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

In judicial review of a regulatory decision, a public authority may rely on a departmental impact assessment if it distils the salient facts that give shape and substance to the decision. It need not reproduce every detail or quantify an uncertain economic effect. A further consultation is not ordinarily required where a recent consultation addressed the issue specifically, its responses remain relevant, and no material change or new argument is shown. Courts give appropriate weight to experienced regulators assessing complex fraud and economic risks. Abolishing a fraud-prone scheme can be rational and proportionate despite adverse effects on legitimate trade where tighter controls proved ineffective and the replacement scheme offers stronger safeguards.

Warehouse operators and alcohol traders challenged the Excise Goods (Drawback) (Amendment) Regulations 2009, which abolished warehouse-for-export drawback for alcoholic liquors. They argued that HMRC and the responsible Minister had failed to assess the commercial impact and the reasons for increased claims, that fairness required a fresh consultation, and that abolition disproportionately restricted cross-border trade.

The Administrative Court granted permission only on the relevant-considerations ground and dismissed the claim. On appeal, the Court of Appeal considered whether the decision-making material captured the salient impacts, whether circumstances required re-consultation, and whether the anti-fraud measure was rational and proportionate.

Disposition. Etherton LJ gave the judgment, with Aikens and Pill LJJ agreeing. The appeal was dismissed.

1. Relevant considerations. The Regulations were made by the Commissioners under section 2 of the Finance (No. 2) Act 1992, and both the Commissioners and the Minister were relevant decision-makers. The commercial impact on legitimate businesses was a material consideration. Under the approach stated in R (National Association of Health Stores) v Department of Health [2005] EWCA Civ 154 and Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24, decision-makers need not personally read every paper. Departmental staff may evaluate, analyse and précis the material, provided the salient facts are conveyed. The impact assessment recognised that legitimate WFE users would be affected and that the impact would be marginal only for most businesses for which WFE was not core. That necessarily recognised a significant impact for core users. The revenue assumption that legitimate claims would move to direct export did not erase that recognition. The assessment therefore fairly summarised the major issues.
2. Consultation. Fairness did not require a further consultation. The 2006 consultation had been relatively recent and had asked specific questions about commercial reasons, business impact and increased costs. The responses remained relevant, and there was no material change in circumstances or new relevant argument requiring re-consultation.
3. Rationality and fraud. HMRC was entitled to conclude that WFE was inherently susceptible to fraud, that the unexplained increase in claims justified concern, and that effective case-by-case investigation required disproportionate resources. The court gave appropriate weight to HMRC’s operational experience. The possibility that fraud might arise under the direct-export arrangement did not invalidate the decision, particularly since that risk was acknowledged and kept under review.
4. Community law. Article 22 of Council Directive 92/12/EEC authorised reimbursement arrangements but did not require repayment before export or before destination duty was paid or secured. In light of the failure of tightened evidential requirements, the resources needed to investigate suspect claims and the difficulty of proving fraud, abolition of WFE was a rational and proportionate response despite its effect on legitimate trade. Post-decision evidence could not directly establish a defect in the decision-making process, though it might have been relevant to relief. Permission to apply for judicial review was refused on the remaining grounds, and the appeal was dismissed.

• Court of Appeal (Civil Division): Refused permission to apply for judicial review on the remaining grounds and dismissed the appeal on the relevant-considerations ground.
• Administrative Court: Mr Kenneth Parker QC, sitting as a Deputy High Court Judge, granted permission only on the relevant-considerations ground, dismissed the claim on that ground, and refused permission on the others.