to fit risk profiles, for instance an individual who has previously identified himself as unemployed, but is making a cross-channel trip soon after a previous trip. In this way travellers who appear to pose a risk can be targeted, allowing Customs to concentrate their resources on those travellers identified as posing the greatest risk. 27. Risk profiles are essentially patterns of behaviour, or features, which together indicate an increased risk. They are developed from experience and recent results, which identify new or re-emerging smuggling methods. A common and long-lived risk profile is a single male in a Dutch hired car. Although apparently stereotypical, use of this profile still generates a number of drug seizures every year. Another profile is an unemployed or disabled person who is claiming benefits, but is making regular short-stay day trips and importing significant quantities of tobacco products. Experience has shown that such a profile is a clear indicator of a potential bootlegger, primarily because of the obvious question of how he can afford to make his purchases. 28. Such profiles are not written down, but they are known by all anti-smugglers. Where new factors or smuggling trends are detected, the information is shared between teams and locations by word of mouth and, where a seizure is particularly unusual or significant, details will be referred to Customs intelligence teams for them to distribute more widely as they see fit. Such a system may appear to be haphazard, but it is said to be surprisingly effective. The members of virtually every team, as they arrive for duty at the start of their shift, will ask their departing colleagues for information of any unusual seizures since they were last on duty. An example of a risk which was quickly brought to officers' attention in this way was the smuggling of HRT in giant boxes of washing powder, which is cheaper in France than in this country. 29. When a vehicle is selected for investigation, it is directed into a search area where officers speak in more detail to the driver and any passengers, covering topics such as details of travel arrangements, places visited, and length of journey. The officers assess the answers and reactions to questioning. Checks are made of the NEDS database and manifest information to see whether there are records of recent travel. A search of the vehicle is then undertaken if the officers believe this may be productive, the extent of the search being at the officer's discretion. The information provided during questioning is compared with what is found during the search."

[27]European Community law: The Divisional Court rightly underlined the importance of the freedom of movement of persons (subject only to measures taken on grounds of public policy, public security or public health) achieved under Directive 73/148/EEC, read together with Directive 64/221/EEC and the principles recognised in Gough . The Divisional Court drew from cases in the European Court of Justice a general distinction between checks on an individualised basis and "systematic" checks. Thus, the Divisional Court said that in Commission v. France [1983] ECR 1013 the European Court outlawed systematic checks at the French frontier directed towards ascertaining whether imports of Italian wine could be restricted on public health grounds. It is however relevant to note that the actual circumstances indicated a different motivation. Following violent domestic demonstrations about the scale of importations of low-price Italian table wine, the French authorities had intensified their checks of such wine, "systematically" refusing to accept accompanying documents on the ground of irregularities and carrying out analyses on three consignments in four, so substantially holding up Italian wine importations. Article 3 of the relevant regulation allowed requests for relevant information and in particular the forwarding of documentation and other evidence "where there was reasonable cause for suspicion" that the product did not conform to the wine provisions. It was in this context that the court said:

"A reasonable cause for suspicion, in the sense of Article 3, …. must be based on concrete evidence relating to the specific carriage operation. Contrary to the argument put forward by the French Government, there are no grounds for entertaining a general suspicion with regard to all imports of Italian wine on the basis of a few irregularities or breaches which had been found in particular cases in the past. In no case may mere formal errors in the accompanying documentation justify a reasonable cause for suspicion."

[28]The context in which the court said that there must be "concrete evidence relating to the specific carriage operation" and the contrast which it drew with the circumstances before it (a complete absence of any rational grounds for a "general suspicion") make Commission v. France a very different case from the present. We do not regard it as providing any real assistance on the permissibility of use of profiles or trends to detect "false personal imports" in the present context of chargeability to excise duty. States must be entitled to take effective measures within their frontiers to collect excise duty in accordance with the principles established by the 1992 Directive. To treat as permissible the use of profiles and trends to target particular individuals on a rational basis, including at or near the frontier, is not inconsistent in this context with a requirement for "concrete evidence relating to the specific carriage operation".

[29]The next case in point of time cited by the Divisional Court was Commission v. Belgium [1989] ECR 997. The court was concerned with the checking of residence permits at a frontier (at the same point as the check of identity cards or passports permitted by the Directives to which we have referred in paragraph 10). This additional check took place under a power which was applicable throughout Belgium, and it was not a pre-condition to entry (failure to produce residence documents merely rendered the traveller liable to a fine). The power did not depend upon reasonable suspicion of anything. The simple question was whether its exercise was permissible at the frontier. The court held that it was. It would only become impermissible, if exercised so as to constitute a barrier to the free movement of persons, which it would be if the checking was carried out "in a systematic, arbitrary or unnecessary manner" (para.15). As it was in fact carried out "sporadically and unsystematically" (para. 16), in which connection the Advocate General had given as an example controls in connection with particular events, it was permissible. The case supports the view that powers of stop and search, such as ss.163 and 163A of CEMA, exercisable throughout the United Kingdom, may be exercised at or near the frontier, although not so as to constitute an unjustified barrier to free movement. As to what is or is not justified, the court's disapproval of systematic (by which it clearly meant, automatic, large-scale or, as one might say, un systematic) checks sheds no light on what amounts to reasonable suspicion (when, as here, it is relevant under domestic law), and certainly does not exclude the use of profiles or trends under either Community or domestic law.

[30]In Commission v. Netherlands

[1991] ECR I-2637

a Dutch law had made it a pre-condition of the right to enter Holland that aliens (including thereby nationals of other member states) should answer questions concerning the purpose and duration of their stay and the financial means at their disposal. As the court held, the only pre-condition to entry that might be imposed on nationals of member states was the production of a valid passport or identity card (cf Directive 64/221/EEC referred to in paragraph 10 above). So the Dutch law infringed European law. Advocate General Tesauro did, however consider the making of requests for information on grounds of public policy or public security, expressing his view at para.12 that frontier officials "may put questions to people whose behaviour is such as to raise suspicions, or, in any event, in circumstances in which public security appears particularly threatened"; and that "the actual request for information motivated by grounds of public policy or public security must be justified by the existence of particular circumstances; and also that the (extreme) step of refusal of entry will have to be justified "specifically in relation to the personal conduct of the person in question". The European Court, on the other hand, simply left on one side cases where controls were prompted by reasons of public policy, public security or public health and specifically recorded the Commission's observation that "the inspection of luggage or other goods was not in issue": judgment paras.6 and 7. Even if one treats the Advocate General's views in the context of public policy or security as relevant to the present case, several points arise. First, considerations of proportionality are inherent in the apparent distinction between the "particular circumstances" which would justify questioning and the "personal conduct of the person in question" which alone could justify the extreme course of refusal of entry; in the present case there is no question of refusing entry to any individual. Secondly, we see no basis for saying that the checking of persons "whose behaviour is such as to raise suspicions" or when "justified by the existence of particular circumstances" would exclude reliance on profiles and trends as giving rise to justifiable suspicion in particular cases.

[31]Fourthly, the Divisional Court referred to Federal Republic of Germany v. Deutsches Milch-Kontor

[1994] ECR I-2757

. European regulations regarding export refunds provided for an inspection relating to the composition and quality of skimmed-milk powder to take place in any exporting state, although not necessarily at the frontier. The German authorities undertook the systematic inspection of all such exports at the frontier, charging a fee, which the exporter resisted paying. The court held that "in intra-Community trade, any systematic inspection at a frontier constitutes an obstacle which may be in breach of Articles 30 and 34 [now 28 and 29] of the Treaty" (para.22). It rejected the submission that the practice of systematic inspection could be justified under article 36 (now 30). But it added in para.44:

"It must, however be added that prevention of fraud with regard to the quality and composition of goods qualifying for export refunds is a legitimate concern of Member States. For that reason they cannot be prevented from maintaining frontier inspections in respect of consignments intended for export, provided that such inspections take place on a random basis"

. The case therefore provides no assistance to the respondents' submission that checking of individuals may not take place having regard to profiles or trends, which suggest on a reasonable basis that a particular individual may be carrying goods which are chargeable to duty. On the contrary, it suggests that, in a matter of legitimate concern, the taking of proportionate measures, which do not systematically or disproportionately interfere with freedom of movement, may be acceptable, even if they consist of random inspections.

[32]Mr Barling referred us to further authority. In Förde-Reederie GmbH v. Council of European Union EC CFI; 20 February 2002), the court observed that "the realisation of an area without internal frontiers has still not led to the abolition of administrative formalities and checks, such as those under the general arrangements under the Directive and Regulation, upon crossing intra-Community national frontiers. The continuing existence of frontiers in terms of the checks that are carried out is explained by the fact that the Community legislature has still not achieved harmonisation, within the Community, of the rate of national excise duties". However, the court was here speaking of the checks provided and permitted on movements across internal frontiers by the 1992 Directive and by Commission Regulation (EEC) No 3649/92 on a simplified accompanying document for intra-Community movement of products subject to excise duty.

[33]Mr Barling also referred us to the Commissioners' skeleton before the Divisional Court, which cited the case of Wijsenbeek [1999] I-6207 as authority for the proposition that "the continued existence of different and unharmonised national rules on immigration, visa and asylum policy justified the continuation of checks at national borders, and the imposition of proportionate and non-discriminatory penalties for breach of national rules". The case raised the issue whether the requirement to present a passport or identity document, under Dutch law, was itself contrary to the principle of freedom of movement enshrined in the Treaty. The court held that it was not. In its reasoning at paragraph 40 the court said:

"That article [Article 14, formerly 7a] cannot be interpreted as meaning that, in the absence of measures adopted by the Council …. requiring the Member States to abolish controls of persons at the internal frontiers of the Community, that obligation automatically arises from expiry of that period."

It also said in the same paragraph that "as long as Community provisions on controls at the external borders of the Community, which also imply common or harmonised rules on, in particular, conditions of access, visas and asylum, have not been adopted, the exercise of those rights presupposes that the person concerned is able to establish that he or she has the nationality of the Member State" . So, the court went on in paragraph 43:

"even if nationals of Member States had an unconditional right to move freely within the territory of the Member States, the Member States retained the right to carry out identity checks at the internal frontiers of the Community, requiring persons to present a valid identity card or passport, as provided for by Directives 68/360, 73/148, 90/364, 90/365 and 93/96, in order to be able to establish whether the person concerned is a national of a Member State, thus having the right to move freely within the territory of the Member States, or a national of a non-member country, not having that right."

The court then said in paragraph 44: "In the absence of Community rules governing the matter, the Member States remain competent to impose penalties for breach of such an obligation, provided the penalties applicable are comparable to those which apply to similar national infringements. However, Member States may not lay down a penalty so disproportionate as to create an obstacle to the free movement of persons, such as a term of imprisonment. …. The same considerations apply as regards breach of the obligation to present an identity card or a passport upon entry into the territory of a Member State.

[34]Wijsenbeek is not a direct parallel to the present case. First, it concerned the lack of harmonisation at the Community level with regard to "conditions of access, visas and asylum". These matters relate directly to the crossing of frontiers, and can only be controlled at frontiers. Dutch law, in requiring presentation of identity papers, was consistent in spirit with a number of EC Directives in different areas, including 73/148/EEC (paragraph 9 above). The present case concerns the extent to which checks may be made affecting the free movement of goods. The lack of harmonisation does not directly affect the principle of free movement, but only the level of excise duties. The inference from article 93 and the 1992 Directive is that it was felt unnecessary to harmonise excise duty levels, as distinct from conditions of chargeability, to ensure the establishment and functioning of the internal market. Second, the 1992 Directive introduces a number of permissible checks in the case of cross-border movements of excise goods, but none that specifically covers the type of checking with which we are presently concerned. Third, as we have pointed out, it is not the crossing of a frontier that makes United Kingdom excise duty as a matter of principle payable, but the fact that goods are held in the United Kingdom for "commercial" purposes. On the other hand, even though the 1992 Directive does not specifically provide for the checking with which we are concerned, we have observed in paragraph 11 above that the terms of the Directive make the purpose for which and transport by which goods move between Member States of potential relevance; it would not be possible to operate, and recover duty properly chargeable under such terms, without the possibility of proportionate checking, for which in practice one natural place is likely to be at or near the border crossing point. To that extent, it appears to us that the Commissioners can gain some assistance from the reasoning in Wijsenbeek , as from Deutsches Milch-Kontor (paragraph 31 above). But it is clear from Wijsenbeek (particularly paragraph 44, which we have quoted) that proportionality remains important. We consider that any such checking must still be proportionate to the aim pursued, that is the recovery of duty chargeable under the 1992 Directive, and must not be such as to interfere unduly with the free movement of goods between Member States.

[35]We therefore proceed on the basis that, where as here powers to check applicable throughout a member state are in fact exercised at the frontier, with the legitimate aim of protecting a Member State's interest with regard to duty chargeable under the Directive, it remains necessary to consider whether the manner, scale and effect of their exercise constitutes an unnecessary and unjustified obstacle to the free movement of persons between member states. We cannot derive from the cases cited any principle making it illegitimate under Community law to take advantage of information about trends and profiles, or to apply the same in relation to any particular person. On the contrary, Community law would sanction random spot checks at or near a frontier in appropriate cases. We add that profiles and trends may have a particular relevance at or near a frontier; but their value is unlikely to be confined to that context, although the relevant characteristics of someone holding goods liable to forfeiture in (say) a public house in the Holloway Road or at a car boot sale will differ from those which apply at or near a frontier.

[36]The domestic legislation: Ss.163 and 163A contain powers which are, as we have noted, exercisable anywhere within the United Kingdom. The pre-condition to their exercise is, in the case of s.163, that there should be "reasonable grounds to suspect that a vehicle or vessel is or may be carrying any goods chargeable" with unpaid duty, or, in the case of s.163A that there should be "reasonable grounds to suspect that a person …. has with him, or at the place where he is, any goods to which the section applies". Their terms are in this respect more restrictive than the position would be under European Community law: they do not allow random spot checks. However, they are, on their face, in other respects general. While reasonable grounds must exist in any particular case, there is nothing to limit the basis on which such grounds may arise or the nature of the matters that may be taken into account. The existence and reasonableness of any suggested grounds for suspicion must be a matter for consideration in the light of the particular facts of the particular case.

[37]Both parties have invoked, either directly or by analogy, the provisions of Code A issued under the Police and Criminal Evidence Act 1984 ("PACE"). Customs officers who are charged with the duty of investigating offences must in the discharge of that duty have regard to any relevant provision of that code (s.67(9) of PACE), and any criminal or civil court must take into account any provision of such code appearing to it to be relevant to any question arising in the proceedings (s.67(11)). The non-definitive list scheduled to Code A (cf para. 1.3) containing the "main" powers of stop and search to which the Code applies only includes s.163. But ss. 163A and 164 must also fall logically within the scope of Code A. Paragraphs 1.6 to 1.7A of Code A read:

"(a) Powers requiring reasonable suspicion 1.6 Whether a reasonable ground for suspicion exists will depend on the circumstances in each case, but there must be some objective basis for it. An officer will need to consider the nature of the article suspected of being carried in the context of other factors such as the time and the place, and the behaviour of the person concerned or those with him. Reasonable suspicion may exist, for example, where information has been received such as a description of an article being carried or of a suspected offender; a person is seen acting covertly or warily or attempting to hide something; or a person is carrying a certain type of article at an unusual time or in a place where a number of burglaries or thefts are known to have taken place recently. But the decision to stop and search must be based on all the facts which bear on the likelihood that an article of a certain kind will be found. 1.6A For example, reasonable suspicion may be based upon reliable information or intelligence which indicates that members of a particular group or gang, or their associates, habitually carry knives unlawfully or weapons or controlled drugs. 1.7 Subject to the provision in paragraph 1.7A below, reasonable suspicion can never be supported on the basis of personal factors alone without supporting intelligence or information. For example, a person's colour, age, hairstyle or manner of dress, or the fact that he is known to have a previous conviction for possession of an unlawful article cannot be used alone or in combination with each other as the sole basis on which to search that person. Nor may it be founded on the basis of stereotyped images of certain persons or groups as more likely to be committing offences. 1.7A However, where there is reliable information or intelligence that members of a group or gang who habitually carry knives unlawfully or weapons or controlled drugs, and wear a distinctive item of clothing or other means of identification to indicate membership of it, the members may be identified by means of that distinctive item of clothing or other means of identification. [See Note 1H]"

[38]The general statements in paragraph 1.6 are readily applicable to the present situation. But the more specific examples given in the ensuing paragraphs are directed to situations distant from the present. Unjustified discrimination on the basis of personal factors, such as colour, age, hairstyle or manner of dress, represents a particular social and policing problem, which paragraph 1.7 aims to address. "Stereotyped images of certain persons or groups as more likely to be committing offences" relate to the same context. It would be self-evidently objectionable if Customs set about targeting individual travellers on the grounds of their colour, age, hairstyle or manner of dress, or because of preconceived and irrationally based assumptions about particular social groups. The use in customs investigations of profiling and trends on a rational basis confirmed by experience, leading to suspicion being attracted with regard to a particular individual or vehicle is however a different matter. Without it, one can safely assume, a considerably smaller number of false personal imports would ever be detected.

[39]Summary of conclusions regarding the use of profiles and trends: i) Neither European Community law nor domestic law permits a "blanket" or automatic approach to checking. ii) European law permits the exercise at or near the frontier of powers of stop and search, such as ss. 163 and 163A of CEMA, which are exercisable throughout the United Kingdom, provided that the manner, scale and effect of their actual exercise at or near the frontier is not such as to involve an unjustified or disproportionate obstacle to the free movement of persons between member states. iii) Subject always to this proviso, European Community law permits both checking on a random basis and the use of profiles and trends to identify particular individuals in relation to whom a power to check might be exercised. In the latter case, the individual cannot in our view be said to be checked without evidence of "particular circumstances", or "concrete evidence". On the contrary, a particular individual is selected for checking, because his or her particular circumstances match an established profile or trend. iv) The domestic law of the United Kingdom is in one respect more restrictive than the position under European Community law. It does not allow random spot checks. There must under s. 163 be "reasonable grounds to suspect that a vehicle or vessel is or may be carrying any goods chargeable" with unpaid duty, or, in the case of s.163A, "reasonable grounds to suspect that a person …. has with him, or at the place where he is, any goods to which the section applies". But there is nothing to limit the basis on which such grounds may arise or the nature of the matters that may be taken into account. There is nothing to exclude reliance on profiles and trends to establish "reasonable grounds" to suspect one of the matters stated. Customs must always be careful not to succumb to sterile and unfounded stereotypes. But the nature and legitimate practicalities of their work make profiles and trends an understandable and in our view important part of it. The Divisional Court's own findings, in its paragraphs 25-29, underline and underlie this conclusion. The dichotomy which the Divisional Court seems to have considered to exist between reliance on "generalities or trends" and "reasonable grounds to suspect the person(s) whom they are checking" is, in short, a false dichotomy.

[40]Any question whether Customs has undertaken checking at Dover Hoverport of so extensive or inconvenient a nature as to amount to a general interference with freedom of movement is fact-specific. So is the question whether Customs' exercise of its powers in any of the particular cases before us was unjustified or disproportionate under European Community law, or took place without "reasonable grounds to suspect" under ss. 163 or 163A of CEMA. Such questions cannot be given any general answer on this appeal. The decisions to seize

[41]In its reasoning, which we have set out in paragraph 5 above, the Divisional Court treated it as axiomatic that, if the decisions to check were invalid, then so were the decisions to seize. No argument was addressed to the Divisional Court to that effect below. The submission below that the seizures were invalid rested on other grounds. However Mr Singh submits before us that the Divisional Court's "intuitive reaction" was soundly based in principle. If the officer was acting outside the scope of his power when checking, then any seizure ensuing must likewise be regarded as made without power. Mr Singh sought to support this conclusion on grounds of policy, by pointing out that otherwise officers might be less careful about keeping within the scope of their powers to check. The fact that an invalid check would of itself justify a claim to damages was, he submitted, unlikely to constitute a sufficient deterrent to such abuse. To meet the problem that a search might reveal prohibited or restricted goods, such as Class A drugs, also liable to forfeiture under s.41(1)(c) of CEMA (paragraph 16 above), he drew a distinction between goods of which possession is inherently unlawful, and which a customs officer would therefore be obliged to seize, and goods such as the present cigarettes, tobacco and alcohol, of which possession is only unlawful if for commercial purposes within the meaning of the Directive and PRO. He did not however suggest that there was any positive support for such a distinction in the wording of the relevant provisions of CEMA, and we find it difficult to see the basis for any such distinction.

[42]Mr Singh referred to a number of authorities, in which seizures of goods have been held invalid, such as: R v. Chesterfield JJ, ex p. Bramley

[2000] QB 576

(holding that seizure of material falling outside the scope of a warrant issued under s.26 of the Theft Act 1968 would, even if it took place in good faith, be unlawful, so as to justify an action for trespass); Oman v. Southwark Crown Court (Div. Cat. 1 st July 1999) (where police officers undertaking a search were not acting in the execution of their duty, because they had failed to provide details of their identity, the object of the search and their grounds for making it, as required by s.2(2) and (3) of PACE, which provided expressly "and the constable shall not commence the search until he has performed that duty"); and R v. Chief Constable of Lancashire ex p. Parker (1993) 97 CAR 90.

[43]In the last case, the Divisional Court was concerned with the seizure of goods under a warrant for entry and search made under s.9 and Schedule 1 para. 12 of PACE. Para. 13 of Schedule 1 provides that "A constable may seize and retain anything for which a search has been authorised under paragraph 12". S.15 of PACE provides various safeguards with respect to any such search warrant. It must identify, so far as practicable, the articles or persons to be sought. Under s.16, a constable executing such a warrant must both produce the warrant and supply a copy to the occupier of the relevant premises. S.15 further provides that an entry on or search of premises is unlawful unless it complies with ss.15 and 16. In ex p. Parker , the constable had failed to comply with s.16, so the entry and search were unlawful. It was however argued that s.22(2)(a) conferred on the police a power to retain documents and materials seized during an unlawful search. S. 22 reads:

"22(1) Subject to subsection (4) below, anything which has been seized by a constable or taken away by a constable following a requirement made by virtue of section 19 or 20 above may be retained as long as is necessary in all the circumstances. (2) Without prejudice to the generality of subsection (1) above- (a) anything seized for the purposes of a criminal investigation may be retained, except as provided by subsection (4) below,- (i) for use as evidence at a trial for an offence; or (ii) for forensic examination or for investigation in connection with an offence …."

S.19(1) (although not the provision under which the police had purported to act in ex p. Parker ) provides general powers of seizure by "a constable who is lawfully on the premises". The court in ex p. Parker held, unsurprisingly, that s.22(2)(a) did not give an entirely independent power to retain, irrespective of the legality of the original search. On the contrary, it contained no more than a specific example of the general power to retain provided by s.22(1) in cases of lawful search.

[44]Returning to the present case, the powers of seizure conferred by ss.49(1)(a), 141(1), 139(1) and Schedule 3 of CEMA are not made dependent upon the exercise of any power to stop and search provided in other sections, such as ss.163 and 163A. The object in undertaking a search will be to look for unlawfully held goods, but that does not mean that the validity of any seizure of such goods is conditional upon the legitimacy of the search. The power to seize is exercisable, even where no search is necessary – to take an obvious example, if a person carrying goods liable to forfeiture puts them on the ground, discards them, or leaves or hides them in some other place to which Customs have access. The power is not exercisable under any warrant or by reference to any criterion, save that the goods are "liable to forfeiture". Further, if the power is exercised, and its exercise is challenged in condemnation proceedings, the condemnation court must condemn the goods if it finds that they were liable to forfeiture (para. 6 of Schedule 3 to CEMA).

[45]Mr Singh points out, correctly, that whether goods are "liable to forfeiture" depends, under the 1992 Directive, upon whether they are held or intended for commercial purposes within the meaning of that Directive. But the need for a particular mental state on the part of their holder is merely a pre-condition to the validity of the seizure. It does not create a linkage between the unlawfulness of any prior check and the legality of any seizure. Mr Singh raises the prospect that questions asked or statements made during the course of an unlawful check might relate to and be relied upon to prove the necessary mental state. That raises in our opinion separate issues. First, ss.163 and 163A are concerned with stopping and searching, rather than questioning. Secondly, and in any event, the issue becomes one of the admissibility of evidence, rather than an objection to the lawfulness of the seizure. It is unnecessary, in this context, to resolve the question whether and on what basis evidence might or should in such circumstances be excluded. If proceedings in which an issue arose whether goods were "liable to forfeiture" were viewed as criminal, it would need to be determined whether answers obtained from or statements made by a traveller during the course of an unlawful check could properly be used to incriminate. Whatever the position in that regard, we believe that English law, fortified by the European Convention on Human Rights, would ensure that no unfairness resulted from an unlawful check. We do not however see any unfairness in the seizure of goods liable to forfeiture, even though their presence happens only to be discovered in the course of an unlawful check. That may be bad luck, but it is not unfair.

[46]The Commissioners sought to gain direct assistance on the issue whether the seizure should be regarded as invalid, from the position regarding the admissibility in a criminal context of evidence obtained unlawfully. Leaving on one side confessions, to which different considerations apply, it is common ground that there is no rule in the criminal context, either under domestic law or under the jurisprudence of the European Court of Human Rights, that such evidence will be excluded. The question is whether the proceedings taken as a whole, including the manner in which the evidence was obtained, were fair: A-G's Reference (No. 3 of 1999)

[2001] 1 AC 91

; Schenck v. Switzerland

(1988) 13 EHRR 242

, 265-6; R v. Khan

[1997] AC 558

, 582 per Lord Nolan; its sequel Khan v. UK

(2000) 31 EHRR 1016

; as well as the European Court's recent decision in Allan v. United Kingdom (Application No 48539/99) (5 November 2002).

[47]A further case of interest is Fox v. Chief Constable of Gwent

[1986] AC 281

. Police, after a traffic accident, entered the appellant's house without consent and authority, and were therefore trespassers. In circumstances falling outside any power provided by the then Road Traffic Act 1972, they then required him to provide a breath specimen, which he refused to do. They then (wrongly) arrested him and took him to a police station where he was required under s.8 of the Road Traffic Act to provide a specimen which he did. This specimen was the crucial evidence that led to his subsequent conviction for driving with excess alcohol. His conviction for refusing to provide a breath specimen at his home was set aside, since there was no right to require it. But his conviction for driving with excess alcohol was upheld. The statutory conditions for requiring a suspect to provide a breath specimen under s.8 (that he should be at a police station and that it should be "in the course of an investigation" of an offence, here driving with excess alcohol, under the Act) were satisfied. It was irrelevant that the appellant was at the police station under a continuing wrongful arrest.

[48]Mr Singh submits that this last authority is simply irrelevant. There is no relevant analogy between the seizure of goods and the presentation of evidence in court. There are, we accept, differences. But its underlying rationale, like that of the cases we have considered in paragraphs 42 and 43 above, is, we think, that, even though unlawful behaviour constitutes the background or context in which evidence is obtained, the courts will consider whether the evidence has an inherent validity which is independent of such unlawfulness. The same in our view can be said of the present seizure. The first enquiry is thus whether the relevant legislation is to be treated as making the validity of the seizure depend on the legality of events leading up to it. This it may do either expressly or by implication (and considerations of fairness and policy can certainly play a part in determining whether it should be so read). Here, paying due regard to such considerations, no such link can or should in our view be read into the provisions of CEMA.

[49]Summary regarding seizure: i) The seizure of the cigarettes, tobacco and alcohol from the three individuals in this case cannot be regarded as axiomatically invalid, merely because it occurred as a result of a check which was invalid. ii) The Divisional Court was in our judgment wrong to conclude that, if the check was invalid, then so, necessarily, was the ensuing seizure. Respondents' notice – suggested alternative grounds for quashing the seizures:

[50]This brings us to the respondents' notice, by reference to which Mr Singh seeks to uphold the Divisional Court's decision to quash the seizures on alternative grounds. As amplified orally, the submissions fall under two heads. The first seeks to build on the Divisional Court's conclusion that Customs' general understanding (based on the terms of the PRO which failed correctly to implement the 1992 Directive) was contrary to law. Therefore, it is submitted, Customs' decision to seize the relevant goods as being chargeable to excise duty and liable to forfeiture was unsoundly reasoned, and should be quashed automatically. Mr Singh recognised that the Customs might in theory be entitled to re-exercise their discretion, although(a) that could hardly be realistic after the lapse of time since 22 nd August 2001, the destruction of the goods and the return of the car and

(b) Mr Singh made clear that, at least in relation to Mr and Mrs and Miss Andrews, his primary contention was that nothing could justify an exercise of discretion to seize.

[51]Mr Singh's second (and independent) submission is that the seizures of Mr and Mrs Andrews' goods and of Miss Andrews' car must be regarded as a breach of these individuals' rights under both the Convention on Human Rights and European Community law, and that Customs' decisions to seize should be quashed on that ground.

[52]In response, Mr Barling submits, firstly, that the Customs' decision to seize should not be quashed merely because it may have been reached under a misapprehension as to the law. Whether Customs were or were not entitled to seize depends, he suggested, not on their precise reasoning, but on whether the goods were "liable to forfeiture". Whether the goods were so liable is an issue which can and should be determined by the condemnation court, under Schedule 3 to CEMA (paragraph 18 above). Before the condemnation court, the Commissioners will be bound (as they acknowledge) to accept that the correct legal position was and is that established by the 1992 Directive, not the PRO, in the respects identified in paragraph 2 above.

[53]Secondly, Mr Barling points out that (apart from its criticisms of the Customs' approach to checking, with which we have dealt) the Divisional Court does not appear to have been fundamentally concerned about Customs' policy in relation to seizure. It said in paragraph 186:

"We have set out the relevant principles of law in this judgment and it will be for magistrates' courts (or the High Court) in condemnation proceedings or the VAT and Duties Tribunal in appeals brought under section 16 of the Finance Act 1994 to apply these principles to the facts of individual cases"

In paragraph 189 the Divisional Court went on:

"Provided that the Commissioners confine their checks to those individuals about whom there are reasonable grounds for suspicion, such grounds being relevant to those individuals, we see nothing unlawful about their policy of seizing goods or vehicles until such time as an independent court or tribunal can adjudicate on the matter. It is their present policy on restoration which concerns us. They do not purport to treat all absentee owners equally, and they do not purport to give a proportionate response in every case ….."

To that extent, Mr Singh's present submissions regarding Customs' policy on seizure appear not so much to seek to uphold the Divisional Court's conclusions by a different route, as to challenge them. However, we note that at paragraph 195 the Divisional Court also said this:

"It is unnecessary for us to determine in this case whether the implementation of the automatic vehicle seizure policy in the case of an innocent third party owner like Miss Andrews could be said to be "provided for by law" within the meaning of Article 1 of the First Protocol to the ECHR. We did not hear sufficient argument on this point, which it is unnecessary for us to decide on this occasion. We note that in the Strasbourg caselaw we were shown, the availability of judicial supervision appeared to point to a willingness to overlook the inaccessibility or unpredictability of the governing law in a case involving wide executive discretion so long as an independent tribunal has power to substitute a proportionate response"

. The aspect mentioned in the first sentence of this paragraph was not the subject of any submissions before us. The third sentence links with the primary theme in paragraph 189.

[54]Thirdly, if one looks at the particular facts regarding the decisions to seize, the position is by no means as favourable to the four individuals as Mr Singh's submissions suggest. The Divisional Court in paragraph 190 expressly declined to make "any particular declarations on the facts" in the context of Hoverspeed's claim; it said that, although the general picture was reasonably clear, there was too much dispute about matters of detail to do so. Further, the decisions made in relation to the four individuals were based on the general reasoning that we have set out in paragraphs 4, 5 and 6 above, and not upon any conclusions of fact as to what motivated Customs' decisions to seize. It is true that a standard statement, which we are told was during the relevant period read out to any travellers whose goods were subject to seizure, reflected in its terms the misapprehension as to the legal position and burden of proof that the Divisional Court identified by its first declaration. But the question is what attitude Customs actually adopted.

[55]The evidence to which we were referred indicates that Customs in fact gave full reasons to Mr Wilkinson for seizing his goods at the end of the search that they made. They regarded his explanation of his purchases as implausible. He had purchased goods to a value of £1,339, despite having been unemployed for five years and having a disposable income from benefits of only £188 a month. He simply claimed at that stage that he had saved that money from benefits and kept it in his house. In short, the matter was not decided on the basis of any legal misapprehension or by reference to any burden of proof. Customs reached a clear conclusion disbelieving Mr Wilkinson. As to Mr and Mrs Andrews, although officers doubted their explanations (which included the fact that Mr Andrews was receiving payments under a £10,000 award in his favour), they concluded that there was not sufficient reason to believe that the goods were to be sold on, and accepted them as being for their own use. Customs seized their goods only on the basis that they were packed with Mr Wilkinson's goods: see s.141(b) of CEMA. Miss Andrews' car was seized as a vehicle in which goods liable to forfeiture were being transported: s.141(a). At the stage when it was seized, the Customs had inevitably had only a very limited opportunity to check or consider her position, or the extent to which she might have been party to or known of the plans of Mr Wilkinson, who was in fact her tenant or lodger.

[56]So far as the evidence goes, there seems therefore little if any present basis for the suggestion that any misapprehension as to the correct legal position played any relevant part at all in relation to the decisions to seize. On the contrary, the indications are that, despite the general misapprehension about the legal position embodied in the PRO, Customs directed themselves in these particular cases correctly. In the light of the information before us, we do not consider that the Divisional Court's decisions quashing the seizures can be upheld on the ground that the seizures were made under or as a result of any misapprehension of law on the part of Customs.

[57]This leaves Mr Singh's submission that, on the particular facts (and not because of any general error of policy or misapprehension of law) the seizures constituted wrongful and/or disproportionate interferences with freedom of movement and/or property contrary to the law of the European Community and/or of the Convention on Human Rights (particularly articles 8 and the First Protocol). In the case of Miss Andrews, since she was not herself travelling, it is probably only the Convention that has any potential relevance. Any claims of breach of either Community law or the Convention must necessarily involve close consideration of the facts, and of issues of proportionality. Mr Barling submits that the primary recourse for an aggrieved individual should remain the framework of remedies, which is provided by CEMA and the Finance Act 1994 and which we have summarised in paragraph 18 above. In accord with what was clearly the Divisional Court's own reaction, we agree that, in view of this alternative framework of remedies, courts should be reluctant to interfere on the facts with decisions by Customs whether to seize, despite the discretionary element introduced by the word "may", which appears in s.139(1). The proper remedy in such cases is, as Mr Barling submits, to use that framework of remedies. That is underlined by this court's recent decision in Sivasubramaniam v. Wandsworth County Court and Anor , especially paragraphs 46-47 (Case B1/2002/0191 and B1/2002/0107) (28 th November 2002).

[58]However, there may possibly be claims for damages under Community law or the Convention, for which this framework does not cater. We can take as examples claims by Mr and Mrs Andrews, or Miss Andrews, for inconvenience caused by the seizure of Miss Andrews' car (if the original seizure was regarded as wrongful). Mr Singh points out that it was for this reason, and in order that all such claims could be resolved in the one forum, that Richards J granted permission for judicial review, and ordered that all aspects of the matter, including the individuals' claims for damages, should be determined in the one set of proceedings. Even so, it is clear that Richards J contemplated the possibility that some factual aspects might still have to be left to be determined in other proceedings, which can always be directed under CPR 54.20. He also said expressly that there were "many possible permutations" with regard to the future conduct of the matter. Mr Barling's primary submission is that, if and in so far as there are claims that could not have been resolved in the condemnation court or on a review (and if necessary an appeal to the VAT Tribunal) in respect of any decision not to restore, their basis and prospects on the particular facts are by no means apparent on the material before the court. With this we agree, having regard to the evidential position as we have summarised it above. But Mr Barling did not suggest that we could or should reach any final conclusion on detailed facts on this appeal. The Divisional Court had not gone into them in any detail, and he submits that we should not attempt to do so either. With that we also agree. It will therefore remain open to any of the individuals, who maintains that, if the particular facts are fully investigated, it will appear that all or any of the seizures constituted a breach (whether of the Convention on Human Rights (particularly article 8 or the First Protocol protecting rights of property) or of European Community law) which is not otherwise remediable and is of sufficient seriousness to justify a claim for damages for breach, to pursue such a claim despite our refusal to quash the decisions to seize.

[59]Summary regarding alternative grounds for quashing seizures: i) The Divisional Court's decisions to quash the Customs' seizures cannot be upheld on the first alternative ground of general misapprehension of law proposed by Mr Singh (paragraphs 50 and 52-56). ii) Nor do we consider that they should be upheld on the basis that the seizures involved, on their particular facts, disproportionate interferences with freedom of movement and/or property (paragraphs 57-58). The appropriate course for anyone aggrieved by seizure of his goods is, normally, to take advantage of the framework of remedies provided by statute (paragraphs 18 and 57). iii) The appeal against the Divisional Court's decisions quashing the seizures is accordingly allowed (paragraphs 49 and 59(i) and (ii)). iv) This will however be without prejudice to any claim for damages, which any of the individuals may have but be unable to maintain before either the compensation court or the VAT and Duties Tribunal, to the effect that the seizures constituted an actionable breach in relation to them of either Community law or the Convention on Human Rights (paragraph 58). v) We will hear counsel as to what directions should be made for remission to the Divisional Court and under CPR 54.20 or otherwise to give effect to this conclusion. Respondents' notice – articles 8 and 9 of the 1992 Directive and "products held for commercial purpose"

[60]The respondents' notice also suggested that the seizures should be held invalid because the expression "held …. for commercial purpose" in article 9 of the 1992 Directive did not have the "artificially wide sense" of including "goods held for supply to others on a non-commercial basis". The argument is that the concepts of "products acquired by private individuals for their own use" in article 8 and "products …. held for commercial purpose[s]" in article 9 are not opposite sides of a coin. There is an area between them, which includes products held for supply to others on a non-commercial basis, to which area neither article applies. It is hard to see how this could be of any relevance in the present case. Mr Wilkinson has never suggested that the cigarettes, tobacco and alcohol which he had with him at Dover were for supply to anyone else on a non-commercial or other basis. Be that as it may, it is common ground that the point is of general importance, and we agreed to determine it on this appeal.

[61]The Divisional Court rejected Mr Singh's argument categorically. It considered article 9 to be "clearly parasitic on article 8", and treated "commercial" purposes as the antithesis of purposes of "own use" (paragraph 110). It approved Mr Stephen Oliver QC's statement in Hodgson v. The Commissioners of Customs and Excise [1997] EuLR 116, that article 9 "enables member states to charge excise duty on false "personal imports", in other words on goods brought and so held here for purposes other than those covered by article 8. The Divisional Court also considered that the PRO had in this respect correctly transposed the language of the 1992 Directive into English law, when it provided: ""own use" includes use as a personal gift provided that if the person making the gift receives in consequence any money or money's worth (including any reimbursement of expenses incurred in connection with obtaining the goods in question) his use shall not be regarded as own use for the purpose of this Order".

[62]Against this, Mr Singh cited prior English authority, particularly Lindsay v. The Commissioners of Customs and Excise

[2002] EWCA Civ 267

;

[2002] 1 WLR 1766

. In that case, the Master of the Rolls acknowledged that the suggested antithesis might exist under the Directive, but did not accept that it existed under the PRO. He said at paragraph 17:

" Mr McKay may be right about the Directive, although the only authority that bears on the point to which we were referred lends no support to his thesis (see R v Customs and Excise Comrs, ex parte EMU Tabac Sarl (Case C-296/95) [1998] QB 791 . So far as the 1992 order is concerned, I cannot accept that a holidaymaker who is bringing back some cigarettes for his sister, in anticipation that she will reimburse him the purchase price, can properly be said to be holding the cigarettes 'for a commercial purpose'. The holidaymaker will be liable to pay duty on the cigarettes by reason of the provisions of the Tobacco Products Duty Act 1979. He will not be entitled to relief because he has not obtained the cigarettes for his own use. It does violence to the English language, however, to say that he is holding the goods 'for a commercial purpose'."

It was not argued in that case that the Directive had direct effect, a proposition that Hoverspeed and the four individuals have now successfully maintained. Once that is accepted, the Directive has priority, if there is any difference between its and the PRO's apparent effect.

[63]The scope and effect of article 8 were considered in EMU Tabac

[1998] QB 791

;

[1998] ECR I-01605

. While it is right that in Lindsay the Master of the Rolls did not find support in this authority for the antithesis for which the Commissioners contend, the opinion of Advocate General Ruiz-Jarabo Colomer does contain a sustained analysis of the place and function of article 8, in the general scheme. It creates a special case, in which excise duty falls to be paid in (and at the rate applied in) the state of acquisition, rather than in the state of destination. Although the general scheme of the 1992 Directive is that duty becomes chargeable when goods are released for consumption (article 6), article 7 provides for reimbursement of duty, when products released for consumption in one state are "held for commercial purposes" (and so dutiable under article 9) in another. The special case recognised in article 8 is one which makes goods acquired by a private individual in one state and transported by him or her from that state to another for his or her own use dutiable in the first state only. There would be an odd lacuna (and indeed a considerably wider exception than article 8 permits) if goods transported by an individual not for his or her own personal use, but for supply to others (albeit, for example, on a purely reimbursement basis) fell outside the concept of "product …. held for commercial purposes" in article 9.

[64]We also consider that the scheme of the 1992 Directive only really makes sense, if articles 8 and 9 are treated as antithetical. This is particularly so, when one reads the relevant recitals:

"Whereas any delivery, holding with a view to delivery or supply for the purposes of a trader carrying out an economic activity independently or for the purposes of a body governed by public law, taking place in a Member State other than that in which the product is released for consumption gives rise to chargeability of the excise duty in that other Member State; Whereas in the case of products subject to excise duty acquired by private individuals for their own use and transported by them, the duty must be charged in the country where they were acquired; Whereas to establish that products subject to excise duty are not held for private but for commercial purposes, Member States must take account of a number of criteria"

Taken on its own, the first of these recitals might support Mr Singh's case, but the third recital, to which effect is given by article 9, assumes that there are only the two possibilities mentioned in the first two recitals. Either goods are held for private use within article 8 or they are held for commercial purposes within article 9.

[65]Summary regarding articles 8 and 9 of 1992 Directive: Having considered the scope of the Directive with the benefit of the full submissions that we have had on this topic, we can summarise the position as follows: i) The concepts of "products acquired by private individuals for their own use" in article 8 and "products held for commercial purposes" in article 9 of the Directive are antithetical, in the sense that, if an individual acquires (or having acquired for his own use subsequently decides to hold) products for a purpose other than his own use, such products are to be regarded as held for commercial purposes (paragraph 64). ii) The Divisional Court's reasoning and conclusion regarding the scope of articles 8 and 9 were therefore correct; and there is no room for a conclusion that United Kingdom excise duty was not chargeable in respect of goods, because, although the individual(s) importing them was or were not doing so "for their own use", they still were, or may have been, holding the goods for supply to others on a non-commercial basis (paragraph 60) iii) We record that we are not concerned with the precise scope of the concept "for his own use". The Commissioners accept that it must receive a sensible interpretation. They accept, in particular, that it is not confined to situations where the private individual himself intends to consume the goods. So, for example, they accept that a private individual who travels abroad in order to stock up for his or her dinner table or a party which he or she is giving is acquiring for his own use. Likewise, we would suppose, in the case of an acquisition destined as a present for a relative or friend. Conclusions

[66]The effect of this judgment is that: i) We uphold the Divisional Court's decision to quash Custom's decision to make checks in respect of Mr and Mrs Andrews and Mr Wilkinson on 22 nd August 2001 (paragraph 2.1.1 of the Divisional Court's order; paragraph 23 of this judgment). ii) We consider that "reasonable grounds to suspect" within the meaning of ss.163 and 163A of CEMA may, in appropriate circumstances, derive from information by way of profiles or trends (paragraph 39). iii) We set aside the Divisional Court's decisions quashing Custom's decisions to seize the cigarettes, tobacco and alcohol being carried with them by Mr and Mrs Andrews and Mr Wilkinson on 22 nd August 2001 as well as Miss Andrews' car (paragraphs 49, 59 and 65). iv) We remit to the Divisional Court for further consideration any claim that any of the individuals may have under European Community law or the Convention on Human Rights, arising out of the particular facts of their particular cases (paragraph 58 and 59(iv) and (v)). v) We will, if necessary, hear counsel as to whether it is appropriate to make any further order or declaration.

COMMISSIONERS OF CUSTOMS AND EXCISE v THE QUEEN ON THE APPLICATION OF HOVERSPEED LIMITED AND OTHERS [2002] EWCA Civ 1804

Lord Justice Mance:

Introduction

(s) to check

Cited in 3 later judgments