Brady (t/a Blackwood Quarry Engineering Ltd) v UK Border Agency [2010] UKFTT 209 (TC) (10 May 2010)

DECISION

1. Mr Andrew Brady (Mr Brady) appeals against the review by Mr R Brenton, the reviewing officer, contained in a letter dated 4 August 2009 refusing to return the Appellant’s Misubishi L200 Trojan pick up truck, registration number FD55 DNN. The Appellant says that the goods, 12 Kilos of hand-rolling tobacco (being half of the 24 Kilos of hand-rolling tobacco shared with Mr Gary Sanders, his friend and passenger), were purchased for his own use. He understood that he could bring in as much tobacco as he wished so long as it was for his own use. Customs should not have seized the tobacco and his goods and the vehicle should have been returned to him. The Respondents (Border Agency) say that, as the goods had been deemed forfeit under paragraph 5 of Schedule 3 of The Customs and Excise Management Act 1979 (“CEMA”), Mr Brady could not claim before the Tribunal that the goods were for his own use. As a result, neither the goods nor the vehicle should be returned. Further more there were no hardship grounds under which the vehicle could be returned.

2. Miss Graham-Wells appeared for the Border Agency with Mr R Brenton, the reviewing officer in attendance as a witness. Copies of the Border Agency bundle were made available to the Tribunal. Mr Brady appeared in person with his wife. He also produced a note headed ‘Customs blunder farcical’.

3. We were referred to the following cases:

Lindsay v Customs and Excise Commissioners [2002] 3 ALL ER 118

Gasgoyne v Customs and Excise Commissioners [2005 CH 215

Customs and Excise Commissioners v Albert Smith CH [2005] APP 0117

Revenue and Customs Commissioners v Dawkin [2008] ALL ER (D) 83 (Aug)

John Morgan TC/00102

The facts

4. Mr Brady, who lives at Coalville in Leicestershire, was stopped by Customs and Excise on 29 May 2009 on his return to Coquelles France with his friend Gary Sanders, who was driving. They had been away since the previous day. They had travelled to Belgium for a night out and to buy some wine and tobacco. They had purchase 24 kg (480 pouches) of hand rolling tobacco at a cost of £2418, the tobacco and costs were shared between them,. Mr Brady said that he had paid for the tobacco out of cash which he had had at his home. He thought the tobacco would last him for at least two years. His goods were seized and he was given notice C156, Customs Warning Letter, and Seizure of Vehicle Notice 12A. The notice explained that he could challenge the legality of the seizure in the Magistrates Court, which would have been in Dover. Mr Brady wrote a letter to HM Revenue and Customs, which they received on 4 June 2009, to say that the seizure was unlawful and that he required the vehicle for his business. Apparently, a substantial vehicle is required for access to the sites of the quarries and without it he was unable to estimate the price of his jobs. He also enclosed copy letter B (referred to below) from Notice 12A stating that he did not want to challenge the legality of the seizure with an appendix to the letter setting out why he believed the goods and vehicle should be returned to him. H M Revenue and Customs treated the letter as a request challenging the legality as Mr Brady had stated that the seizure was unlawful. They wrote to him on 12 June 2009 indicating that condemnation Proceedings would be instigated on his behalf. Mr Brady wrote back on the 19 June 2009 requesting the restoration of his vehicle and for the Condemnation Proceedings to be withdrawn. On 25 June 2009 an officer replied to his letter refusing to restore the excise goods or the vehicle. He also advised that on Mr Brady’s request the proceedings before the Magistrates’ court had been withdrawn. Mr Brady requested a review of the decision on 29 June 2009 and the review letter was sent by Mr Brenton on 4 August 2009’ informing him that the restoration of the goods or the car had been refused.

5. Miss Graham-Wells said that the Border Agency had taken over Customs responsibilities from H M Revenue and Customs and, both in this case, and in the future would be responsible for hearings before the Tribunals. Mr Brady’s Notice of Appeal to the Tribunal sought to challenge the legality of the seizure of the vehicle and the goods. As a result the Tribunal needed to decide, as a preliminary issue, whether it would be ‘an abuse of process’ for Mr Brady to raise the defence before this Tribunal that the goods were purchased for his own use. She referred us to the four cases mentioned above and indicated that Revenue and Customs Commissioners v Dawkin [2008] ALL ER (D) 83 (Aug) referred to the leading cases and was relied upon as the primary reference in this appeal. The earlier cases have expanded the proposition that because an appellant chooses not to apply to the Magistrates Court to contest the legality of the seizure under section schedule 3 of CEMA, it is not open to that appellant to argue that he purchased the goods for his own use in the Tribunal. This was particularly the case where the appellant failed to attend the hearing at the Magistrates Court without a good reason for not doing so. An appellant had the opportunity to attend at the Magistrates Court to justify his purchase of the goods and, if he chose not to attend, he could not then raise the defence in the Tribunal that he had bought the goods for his own use. It would be an ‘abuse of process’ for the Tribunal to allow him to do so. Paragraph 5 of Schedule 3 of CEMA goes a step further however and provides that if there is no actual hearing before the Magistrates Court the goods are deemed to be forfeit. The cases referred to have decided that in those circumstances an appellant cannot raise the argument that he purchased the goods for his own use in the Tribunal as that would be an abuse of process. There may not even have been a hearing, either because the one month period had passed for an application to be made, or because, as here, the appellant asked for those proceedings to be withdrawn before a date had been set for the hearing by the Magistrates Court. Buxton LJ in Gasgoyne v Customs and Excise Commissioners [2005 CH 215 was concerned for the appellant’s convention rights and said:-

“ 54. As it seems to me, for an importer to be completely shut out in the only Tribunal before which he has in fact appeared from ventilating the matters that are deemed to have been decided against him because of paragraph 5 of schedule 3 does not adequately enable him to assert his convention rights.

55. In my view, therefore, in a case where the deeming provisions under paragraph 5 are applied, the Tribunal can reopen those issues; though the Tribunal will always have very well in mind considerations of, or similar to, abuse of process in considering whether such issues should in fact be ventilated before it.

56. The mere fact that the applicant has not applied to the commissioners, and therefore there have been no condemnation proceedings, would not in my view, be enough (emphasis added). But, in my judgment, it goes too far to say that the deeming provisions have always, in every case, got to be paramount.”

In Customs and Excise Commissioners v Albert Smith CH [2005] APP 0117

Lewison J considered and applied the observations of Buxton J and stated:

“ 20……………………. There must, therefore, be something more than a failure on the part of the applicant to invoke condemnation proceedings before the Tribunal is empowered to question the legality of the forfeiture.

22. It is, in my judgment, clear from that passage that in the run of the mill cases where there has been a failure to give a paragraph 3 notice invoking the condemnation proceedings the deeming provisions will operate against the applicant in any subsequent appeal to the Tribunal . The Tribunal’s function, therefore, is analogous to a sentencing court once a defendant has been convicted. No matter that the defendant still protests his innocence of the charge against him, the functioning of the sentencing court is to accept mitigation but not to question the original conviction.

23. …. So the relevant questions will always be, first, could the applicant have raised the question of lawfulness of forfeiture in other proceedings and, if the answer to that question is yes, why did he not do so. In light of his reasons for not raising the matter of condemnation proceedings the Tribunal can then answer the question should he have done so and if they answer that question ‘yes’ then it will be, in most cases, an abuse of process for him to raise the question before the Tribunal.”

6. Miss Graham-Wells identified the law. Duty is payable on tobacco products imported into the United Kingdom by operation of section 2 (1) of the Tobacco Products Duty Act 1979[8] and regulation 4 (1) of the Excise Goods (Holding, Movement, Warehousing and REDs) Regulations 1992 [8-9]. By virtue of Council Directive 92/12/EC products acquired by private individuals for their own use and transported by them may be exempt from payment of excise on importation into the United Kingdom when the duty has been paid in the Member State in which they were acquired. Articles 8 and 9 refer [9-10]. The Excise Goods, Beer and Tobacco Products (Amendment) Regulations 2002[10-12] brings the Council Directive into effect in domestic legislation and set out matters to which reference may be had when determining whether excise goods are held for a commercial purpose.[11]

Section 49 CEMA provides that goods imported without payment of duty are liable to forfeiture

Section 141 CEMA provides as follows-

(1)…where anything has become liable to forfeiture under the Customs and Excise Acts –

(a) any ship, aircraft, vehicle…which has been used for the carriage handling deposit….of the thing so liable for forfeiture…and

(b) any other thing mixed, packed or found with the thing so liable shall also be liable to forfeiture.

Section 152(b) CEMA provides that the Commissioners may as they see fit , restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized.

Schedule 3 to CEMA lays down the procedure relating to forfeiture:

3. Any person claiming that any thing seized as liable to forfeiture is not so liable shall, within one month of the date of the notice of seizure or, where no such notice has been served on him, within one month of the date of the seizure, give notice of his claim in writing to the Commissioners at any office of customs and excise.

5. If on the expiration of the relevant period under paragraph 3 above for the giving of notice of claim in respect of any thing no such notice has been given to the Commissioners, or if, in the case of any such notice given, any requirement of paragraph 4 above is not complied with, the thing in question shall be deemed to have been duly condemned as forfeited.(Our emphasis)

If an appellant claims in the Notice of Claim that the thing seized is not liable to forfeiture condemnation proceedings must be commenced in the Magistrates Court or High Court. If the deciding Court is satisfied that the thing was not liable to forfeiture and therefore the seizure was unlawful it will decline to condemn it as forfeit. If no Notice of Claim is given within the period of one month then the thing shall be deemed to be forfeit. HMRC and the Border Agency may consider restoring any thing liable to forfeiture. Any refusal will be reviewed upon a proper request being made and if the refusal to restore is confirmed then an appeal may be lodged for a decision by the Tribunal. Under section 16 of the Finance Act 1994 the Tribunal is constrained to consider the reasonableness of HMRC/ the Border Agency’s decision to refuse restoration. For the Tribunal to allow Mr Brady to raise the issue that he purchased the goods for his own use, when he should have raised the issue in the Magistrates Court, would be an abuse of process. Further, the vehicle has been condemned by passage of time and it is deemed forfeit and the seizure was lawful.

7. Mr Brady told the Tribunal that he was handed Customs Notices 1 and 12A. In the letter received by HMRC on 4 June 2009, Mr Brady asked for the tobacco and vehicle to be returned. The letter enclosed ‘Letter B’ requesting a return of the seized things. He asserted the seizure was unlawful and as a consequence condemnation proceedings were commenced. The note to Letter B states:

“Note: if your only reason for requesting the return of the seized things is that you think that Customs have no legal right to seize them (e.g. that the excise goods were entirely for your ‘own use’ or they were to be given to others as gifts ‘free of charge’), you cannot rely on that as a reason for it to be returned to you. In those circumstances you must also challenge the legality of the seizure as set out in Section 2 of this notice.

If you wish us only to consider returning the seized thing you must make it clear (by ticking the box below) that you do not also wish to contest the legality of the seizure.

It was therefore made quite plan to Mr Brady that the correct place to challenge the legality of the seizure was the Magistrates Court. In his letter Mr Brady unequivocally states that he does not wish to “legally challenge the seizure and requests that any condemnation proceedings are halted forthwith.” Mr Brady has not been misled and the Tribunal cannot therefore allow him to bring evidence to the effect that he purchased the tobacco for his own use and his appeal must fail.

8. Mr Brady submitted that he did not understand the implications of not pursuing the case in the Magistrates Court. Notice 12A indicated that if he was unsuccessful in the Magistrates Court he might have to pay costs of a minimum of £1500. Miss Graham–Wells indicated to the Tribunal that Mr Brady would not have known that he might be subject to costs until he received details of the hearing from the Magistrates Court. Unfortunately that information is incorrect because the reference appears at paragraph 2.16 of the Notice. His wife confirmed, however, that she had understood that if they did not go to the Magistrates Court they would not be able to allege that the tobacco had been purchased for their own use.

We have decided that it would be an abuse of process for us to allow Mr Brady to claim that the tobacco had been purchased for his own use. In Revenue and Customs Commissioners v Dawkin [2008] ALL ER (D) 83 (Aug) Richards J stated the position with regard to ‘abuse of process’ at paragraph 40:

“40……………….. The prima facie position of HMRC is the same as that of the Tribunal. They are bound by the deeming effect of paragraph 5 of the 3 schedule to CEMA. However, where it would not be an abuse of process for the importer to raise the issue as to whether he imported the goods for his own use, HMRC like the Tribunal are bound to consider it. Unless it would not be an abuse of process, it cannot be a criticism of HMRC or a factor in favour of permitting the importer to raise the issue before the Tribunal that HMRC did not consider it on review. There may be other exceptional cases. such as the existence of incontrovertible evidence that the goods were for the importer’s own use, which would require the reviewing officer to consider the issue, but this is not the present case. It is hard to see how a reviewing officer, who is to conduct a review of an administration decision not to restore goods and is not conducting a hearing at which the parties can appear and witnesses can give evidence, could give an importer an opportunity to test the evidence of seizure.

In the light of that decision, and on the basis that this is not an exceptional case, we cannot allow Mr Brady to give evidence to the effect that he purchased the tobacco for his own use. Mr Brady had the opportunity to attend at the Magistrates Court and he chose not to do so. Whether that was because he thought the costs of £1500, including his cost in attending, were too great or that he believed he could recover his vehicle by applying directly to HMRC we do not know. It cannot have been too much of a difficulty to go to the Magistrates Court even if the Court was on the south coast. He had been quite prepared to travel to Belgium for two days in order to buy wine and tobacco. We therefore uphold Mrs Graham-Wells’ objection.

9. We are bound to say that the position with regard to condemnation proceedings is far from satisfactory. In all other tax jurisdictions attempts are made to make the hearing venue as reasonably assessable to appellant as possible. There are Magistrates Courts situate in numerous locations in the United Kingdom and it ought to be possible to arrange for the hearing in the Magistrates Court to be convenient for an appellant. .Nor do we consider Notice 12A and letter A and B to be readily understood. Even Counsel and her instructing officer were unaware that paragraph 12.16 identifies the likely costs of the proceedings if an appellant lost at the Magistrates’Court. Interestingly, it does not indicate that if Mr Brady were to be successful he would be entitled to his limited costs. It would be beneficial to an appellant if paragraph 12.16 were to explain the situation in more detail. Paragraph 1.2 should make it clear that an appellant MUST appear before the Magistrates Court if he or she wishes to allege that they bought the goods for themselves or their family as gifts. If they do not apply to the Magistrates Court, then they may ask the Border Agency to return a vehicle to them (but not the goods) on the basis of hardship. If the Border Agency refuses then the appellant must request a review. The Border Agency has 45 days to provide that review. Thereafter, and if the application for a review is unsuccessful, the appellants must apply within 30 days of the receipt of the review letter to the tribunal. The tribunal will then consider whether the reviewing officer acted reasonably in refusing to return the vehicle on the evidence the reviewing officer had before him. If the tribunal consider that he did not act reasonably they must refer the matter back to the Border Agency for a further review by a different officer. It would appear that only if appellants have good reason for not attending at the Magistrates Court can the Tribunal consider whether they purchased the goods for their own use. A good reason might be a failure by the Magistrates Court to advise an appellant of the hearing date; or perhaps that the appellant became suddenly ill, so that he or she could neither ask for an adjournment nor attend on the day. We were advised that the Border Agency would be revising the Notice and letters and we can only hope that they might consider asking some of the importers to help make the notice and letters more intelligible.

10. The Tribunal then considered whether the reviewing office had acted unreasonable in not restoring the vehicle or the goods on the grounds of hardship. Mr Brady said that his business is involved in maintaining and repairing machinery and vehicles used at quarries. As a result, he has to attend at the quarries. Many of the machines are located at the base of the quarries accessed along rough access roads. Large quarry vehicles use the roads at the same time, and, not infrequently, large rocks and quantities of gravel fall off on the vehicles. It is therefore necessary to have a robust vehicle, which the Mitsubishi is, to gain access. After the vehicle was taken from him he had the use of a mini, which belonged to his wife and a BMW. Neither vehicle was suitable for the work. Shortly after the vehicle was seized, he had hired a large machine to lift the heavier quarry machines. Unfortunately, that machine had stood idle for four days because the wind was too strong and it had cost him over £3000 per day. He had had his vehicle seized in June 2009 and expected that it would be returned because it was essential to his business. By August, it was clear that that would not happen. He accepted that he needed to acquire another vehicle, but he had had to sell the BMW to inject cash in to his business. He was not prepared to hire a vehicle because of the likelihood of it getting damaged. In his letter to Mr Brenton, received on 4 June 2009, Mr Brady did not give any details of his other vehicles; that he had sold the BMW; or the trouble he had had with the crane. He indicated that the loss of the vehicle would seriously affect his livelihood and that of his employees. He referred to his paper headed ‘Customs blunder farcical’ in which it appeared that others in a similar position to him had been able to recover their vehicles. Unfortunately, the paper was not specific as to any particular case and it did not assist his submissions.

11. Mrs Graham-Wells produced to the Tribunal details of 5 vehicles apparently still owned by Mr Brady, but conceded that 3 of them were no longer in use. No evidence was given as to the vehicles he did have at the time of the seizure. Mr Brenton said in his review letter of 4 August 2009:

“ I have also paid particular attention to the degree of hardship caused by the loss of the car. One must expect a considerable inconvenience as a result of having a vehicle seized by Customs, and perhaps considerable expense in making other transport arrangement or even replacing the vehicle…… I would consider only exceptional hardship as a reason not to apply the policy not to restore the vehicle. I do not regard either the inconvenience or expense in your case as exceptional hardship over and above what one should expect. I see from official records that you are shown to be the keeper of various commercial vehicles and a BMW 645 CI.

Miss Graham-Wells submitted that Mr Brady should have made some attempt either to hire or purchase a similar vehicle and that Mr Brenton had acted reasonably in not returning the vehicle.

The decision

12. We have decided that Mr Brenton acted reasonably in not returning the vehicle. We have been referred to Lindsay v Customs and Excise Commissioners [2002] 3 ALL ER 118. Lord Phillips at paragraph 63 stated:

“63. …….. I would not have been prepared to condemn the commissioners’ policy had it been one that was applied to those who were using their cars for commercial smuggling, giving that phrase the meaning that it naturally bears of smuggling goods in order to sell them at a profit. Those who deliberately use their cars to further fraudulent commercial ventures in the knowledge that if they are caught their cars will be rendered liable to forfeiture cannot reasonably be heard to complain if they lose their vehicles. Nor does it seem to me that, in such circumstances, the value of the car used need be taken into consideration. Those circumstances will normally take place beyond the threshold where that factor can carry any significant weight in the balance. Cases of exceptional hardship must always, of course, be given due consideration.”

In light of that, and the fact that Mr Brady’s business was at risk of losing business, any reasonable business man would have acquired another vehicle. Mr Brady told us that he had sold his BMW for over £10,000 and we consider that some of that money should have been used to acquire another vehicle even it was second-hand.

13. Mr Brady had attended the Tribunal on the 2 March 2010 for this case to be heard. Unfortunately no bundles had been provided and in the absence of documentary evidence the meeting had been adjourned until today. As the lack of documentation was not Mr Brady’s fault Lady Mitting required HMRC, now the Border Agency, to pay his costs. Mr Brady produced an estimate of those costs to this Tribunal, which showed Mrs Brady’s costs of £137.56 and his own of £152.00. The Border Agency agreed the total costs of £289.56 and we award such costs to be paid to Mr and Mrs Brady as soon as reasonably possible after the release of this appeal.

The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)”, which accompanies and forms part of this decision notice.

First-tier Tribunal (Tax)

(FORMERLY THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS) (Customs Duty) Respondents

DAVID S PORTER

TRIBUNAL JUDGE

RELEASE DATE: 10May 2010

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Brady (t/a Blackwood Quarry Engineering Ltd) v UK Border Agency [2010] UKFTT 209 (TC) (10 May 2010) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2010/TC00511.html Cite as: [2010] UKFTT 209 (TC)