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

Section 144(2) of the Customs and Excise Management Act 1979 does not automatically bar recovery of costs merely because objectively reasonable grounds for detention might exist. The grounds must relate to a reason having at least the potential to be a proper statutory reason for detention. A reason unlawful per se cannot be treated as a reasonable ground under the Customs and Excise Acts. Obiter observations in a different factual and legal context do not determine that issue. Although an interim payment of costs is generally appropriate after success, the court must consider all the circumstances, including an appeal, the parties’ financial positions and the overriding objective. Where the claimant may succeed on the merits but ultimately receive no costs because of the statutory issue, an interim payment may properly be refused.

The claimant had succeeded in its judicial review claim against HMRC. The court had adjourned costs pending the Court of Appeal’s decision in Eastenders Cash & Carry Plc and Another v Commissioners of Her Majesty’s Revenue & Customs [2012] EWCA Civ 689, which concerned section 144(2) of the Customs and Excise Management Act 1979. The claimant sought an interim payment of costs exceeding £600,000. HMRC relied on the statutory costs bar and the possibility that the claimant might succeed on the substantive claim but fail on costs. The issues were whether section 144(2) applied to the present claim and whether an interim payment should be ordered pending appeal.

1. Interpretation of section 144(2). The court accepted that section 144(2) can apply to civil proceedings, including judicial review, and that the word “or” operates disjunctively, so the provision can address a costs-only claim. However, the provision requires reasonable grounds for detention under the Customs and Excise Acts. It does not permit objectively reasonable grounds to be substituted for the actual reason relied upon where that reason was unlawful per se.
2. The reasoning in Eastenders Cash & Carry Plc and Another v Commissioners of Her Majesty’s Revenue & Customs [2012] EWCA Civ 689, particularly paragraph 27 of Mummery LJ’s judgment, was materially different in context and was obiter. The court was therefore not bound by it, although it paid great respect to the observations.
3. The court accepted the reasoning in Checkprice (UK) Limited (in administration) v Commissioners for Her Majesty’s Customs and Excise [2010] EWHC 682 (Admin). HMRC’s statutory power depended upon actual and valid exercise of the relevant power; the notional availability of another power did not create an underlying right of retention.
4. An interim order for payment of costs should generally be made before assessment, but the court must consider all the circumstances, including the unsuccessful party’s wish to appeal, the parties’ relative financial positions and the overriding objective. This was an unusual case because the claimant could succeed on the substantive judicial review yet fail on costs if the Court of Appeal adopted the contrary interpretation of section 144(2). The court therefore refused an interim payment. Permission to appeal was granted, and the costs order was to be subject to detailed assessment if not agreed.

• High Court (Administrative Court): The claimant’s substantive judicial review claim had been decided on 27 March 2012. On 16 July 2012 the court determined the adjourned costs issue, refused an interim payment and granted HMRC permission to appeal.