HM Revenue & Customs v James (t/a M&D Enterprise) [2008] EWHC 230 (QB)

[2008] EWHC 230 (QB)Case No QB/2007/APP/0548
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 14 February 2008
Before
THE HONOURABLE MR JUSTICE EADY
Between
HM Commissioners of Revenue & CustomsAppellants/Dean Mark James (t/a M&D Enterprise)Respondent/
Andrew Bird (instructed by Solicitor’s Dept, HM Commissioners of Revenue & Customs) for AppellantJeremy Pike (instructed by Pardoes) for RespondentHearing Hearing date: 18 January 2008
JudgmentMr Justice Eady :
[1]On 18 January 2008 I heard an appeal from a decision of Deputy District Judge Watkins dated 12 July 2007, whereby he declined to strike out the claim on the ground of either lack of jurisdiction or abuse of process. The proceedings were brought by Mr James in respect of the seizure of his Ford Escort van by Her Majesty’s Revenue & Customs as long ago as 18 December 2001 in accordance with the provisions of s.139 of the Customs and Excise Management Act 1979.[2]It is the Appellants’ case that this procedure is governed exclusively by a statutory code and that, accordingly, the court has no jurisdiction; alternatively, that the Claimant should have availed himself of the statutory means of challenge within the one month time limit laid down in Sched 3 to the 1979 Act and, because he did not do so, the claim represents an abuse of process in accordance with the principles discussed in Johnson v. Gore Wood [2002] 2 AC 1. What the Claimant had in fact done was to seek restoration under s.152 of the 1979 Act (a course of action which he could, had he so chosen, have combined with a challenge under Sched 3 to the lawfulness of the seizure).[3]Both these arguments were rejected by the judge below and the Appellants argue that the matter is an issue of law which can be determined at a preliminary stage without the need for a trial. It was argued on the Respondent’s behalf that it is not possible to adopt the “broad, merits-based approach” prescribed by Lord Bingham in the House of Lords (at 31C-D) without investigating and establishing the facts relevant to making such a judgment (and, in particular, without any evidence from the Claimant/Respondent as to his reason for not challenging the legality of the seizure via the statutory route).[4]The Claimant seeks damages under the Torts (Interference with Goods) Act 1977 on the basis of wrongful interference. The background to the claim is that the vehicle was seized at a time when it was not in the possession or control of the Claimant and in circumstances which might be thought, with the benefit of hindsight, did not justify a seizure. He had lent the vehicle to a colleague or employee (a Mr Llewellyn) whom he had no reason to distrust and he was unaware that Mr Llewellyn would take the vehicle out of the country for the purpose of importing drink and tobacco or, as it was put by Mr Bird on behalf of the Appellants, “smuggling”. He eventually received the vehicle back after a long delay and now seeks to recover some £25,000 by way of compensation for losses during the time he was deprived of its use.[5]Reference is made (at para 15 of the Particulars of Claim) to the provisions of s.144(2)(b) of the 1979 Act, in the light of which it is argued that the seizure was not “reasonable” because, in the circumstances I have described, the Claimant could not be said to be “culpable”.[6]There is an alternative plea (in para 17 of the Particulars of Claim) to the following effect:
“Further and alternatively the seizure of the vehicle by the Defendant was unlawful by virtue of being a breach of European Union law, in particular Article 28 of the Treaty and Council Directive 92/12/EEC. Article 28 of the Treaty and Council Directive 92/12/EEC have direct effect and may be relied upon in the national courts of member states by individuals. As a consequence of the Defendant’s breach of European Union law the Claimant is entitled to damages under the doctrine of state liability set out by the European Court of Justice in Joined Cases C-6 and C-9/90 Francovich and Bonifaci v. Italy [1991] ECR 1-5357.”
[7]There is also a claim (under para 18 of the Particulars of Claim) based upon “unlawful deprivation” within the terms of Article 1 to the First Protocol of the European Convention on Human Rights and Fundamental Freedoms. Since the proceedings were only launched in 2007, all this is coupled with an application for the court to exercise its power to extend time under s.7(5)(b) of the Human Rights Act 1998.[8]One may have considerable sympathy for Mr James in the predicament in which he found himself, although Mr Bird points out that he would have, in any event, a remedy (for whatever it may be worth) against Mr Llewellyn in respect of his misuse of the vehicle.[9]It is argued by the Appellants that, in effect, the law has already determined that the seizure was lawful and its legality is therefore beyond challenge. It was conceded in argument by Mr Pike, on behalf of Mr James, that it is an integral part of his case that the original seizure was unlawful. If, as Mr Bird submits, that argument is simply not open to him, then it would be the court’s duty to strike out the claim (whether for lack of jurisdiction or abuse of process).[10]The Appellants’ argument focuses especially on Sched 3, paras 3 and 5, of the 1979 Act. These are in the following terms: “3. Any person claiming that any thing seized as liable to forfeiture is not so liable shall, within one month of the date of the notice of seizure or, where no such notice has been served on him, within one month of the date of the seizure, give notice of his claim in writing to the Commissioners at any office of customs and excise. … 5. If on the expiration of the relevant period under paragraph 3 above for the giving of notice of claim in respect of any thing no such notice has been given to the Commissioners, or if, in the case of any such notice given, any requirement of paragraph 4 above is not complied with, the thing in question shall be deemed to have been duly condemned as forfeited.” …[11]The notion of “condemnation” has been explained in a number of authorities, for example, in Commissioners of Customs & Excise v. Trustee of the Property of Sokolow (a Bankrupt) [1954] 2 QB 336, 344 (Hilbery J). With reference to proceedings for the “forfeiture and condemnation” of goods, it was said that their purpose is to determine the legality of the seizure. If held to be legal, then the customs authorities would have a good title to the goods and thus be able to pass to a purchaser of the goods from them.[12]It is at the heart of Mr Bird’s argument, therefore, that in circumstances where no notice has been given to the Commissioners (under para 3 of Sched 3) it follows as a matter of law that the seizure was lawful and that title was passed to the Commissioners. Furthermore, where these conditions are fulfilled, there is authority which demonstrates that the title is deemed to relate back in time to the moment of forfeiture: see e.g. Att.-Gen. of New Zealand v. Ortiz [1984] AC 1, where it was also held that after condemnation the title is perfected and can no longer be disputed by anyone.[13]Here, it is uncontroversial that no notice was served and that, after the period of one month had elapsed, there would be deemed condemnation and the Commissioners would have acquired (with retrospective effect) a good title to the vehicle in question.[14]Mr Bird submitted that the process of seizure and condemnation is a familiar and long-standing statutory process sanctioned by Parliament for public policy reasons. Protection is afforded to the owner of the relevant “thing” in the sense that he may either seek to mount a challenge to the legality of the seizure in accordance with the procedure laid down in Sched 3 (by service of a notice of claim within one month) or seek a restoration of the goods in accordance with the provisions of s.152 of the 1979 Act. An owner may, if he so chooses, avail himself of both these specified procedures. In the present case, as it happens, Mr James chose to confine himself to the s.152 procedure. There is nothing in evidence to explain why he took that decision, but this would not appear to be relevant in determining the validity of Mr Bird’s legal submissions.[15]In a case where a notice of claim is served within the one month time limit, this would have the effect of imposing upon the Commissioners a responsibility to initiate proceedings for condemnation (which would normally take place in a magistrates’ court, although in some cases the High Court would be the appropriate tribunal). A court determining condemnation proceedings will decide whether or not the “thing” is liable to forfeiture. Where, as here, the case concerns a vehicle used to transport excise goods, the court will normally make findings as to whether or not the goods were indeed for “own use” (as Mr Llewellyn claimed) and whether or not the car was used to transport them.[16]In some circumstances such a court may decline to condemn the goods and, if it does so, then there is a power under s.144(1) to issue a certificate of “reasonable grounds for seizure”. Such a certification will protect officers in certain respects, including from the payment of compensation of the kind sought in the current proceedings by Mr James.[17]On the other hand, Mr Bird submits (and in my judgment correctly) that no question of “reasonable grounds” arises in a case where the court does decide to condemn or, moreover, in a case where no notice of claim is served and, consequently, automatic or deemed condemnation comes into effect.[18]The statutory route which Mr James in fact adopted, under s.152 of the Act, was initiated by letter. It is important to have well in mind the nature of such proceedings. It is provided by s.152 that:
“The Commissioners may, as they see fit – … (b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized … ; or (c) after judgment, mitigate or remit any pecuniary penalty imposed … ” (b) restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized … ; or (c) after judgment, mitigate or remit any pecuniary penalty imposed … ”
[19]It will be observed that this latter statutory provision is concerned with the exercise of a discretionary power. In a case where condemnation has taken place, the exercise of that discretion would in no way undermine the legality of the original seizure or the title acquired by the Commissioners.[20]A useful summary of the statutory procedures is to be found in the judgment of Lightman J in Fox v. Commissioners of Customs and Excise [2003] 1 WLR 1331 and, in particular, at [9]–[11], to which I was referred.[21]It is necessary also to refer briefly to two relatively recent decisions of the Court of Appeal in which the statutory procedures were considered, although the factual background differed from the present in a number of respects: Gora v. Customs and Excise Commissioners [2004] QB 93 and Gascoyne v. Customs and Excise Commissioners [2005] Ch 215. The cases were concerned with appeals from the VAT and Duties Tribunal. It was held, inter alia, in the Gora case that the tribunal had no jurisdiction to determine matters which had already been adjudicated upon in condemnation proceedings. The matter was explained by Pill LJ as follows: “56. The tribunal accepted that where liability to forfeiture has been determined by a court in condemnation proceedings, ‘there is no further room for fact-finding by the tribunal’ and it has no jurisdiction. However, the tribunal went on to hold that Mr Gora did not give a notice under paragraph 3, ‘and as a result the law took its course and the goods were treated as property seized and so liable to forfeiture. No finding of fact resulted. A deemed fact is not a real fact. It cannot consequently rank as a consideration relevant to the subsequent decision on restoration until determined by the tribunal or conceded to exist.’ It was held to be open to the tribunal to determine the question of fact whether the goods were seized.57. I do not agree with that conclusion. Jurisdiction to decide whether anything forfeited is to be restored under section 152(b) is with the tribunal. The jurisdiction in condemnation proceedings is, by virtue of Schedule 3, with the courts. If the deeming provision in paragraph 5 of the Schedule operates, the thing in question shall be deemed to have been duly condemned as forfeited. The effect of this deeming provision is to provide that the thing is to be treated as forfeited. The purpose of the provision is to treat the deemed fact as a fact and I cannot accept that it can be treated as ‘not a real fact’.58. While the division of jurisdiction between the courts and the tribunal may arguably be curious, and is probably retained because of the long standing jurisdiction of the courts in proceedings for condemnation, the division is clear and it is not intended that the tribunal should have jurisdiction to reconsider the condemnation of goods as forfeited. [Counsel’s] submission that the tribunal should have jurisdiction to consider whether duty has been paid is no more than another way of claiming that the court’s findings should be reopened. The tribunal’s view would produce the surprising result that the person whose goods had been seized could make a choice of fact-finding tribunal. If he wanted the court to determine the issue he would serve a notice under paragraphs 3 and 4; if he wanted the tribunal he would do nothing. In my judgment, the statutory scheme does not produce that result. The application to the tribunal is for restoration under section 152. There is no breach of Article 6 because the owner has recourse to the courts in the condemnation proceedings.” ‘and as a result the law took its course and the goods were treated as property seized and so liable to forfeiture. No finding of fact resulted. A deemed fact is not a real fact. It cannot consequently rank as a consideration relevant to the subsequent decision on restoration until determined by the tribunal or conceded to exist.’ It was held to be open to the tribunal to determine the question of fact whether the goods were seized.[22]Chadwick and Longmore LJJ agreed with Pill LJ and, although it was accepted that this part of the court’s decision was obiter, both counsel before me recognised that the reasoning is nonetheless authoritative and persuasive. Furthermore, this aspect of the case was further considered by the Court of Appeal in the later Gascoyne case and the principles set out in Gora were in general terms accepted. The overall effect of the later decision is to recognise that the tribunal was indeed unable to reopen questions as to the legality of seizure, although it would still have the power to exercise a discretion in relation to restoration. An analogy was drawn in the decision of Lewison J in Commissioners of Customs and Excise v. Smith [2005] EWHC 3435 (Ch) between challenging, in the criminal context, a conviction and, on the other hand, taking into account matters by way of mitigation of sentence.[23]It is important to note the observation of Buxton LJ in Gascoyne at [46] that:
“I do not think it can have been intended that the importer before the tribunal would have a second bite at the cherry of lawfulness, having failed in the condemnation proceedings, or let them go by default.”
He went on to refer to “the normal English law rules of res judicata or abuse of process”.[24]In the light of these principles, Mr Bird submitted on behalf of the Commissioners that it is simply not open to Mr James in these proceedings to reopen the question of the lawfulness of the seizure in December 2001, having regard to the deemed condemnation under the statute, either because (by way of analogy with the Court of Appeal’s conclusion as to the tribunal’s jurisdiction) this court should refuse jurisdiction, or because it should apply “the normal English law rules of res judicata or abuse of process”.[25]Mr Pike relied on the arguments, as he did before the judge below, that there is nothing in the statutory code by way of express ouster of jurisdiction and that, in any event, the terms of s.144(2) of the 1979 Act are inconsistent with absence of jurisdiction. Both these arguments were upheld by the deputy district judge, but Mr Bird submits that in this respect he fell into error.[26]I accept that there is no express ouster in the statutory provisions. Moreover, this court should be reluctant to conclude that it has no jurisdiction, thereby inevitably excluding the parties from access to justice in this respect, unless the position is clear. I would accept also that the Court of Appeal’s decision as to the tribunal’s jurisdiction, a matter to be judged within the terms of the specific statutory code, would not necessarily entail that the High Court in the present circumstances is also without jurisdiction.[27]On the other hand, I do not accept Mr Pike’s argument based on s.144 and, it follows, I consider that the judge at least in this respect erred. Its terms, so far as material, are as follows:
“(1) Where, in any proceedings for the condemnation of any thing seized as liable to forfeiture under the customs and excise Acts, judgment is given for the claimant, the court may, if it sees fit, certify that there were reasonable grounds for the seizure. (2) Where any proceedings, whether civil or criminal, are brought against the Commissioners, a law officer of the Crown or any person authorised by or under the Customs and Excise Act 1979 to seize or detain any thing liable to forfeiture under the customs and excise Acts on account of the seizure or detention of any thing, and judgment is given for the plaintiff or prosecutor, then if either – (a) a certificate relating to the seizure has been granted under subsection (1) above; or (b) the court is satisfied that there reasonable grounds for seizing or detaining that thing under the customs and excise Acts, the plaintiff or prosecutor shall not be entitled to recover any damages or costs and the defendant shall not be liable to any punishment.” (a) a certificate relating to the seizure has been granted under subsection (1) above; or (b) the court is satisfied that there reasonable grounds for seizing or detaining that thing under the customs and excise Acts, the plaintiff or prosecutor shall not be entitled to recover any damages or costs and the defendant shall not be liable to any punishment.”
[28]I would accept that the terms of s.144, if they were consistent only with proceedings being brought by a litigant following condemnation, would provide a powerful argument in Mr Pike’s favour. As Mr Bird has pointed out, on the other hand, they are also consistent with proceedings being brought in the absence of any condemnation.[29]Nevertheless, although it may be somewhat academic in the present circumstances, I would not be prepared to hold that the High Court lacks jurisdiction as a matter of law. Mr Bird’s argument on abuse of process, however, which is relied upon in the alternative, is tantamount to saying that the court (assuming jurisdiction to exist) is bound to come to one conclusion, and one conclusion only, on the lawfulness of the seizure by reason of the deeming provisions in Sched 3. The outcome would thus be virtually the same as refusing jurisdiction. Despite this, I would not be prepared to hold that the jurisdiction of the High Court is, as such, ousted. I go on, therefore, to consider the abuse of process argument.[30]It is argued by Mr Bird that Mr James could, and should, have taken advantage of the statutory route to challenge legality within one month of the seizure. Since he did not do so, it must be regarded as an abuse of process to seek to challenge the legality by means of the present proceedings: see e.g. Henderson v. Henderson (1843) 3 Hare 100 and Johnson v. Gore Wood, cited above. The judge below placed considerable reliance upon the well known passage in Lord Bingham’s speech in Johnson at page 31, to the following effect:
“It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”
[31]The judge below did not fully explain why he concluded that this was not an abuse of the court’s process. He simply said:
“I am satisfied that the statement of case is not an abuse of the court process. I simply fail to see how that argument can be sustained.”
He needed to deal with the formidable argument that, as was recognised by the Court of Appeal in both Gora and Gascoyne, failure to give a notice of complaint will, in most cases, preclude subsequent challenge to the lawfulness of the seizure (which, as I have said, Mr Pike recognises is an essential element in his client’s case). To my mind this point is unanswerable, and that has to be an end of the matter. I would not criticise the judge for being unable to come up with an answer, but on the other hand he should have recognised the consequences and, despite one’s natural sympathy for Mr James’ position, brought the proceedings to a conclusion then and there.[32]Mr Pike argued that neither the deputy district judge nor this court is in a position to come to “broad, merits-based judgment” without having some facts established. There was no evidence before the court, he argued, although it is fair to say that the Commissioners’ application notice does (in its Part C section) set out some basic evidence. It was, as I understand it, nonetheless open to his client, if he so wished, to put in evidence and, in particular, as to the reason why he chose not to go down the statutory route for challenging the legality of the seizure. As it happens, I am unable to think of any evidence which could materially affect the position, and the court ought not to shirk its duty of bringing proceedings to a rapid conclusion if they are hopeless.[33]Mr Bird submitted that the deputy district judge fell into other errors. It seems that he concluded that it was for the Commissioners to show that the continued “detention” of the vehicle after the original seizure was “reasonable”. There is no statutory basis for this whatever and it is an interpretation which is quite inconsistent with the finality clearly intended by Parliament by providing for the “deemed” condemnation. It may very well be that the judge was misled by the word “detained”, which has a rather special meaning in this statutory context. Here, in its true meaning, there was no detention at all. This was a seizure case. “Detention” can take place before seizure and s.144 affords certain forms of protection to the Commissioners in circumstances where they have detained (without seizure). Since there was undoubtedly seizure of Mr James’ vehicle, the alternative notion of “detention” does not come into play at all.[34]Another problem arises in relation to the significance attached by the deputy district judge to the decision of the VAT and Duties Tribunal, which found in Mr James’ favour as to the Commissioners’ failure to restore the goods. He interpreted this as giving rise to an “implicit concession” having been made by the Commissioners, to the effect that they had not taken all matters into account. There was no such concession and, in any event, insofar as any “matters” should have been taken into account, they could only be relevant to the issue of restoration – not to the lawfulness of the original seizure. The tribunal’s consideration was limited to the application for restoration under s.152, which was Mr James’ only chosen route of complaint.[35]I thus accept Mr Bird’s submission that, here too, the judge below fell into error.[36]I believe that all that now remains is for me to refer to Mr Pike’s argument based upon the Treaty and the European Convention. I believe that it is unnecessary to say more than that there is no reason to suppose, in the light of the recent authorities, that there is anything about the long established statutory procedure which is inconsistent or in any way not compliant with these European provisions. Moreover, as was observed by Buxton LJ at [55] of the Gascoyne case:
“In my view, therefore, in a case where the deeming provisions under paragraph 5 are applied, the tribunal can reopen those issues [i.e. Convention rights]: though the tribunal will always have very well in mind considerations of, or similar to, abuse of process in considering whether such issues should in fact be ventilated before it.”
[37]Shortly afterwards, at [56], Buxton LJ recognised that “ … it goes too far to say that the deeming provisions have always, in every case, got to be paramount”. There is nothing here, however, to suggest that there is anything out of the ordinary so as to avoid the normal consequence that “failure to give a paragraph 3 notice will, in most cases, preclude subsequent challenge to the lawfulness of the seizure”: ibid at [76]. In the Smith case, at [19], Lewison J considered the remarks made by Buxton LJ which I have cited:
“Pausing there, what Buxton LJ is saying is not enough is the mere fact that the applicant has not applied to the Commissioners requiring them to invoke condemnation proceedings. Not enough for what? Clearly, in my view, not enough to enable the tribunal to re-open the question, or indeed open the question for the first time. There must, therefore, be something more than a failure on the part of the applicant to invoke condemnation proceedings before the tribunal is empowered to question the legality of the forfeiture.”
Here, there is no inkling of what that additional factor might be.[38]In the result, I would uphold Mr Bird’s submissions and allow the appeal on the basis that Mr James is now precluded by the statutory provisions from challenging the lawfulness of the original seizure of his vehicle.