Checkprice (UK) Ltd (In Administration) v HM Revenue & Customs

The statutory power to detain goods suspected of being liable to forfeiture is temporary. It permits reasonable inquiries for a reasonable period, after which HMRC must return the goods or exercise the distinct power of seizure. Continued detention without seizure may constitute conversion, even if seizure would then have been available. The court must assess damages by reference to the loss actually suffered. Market value is the usual measure, but a lost opportunity to establish entitlement in condemnation proceedings may justify only nominal damages. Speculative and remote consequential trading losses are not recoverable where interest adequately compensates for the loss of use of money.

Checkprice supplied alcoholic beverages to Star Beers subject to retention of title. HMRC detained the goods after finding circumstances giving reasonable grounds to suspect that United Kingdom duty had not been paid. The goods were held while HMRC investigated their provenance and duty status. Many passed their sell-by dates and were destroyed.

Checkprice brought judicial review proceedings seeking damages for conversion and compensation under the Human Rights Act 1998. The principal issues were whether HMRC detained the goods for longer than the statutory power permitted, whether the continuing detention amounted to conversion, and how damages should be assessed where earlier seizure proceedings would have determined whether the goods were liable to forfeiture.

1. Disposition. The claim succeeded. HMRC had converted significant quantities of Checkprice’s goods by retaining them after the reasonable period for investigation had expired. Substantial damages were payable for the surviving Strongbow cider, assessed by reference to its value at the date of conversion. Nominal damages of £500 were awarded for the remaining goods.
2. Detention and seizure. Under section 139(1) of the Customs and Excise Management Act 1979, detention and seizure are distinct powers. Detention permits HMRC to hold goods temporarily while reasonable inquiries are made into whether they are liable to forfeiture. The inquiries must be conducted expeditiously, followed by a prompt decision to return the goods or seize them. The initial detentions were justified by reasonable grounds, but the subsequent delays were unreasonable.
3. Conversion. Once the reasonable detention period expired, HMRC could retain the goods only by actually exercising the statutory seizure power. The mere availability of seizure was no defence. Seizure would have activated the protective regime in Schedule 3 to the Customs and Excise Management Act 1979, including condemnation proceedings in which the owner bore the burden of proving that duty had been paid. Because HMRC had not seized the goods, it could not rely on that hypothetical statutory right of retention.
4. Damages. The ordinary measure for conversion is market value, but the governing principle is compensation for actual loss. For goods which would probably have been seized, Checkprice lost the opportunity to prove its case in the magistrates’ court, not an established right to recover the goods. The evidence did not show a significant chance of success, so nominal damages were appropriate. For the Strongbow cider, market value was appropriate. Additional claimed profits from successive trading transactions were too speculative and remote; interest provided the appropriate compensation for loss of use of the money.

First-instance judicial review proceedings were commenced on 15 May 2008. The judgment records that most goods had then been destroyed or were later destroyed after passing their sell-by dates. No earlier judgment or appeal is stated.