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Facts

In Eastenders, customs officers entered Eastenders’ premises and detained alcoholic goods so that further enquiries could be made, after employees were unable to provide evidence that duty had been paid on them. The Commissioners afterwards stated that the goods had been detained under the Customs and Excise Management Act 1979, s 139. This section empowers the Commissioners or their officers to seize or detain “any thing liable to forfeiture under the customs and excise Acts”. This includes dutiable goods imported without payment of duty. Following enquiries, the Commissioners seized most of the detained goods and returned the remainder. Eastenders applied for judicial review of the decision to detain those of the goods which were subsequently returned, the officers’ enquiries having proved inconclusive.In First Stop, customs officers detained alcoholic goods at First Stop’s premises because it was suspected that duty had not been paid. Again, this was while enquiries were made. Written notices were provided stating that the goods had been detained “pending evidence of duty status” under the 1979 Act, s 139. First Stop were granted permission for judicial review of the detention of the goods which were still detained pending the outcome of the officers’ enquiries. Before the application was heard, most of the detained goods had been seized. The remainder were returned to First Stop.

Legal Issues

The question at the heart of both cases was around the interpretation of the wording of s 139 and what is meant by the condition in that section that the property must be “liable to forfeiture” when seized or detained. The Supreme Court had to consider whether the wording of s 139 meant the property must actually be liable to forfeiture, or if it was enough if they reasonably suspect it may be liable to forfeiture, or wish to investigate whether it is or not.

Case History

In Eastenders, the court at first instance held that the Commissioners had acted lawfully in detaining the goods, as the 1979 Act, s 139 conferred a power to detain goods for a reasonable time, pending enquiries as to whether duty had been paid, where they had reasonable grounds to suspect that the goods might be liable to forfeiture. The application for judicial review was dismissed. However, the Court of Appeal reversed this decision by majority, holding that s 139(1) applied only where goods were actually liable to forfeiture, and it had not been established that the goods were so liable. Accordingly, the goods not liable to forfeiture were unlawfully detained. Further, it was held that Eastenders were not entitled to damages or costs, as s 144(2) prevents this where the court holds that a seizure or detention was unlawful and the court is satisfied that the Commissioners acted on reasonable grounds.

In First Stop, the judge at first instance, hearing the case after Eastenders had been decided in the Court of Appeal, made three judgments on different issues. First, he held that the detention of the goods had been unlawful because the reason given for the detention was the need to investigate and, following Eastenders, goods could not lawfully be detained for that purpose under s 139, even if they might later be found to be liable to forfeiture. Second, the judge held that s 144(2) does not prevent an award of costs against the Commissioners, as they could not have acted on “reasonable grounds” if the detention was unlawful. Third, the judge held that a statement in the seizure notices that “no evidence of UK duty payment has been provided” was a sufficient statement of the grounds for seizing the goods as “liable to forfeiture”. The Court of Appeal allowed the Commissioners’ appeal against the first judgment, holding that the judge’s view was inconsistent with the majority of the court on this point in Eastenders.  In their view, the effect of the Eastenders decision was that if the goods were in fact “liable to forfeiture”, detention for a reasonable time was lawful under s 139(1) irrespective of any reason that might have been given. The appeal against the second judgment was also allowed, as the court said that the judge’s decision was inconsistent with the Court of Appeal’s decision on damages and costs in Eastenders. The Court of Appeal upheld the judge’s third judgment.

Supreme Court Judgment

In Eastenders, the Commissioners appealed against the Court of Appeal’s decision that the goods were unlawfully detained. First Stop appealed to the Supreme Court against the Court of Appeal’s decisions that the goods were not unlawfully detained and that First Stop were not entitled to an award of costs or damages.

Eastenders were refused permission to appeal against the decision not to award costs or damages. However, the Supreme Court noted that it had to decide on the latter in First Stop and stated that whatever the outcome, it would also have to be applied to Eastenders.

The Supreme Court handed down its judgment on 11 June 2014. On the question of the meaning of s 139, the Supreme Court concluded that the right to seize or detain property is dependent on that property actually being liable to forfeiture. This turns on the objectively ascertained facts and not on the beliefs or suspicions of the Commissioners or their officers, however reasonable. The court gave a number of reasons for this, including that elsewhere in the 1979 Act, it is clearly stated when powers are exercisable on the basis of suspicion or belief and the omission of such language from s 139 must have been deliberate.

However, the Supreme Court noted that this interpretation, while correct, is not without difficulties if there is no other power of detention. Among these difficulties is the fact that it is essential that customs officers should be able to detain goods to enable them to be examined and secured pending investigations which might lead to their subsequent seizure. Further, if s 139 is interpreted so strictly, it means that the detention of goods is unlawful whenever the goods are not in fact liable to forfeiture, including whenever suspicion turns out to be unfounded. The court noted that this has worrying implications in terms of compliance with EU law, including the Human Rights Act 1998 and the EU principle of legal certainty.

The Supreme Court then looked at the legislative background in more detail, noting that customs officers have for a long time had a statutory power to examine goods in order to determine the duty payable or whether the goods are liable to forfeiture. The power of detention arose by necessary implication from the officers’ statutory powers to examine goods for these purposes. The Customs and Excise Act 1952 later created an express statutory power to detain goods which were liable to forfeiture. However, in the Supreme Court’s view, in doing this Parliament did not intend to abolish the power of detention which had previously been held to arise by necessary implication and which is not conditional upon property being liable to forfeiture.

The Supreme Court concluded that on this basis, the Commissioners in Eastenders had acted lawfully in detaining the goods. They were carrying out a lawful inspection of the goods for the purpose of determining whether the appropriate duties had been paid, and had reasonable grounds to suspect that duty had not been paid, therefore they were entitled to detain the goods for a reasonable period to achieve that purpose. In First Stop, the detention of goods was also lawful. The examination of the goods was not completed until the necessary enquiries as to provenance had been made, and the power of examination impliedly included an ancillary power of detention for a reasonable time while those enquiries were made.

On the question of damages or costs, the court held that s 144(2) was not applicable, as judgment should not have been given for the claimants and their applications for judicial review should have been dismissed. Therefore, the court would exercise its ordinary costs discretion and parties were invited to make submissions on the issue of costs.

Comment

The Supreme Court’s judgment recognises a difference between the strict interpretation of s 139 and the need for a more practical interpretation that will allow customs officers to carry out their duties and properly investigate. However, some commentators have noted that this leaves the issue of detention of goods open to further challenges in future, for example in terms of what constitutes reasonable grounds to suspect that duty has not been paid and what constitutes a reasonable period of time to detain goods.