HM Revenue and Customs v First Stop Wholesale Ltd & Anor

Pending a Supreme Court decision, the Court of Appeal was bound to hold that detention under section 139 of the Customs and Excise Management Act 1979 is lawful only if the goods are in fact liable to forfeiture. That question may be resolved with hindsight and by reference to a forfeiture ground not known when the goods were detained.

The Act imposed no further requirement to give reasons for detention at the time. The statutory notice requirements for seizure did not create such a condition. The section 144(2) costs protection turns on the objective existence of reasonable grounds for detention, without a distinction between a detention that was potentially lawful and one said to be unlawful per se.

A seizure notice sufficiently states the grounds where, read in context, it clearly conveys that duty is said not to have been paid.

HMRC detained substantial quantities of alcohol at First Stop Wholesale Ltd’s premises in June 2011, stating that the goods were held pending evidence of their duty status. The litigation concerned both goods still detained after 4 November 2011 and other goods seized before that date.

Singh J declared the continued detention unlawful in [2012] EWHC 1106 (Admin). He later awarded First Stop its costs in [2012] EWHC 2191 (Admin). In a third judgment, [2012] EWHC 2975 (Admin), he rejected First Stop’s challenge to the validity of seizure notices.

HMRC appealed the declaration and costs order. First Stop appealed the ruling on the seizure notices. The central questions were whether lawful detention required adequate reasons at the time of detention, how section 144(2) operated, and whether the notices stated sufficient grounds for seizure.

1. HMRC’s appeal was allowed and First Stop’s appeal was dismissed. The court was bound by [2012] EWCA Civ 15 to treat actual liability to forfeiture as the condition for detention under section 139 of the Customs and Excise Management Act 1979. The legality of detention was therefore to be determined with hindsight. HMRC could rely on a ground showing actual liability to forfeiture even if that ground was not known when the goods were detained.

2. Singh J had impermissibly added a further condition by holding that detention was unlawful because HMRC had stated that it was pending inquiry into duty status. The Act required no formal notice of detention. The notice requirement in paragraph 1 of Schedule 3 concerned seizure, not detention. It was not a condition of the lawful exercise of the power to seize, since notice might be given later and was unnecessary where seizure occurred in the owner’s presence. A requirement to state reasons at the time of detention was inconsistent with the binding reasoning in [2012] EWCA Civ 15.

3. Section 144(2) provided an objective costs protection where reasonable grounds existed for detention. The court followed [2012] EWCA Civ 689: the provision did not distinguish between a detention described as potentially lawful and one described as unlawful per se. The relevant inquiry concerned the circumstances and evidence existing when the goods were detained. Singh J’s contrary approach was erroneous.

4. The seizure notices were sufficient. In their factual and statutory context, the statement that no evidence of UK duty payment had been provided clearly conveyed HMRC’s assertion that duty had not been paid. Any verbal distinction between those formulations was technical and did not invalidate the notices.

The parties were invited to make written submissions on the implications for the costs order made in the October judgment.

• Court of Appeal (Civil Division): HMRC’s appeals against the declaration and costs order were allowed, and First Stop’s appeal concerning the seizure notices was dismissed: [2013] EWCA Civ 183.

• High Court, Administrative Court (Singh J): The continued detention was declared unlawful: [2012] EWHC 1106 (Admin).

• High Court, Administrative Court (Singh J): HMRC was ordered to pay First Stop’s costs: [2012] EWHC 2191 (Admin).

• High Court, Administrative Court (Singh J): The challenge to seizure notices was rejected: [2012] EWHC 2975 (Admin).