OWD Ltd (t/a Birmingham Cash and Carry) & Anor v Revenue and Customs [2019] UKSC 30

Alcohol wholesalers refused HMRC approval under the Alcohol Wholesaler Registration Scheme sought to continue trading pending their appeals to the First-tier Tribunal. The Supreme Court held HMRC had no power to grant temporary approval under section 88C ALDA or section 9 of the 2005 Act.

Facts

The Finance Act 2015 introduced the Alcohol Wholesaler Registration Scheme (AWRS), inserting Part 6A into the Alcoholic Liquor Duties Act 1979 (ALDA). Section 88C required wholesalers of duty-paid alcohol to obtain HMRC approval, which could only be granted if HMRC were satisfied the applicant was a ‘fit and proper’ person. The scheme aimed to combat fraud involving duty-paid alcohol entering the supply chain without the requisite duty being paid.

OWD, Hollandwest and Budge Brands (the wholesalers) were existing duty-paid alcohol wholesalers who applied for approval. HMRC refused their applications, being unsatisfied that they were fit and proper. Each wholesaler appealed to the First-tier Tribunal (FTT) and sought HMRC’s permission to continue trading pending appeal. When HMRC refused, the wholesalers brought judicial review proceedings. The Court of Appeal held HMRC had power under section 88C to grant temporary approval but that hardship and impact on appeal rights were irrelevant. Both parties appealed.

Issues

The Supreme Court considered two principal issues:

1. Whether HMRC, having refused approval under section 88C ALDA, had any power to grant temporary approval pending an FTT appeal, either under section 88C itself or under section 9 of the Commissioners for Revenue and Customs Act 2005.
2. Whether the High Court could grant injunctive relief under section 37 of the Senior Courts Act 1981 to prevent the FTT appeal being rendered nugatory, and if so what form such an order could take.

Arguments

HMRC

HMRC argued that, having determined a wholesaler was not fit and proper even for a limited period with conditions, it could not separately conclude the same business was fit and proper to trade pending appeal. The introduction of the extraneous factor of a pending appeal could not alter the fitness assessment. Section 88C(1) permitted trading only under an approval given ‘under this section’, precluding recourse to section 9 of the 2005 Act. However, HMRC accepted the High Court retained power under section 37 of the Senior Courts Act 1981 to grant interim relief in exceptional cases.

The Wholesalers

The wholesalers argued that section 88C empowered HMRC to grant temporary approval and that hardship and the impact on appeal rights were relevant considerations. Alternatively, section 9 of the 2005 Act provided ancillary powers permitting temporary approval, since if ancillary powers never enabled a decision-maker to do something it otherwise lacked power to do, such powers would be redundant. They also relied on Article 6 ECHR and A1P1, submitting that without interim measures their appeals would become illusory.

Judgment

Section 88C ALDA

Lady Black (with whom Lord Reed, Lord Sumption and Lord Briggs agreed) held that where HMRC had concluded that no conditions or limitations could enable them to be satisfied a person was fit and proper, there was no power to grant temporary approval pending appeal. Section 88C operates through HMRC being satisfied of fitness; the impact on the person or their business was not material to that evaluation. If someone was not fit and proper for even a limited period, that held good whatever purpose the time-limited approval would serve. HMRC’s former practice of allowing winding-down periods did not prove the existence of the power contended for.

Section 9 of the 2005 Act

Section 9 concerns ancillary powers necessary or expedient in connection with, or incidental or conducive to, HMRC’s functions—not powers which undermine or contradict those functions. Using section 9 to grant approval to someone HMRC considered not fit and proper would undermine, rather than assist, the statutory scheme. Approval granted under section 9 would be practically useless without registration under section 88D, and placing such a person on the register would involve holding out as fit and proper someone HMRC considered unfit. Drawing on R (Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718, Lady Black held section 9 should not be construed as conferring a power Parliament could have conferred through Part 6A or FA 1994 but did not.

High Court’s Injunctive Powers

Because permission to appeal had not been granted on the grounds concerning the High Court’s powers, both parties proceeded on the basis that section 37 of the Senior Courts Act 1981 conferred power to grant injunctive relief in exceptional circumstances, following CC & C Ltd v Revenue and Customs Comrs [2015] 1 WLR 4043. However, Lady Black expressed unease about what form such an order could properly take. Ordering HMRC to grant temporary approval under section 88C would require HMRC to be satisfied when it was not satisfied. More fundamentally, if HMRC had no power it could legitimately exercise, a High Court injunction compelling such action looked worryingly like endorsing inherent authority to override an Act of Parliament. As the evidential threshold had not been met in the present case, the Court made no definitive pronouncement.

Lord Hughes (with whom Lord Sumption agreed)

Lord Hughes agreed with Lady Black and added that it was ‘difficult to see’ how a power to preserve a trader’s ability to trade pending appeal could be found in the High Court. He observed that where a statutory right of appeal exists, it could potentially breach Article 6 read with Article 13 ECHR if rendered illusory or nugatory by the absence of any power to stay HMRC’s decision. Courts cannot invent a remedial legislative provision where the statutory language does not admit such a construction, and section 8 of the Human Rights Act provides no remedy where no other course is possible under section 6(2). He suggested that those responsible for legislation may wish urgently to address amendment to give either the FTT or the High Court a limited power to impose a stay pending appeal.

Implications

The decision confirms that HMRC’s power to approve wholesalers under section 88C ALDA is strictly tied to their satisfaction that the applicant is fit and proper. Where HMRC have concluded the applicant is not fit and proper even for a limited period with conditions, they cannot grant temporary approval pending appeal, and considerations of hardship or the efficacy of appeal rights are irrelevant to the fit and proper assessment.

Section 9 of the 2005 Act provides ancillary powers only to the extent they assist, rather than undermine, HMRC’s statutory functions. It cannot be used to circumvent specific statutory schemes.

The judgment leaves unresolved the precise scope and form of any High Court injunctive relief under section 37 of the Senior Courts Act 1981 to protect wholesalers pending FTT appeals. Lady Black’s reservations and Lord Hughes’s observations suggest potential incompatibility with Article 6 ECHR where a trader’s appeal rights would be rendered nugatory. Lord Hughes expressly invited legislative amendment to confer on the FTT or High Court a limited power to stay HMRC decisions pending appeal. The decision matters to wholesalers within the AWRS, to HMRC in administering the scheme, and potentially to Parliament in considering legislative reform. The factual limit of the case is significant: the wholesalers’ evidence failed to establish that their appeals would be rendered nugatory, so the Court did not need to resolve the injunctive relief issue definitively.

Verdict: HMRC’s appeal was allowed: the Court of Appeal’s order remitting to HMRC the question of temporary approval under section 88C ALDA was set aside, HMRC having no such power in these circumstances. The wholesalers’ appeal concerning section 9 of the 2005 Act was dismissed, the Court of Appeal having correctly held that section 9 did not confer power to grant temporary approval pending appeal.

Source: OWD Ltd (t/a Birmingham Cash and Carry) & Anor v Revenue and Customs [2019] UKSC 30