Eastenders Cash & Carry Plc & Ors v HM Revenue & Customs

The statutory power to seize or detain goods described as “liable to forfeiture” arises only when the facts making the goods liable to forfeiture actually exist. Reasonable suspicion that those facts may exist does not itself confer the power. The identical statutory formula governing seizure and detention must receive the same meaning for both powers.

If the goods are not in fact liable to forfeiture, detention is unlawful. However, where the authorities acted on reasonable grounds, the statutory immunity may prevent an award of damages or costs and protect against punishment. Legality may therefore be determined retrospectively, while the consequences of an unlawful detention depend upon the scope of the immunity.

HMRC detained alcoholic goods at the appellants’ warehouses while investigating whether import duty had been paid. HMRC had reasonable grounds for its suspicions. Some goods were seized, but others were returned when the inquiries could not be completed within a reasonable period.

Sales J dismissed the appellants’ application for judicial review in [2010] EWHC 2797 (Admin). He held that section 139(1) of the Customs and Excise Management Act 1979 authorised detention where HMRC reasonably suspected that goods might be liable to forfeiture.

The central issue was whether section 139(1) required the goods to be liable to forfeiture as an objective fact, or whether reasonable suspicion of that liability was sufficient.

1. Appeal allowed by a majority. Elias and Davis LJJ held that the detention was unlawful. Mummery LJ dissented and would have dismissed the appeal.

2. The same phrase, “liable to forfeiture”, governs both seizure and detention under section 139(1) of the Customs and Excise Management Act 1979. The conditions precedent to both powers are therefore the same. Parliament’s language could not legitimately be rewritten so that seizure depended upon reasonable belief while detention depended upon reasonable suspicion.

3. Goods are “liable to forfeiture” for this purpose only where the facts prescribed by the legislation as producing forfeiture actually exist. This construction accords with the use of the same expression in section 49, section 144 and Schedule 3. In particular, a court acting under paragraph 6 of Schedule 3 must determine whether the factual conditions for forfeiture existed at the time of seizure.

4. The distinct powers of seizure and detention remain capable of serving different purposes despite having the same statutory trigger. Seizure initiates the Schedule 3 condemnation procedure. Detention merely prevents dealings with the goods and may provide a measured response where an established breach makes goods liable to forfeiture but further matters can be clarified.

5. A power interfering with private property should not be enlarged by implication unless Parliament’s intention is clear. Section 138 expressly employs a reasonable-suspicion formula for arrest, whereas section 139 does not. The perceived desirability of an investigatory detention power could not justify supplying omitted words.

6. Section 144(2) assumes that seizure or detention on reasonable grounds may nevertheless be unlawful. It protects HMRC from damages, costs and punishment where the court is satisfied that reasonable grounds existed. It does not convert reasonable grounds into the source of the section 139 power or necessarily bar every form of relief.

7. The returned goods had not been shown to be liable to forfeiture and their detention was therefore unlawful. Since it was common ground that HMRC had acted reasonably, Elias LJ considered that the appropriate remedy was a bare declaration rather than damages or other substantive relief.

1. Court of Appeal (Civil Division): By a majority, allowed the appeal from [2010] EWHC 2797 (Admin) and held that detention of the returned goods was unlawful. Mummery LJ dissented.
2. High Court, Administrative Court: Sales J dismissed the application for judicial review, holding that section 139(1) of the Customs and Excise Management Act 1979 permitted detention where HMRC had reasonable grounds to suspect that duty might not have been paid.