OWD Ltd trading as Birmingham Cash and Carry (In Liquidation) and another v Commissioners for Her Majesty’s Revenue and Customs

Approval to wholesale duty-paid alcohol under section 88C of the Alcoholic Liquor Duties Act 1979 depends upon HMRC being satisfied that the applicant is fit and proper. Once HMRC are not satisfied that the applicant is fit and proper even for a limited period and subject to conditions, section 88C gives no power to approve temporary trading pending an appeal. Hardship and the possible effect upon the practical value of the appeal are irrelevant to that statutory assessment.

HMRC’s ancillary power under section 9 of the Commissioners for Revenue and Customs Act 2005 cannot supply an alternative route. An ancillary power may assist the exercise of statutory functions, but cannot contradict or undermine a scheme which expressly makes fitness and propriety a condition of lawful trading.

The appellants were existing wholesalers of duty-paid alcohol who required approval under the Alcohol Wholesaler Registration Scheme. HMRC refused approval because it was not satisfied that they were fit and proper persons. The wholesalers appealed to the First-tier Tribunal and sought permission to continue trading until those appeals were determined. After HMRC refused, they brought judicial review proceedings seeking interim relief.

The High Court refused relief. The Court of Appeal, in [2017] EWCA Civ 956, held that HMRC could grant temporary approval under section 88C of the Alcoholic Liquor Duties Act 1979, although hardship and the effect upon appeal rights were irrelevant. It held that section 9 of the Commissioners for Revenue and Customs Act 2005 conferred no such power. Both sides appealed.

The principal issues were whether either provision empowered HMRC to permit trading pending appeal and, more narrowly, what form of interim order the High Court could lawfully make.

1. HMRC’s appeal was allowed and the wholesalers’ appeal was dismissed. Lady Black, with whom Lord Reed, Lord Sumption and Lord Briggs agreed, held that HMRC had no power under section 88C of the Alcoholic Liquor Duties Act 1979 to give the temporary approval sought. Lord Hughes, with whom Lord Sumption agreed, reached the same conclusions. The decision was unanimous.

2. Sections 88C(2) and (3) permit HMRC to consider whether conditions, restrictions or a limited approval period would enable it to be satisfied that an applicant is fit and proper. They do not require fitness and propriety to be assessed in the abstract. Once HMRC has concluded, however, that the applicant is not fit and proper even for a limited period and subject to any available conditions, the pendency of an appeal cannot alter that assessment. Hardship and the possible loss of an effective appeal are extraneous to the statutory criterion. The former administrative practice of allowing a winding-down period could not enlarge the section’s proper construction.

3. Section 9 of the Commissioners for Revenue and Customs Act 2005 did not provide an alternative source of authority. Whether an asserted power is ancillary depends upon the detailed provisions and attributes of the governing statutory scheme. Ancillary powers may facilitate HMRC’s functions but cannot undermine or contradict them. The scheme expressly prohibits controlled activity without approval under section 88C and permits approval only where HMRC is satisfied as to fitness and propriety. Using section 9 to approve a person in respect of whom HMRC was not so satisfied would contradict that scheme, including its registration and criminal-enforcement provisions. Parliament had also provided no suspensory power for these appeals, although it had expressly made different interim provision for certain other revenue appeals.

4. The Court declined to decide what form of interim order the High Court could make under section 37 of the Senior Courts Act 1981. Permission to challenge the Court of Appeal’s recognition of a narrowly confined jurisdiction had been refused, and the wholesalers had not proved that their appeals would become ineffective without relief. Lady Black nevertheless questioned whether a mandatory injunction could require HMRC to exercise a power which the statutory scheme denied it or to profess satisfaction which it did not hold.

5. Lord Hughes added that an appeal conferred by law may engage article 6 of the European Convention on Human Rights if the absence of any stay renders it illusory or nugatory. Courts cannot invent a remedial legislative provision where the statutory language admits none. Legislative amendment might therefore be required to create a limited power to stay HMRC’s decision pending appeal.

1. United Kingdom Supreme Court: In [2019] UKSC 30, allowed HMRC’s appeal, set aside the remittal for reconsideration under section 88C, and dismissed the wholesalers’ appeal concerning section 9.

2. Court of Appeal: In [2017] EWCA Civ 956, held that HMRC could grant temporary approval under section 88C but not section 9. It quashed HMRC’s decisions that no section 88C power existed and remitted the matter for reconsideration. It also recognised a narrowly confined power in the High Court to grant interim relief in exceptional cases.

3. High Court: The judges hearing the wholesalers’ judicial review proceedings refused interim relief. The evidence did not establish that the First-tier Tribunal appeals would be rendered nugatory without it.