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

Section 144(2) of the Customs & Excise Management Act 1979 applies to judicial-review proceedings arising from the detention of goods. Where there were objectively reasonable grounds for detention, it prevents an award of damages or costs against HMRC, even if the detention was unlawful.

The provision does not distinguish between a detention based on a potentially lawful reason and one said to be unlawful from the outset. Its conditional protection is compatible with article 6: it does not deny court access, does not require costs shifting, and strikes a proportionate balance where HMRC acted reasonably.

HMRC detained the claimants’ goods because of discrepancies in the available documentation and a possible failure to pay duty. It was accepted that HMRC had reasonable grounds for a temporary detention pending investigation.

The claimants succeeded in their appeal from Sales J in the Administrative Court. The Court of Appeal had declared the detention unlawful. The remaining issues were whether the claimants could recover their costs under section 144(2) of the Customs & Excise Management Act 1979, and whether either party should receive permission to appeal to the Supreme Court.

The central question was whether the statutory costs shield applied to these judicial-review proceedings despite the claimants’ success on the substantive appeal.

1. Appeal allowed, but no costs order against HMRC. The court made the declaration that the detention was unlawful, but ordered each side to bear its own costs, both in the Court of Appeal and below. It refused both parties permission to appeal to the Supreme Court.

2. Section 144(2) of the Customs & Excise Management Act 1979 was a statutory bar to costs. Judicial review is included within the broadly expressed term “civil proceedings”. The proceedings arose on account of the detention of the goods, and it was undisputed that reasonable grounds existed for their temporary detention. The statutory condition is objective. It does not depend on whether the reason given for detention was potentially lawful or was said to be unlawful in itself.

3. The bar was compatible with article 6. Article 6 does not itself require a costs-shifting regime, and the claimants had not been denied access to a court. Stankiewicz v Poland [2006] ECHR 360 concerned exceptional and materially different circumstances, including an incorrect application of domestic costs rules. Here the protection applied only where HMRC had acted reasonably. It served the public interest in allowing reasonable investigations into whether duty had been paid and was proportionate.

4. Elias LJ added that differential costs rules may exceptionally engage article 6 where they operate with manifest unfairness. This case was not such an exception. The alternative article 14 argument also failed: being a litigant in dispute with HMRC was not an “other status” for that purpose.

• Court of Appeal (Civil Division): The claimants’ appeal was allowed and a declaration made that the detention was unlawful. In this post-judgment decision, the court held that section 144(2) of the Customs & Excise Management Act 1979 barred a costs order against HMRC and refused both parties permission to appeal to the Supreme Court.
• High Court, Administrative Court: Sales J decided the case in HMRC’s favour and made a costs order against the claimants. The reasonable grounds for temporary detention were not in dispute.