Supreme Court judgement in the joint appeal of Eastenders & First Stop
17th June 2014
Eastenders concerned the interpretation of s.139(1) Customs and Excise Management Act 1979 (“CEMA 1979”). Section 139(1) – before it was amended – provided the Commissioners of Her Majesty’s Revenue and Customs (“HMRC”) with a statutory power to detain and seize goods that were “liable to forfeiture”. Goods are liable to forfeiture in a number of circumstances.
The Court of Appeal ( EWCA Civ 15), reversing the judgment at first instance, held that the term “liable to forfeiture” (which is not defined in CEMA 1979) meant that there had to have been a breach of a relevant obligation (for example the obligation to pay duty) before the goods could be detained or seized. It was insufficient if HMRC only reasonably believed or suspected that a breach of the relevant obligation had occurred, and it was not for the courts to fill any lacuna created by the legislation. Section 139 CEMA 1979 has since been amended by s.226 Finance Act 2013.
First Stop concerned both the interpretation of s.139(1) CEMA 1979 as well as two further issues: the application of public law principles to the exercise of HMRC’s statutory powers, and the operation of the “costs shield” in s.144 CEMA 1979.
The Court of Appeal ( EWCA Civ 183), reversing the judgments at first instance, held that whilst public law principles were applicable to decisions to detain and seize goods that were liable to forfeiture, HMRC was not under a duty to provide reasons for detaining the goods at the time of detention. Furthermore, where proceedings are brought against HMRC by the owner of goods detained by HMRC, s.144(2) CEMA 1979 is a statutory bar on the court ordering HMRC to pay the owner’s costs of the proceedings, where the reason for detention is found to have been unlawful but the court is satisfied that there were reasonable grounds to detain the goods.
The Supreme Court allowed the Commissioners’ appeal in Eastenders and dismissed the first appeal in First Stop, allowing First Stop’s appeal on costs. The judgment of the Court may be downloaded here, and a press summary is available here.
The decision of the Supreme Court is notable for four main reasons. First, the Court rejected the Commissioners’ interpretation of s.139 CEMA 1979 which had been argued in each court below. The right to seize or detain property under s.139 CEMA 1979 could not be founded on the basis of suspicion or belief. The section did not contain the power of detention sought by the Commissioners.
Second, however, the Supreme Court found that there is a common law power to detain upon reasonable suspicion for such time as is reasonably necessary to allow customs officers to examine and investigate the status of the goods. This power is included “by necessary implication” with the statutory power to detain.
Third, the boundaries and limits of this common law power have not yet been tested, given that the issue of such an implied power was not argued. The Commissioners argued in the courts below that s.139 CEMA 1979 alone provided customs officers with the necessary power to detain, not that there was any implied power.
Fourth, it is clear that the Court was concerned by the policy implications of its decision on s.139 CEMA 1979. This in part fuelled the argument that customs officers must have some other power to detain. This decision is likely to have significant implications for future cases involving the detention of goods where there is a dispute over the reasonableness of the reason and time taken.
Marc Glover and Niraj Modha, led by Geraint Jones QC, were instructed by the Respondents in Eastenders: R (on the application of Eastenders Cash and Carry plc and others (Respondents) v The Commissioners for Her Majesty’s Revenue and Customs (Appellant) – UKSC 2012/0163.
Marc Glover and Niraj Modha, led by James Pickup QC, were instructed by the Appellant in First Stop: R (on the application of First Stop Wholesale Limited) (Appellant) v The Commissioners of H.