[2012] UKFTT 426 (TC)
TC02108
Appeal number: TC/2011/07313
TYPE OF TAX – s. 16 Finance
Act 1994 – was Reviewer’s decision not to restore vehicle reasonable – yes.
FIRST-TIER TRIBUNAL
TAX CHAMBER
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LEADSHAM TRADING
COMPANY LIMITED
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE ALISON MCKENNA
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SHEILA CHEESMAN
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Sitting in public at Bedford Square on 11 June 2012
Gary Leadsham, a director of
Leadsham Trading Company Limited, appeared for the Appellant
Victoria Forbes of counsel,
instructed by the Director of Border Revenue, appeared for the Respondents
© CROWN COPYRIGHT
2012
DECISION
Background
1.
This appeal concerns the Appellant company’s application for the
restoration of a commercial vehicle, namely a Renault magnum unit and a Gray
and Adams tri axle trailer (“the vehicle”) belonging to the company. The vehicle
had been stopped by officers of the United Kingdom Border Agency (“UKBA”) at Dover on 15 December 2010 and found to contain 7,676,796 cigarettes which would attract
customs duty of £1,498,740.10.
2.
There was some disagreement between the parties as to whether the driver
of the vehicle was given a form telling him of his rights and how to apply for
the restoration of the vehicle. In any event, Mr Leadsham contacted the
relevant authorities and requested the restoration of the vehicle on 17
December 2010. There followed a correspondence between Mr Leadsham and the
UKBA, which we refer to below, culminating in a decision not to restore the
vehicle. Mr Leadsham asked for the decision to be reviewed, as he was entitled
to do.
3.
UKBA’s decision not to restore the vehicle was reviewed on 5 July 2011
and it follows that this was an appeal against the review decision of that
date. The Tribunal’s jurisdiction in such an appeal is derived from s 16 (4)
of the Finance Act 1994 which provides that, in order to succeed, the Appellant
must satisfy the Tribunal that the reviewer could not reasonably have arrived
at the review decision. If the Tribunal decides that the decision was
unreasonable it may direct that the reviewer’s decision ceases to have effect
and/or require UKBA to conduct a further review of the decision not to restore.
4.
The legality of the seizure of the vehicle was not challenged by Mr Leadsham
in the Magistrates Court. Consequently it was deemed to have been duly
condemned as forfeited. The legality of the seizure and the deemed forfeiture
was not an issue before us in these proceedings.
5.
Mr Leadsham told the Tribunal that the vehicle had already been sold.
Ms Forbes explained that unfortunately this sometimes happens, even though
restoration proceedings were pending. She explained that, if the appeal were
successful and there was a decision to restore the vehicle, UKBA would
undertake to pay the Appellant the value of the vehicle in lieu of
restoration.
6.
The Tribunal reserved its decision.
The Facts
7.
The Tribunal heard that on 15 December 2010 at Dover Eastern Docks, a Mr
Richard Dennis was intercepted whilst driving the vehicle on behalf of Leadsham
Trading Company Limited. The vehicle documentation showed that it was carrying
33 pallets of dried food goods. However, an examination of the vehicle showed
that it contained almost 8 million cigarettes. On questioning, Mr Dennis told
the UKBA officers that he had not been present during the loading of the
vehicle, but that he had placed his own seal and padlock on the trailer after
loading and had seen the pallets at the rear of the trailer.
8.
Mr Dennis had produced a “CMR” (a consignment note required by the
Carriage of Goods By Road Act 1965, confirming certain particulars) for the
load, showing the collection and delivery addresses; he had no delivery note,
invoice or packing list. Mr Dennis told officers that this was the first time
he had collected goods from this particular address (although in his
subsequent interview he said he had picked up from there on a previous
occasion) and he said that the vehicle had been empty on the outward journey.
9.
The vehicle was seized on the basis that it had been used for the
carriage of goods liable to forfeiture. There was no challenge to the legality
of the seizure in a Magistrates Court hearing and accordingly the vehicle was
deemed forfeit and its ownership passed to the Crown.
10.
Mr Leadsham (and a firm of solicitors instructed on his behalf) corresponded
with UKBA, requesting the restoration of the vehicle and providing information
about the company’s relationship with its drivers. The information provided by
Mr Leadsham was that he does not have written contracts with his drivers; he
takes up employment references on them verbally; he makes no checks on the
consignor or consignee; and he did not think it was possible to prevent
smuggling.
11.
Mr Leadsham was initially informed by letter dated 8 June 2011 that
restoration would be made on condition of payment of £5,800. Mr Leadsham asked
for a formal review of that decision. The review decision of 5 July 2011 was
carried out by UKBA officer Mr Raymond Brenton, who refused restoration. The
letter of that date communicating the decision to Mr Leadsham sets out the
factors taken into account in making that decision. These included the lack of
appropriate checks made by the company on its drivers, the absence of clear
contractual terms to the effect that smuggling would result in dismissal and
the fact that Mr Leadsham had admitted in correspondence being “reckless” in
this regard; the absence of checks on business customers; the lack of
documentation (including any invoice) regarding the contract with this
consignor; the failure of the driver to make basic checks on the load (the
cigarettes were said to be clearly visible and not concealed); the fact that
this was an uneconomic journey in view of the fact that there was no outward
load; and that the revenue involved was more than £50,000.
12.
The letter of 5 July informed Mr Leadsham that UKBA policy in these
circumstances allowed for the discretionary restoration of the vehicle if there
was evidence of basic reasonable checks having been carried out by the operator
and/or driver to confirm the legitimacy of the load, to detect any illicit load
and if the operator was found to be neither responsible for nor complicit in
the smuggling. In this case, he had concluded that neither the operator nor
the driver had carried out basic checks. The review decision concluded that
this was a case of smuggling for profit, involving the use of a commercial
vehicle containing a substantial number of cigarettes, and that the company was
on the balance of probabilities either responsible for, or complicit in, the
smuggling.
13.
Mr Brenton’s oral evidence to the Tribunal was given on oath. He
confirmed that he had had regard to the HMRC policy document on restoration of
vehicles and that his review decision not to restore the vehicle was in
accordance with that policy. Mr Brenton was asked by the Tribunal what
evidence he had taken into account in concluding that it was uneconomic for the
vehicle to have made the outbound journey without a load. He said that this
was based on his own experience of the transportation industry. He also told us
he had never come across a haulier who had carried out so little in the way of
checks.
14.
Mr Brenton told us that he had also considered, in line with UKBA’s
policy, whether exceptional hardship would arise as a result of the forfeiture
of the vehicle. He had considered whether there were humanitarian grounds for
restoration. Mr Leadsham had informed UKBA in correspondence that he has a
disabled daughter. Mr Brenton concluded that this was not a factor to be taken
into account in respect of a commercial vehicle rather than a family car and
concluded that there were no exceptional humanitarian grounds for restoration
in this case.
15.
Mr Leadsham also gave oral evidence to the Tribunal on oath. He told us
that he is the managing director of the company. The other director is his
daughter and the shareholders are himself, his wife and his daughter. He told
us that he had been in the transport industry since he was 19 years old and had
refused to become involved in smuggling because he had to care for his disabled
daughter. He told us he was a member of the Road Haulage Association and
received their guidance materials regarding the risks of smuggling.
16.
Mr Leadsham said that he had taken a reference for Mr Dennis the driver
from his own brother and did not need anything in writing. He had (after these
events) produced a note to drivers warning them not to smuggle goods, but had
not routinely asked them to sign to acknowledge receipt of the note (there was
no designated space for a signature on the sample note he produced to the
Tribunal) but he thought some drivers had signed. He said the documents for
the vehicle in question here were retained within it so he did not have access
to them. He had produced an e mail confirming the collection and delivery
addresses sent from the freight forwarder. He told us that in the “real world”
with a small business (4 vehicles) it was not unusual only to have an e mail
confirmation by way of documentation for a contract. In this case he said
there was no need for the e mail to detail the goods or the contract price
because it merely confirmed a telephone conversation and he had written on the
e mail the price agreed (£765). He said he trusted his customer. He said that
in an ideal world the driver would watch the loading of the vehicle but health
and safety rules usually meant he could not do so. He denied that the
cigarettes were plainly visible and said that the driver had made a note of a
discrepancy between the number of pallets on the documentation and the number
of pallets loaded (this documentation was not in evidence before us).
17.
With regard to the industry knowledge that Mr Brenton said he relied
upon in relation to whether the outward journey was uneconomic, Mr Leadsham
told us that in his view Mr Brenton knows nothing about the haulage industry.
He told us that it is quite normal for empty vehicles to go across the Channel
and return with goods and whilst it was not as profitable as he would like it
to be, it was not uneconomic. He said the reality was that if you didn’t ship
out empty you would never work and that perhaps 50% of the time his vehicles
leave the country empty.
The Law
18.
UKBA has discretion under s 152(b) of the Customs and Excise Management
Act 1979 to restore anything that has been forfeited or seized. The Finance
Act 1994 provides a mechanism for appealing against an exercise of discretion
not to restore. As noted above, s 16(4) of the Finance Act 1994 provides that
(4) in relation to any decision as to an ancillary
matter, or any decision on the review of such a decision, the powers of an
appeal tribunal on an appeal under this section shall be confined to a power,
where the tribunal are satisfied that [HMRC] 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 [HMRC] to conduct, in accordance with
the directions of the tribunal, a review or further review as appropriate of
the original decision; and
(c) in the case of a decision which has already been
acted upon or taken effect and cannot be remedied by a review or further review
as appropriate, to declare the decision to have been unreasonable and to give
directions to [HMRC] as to the steps to be taken for securing that repetitions
of the unreasonableness do not occur when comparable circumstances arise in the
future.
19.
The test of reasonableness which the Tribunal must consider is one
essentially derived from Associated Provincial Picture Houses v Wednesbury
Corporation [1948] 1 KB 223 namely that the Tribunal must ask itself
whether the reviewer’s decision was one that no reasonable reviewer could have
come to because the reviewer had taken irrelevant matters into account, had not
taken relevant matters into account, or had made an error of law. The
Tribunal did not, accordingly, admit fresh evidence in the appeal hearing.
20.
The case law in relation to the restoration of seized goods was recently
reviewed by the Upper Tribunal (Tax and Chancery Chamber) in HMRC v Jones [2010] UKUT 116 (TCC). The Upper Tribunal in that case reviewed the earlier
authorities, including the Court of Appeal’s decision in Gascoine v Customs
and Excise Commissioners [2004] EWCA Civ 1162, in which it was confirmed
that as forfeiture potentially interferes with the Appellant’s rights to property
under article 1 to the First Protocol of the European Convention on Human
Rights, issues of proportionality were a relevant consideration for the
Tribunal. This means that, although each case must be considered on its facts,
there must be a reasonable relationship of proportionality between the means
employed and the aim pursued by UKBA in forfeiting the vehicle.
Conclusion
21.
We bear in mind the fact that it is the review decision itself which is
capable of appeal to this Tribunal and not the terms of the letter in which
that decision was communicated. We find that the review decision was based
upon relevant facts and took appropriate account of policy guidelines.
22.
There were, however, certain respects in which the Tribunal found itself
disquieted by Mr Brenton’s letter of 5 July. Firstly, his letter refers to the
seizure of another vehicle belonging to this company on 10 February 2011. This
event post-dated the relevant facts in this case and does not seem to us to be
a relevant consideration in respect of the restoration of this vehicle. We
note that the policy provides for the fact of an earlier seizure to be taken
into account in any subsequent restoration decisions, but not for subsequent
seizures to be taken into account in considering a first occasion seizure. Secondly,
whilst we accept that Mr Brenton’s opinion that the outward journey with no
load was uneconomic was based on his own industry experience, it seems to us
that the evidential basis for such a conclusion should have been made clear if
it was to be taken into account and should have been explained to Mr Leadsham
in the letter. Finally, we were concerned by some of the language in Mr
Brenton’s letter: “your recklessness knows no bounds” and “your
willful recklessness is a façade to disguise your complicity” are not, in
the Tribunal’s view, appropriate terms to be included in a formal letter. We
note that the inclusion of immoderate language carries with it the risk of
disturbing a sound decision through the appearance of bias. Having
considered these matters carefully, we conclude that these factors do not serve
to undermine the reasonableness of the decision itself which is based on
relevant factors and addresses the key points without the need to take into
account these three factors.
23.
We have, as we are required to do, considered the issue of proportionality
in this case. We note the value of the vehicle was said to be £14,000. The
revenue involved was some £1.5 million. We consider that the aim of preventing
commercial importation without the payment of duty and of interrupting the
onward sale of the tobacco, with associated future loss of duty, makes the
non-restoration decision in this case proportionate. We do not find that
there are any grounds of exceptional hardship for setting aside the review
decision.
24.
In all the circumstances we consider that UKBA’s review decision of 5
July 2011 was reasonable and shall stand.
25.
This document contains full findings of fact and reasons for the
decision. Any party dissatisfied with this decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be
received by this Tribunal not later than 56 days after this decision is sent to
that party. The parties are referred to “Guidance to accompany a Decision from
the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this
decision notice.
ALISON
MCKENNA
TRIBUNAL JUDGE
RELEASE DATE: 28 June 2012
