R (On the application of Eastenders Cash and Carry plc and others) v The Commissioners for Her Majesty's Revenue and Customs; R (on the application of First Stop Wholesale Limited) v The Commissioners of Her Majesty's Revenue and Customs

The Supreme Court considered whether the statutory power in section 139(1) of the Customs and Excise Management Act 1979 to "seize or detain any thing liable to forfeiture" authorises detention of goods merely on reasonable suspicion that they may be liable to forfeiture, or whether the property must in fact be objectively "liable to forfeiture". The court held that "liable to forfeiture" refers to actual liability determined by objective facts, not merely the officer's reasonable suspicion.

However, the court also held that statutory powers to inspect or examine goods, for example under section 118C(2) (premises used in connection with supply/import/export of dutiable goods) and section 112(1) (entry and inspection of revenue traders' premises), include by necessary implication an ancillary power to detain goods for a reasonable time while the inspection and necessary enquiries are completed. That implied power permits temporary detention pending enquiries into duty status where officers have reasonable grounds to suspect non-payment of duty and the detention is for a reasonable period.

The court further held that section 144(2), which protects the Commissioners from an award of damages or costs if they acted on reasonable grounds in seizing or detaining goods "liable to forfeiture", was not applicable where the detention was lawful by virtue of the implied inspection power; accordingly previous orders on costs made on an incorrect basis should be set aside and the matter of costs remitted for reconsideration.

This consolidation appeal concerned two related judicial-review challenges to the detention of alcoholic goods by customs officers while enquiries were made into whether appropriate duties had been paid. In Eastenders, officers inspected premises under section 118C(2) and detained goods pending enquiries; many goods were later seized and condemned, but some were returned after enquiries proved inconclusive. Sales J found the officers had reasonable grounds to suspect non-payment and that detention was for a reasonable time, and dismissed Eastenders' judicial review. The Court of Appeal granted a declaration that goods not liable to forfeiture were unlawfully detained, construing section 139(1) to apply only where goods were actually liable to forfeiture. In First Stop, officers acting under section 112(1)/section 112A detained goods pending enquiries and gave notices referring to section 139; Singh J held detention unlawful in light of the Court of Appeal in Eastenders but the Court of Appeal allowed the Commissioners' appeals on those points, upholding a power to detain under section 139(1); other related judgments on costs and adequacy of seizure notices produced conflicting outcomes in the courts below.

Nature of applications: judicial review applications seeking declarations that detentions were unlawful and consequential relief, and contested questions about costs under section 144(2) of the 1979 Act.

Issues framed:

• Does section 139(1) permit detention of goods on the basis of reasonable suspicion, or is actual objective liability to forfeiture required?
• If section 139(1) does not authorise detention on suspicion, is there any other statutory basis for detaining goods pending enquiries?
• What are the consequences for costs under section 144(2) where detention was held unlawful?

Reasoning and conclusion: The court analysed the statutory language and legislative history and concluded that "liable to forfeiture" in section 139(1) requires actual liability determined by objective facts, because throughout the Act the draftsman expressly used language of "reasonable grounds to suspect" where such an evidential standard was intended and because seizure triggers the Schedule 3 condemnation procedure. That construction, however, did not leave the Commissioners without any power to detain goods pending enquiries: longstanding authorities (notably Jacobsohn v Blake and Compton (1844)) and the nature of the statutory powers to inspect under sections such as 118C(2) and 112(1) justify an implied ancillary power to detain goods for a reasonable time to complete necessary enquiries. The court applied that reasoning to both appeals: the detention was lawful as an incident of the inspection power; accordingly the Commissioners' appeal in Eastenders was allowed and the principal First Stop appeal dismissed. Because the detentions were lawful on that basis, section 144(2) did not operate to bar ordinary costs awards and the previous costs decisions were set aside; the Supreme Court invited submissions and remitted costs for reconsideration.

The court remarked on the necessity and practical justification for the implied power of temporary detention for investigations, and addressed potential ECHR and EU law concerns by emphasising the need for detention to be authorised by law and subject to legal certainty.

The Supreme Court held that section 139(1) of the Customs and Excise Management Act 1979 requires that goods be actually liable to forfeiture (an objective fact) for the express seizure/detention power in that subsection to apply. However, the court held that the statutory powers to inspect or examine goods (for example section 118C(2) and section 112(1), with section 112A enabling inspection of documents) carry an ancillary implied power to detain goods for a reasonable time while necessary enquiries are made to determine duty status. Applying that principle the detentions in both appeals were lawful as incidents of the inspection powers. The Commissioners' appeal in Eastenders was allowed; the primary First Stop appeal was dismissed. Decisions on costs previously taken on an incorrect basis were set aside and remitted for reconsideration in this court, with parties invited to make submissions.

Appeals to the Supreme Court from decisions of the Court of Appeal: Eastenders from [2012] EWCA Civ 15 (with a subsequent costs decision [2012] EWCA Civ 689); First Stop from decisions including [2013] EWCA Civ 183. Prior High Court judicial-review judgments include [2010] EWHC 2797 (Admin) (Sales J) and a series of High Court judgments by Singh J in the First Stop proceedings (reported at [2012] EWHC 1106 (Admin), [2012] EWHC 2191 (Admin) and [2012] EWHC 2975 (Admin)).