First Stop Wholesale Ltd, R (On the Application Of) v Revenue & Customs [2012] EWHC 2191 (Admin)

[2012] EWHC 2191 (Admin)

Case No CO/7223/2011

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Venue Royal Courts of Justice

Date Monday 16 July 2012

The Strand

London

WC2A 2LL

B e f o r e:

MR JUSTICE SINGH

Between

FIRST STOP WHOLESALE LIMITEDClaimant

COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMSDefendant

The Queen on the application of

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Mr Geraint Jones QC and Mr Marc Glover

(instructed by Rainer Hughes) appeared for Claimant

Mr James Puzey (instructed by Her Majesty's Revenue & Customs,

Manchester) appeared for Defendant

Judgment

Monday 16 July 2012

MR JUSTICE SINGH:

[1]In this case I gave judgment on the substantive claim for judicial review on 27 March 2012 and adjourned the question of the claimant's application for costs pending the decision of the Court of Appeal in Eastenders Cash & Carry Plc and Another v Commissioners of Her Majesty's Revenue & Customs

[2012] EWCA Civ 689

. That judgment was handed down on 22 May 2012.

[2]The provision which causes a potential barrier to arise in the way of the application for costs is section 144(2) of the Customs and Excise Management Act 1979, which provides:

"Where any proceedings, whether civil or criminal, are brought against the Commissioners, a law officer of the Crown or a person authorised by or under the Customs and Excise 1979 to seize or detain any thing liable to forfeiture under the Customs and Excise Acts on account of the seizure or detention of any thing, and judgment is given for the plaintiff or prosecutor, then if .... .... (b) the court is satisfied that there were reasonable grounds for seizing or detaining that thing under the Customs and Excise Acts, the plaintiff or prosecutor shall not be entitled to recover any damages or costs and the defendants shall not be liable to any punishment."

[3]The main judgment in Eastenders was given by Mummery LJ. Although he had dissented on the underlying substantive issue in the case in an earlier judgment given in January, it is clear that on the costs' issue the court was of one view: see the concurring judgment of Elias LJ (at paragraph 39), and the agreement with both judgments expressed by Davis LJ (at paragraph 47).

[4]The principal issue before the Court of Appeal concerned the compatibility of section 144(2) with Article 1 of the First Protocol to the European Convention on Human Rights, and Articles 6 and 14 of the same Convention, which are set out in Schedule 1 to the Human Rights Act 1998. That was dealt with at length in the main judgment of Mummery LJ (paragraphs 12 to 24). The point was decided against the claimants in that case. Elias LJ also dealt with the point (at paragraphs 40 to 45). Under the heading "Belief in lawful reason for detention" Mummery LJ dealt with a separate argument (paragraphs 25 to 27). The defendant before me places particular reliance upon paragraph 27, which reads:

"I can see no basis in section 144(2) for the distinction on which claimants rely in their additional submission. The only condition stipulated by section 144(2) is the objective one that there were reasonable grounds for detaining the goods. That stipulation assumes that the detention was unlawful, as, if the detention was lawful, there would be no occasion for HMRC to invoke section 144(2). Nothing is said in the section about whether the reason relied on at the time of detention is a potentially lawful reason or a reason which is unlawful per se. In any event, it is difficult to see what difference in substance there is between the existence or non-existence of reasonable grounds for detention of the goods and the different kinds of reason for the detention of the goods. The reasonable grounds in this case were the reason for detention."

[5]The claimant before me places particular emphasis on the last sentence in that passage. It is submitted that the facts of Eastenders were materially different from the facts of the present case. In Eastenders it was conceded that the expressed grounds for detaining the goods were ones where there were reasonable grounds. In the present case it is submitted that the express ground that was given I have held to be unlawful and that an unlawful ground cannot be a reasonable ground. It is also submitted that there has been no concession in the present case that there were reasonable grounds. They were not, as is said at the end of paragraph 27 in Eastenders, the same as the "reason for detention". It would appear therefore that that passage in the reasoning of Mummery LJ was not strictly necessary for the outcome of the decision on costs in Eastenders. It would seem that the Court of Appeal has not had to grapple in such stark terms, as I have to do in the present case, with the potential injustice to which, it is submitted, the terms of section 144(2) would lead if applied to a case like the present.

[6]On behalf of the claimant, Mr Jones QC submits that in the present case, unlike Eastenders, the court does indeed have to grapple with whether there may be a distinction between a potentially lawful reason under the Customs and Excise Acts and a reason which is unlawful per se. He submits that there are potentially three categories of case. The first category is where the detention is lawful. It is common ground that section 144(2) is not necessary in such a case. As Mummery LJ said in paragraph 27 of Eastenders, the necessary premise for the need to invoke section 144(2) in the first place is that a detention is not lawful, otherwise there would be no need to invoke it. However, Mr Jones submits that, as well as the category of unlawful grounds, there is the middle category of potentially lawful grounds. This is where there may be, on the face of it, and in the terms which have been expressed by the detaining authority, a reason which is potentially lawful within the meaning of the relevant legislation. If, however, it turns out not to be a lawful reason on the facts of a given case, then the detention would be in fact unlawful. Nevertheless, in such a case, submits Mr Jones, section 144(2) will have room to operate because if there are, objectively considered, reasonable grounds for detaining the goods in question, then Parliament has laid down a barrier for the recovery of damages or costs.

[7]Mr Jones did not dispute two things which at one point might have been thought to be in issue. He does not dispute them in the light of the decision of the Court of Appeal in Eastenders. First, it is common ground before me that section 144(2) is capable of applying to all civil proceedings, including proceedings for judicial review, such as the present. Secondly, it is common ground before me that the word "or" in section 144(2) is to be read disjunctively and not conjunctively. In other words, it is accepted that section 144(2) precludes a claim for costs not only where there is also a claim for damages, but where there is only an application for costs in such a case as the present. However, Mr Jones does not accept that, as a matter of correct interpretation, the provision is capable of applying to a case like the present. He emphasises that the words of section 144(2) require reasonable grounds for detention to arise "under the Customs and Excise Acts". He submits, therefore, that the reason for detaining goods in a particular case must have at least the potential of being a proper and lawful reason under those Acts. As an illustration he postulates an extreme, but hypothetical, example in order to test how far the principle extends. He poses a fanciful scenario of the Customs official who says that he will detain the goods because he does not like the appearance of the person concerned perhaps on racial grounds or for some other improper reason. He says that the court could not properly refuse a successful claimant in judicial review proceedings, an application to recover their costs having succeeded before the court. The reason given, he submits, would plainly be outside the contemplation of the Customs and Excise Acts. It could not be considered to be a reasonable one, let alone a lawful one. He submits that it would not matter in such a scenario if there was evidence which, objectively considered, would have justified on reasonable grounds the detention of the goods in question. He submits that there is no need to give such a wide interpretation to the relevant provision, interfering as it does with the ordinary principle that, in order to do justice, a successful party to litigation should normally be awarded their costs.

[8]Mr Jones also prayed in aid the decision of Sales J in Checkprice (UK) Limited (in administration) v Commissioners for Her Majesty's Customs and Excise

[2010] EWHC 682 (Admin)

. That case related to a claim for damages, not an application for costs. However, Mr Jones submits, rightly in my view, that it is of importance because the same provision, section 144(2) governs both claims for damages and applications for costs. He drew my attention to paragraphs 42, 43 and 52. In that case the point in issue before the court was not the same as the point before me. It concerned a reasonable time provision. Sales J had already held that the reasonable time had expired. In considering a claim for conversion of the goods in question, Sales J rejected the argument advanced by HMRC in that case by way of analogy with the law on bailment. It had been submitted on behalf of HMRC that in a bailment context the bailee will not be liable for conversion for detaining goods if the reason upon which he relies is, on analysis, an unlawful one, provided he could lawfully have detained the goods for some other reason. Sales J said this:

"43. I do not accept this argument. In the bailment example the bailee has an underlying right under the terms of the bailment to detain the goods, and it does not matter whether or not he correctly refers to that right at the time he detains the goods. On proper analysis, he detains the goods in question in circumstances where he has a right to detain them (cf. the right of an innocent party to a contract to rely on breaches of contract against the other party even though they were not invoked by him at the time he treated the contract as having been repudiated: Boston Deep Sea Fishing & Ice Co v Ansell (1888) LR 39 Ch D 339, CA). This analysis does not apply in the present case. HMRC had no right to withhold the goods in question save to the extent that they validly exercised a statutory power to do so. They had a statutory power under section 139(1) of CEMA to detain the goods for a reasonable period, which period expired in mid-August 2007. Thereafter, HMRC could only lawfully retain the goods if they properly exercised their distinct power of seizure contained in section 139(1). Exercise of that power of seizure brings into operation statutory provisions constituting a protective regime for the benefit of the property-owner. The notional availability of the power of seizure cannot be relied upon as a defence to a claim in conversion where it has not in fact been exercised and where, therefore, HMRC have not brought the statutory protective regime into operation. There is no underlying right of retention for HMRC as there is in the bailment situation. HMRC's right of retention of the goods pursuant to the power of seizure is conditional upon their actual exercise of that power. Therefore, in my judgment, HMRC were liable for conversion in respect of the relevant goods in category C in mid-August 2007."

When turning to the question of the measure of damages, Sales J said:

"52. .... section 144 of CEMA does not afford HMRC any defence ...., since it is brought on account of the detention of the goods and at the point it arose HMRC's reasonable grounds for detaining the goods had come to an end (see section 144(2)) ...."

As is plain from that passage, Sales J had well in mind the very provision with which I am concerned in the present case.

[9]On behalf of HMRC I was invited to look at the evidence in this case to see what the grounds in fact were. The submission was advanced that there were indeed reasonable grounds for detaining the goods in the present case, and that evidence to that effect could be called, if necessary at an adjourned hearing.

[10]However, it seems to me, in accepting the claimant's submissions, that that is both unnecessary and inappropriate in the present context. I have come to the conclusion that the claimant is correct in its interpretation of section 144(2) and that it does not provide an insuperable barrier as a matter of law to the present application for costs. I accept the submissions made by Mr Jones on behalf of the claimant. I also accept his submission that in this respect the court is not bound by the decision of the Court of Appeal in Eastenders, which was concerned with a different set of facts and was largely concerned with a different argument, although I pay great respect to what, on analysis, appear to be obiter dicta at paragraph 27 in the judgment of Mummery LJ.

[11]I have not found this an easy question of statutory interpretation. Subject to any further submissions from counsel, at first blush it appears to me that the just course might be for the Court of Appeal to have the opportunity to consider this judgment, together with the substantive judgment which I gave on 27 March and in relation to which I have already granted HMRC permission to appeal. That is all I wish to say at this moment on the application for costs. I will hear counsel further.

[12]MR JONES: My Lord, it will, of course, follow that if my learned friend's side take up their permission to appeal, that all matters will then be at large in the Court of Appeal if the Court of Appeal reverses your Lordship's decision.

[13]MR JUSTICE SINGH: Exactly. That seems to me probably to be where we are, subject to anything that either of you may wish to say to me.

[14]MR JONES: My Lord, what I was going to say at this stage, I was going to invite my Lords for perhaps ten minutes. I want to take instructions as to whether we seek summary assessment or a detailed assessment -- my Lord may not be attracted by the latter -- and see whether perhaps something can be agreed between my learned friend and I in respect of an interim payment.

[15]MR JUSTICE SINGH: Yes. Yes, Mr Puzey?

[16]MR PUZEY: My Lord, I do apply for leave to appeal.

[17]MR JUSTICE SINGH: You do? Well, as I have already indicated, I will grant that. I see no objection has been positively advanced to that.

[18]MR PUZEY: Yes. I would be opposed to any summary assessment because we have not received a schedule.

[19]MR JUSTICE SINGH: I would not have thought that this was the kind of case where I would be considering summary assessment, but I will rise for a few minutes if you want me to.

[20]MR JONES: My Lord, I am inclined to agree that it is not really a summary assessment case.

[21]MR JUSTICE SINGH: Exactly. It is not a straightforward case.

[22]MR JONES: Nonetheless, we will be seeking an interim payment.

[23]MR JUSTICE SINGH: You may be able to agree that.

[24]MR JONES: I am sure we will be able to agree.

[25]MR PUZEY: I am not sure that that is the case. I have not even seen a schedule. So how can I be expected to agree an interim payment?

[26]MR JONES: My Lord, my learned friend knows enough about costs and the sort of costs that are incurred. If my learned friend does not want to discuss it, we will proceed, but I would like a few moment just to take instructions.

[27]MR JUSTICE SINGH: Very well. We will resume at 3.15pm. (The court adjourned for a short time)

[28]MR JONES: My Lord, we are content that there should be an order for costs, to be subject to detailed assessment if not agreed --

[29]MR JUSTICE SINGH: Right.

[30]MR JONES: -- and subject to there being an interim payment.

[31]MR JUSTICE SINGH: Yes.

[32]MR JONES: To that end I have handed in a schedule. I appreciate that both my learned friend and my Lord will have had but a brief period of time with which to peruse that schedule.

[33]MR JUSTICE SINGH: Yes.

[34]MR JONES: My Lord will see that the costs are supported by various fee notes both in respect of counsel, experts and Brindleys(?) Accountants, and come in total to £610,000, which, on the face of it, seems a substantial figure for a case of this nature.

[35]MR JUSTICE SINGH: Yes.

[36]MR JONES: I accept that. However, it has been a case in which numerous stones have been lifted up and from under which various things have crawled. For example, we have had to deal with, amongst other things, the alternative basis upon which Cranston J was told this case was going to be put, that is the mixed goods argument; and that, in turn, fuelled the obtaining of expert evidence and the expert evidence was also aimed at the issue of whether or not there had been any basis to believe that any connection with Tyne(?) or Tidechange(?) had any bearing in this matter. I am not going to tell my Lord what the expert evidence would have said on those matters, suffice it to say that had this matter gone to a full hearing on the facts, such evidence would have been called as would have been highly relevant to those issues.

[37]MR JUSTICE SINGH: Yes.

[38]MR JONES: So, my Lord, we say that HMRC have raised numerous issues that caused costs to be incurred, and no doubt they will complain no doubt before the Costs Judge that certain costs have been unnecessarily incurred, that will be a matter for argument on that occasion.

[39]So far as the principles are concerned, can I invite my Lord's attention to --

[40]MR JUSTICE SINGH: Before you turn to those -- and I will look at them if you want me to -- it seems to me that this is a relatively unusual case because we have the provision in section 144(2) and I have given my interpretation of that, but I have also given permission to appeal in that, and I am just wondering whether it would be a sensible course in this case to make an interim payment order when the Court of Appeal may say that there is an absolute bar to costs in this case in the first place.

[41]MR JONES: I understand my Lord's point, but that point would be a good one in just about any case where an appeal is going to go to the Court of Appeal because the party against whom the interim order is sought would argue that it may be reversed on appeal.

[42]MR JUSTICE SINGH: Yes.

[43]MR JONES: That is just the nature of litigation. But, in our submission, that is not -- and the Court of Appeal has not recognised that as a good enough reason to keep a party out of costs which ought in any event to be payable to it. That, I think, does emerge from the cases and principles set out in the notes in the White Book.

[44]MR JUSTICE SINGH: Where do you want me to look?

[45]MR JONES: My Lord, can we perhaps start at page 1326?

[46]MR JUSTICE SINGH: Yes.

[47]MR JONES: At the bottom of page 1326, rule 44.3(8), payment on account.

[48]MR JUSTICE SINGH: Yes.

[49]MR JONES: My Lord will be familiar with this, but if I can just remind you:

"The court has power to order an amount to be paid on account of costs even though the costs have not been assessed. Quite apart from the specific rule, the court has an inherent jurisdiction to control its own processes. Rule 3.1(1)expressly preserves the inherent powers of the court. Where the paying party had refused to comply with orders requiring them to make interim payments towards the receiving party's costs the costs judge had the power to make an unless order ...." and so forth. Two lines from the bottom: "

The court therefore ordered detailed assessment, but the paying party was not permitted to participate further, unless the payments already ordered were made together with interest." That really deals with the wide general powers of the court.

[50]MR JUSTICE SINGH: Yes.

[51]MR JONES: Then the principles themselves are better picked up at page 1328, about a third of the way down:

"In general an interim order for payment of costs prior to assessment should be made, but the court has to take into account all the circumstances in the particular case, including the unsuccessful party's wish to appeal; the relative financial position of each party; the court's overriding objective to deal with cases justly. Where it was necessary to wait for a detailed assessment, making an order for a lesser amount which the successful party would almost certainly recover was a closer proximation to justice. Having considered the circumstances and the conduct of the parties the court came to the view that the successful claimant was likely to recover only 40% of its costs."

[52]MR JUSTICE SINGH: Yes.

[53]MR JONES: Can I take each of those factors one by one?

[54]MR JUSTICE SINGH: Yes.

[55]MR JONES: "Including the unsuccessful party's wish to appeal", that is but one factor. We say it is not a factor to be given any substantial weight because if it was, in every case where an appeal is intimated, there would be a bar on an interim payment. As my Lord knows, that is not the general position.

[56]MR JUSTICE SINGH: No.

[57]MR JONES: Then the relative financial position of each party. Well, my Lord, my clients are a commercial enterprise and, like all commercial enterprises, they have cash flow considerations to consider. They run a business, they need their cash to run their business and if they are kept out of their costs there is at the very least the potential of prejudice to their cash flow and their ability to run their business in the most efficient manner.

[58]Contrast that with the situation of HMRC who may not like it if I say have the backing of the State and the Treasury behind them, and thus, in terms of HMRC, a costs order made against them has no impact on such things as cash flow or their ability to conduct their business. It is simply an accounting exercise at the Treasury.

[59]So the respective positions of the parties is that my client is the weaker party in terms of being able to bear a financial burden over what could, if this matter does proceed to the Court of Appeal, be quite literally months. It could be six or nine months, as my Lord knows, before the matter is even listed, let alone before a judgment is handed down.

[60]MR JUSTICE SINGH: But if it turns out that you should not have had any costs at all, what guarantee have they got that it will all be paid back?

[61]MR JONES: Well, they do not have any security, but then that is not a normal provision in any event. They have not sought to say to my Lord that there is a substantial risk that my client would be impecunious.

[62]MR JUSTICE SINGH: Well, you have just talked about cash flow problems, and you are saying that they do not have cash flow problems --

[63]MR JONES: No, my Lord, I did not say they had cash flow problems; I said we have the commercial interests in proper cash flow --

[64]MR JUSTICE SINGH: Yes.

[65]MR JONES: -- which all businesses, of course, have to address because we live in a commercial world. That is not to say that my clients are impecunious. If HMRC want to advance that argument, then of course it would be up to them to put evidence before the court. It would be similar to asking for security for costs.

[66]MR JUSTICE SINGH: Yes.

[67]MR JONES: They would have to put forward good grounds for saying that there is justification for that course to be adopted, otherwise whenever anybody litigated against the State, in whatever guise the State maintain -- CPS, HMRC, whatever -- and they were the successful party and the State wanted to appeal, the State could always pray in aid the argument, "Ah, we can pay at the end of the day. We take the risk you may not be able to". That would emaciate the prima facie rule that has been encouraged by the Court of Appeal in respect of costs on account.

[68]MR JUSTICE SINGH: Right.

[69]MR JONES: If one then looks at the next factor, the court's overriding objective is to deal with cases justly, I do pray in aid the letter back in January of this year.

[70]MR JUSTICE SINGH: Yes.

[71]MR JONES: My Lord may think that that was a very sensible letter to write. HMRC at that stage could have said:

"Okay, we are quite happy with a declaration that this was the intention at a time when your costs are no doubt extremely modest"

. They might have even sought to do a deal on a no order as to costs basis:

"Okay, we will concede if you will agree no order as to costs", but they did not. They said, "

No, we are proceedings. We are going before the directions judge, Mr Justice Cranston. We are going to seek to put our case on an alternative basis, the mixed goods argument", which, as my Lord knows, never got off the ground, but which required my clients to undertake substantial work.

[72]If one is looking at the balance of justice, to keep my clients out of costs when they have incurred at least some of those costs in seeking to meet a case that was never even run against them, I would say only has to be stated for the unfairness of that to be appreciated.

[73]I also pray in aid the fact that the authorities say that it is the norm, unless there are very good reasons --

[74]MR JUSTICE SINGH: That is right. That is certainly right, but in my experience the claim for costs that you are making is unusually high in the Administrative Court.

[75]MR JONES: My Lord, that is not a factor that determines whether a payment on account should be made.

[76]MR JUSTICE SINGH: No, no, I agree.

[77]MR JONES: My Lord might say "I am going to limit it to X --"

[78]MR JUSTICE SINGH: Yes.

[79]MR JONES: "-- because in my experience I think that a taxing master might tax you down to X plus Y". I accept that. I aspect that it is a discretionary aspect --

[80]MR JUSTICE SINGH: In your skeleton you ask for 50%.

[81]MR JONES: Well, my Lord, the old saying is: "Plead high, settle low".

[82]MR JUSTICE SINGH: Yes, but what I am saying is that even half of what you have claimed is, in my experience, virtually unprecedented in the Administrative Court. I take your point that a lot of work had to be done on side issues that did not necessarily take up the court's time, but, even so, I have seen the volume of paperwork there is and I know the time estimate for the hearing and I know how much work has had to be done at the hearings.

[83]MR JONES: My Lord, that is partly why we have exhibited the various fee notes.

[84]MR JUSTICE SINGH: Yes.

[85]MR JONES: My Lord, you will see that counsel's fees alone come to £100,000.

[86]MR JUSTICE SINGH: Yes.

[87]MR JONES: Experts' reports to £11,200.

[88]MR JUSTICE SINGH: Yes.

[89]MR JONES: No, I am sorry, nearly £15,000 --

[90]MR JUSTICE SINGH: Yes.

[91]MR JONES: -- and the accountant to £10,000.

[92]MR JUSTICE SINGH: Yes, but even that would come to something well below £200,000, and yet the overall bill is for over £600,000.

[93]MR JONES: My Lord, yes. I accept that no doubt there will be arguments upon taxation as to whether the work was reasonably and necessarily done to that extent. At the moment I am addressing the principle as to whether there should be an interim payment.

[94]MR JUSTICE SINGH: Yes.

[95]MR JONES: The quantum -- well, I think I have made my submissions on that.

[96]MR JUSTICE SINGH: Yes.

[97]MR JONES: The quantum is a separate issue.

[98]MR JUSTICE SINGH: Yes.

[99]MR JONES: It is a matter for my Lord. Some judges say, "Well, I have to take a broad brush approach".

[100]MR JUSTICE SINGH: Yes.

[101]MR JONES: I do not dissent from the view that my Lord has to draw from experience. That is why my Lord is sitting where my Lord is sitting. That is part of your function. If my Lord says that a fair and just sum on account is X, even thought the bill is Y, then the remainder has to abide the event of taxation.

[102]MR JUSTICE SINGH: Yes.

[103]MR JONES: And we cannot complain about that.

[104]MR JUSTICE SINGH: Yes.

[105]MR JONES: But I do say that does not and should not influence whether in principle we should have an interim payment.

[106]MR JUSTICE SINGH: I understand that, but I just wanted to see where we are going here.

[107]MR JONES: I do ask my Lord to have regard at least to the exhibited fee notes.

[108]MR JUSTICE SINGH: I have looked at those, yes.

[109]MR JONES: And I say that that, seen in the context of the letter of January of this year asking HMRC to concede really makes an overwhelming for interim payment.

[110]MR JUSTICE SINGH: Yes, I see. Thank you very much. Yes, Mr Puzey?

[111]MR PUZEY: The words "Plead high, settle low" sent a chill down my spine. £600,000 for a claim where the duty value of goods -- the entire goods, everything -- is 26,000. One has to consider proportionality when putting forward a bill of £600,000. I have had no chance -- nor have those instructing me -- to look at these figures -- none at all.

[112]This is not a case which might go to the Court of Appeal; this is a case which is going to the Court of Appeal. Permission has been granted. It is going to the Court of Appeal in part because at the permission stage there is a provision which operates as an absolute bar.

[113]MR JUSTICE SINGH: Yes.

[114]MR PUZEY: This company has had goods seized from it before. It is a limited company. It can be put into liquidation at any time. No case is advanced that this case is about to go to the wall and it needs these costs to be paid.

[115]MR JUSTICE SINGH: Well, you are entitled to say, Mr Puzey, not just that there is on the face of it a statutory bar, but that the Court of Appeal has said at the very least, in obiter dicta, that there is a statutory bar.

[116]MR PUZEY: Yes, absolutely.

[117]MR JUSTICE SINGH: And I have granted permission in this case because, if I may say so, I have not found the issue of interpretation an easy one and feel that the Court of Appeal should have the opportunity to look at this question at the same time as the underlying substantive issues.

[118]MR PUZEY: I respectfully agree, my Lord. This is an unusual case. The Commissioners do not wish to have a substantial sum paid out in costs which they never see again on the quite possible outcome which is that there are no costs due at all. There is a balancing act to be performed here and, in my respectful submission, it comes down against an interim award -- in these particular circumstances.

[119]MR JUSTICE SINGH: Do you say anything about the quantum?

[120]MR PUZEY: My Lord, I say at first blush -- I have not had any opportunity to examine it -- it seems quite disproportionate to the sums at issue in this case. Your Lordship commented that it was unprecedented in your experience to claim £300,000 as an interim payment.

[121]MR JUSTICE SINGH: It is not unprecedented. One does see very high value commercial judicial review cases, even in this court.

[122]MR PUZEY: This is not a high value commercial judicial review case.

[123]MR JUSTICE SINGH: No, it does not strike me to being similar to ones I have seen.

[124]MR PUZEY: My learned friend mentioned expert evidence. The expert evidence consists of an ex-Customs officer who now takes litigation against Customs and says "In my experience they do X, Y and Z and then they make investigations". That is the sort of expert evidence that is being relied upon here.

[125]MR JUSTICE SINGH: Yes, thank you. Yes, Mr Jones?

[126]MR JONES: My Lord, my learned friend says that the value of the goods seized were £26,000 and thus it is disproportionate. That might be an argument on taxation. However, we all know there are cases -- for example, personal injury cases -- where the eventual damages are a modest, let us say, £100,000; the costs on each side are half a million pounds because of the numerous causation issues, medical issues, accountancy issues, and they have simply gone up. If they were reasonable and necessarily incurred, which is the test on taxation, then they are recoverable, even though the damages themselves recovered were modest.

[127]MR JUSTICE SINGH: But that is precisely the task in which I am not engaged. That is the problem.

[128]MR JONES: No, but I am seeking to meet my learned friend's argument that the costs because it is disproportionate for some reason should not be paid on an interim basis.

[129]MR JUSTICE SINGH: I understand that, but what if I formed the view that the overall costs are unusually high? That does not mean that they were not justified in this case; it is just that they are very unusually high. So even if I were to give 50% -- or even 40%, or 30% -- I will be making an interim order for an exceptionally high amount of costs in this jurisdiction at least. If I couple that with my consideration that this is an unusual situation because there is on the face of it a statutory bar, which I have held does not apply, but the Court of Appeal thought, obiter at least, does apply, does that not tend to point towards my not making an interim order?

[130]MR JONES: The difficulty with that analysis is that every judge could say when such an application is made: "Well, I have granted permission to appeal. The matter therefore, let us assume, will proceed to the Court of Appeal. They may reverse my decision" -- but those are all "mays", "ifs" and "maybes".

[131]MR JUSTICE SINGH: No, it is very unusual because they may uphold my decision of March, but still say that I was wrong today.

[132]MR JONES: My Lord, yes. Of course, that is possible.

[133]MR JUSTICE SINGH: That is not costs follow the event.

[134]MR JONES: No.

[135]MR JUSTICE SINGH: That is very unusual.

[136]MR JONES: But my Lord is tasked today with giving your judgment --

[137]MR JUSTICE SINGH: Yes.

[138]MR JONES: -- and my Lord has done that.

[139]MR JUSTICE SINGH: Yes.

[140]MR JONES: Having done that, we proceed on the basis that, unless and until told otherwise, it was a correct judgment.

[141]MR JUSTICE SINGH: Yes. MR JONES: The Court of Appeal developed the principles on interim payments, which effectively can be summarised thus: a successful party should normally be granted an interim award of costs and there are certain factors which can be taken into account, which I have gone through earlier.

[142]MR JUSTICE SINGH: Yes.

[143]MR JONES: What my learned friend seeks to do now is to cast aspersions against the claimant and say "Ah, well, they are a limited company. They have had goods seized previously and they could go into liquidation." Well, he has adduced no evidence about the financial standing of the claimant. He does not point out that they have ten shops and one warehouse. They have been in business for over fifteen years. The proposition that they are going to go into liquidation possibly to avoid having to repay X pounds in costs on account is fanciful, absent cogent evidence to bring home that idle submission.

[144]MR JUSTICE SINGH: Yes.

[145]MR JONES: Therefore, simply to say "Well, because it is slightly unusual, the normal rule ought not to apply", in my submission, is being too lenient to an organ of the State and giving it a protection which it ought not to have, absent leading evidence to justify it.

[146]MR JUSTICE SINGH: Yes.

[147]MR JONES: If it had said to my Lord, "Look, if we pay this money on account and the judgment is reversed, we will never see it back, and here is the evidence in support" -- one can understand that argument. But to put it on a speculative basis and to add insult by saying, "Ah, well, there have been previous seizures; these are bad lads and so they ought not to have an interim payment" is not, in my submission, a proper approach. I can understand my Lord's approach, which is to say: "Well, the Court of Appeal may reverse my judgment on one or other, or both limbs that have now been decided", but, my Lord, a judge can always say that.

[148]MR JUSTICE SINGH: Yes.

[149]MR JONES: And, in my submission, that is not a good enough reason, even if the case is slightly out of the ordinary.

[150]MR JUSTICE SINGH: Yes.

[151]MR JONES: And I would ask my Lord to order a payment on account. I accept the amount is in my Lord's hands. If my Lord takes the view that the amount is high in the context of the numerous issues that have been raised in this case, then my Lord is tasked with arriving at a fair and reasonable sum on account pending detailed assessment.

[152]MR JUSTICE SINGH: Yes. Thank you very much.

[153]The claimant applies for an interim order for payment of costs with the amount to be assessed by the court, although in the skeleton argument the suggestion is made that the court should make an award of 50% of the costs claimed. Those cost, I have been told, amount to over £600,000. That, in my experience at least both as a practitioner and as a judge in the Administrative Court, is unusually high, although not unprecedented. There are sometimes high value commercial judicial review cases where such sums, and higher, have been known. However, this was a case where the issues did not take a huge amount of court time, although there is a large amount of evidential and other material. No doubt a lot of work has had to be done, not all of which was it necessary in the end to make direct use of in court.

[154]Against that background I turn to what is in my view the very unusual feature of this case. On the face of it there is a statutory bar to an application for costs in the present context provided by section 144(2) of the Customs and Excise Management Act 1979. I have already given my interpretation of that provision in an earlier judgment today. But it is not only that there is, on the face of it, a statutory bar (although I have held it not to be a bar in the present context); it is that in the recent judgment in Eastenders, to which I made reference in my judgment of 27 March 2012 (at paragraph 27), there are what are on any view obiter dicta in the judgment of Mummery LJ which would appear to contradict the view to which I have come on the meaning of the provision.

[155]I turn, therefore, to the relevant approach to which the claimant has invited my attention to the current edition of the White Book, volume 1, page 1328, which reads:

"In general an interim order for payment of costs prior to assessment should be made, but the court has to take into account all the circumstances in the particular case including the unsuccessful party's wish to appeal; the relative financial position of each party; the court's overriding objective to deal with cases justly."

[156]I take all of the circumstance of this case into account, and in particular the matters to which I have already referred, including the fact that I have given permission to appeal, not just because there may well be an appeal to the Court of Appeal. It seems to me that what is unusual in the present context is that it is entirely possible that the Court of Appeal may uphold my judgment of March 2012 in relation to the substantive issue in this claim for judicial review, and yet disagree with my interpretation of section 144(2). It is entirely feasible -- and this is a very unusual case in this respect -- that the claimant may succeed, and yet fail on its application for costs. The Court of Appeal may well conclude that the context is one in which costs do not follow the event on the face of the legislation given the obiter dicta to which I have already made reference.

[157]In all those circumstances, and in the exercise of the court's discretion, I have come to the conclusion that this is not an appropriate case in which the court should make an order for the interim payment of costs. Is there anything else?

[158]MR JONES: My Lord, my learned friend and I will seek to agree the order. I think it should now be fairly straightforward.

[159]MR JUSTICE SINGH: Yes.

[160]MR JONES: Declaration of the goods seized, detained on such and such a date --

[161]MR JUSTICE SINGH: Yes. Can you draft that and agree a form of words of all of my rulings and let me have that through my clerk?

[162]MR JONES: My Lord, yes.

[163]MR JUSTICE SINGH: Let me have it by e-mail and then I shall amend it as necessary and endorse it.

[164]MR JONES: Yes.

[165]MR PUZEY: May I just clarify one matter, my Lord?

[166]MR JUSTICE SINGH: Yes.

[167]MR PUZEY: Your Lordship granted permission on the last occasion to appeal the substantive decision.

[168]MR JUSTICE SINGH: Yes.

[169]MR PUZEY: At the end of my Lord's decision, you said at paragraph 139: "It does seem to me that subject to anything you might say the sensible thing would be for me to finalise the order so it is sealed once I have made all the decisions that arise, including costs".

[170]MR JUSTICE SINGH: Yes, I think what I was getting at there was that I did not want anyone to have any time limit problems. That is why we left the sealing of the order pending this hearing.

[171]MR PUZEY: My recollection is that I, in fact, raised it suggesting that the drawing up of the order awaits the costs ruling --

[172]MR JUSTICE SINGH: Exactly.

[173]MR PUZEY: -- and there be one composite order and the time for appeal would then run from that order.

[174]MR JUSTICE SINGH: Exactly.

[175]MR PUZEY: So I am just clarifying that it is 21 days from today's date?

[176]MR JUSTICE SINGH: Yes, the norm would be 21 days for the Appellant's Notice, yes.

[177]MR PUZEY: Thank you, my Lord.

[178]MR JUSTICE SINGH: Thank you. Can I thank you all for the very considerable assistance that the court has received in this case?

[179]MR JONES: My Lord, I do not know that it is strictly necessary, but it is sometimes nonetheless prudent, to ask the judge who is seised of the matter to express the view that it was suitable for two counsel, the thinking being that that judge is in a better position than the taxing master to form a view --

[180]MR JUSTICE SINGH: Do you have anything to say about that?

[181]MR PUZEY: No, my Lord.

[182]MR JUSTICE SINGH: Well, I will express that view, even though I am not sure it is strictly necessary, but I certainly think it was reasonable to have two counsel in this case.

[183]MR JONES: I am much obliged, my Lord.

[184]MR JUSTICE SINGH: Thank you very much.

First Stop Wholesale Ltd, R (On the Application Of) v Revenue & Customs [2012] EWHC 2191 (Admin)

Cited in 2 later judgments