Customs & Excise v Jack Baars Wholesale & Ors

Insolvency proceedings are not the proper forum for determining a debt that is bona fide disputed on substantial grounds. Where that threshold is met, the court should not make a winding-up or bankruptcy order. It retains a discretion to adjourn rather than dismiss the proceedings, particularly where the underlying dispute is already before a specialist tribunal, delay is partly attributable to the petitioner, and protective insolvency appointments reduce the risk of prejudice.

In construing the Excise Duty Points (Duty Suspended Movement of Excise Goods) Regulations 2001, liability under regulation 7(2) depends on causing the relevant excise duty point, not merely owning the goods. The regulation does not, on its wording, require knowing participation, although its legality and application remained issues for determination elsewhere.

The Commissioners sought the winding up of Jack Baars Wholesale, an unregistered partnership, and bankruptcy orders against Jack Baars and Ann Carol Baars. The claims concerned alleged unpaid excise duty and VAT arising from 42 duty-suspended movements of alcoholic goods to France and Spain.

The underlying assessments had been appealed to the VAT and Duties Tribunal. The respondents argued that the debt was genuinely disputed and that the insolvency proceedings should not proceed before the tribunal determined the assessments. They also raised procedural objections, challenged the validity of the domestic excise-duty regulations, and disputed the sufficiency of the assessment and notification.

1. Disposition. The court made no winding-up or bankruptcy orders. All five matters were adjourned generally, with liberty to apply. The Provisional Liquidator, Interim Receiver and Special Manager remained in office.
2. The familiar insolvency test was whether the petition debt was bona fide disputed on substantial grounds. The stricter formulation in Everard v Society of Lloyds, [2003] EWHC 1890 (Ch), was not adopted as exclusive guidance. The pending appeals raised a genuine triable issue concerning the compatibility and effect of the domestic excise-duty regime, and the dispute extended to the whole debt because failure on excise duty defeated the VAT claim.
3. On the construction provisionally applicable to the challenge, regulation 7(2) of the Excise Duty Points (Duty Suspended Movement of Excise Goods) Regulations 2001 imposed joint and several liability on a person who caused the occurrence of an excise duty point. It did not impose liability merely because a person owned the goods. The wording supplied no requirement of knowledge or complicity. The court did not finally determine the regulation’s validity or its application to the facts.
4. The procedural objection based on the Insolvent Partnerships Order 1994 and section 267 of the Insolvency Act 1986 did not justify dismissal at the hearing stage. Any defect was, at most, an irregularity capable of waiver, and no consequential prejudice was shown. The challenge under section 1 of the Finance (No. 2) Act 1992 failed, consistently with In re The Arena Corporation, [2003] EWHC 3032 (Ch).
5. The letter sent to JBW could constitute both a valid assessment and notification. Even apart from the disputed debt, adjournment was appropriate because the tribunal was the proper forum for findings of fact, the Customs had contributed to delay, and existing protective appointments substantially reduced the risk of prejudice.

First-instance decision. The judgment does not state any earlier appellate decision.