First Stop Wholesale Ltd, R (On the Application Of) v Revenue & Customs

Under section 139 of the Customs and Excise Management Act 1979, actual liability to forfeiture is a condition precedent to lawful detention. It is not necessarily sufficient. The statutory power remains discretionary and must be exercised lawfully in accordance with ordinary public law principles. A detention based on an unlawful reason is not validated by showing that the goods could have been detained lawfully on another basis. Declaratory relief may therefore be granted, while questions concerning reasonable grounds and statutory immunity under section 144 may remain for condemnation proceedings or any later claim.

HM Revenue and Customs detained alcoholic goods from a wholesaler’s warehouse, retail premises and a lorry pending investigation of their duty status. Some goods were later seized and became subject to, or were intended to be subject to, condemnation proceedings under Schedule 3 to the Customs and Excise Management Act 1979.

The judicial review concerned goods detained but not seized by 4 November 2011, when permission was granted. The Court of Appeal’s intervening decision in Eastenders Cash & Carry Plc v HM Revenue & Customs held that actual liability to forfeiture was a condition precedent to lawful detention. The central issue was whether detention pending investigation, on the reason stated in the notices, was nevertheless a lawful exercise of the statutory discretion.

1. The claim succeeded. The detention of the goods referred to in the judicial review claim was declared unlawful because the reason stated for detention, namely that it was pending further investigation of duty status, involved an error of public law.

2. The Court of Appeal’s decision in Eastenders Cash & Carry Plc v HM Revenue & Customs established that actual liability to forfeiture is a condition precedent to exercising the power of detention under section 139, as it is to exercising the power of seizure. That condition is not necessarily sufficient for lawful detention. A statutory power may exist yet be unlawfully exercised.

3. The discretion must be exercised according to ordinary public law principles, including the Wednesbury principles. By analogy with false imprisonment and arrest authorities, it is immaterial that HMRC could have exercised the power lawfully on another basis if the power was in fact exercised for an unlawful reason.

4. The court did not determine issues reserved for condemnation proceedings. It did not anticipate whether there were reasonable grounds for seizure or detention, whether a certificate should be granted under section 144(1), or what consequences section 144(2) might have in any future damages claim.

5. The Administrative Court was not the appropriate forum for resolving disputed facts relating to forfeiture where condemnation proceedings were pending in the Magistrates’ Court. Tidechain Ltd’s application to become an interested party or intervenor was refused. Consideration of costs was adjourned, and permission to appeal was granted on the arguable question whether relevant passages in Eastenders Cash & Carry Plc v HM Revenue & Customs formed part of its ratio.

The judgment records that Eastenders Cash & Carry Plc v HM Revenue & Customs had been decided by the High Court and then allowed on appeal by the Court of Appeal. No prior decision in this litigation is stated.