Seabrook Warehousing Ltd & Ors, R (on the application of) v Revenue and Customs

Measures abolishing an excise-duty drawback arrangement are economic-management decisions involving complex commercial judgments. Judicial review requires clear and convincing grounds before the court interferes. A decision-maker may rely on informed estimates and keep the policy under review where precise economic effects cannot reliably be quantified.

Where a previous consultation addressed the same proposal and the same underlying problem, fairness does not ordinarily require re-consultation merely because later evidence has emerged. Under Article 22 of the relevant excise-duty Directive, reimbursement need not be made before export and payment or security of duty in the destination state.

The claimants were warehouse operators and traders in alcoholic liquor. They challenged HMRC’s decision, implemented by the Excise Goods (Drawback) (Amendment) Regulations 2009, to abolish warehousing for export drawback from 1 June 2009.

They alleged failure to consider relevant economic effects, breach of a duty or legitimate expectation requiring further consultation, and unlawful interference with free movement of goods. The court considered the rationality of HMRC’s assessment of fraud, competition and cash-flow effects, the applicable test for re-consultation, and the scope of Article 22 of the excise-duty Directive.

1. First ground: rationality. Section 2 of the Finance (No 2) Act 1992 conferred wide powers of economic management. HMRC was required to assess competing commercial interests, but the court would interfere only on clear and convincing grounds. The alleged reduction in legitimate cross-border trade was speculative and not reliably quantifiable. HMRC was entitled to rely on evidence of substantial increases in WFE claims, the absence of a convincing economic explanation, and its operational assessment that direct export offered better anti-fraud control.
2. Consultation. Assuming that a duty to consult existed, the test in R (Smith) v East Kent Hospital NHS Trust [2002] EWHC 2640 required a fundamental difference between the consulted proposal and the proposal later adopted. There was no such difference. The 2006 consultation had addressed abolition of WFE and the unexplained increase in claims. The later increase in claims did not create materially different circumstances. The consultation reference to future discussions concerned evidential procedures, not a promise to re-consult on abolition. The claimants therefore had no legitimate expectation of further consultation.
3. Free movement. Article 22 of the Directive did not require reimbursement before export or before destination-state duty had been paid or secured. Its terms supported the conclusion that Member States could impose those conditions. The abolition of WFE did not significantly restrict trade because traders could use duty-suspension arrangements or direct export drawback. In any event, the measure was rationally considered necessary and proportionate to combat substantial fraud and competition distortion.
4. Disposition. Permission was refused on the second and third grounds. Permission was granted on the first ground, but the claim on that ground was dismissed. The claim was therefore dismissed in substance.

The judgment records interim-relief proceedings before Mrs Justice Dobbs and a rolled-up hearing before Kenneth Parker QC, sitting as a deputy High Court judge. No appellate decision is stated.