C00260

CUSTOMS DUTY – restoration of counterfeit goods refused – whether unreasonable – no – appeal dismissed 

	LONDON TRIBUNAL CENTRE

	DOMINIC MINCHELLA	Appellant

	- and -

		THE COMMISSIONERS FOR HER MAJESTY’S 
		REVENUE AND CUSTOMS	Respondents

			Tribunal:	NICHOLAS ALEKSANDER (Chairman)
					P DAVDA

Sitting in public in London on 6 June 2008

The Appellant in person

Rupert Jones, counsel, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	Mr Dominic Minchella appeals against the decision by Customs following a review not to restore various items of counterfeit goods.  The disputed decision in contained in a letter dated 28 August 2007.  
2.	The Appellant and Mr G Crouch, the Customs Review Officer gave evidence.  Bundles of documents were submitted by both the Appellant and Customs.  We were also shown photographs submitted by the Appellant of examples of authorised branded rally jackets and football shirts and of examples of the jackets and shirts imported by the Appellant.
3.	The Appellant is in partnership with Mrs P Fleming.  They live in the Republic of Ireland, where they are in business selling at markets and car boot sales.  They used to sell TY Beenie toys and baby clothes, but now sell a variety of goods. For the last six years, the Appellant has visited Thailand to purchase stock.  Initially he went on one buying trip each year, but in more recent years he goes twice a year. He spends €4000 on each trip – half contributed by himself and half by Mrs Fleming.  The goods form part of the stock of the partnership and are jointly owned. On this occasion the Appellant purchased replica football shirts, rally jackets, school backpacks and other goods. 
4.	By way of example, the Appellant told us in evidence that he purchased a typical replica football shirt in Thailand for €3 and would sell it in Ireland for €10, whereas the authorised version would sell in Ireland for about €40. As regards rally jackets, he purchased Ferrari rally jackets for €13 in Thailand and would sell them in Ireland for €40, whereas the authorised version would sell for €150.
5.	The Appellant supervised the packing of his purchases into five boxes at the shipping agent in Thailand.  Due to an error, instead of the boxes being shipped to Dublin, they were sent to Southampton.  The Appellant was notified by the shipping agent that the goods had arrived in Southampton, and he arranged to have them cleared by Customs in Southampton and travelled to Southampton in his van to collect them on 3 March 2006.
6.	Customs decided to examine the boxes, and on inspecting the contents Customs suspected that the goods were counterfeit and detained the boxes. EU Council Regulation No. 1383/2003 ("the Regulations") provides in Article 16 that goods found to infringe an intellectual property right at the end of the procedure provided for in Article 9 shall not be allowed to enter into the Community Customs territory. Article 9 permits Customs to ask the right-holder of the intellectual property to analyse the goods.  Accordingly, samples of football shirts, rally jackets and backpacks were sent to the right-holders of the intellectual property.  The table below sets out the results of this exercise
Description	Quantity	Response	
Honda Rally Jacket	38	Confirmed counterfeit by Honda on 3/5/07	
BMW Rally Jacket	39	Confirmed counterfeit by BMW on 14/3/07	
Ferrari Rally Jacket	50	Confirmed counterfeit by Ferrari on 17/3/07	
Subaru Rally Jacket	43	No response	
Porsche Rally Jacket	23	No response	
Ford Rally Jacket	24	Confirmed counterfeit by Ford’s solicitors on 7/6/07	
Mitsubishi Rally Jacket	19	Confirmed counterfeit by Mitsubishi on 15/3/06	
Toyota Rally Jacket	22	Confirmed counterfeit by Toyota on 14/3/07	
Mercedes Rally Jacket	48	Confirmed counterfeit by Daimler Chrysler on 23/5/07	
Celtic Football Shirt	48	Confirmed counterfeit by Celtic on 13/3/07	
Manchester United Football Shirt	56	No response	
Arsenal Football Shirt	23	Confirmed counterfeit by Arsenal on 13/1/06 (sic)	
Liverpool Football Shirt	58	Confirmed counterfeit by Liverpool on 13/3/07	
Chelsea Football Shirt	28	No response	
Real Madrid Football Shirt	18	No response	
Disney Backpacks		Confirmed to be genuine	
Marvel Backpacks	8	No response	

7.	On 30 March 2006 the goods in the boxes were seized and a Notice of Seizure was issued to the Appellant.  The seizure notice described the goods as being “Baseball caps/Cotton T Shirts/Soft Toys”.  As the seizure was not challenged in condemnation proceedings, the goods were condemned as forfeit by the passage of time under paragraph 5, schedule 3, Customs and Excise Management Act 1979 (“CEMA”).  On 12 April the Appellant wrote asking for the goods to be restored.  Customs agreed to restore those goods considered not to be counterfeit, and two boxes of goods were collected by the Appellant on 10 May 2006. 
8.	Correspondence and telephone calls between Customs and the Appellant then followed, in which the Appellant requested the restoration of the remainder of the goods.  One of the Appellant’s complaints was that the Notice of Seizure did not accurately describe the goods seized (namely replica football shirts, rally jackets and backpacks).  In consequence the Notice of Seizure was revised on 17 July 2006 to itemise the goods seized.  Following further correspondence and telephone calls, Customs wrote to the Appellant on 14 June 2007 refusing to restore the remainder of the goods, other than the Disney backpacks which had by then been confirmed to be genuine and were offered for restoration.
9.	There is no provision for an appeal against that decision, but section 14 Finance Act 1994 permits a person by written notice to require the Commissioners to review a decision, and section 15 Finance Act 1994 provides that:
“(1) Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may on that review, either:
(a)	confirm the decision; or
(b)	withdraw or vary the decision…”
10.	Section 16 provides for an appeal to this Tribunal in relation to that review. On 16 July 2007 the Appellant requested a review, and the results of the review were communicated to the Appellant in a letter dated 28 August 2007.  The conclusion of the review was that the remainder of the goods should not be restored to the Appellant.  The reason for this decision was that most of the goods were confirmed by the relevant rights holder to be counterfeit, and Customs considered that on the balance of probabilities the remainder were counterfeit.  The Appellant now appeals to this Tribunal against parts of that decision.
11.	In relation to this appeal the Tribunal's powers are circumscribed by section 16(4) which provides:
(4) In relation to any decision, as to an ancillary matter [which includes a decision not to restore], or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say -
(a)	to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;
(b)	to require the Commissioners to conduct, in accordance with the directions of the tribunal, a further review of the original decision; and
(c)	in the case of a decision which has already been acted on or taken effect and cannot be remedied by a further review, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.”
12.	Thus the Tribunal is not empowered to substitute its own decision for that of Customs.  Instead it has to consider whether Customs’ decision could reasonably have been arrived at, and if it decides it could not have been it may make one of the orders set out above. 
13.	In Gora v Customs & Excise Commissioners [2004] QB 93, the Court of Appeal established that the Tribunal did not have jurisdiction to reconsider the legality of the forfeiture and seizure of goods (either where condemnation proceedings had taken place or were they had been deemed to have been concluded under paragraph 5, Schedule 3, CEMA). But in Gascoyne v Customs & Excise Commissioners [2005] Ch 215, the Court of Appeal held that it was open to the Tribunal to make findings of fact that goods were imported for private use as part of its consideration of the issues under section 16.
14.	After considering the issues first purely as a matter of domestic law unaffected by the provisions of the Human Rights Act, the Court turned to the effect of that Act and the Conventions on the interaction of paragraph 15 Schedule 3 and section 16. Buxton LJ said:
“52.	…[the Convention] jurisprudence itself creates a great deal more difficulty in relation to the deeming provisions under paragraph 5 of Schedule 3. One's instincts, if no more, suggest that the extent to which it was held in Gora that those provisions necessarily prevent any further consideration of the legality of the seizure was an excessive limitation.
53.	… Lord Phillips in Lindsay at paragraph 64 of his judgment: [states] that the principle of proportionality requires that each case should be considered on its particular facts. …
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 may view, be enough. But, in my judgment, it goes too far to say that the deeming provisions have always, in every case, got to be paramount”
15.	In Commissioners of Revenue and Customs v Albert Charles Smith (17th November 2005, unreported) Lewison J commented on this test as follow:
“There must therefore, be something more than a failure on the part of the applicant to involve condemnation proceedings before the Tribunal is empowered to question the legality of the forfeiture.”
16.	Lewison J's went on to say:
“The Tribunal's function, therefore, is analogous to a sentencing court once a defendant has been convicted … the function of the sentencing court is to accept mitigation but not to question the original conviction.”
17.	Finally there is the decision of the High Court in Commissioner of Customs and Excise v David Weller [2006] EWHC 237 (Ch) where the High Court refused to interfere with the Tribunal's decision to permit the validity of forfeiture to be contested. Evans-Lombe J said that the question of whether an Appellant could raise the validity of forfeiture on review and on appeal under section 16 depended upon two questions:
“… first did the importer have a realistic opportunity to invoke the condemnation procedure and, secondly, if he did, are there nonetheless reasons disclosed by the facts of the case which should persuade the Commissioners or the Tribunal to permit him to re-open the question of the validity of the original [forfeiture]...”
18.	Mr Jones submitted that these questions compelled the answer that it was an abuse of process for the Appellant to seek restoration of his goods through an appeal to this Tribunal. He said it was clear that the Appellant had had a realistic opportunity to invoke condemnation proceedings, which would determine whether or not the goods were counterfeit, and that there are no reasons which should persuade us to permit him to re-open the question.
19.	We take the view that it would not be an abuse of process for us to consider this appeal. It was conceded by the Appellant that some of the goods were counterfeit. Therefore the forfeiture of the other goods in the five boxes would be permissible as a result of section 141 CEMA. That section makes forfeit goods which are mixed, packed or found with goods liable to forfeiture. Such “mixed, packed or found” goods would be legally forfeit even though they might not be counterfeit, and in relation to such non-counterfeit goods, restoration may be appropriate.
20.	This is illustrated by the Marvel backpacks.  During the course of the hearing, the Appellant produced a shop receipt for the backpacks that he had purchased in Thailand – being for both the Disney backpacks (which Disney had confirmed were genuine) and the Marvel backpacks.  Customs conceded that as the Marvel backpacks had been purchased in the same shop as the genuine Disney backpacks, on a balance of probabilities, the Marvel backpacks were genuine and should be restored to the Appellant, even though they were "mixed, packed or found" with counterfeit items.
21.	Secondly, there was, as we have noted, some confusion in the mind of the Appellant as to the goods seized, given the broad manner in which the 30 March seizure notice was drafted.  We consider that it would be unjust for the Appellant to be completely shut out from ventilating the issues he has raised before us in light of the fact that the precise extent of the seizure was only clarified by the issue of a revised notice on 17 July - after the expiry of the deadline within which condemnation proceedings must be commenced.  
22.	Section 16(4) permits us to make one of the specified orders only if we are satisfied that the person making the decision could not reasonably have arrived at it.  In other words we can only make one of the specified orders if it is shown that the reviewing officer had acted in a way in which no reasonable reviewing officer could have acted; if he had taken into account some irrelevant matter or had disregarded something to which he should have given weight.
23.	The Appellant contends that he bought the goods in good faith not knowing that they were counterfeit.  The Appellant seeks restoration of the Subaru Rally Jackets, the Porsche Rally Jackets, the Manchester United Football Shirts, the Chelsea Football Shirts, the Real Madrid Football Shirts and the Marvel Backpacks on the grounds that the relevant owners of the intellectual property rights have not confirmed to Customs that the goods are counterfeit.  The Appellant contends that there is no evidence that these items infringe any intellectual property rights, and ought to be restored for that reason.  Customs conceded during the course of the hearing (as mentioned above) that the Marvel backpacks were genuine, and agreed to restore them.
24.	The Appellant seeks restoration of the Ford, Mercedes-Benz and Honda Rally Jackets on the grounds that although the owners of the intellectual property rights have confirmed that the jackets are counterfeit, they did so after the deadline set in Custom’s manual.  The Appellant referred us to Customs’ manual C4-6 “Intellectual Property Rights and False Indications of Origin”.  Section 3.4 of the manual sets out the procedure that Customs follows when they suspect that goods being imported infringe intellectual property rights.  The manual states that a sample of the goods should be sent to the right-holder, who should respond within ten working days from the date of detection confirming whether or not an infringement has taken place.  If the right-holder fails to supply a witness statement within the prescribed time period (which can be extended by a further ten working days where circumstances warrant), the goods should be released.  The Appellant contends that as Ford, Daimler Chrysler (the owner of the Mercedes-Benz intellectual property) and Honda replied after the ten working day deadline, these rally jackets should be restored in accordance with the policy set out in the manual.
25.	Mr Jones submits that Customs’ policy of not restoring counterfeit goods is a reasonable one.  It reflects the prohibition in Article 16 of the Regulations on such goods entering the customs territory of the Community.  In this regard, Mr Jones referred us to the decision of this Tribunal in Foresythe v HMRC (2006) Customs Decision 00216.  Mr Jones submitted that there is nothing to suggest that the decision not to restore was unreasonable or disproportionate, and no exceptional circumstances have been put forward to justify a departure from Customs’ policy.  
26.	We find that the review decision was both reasonable and proportionate for the reasons put forward by Mr Jones.
27.	The fact that some of the rights-holders were tardy in responding to Customs’ enquiries is irrelevant.  If the goods are counterfeit, then Article 16 prohibits those goods from being imported into the European Union (Ireland as well as the UK).
28.	The Subaru Rally Jackets, the Porsche Rally Jackets, the Manchester United Football Shirts, the Chelsea Football Shirts, the Real Madrid Football Shirts were purchased from the same sellers and in the same circumstances as the other jackets and shirts.  We examined photographs of some of the garments imported by the Appellant and of authorised garments.  Although there were differences of detail between the imported and the authorised articles (for example in the placement of the team logo or the width of stripes), these were essentially minor aspects of the overall design.  The logos used on the imported shirts were identical to the authorised versions as were the colour schemes. We therefore consider that on the balance of probability these goods are counterfeit, and they are therefore prohibited from being imported into the European Union under Article 16.
29.	We have to weigh up the Appellant’s loss of the Goods for which he and Mrs Fleming paid approximately €4000, which is a significant loss to them, against the loss to the rights-holders of the equivalent genuine goods and the public interest of preventing the import of counterfeit goods.  We consider that non-restoration of counterfeit goods when the Regulations make it illegal to import counterfeit goods, subject to complying with the procedure laid down in the Regulations (even if they may not have been fully complied with), carries greater weight than the Appellant’s right to his property before it was forfeit.
30.	We are satisfied that the review decision was one that Customs could reasonably have arrived at.  Accordingly we dismiss the appeal.   Mr Jones did not ask for costs.

Nicholas Aleksander
CHAIRMAN
RELEASE DATE: 26 June 2008
LON/07/7073

Cases referred to in argument but not mentioned in this Decision:

Dickinson v Customs & Excise Commissioners [2004] 1 WLR 1160
Lindsay v CCE [2002] 1 WLR 1766.