R (on the application of Eastenders Cash and Carry plc & Ors) v Revenue and Customs [2014] UKSC 34

HMRC officers detained alcoholic goods at warehouses pending enquiries into whether excise duty had been paid. The Supreme Court held that detention was lawful under the statutory power of examination, not section 139(1) of the Customs and Excise Management Act 1979, which requires actual liability to forfeiture.

Facts

These conjoined appeals concerned the powers of HM Revenue and Customs officers to detain goods pending investigations into whether excise duty had been paid. In the Eastenders case, officers entered warehouses under section 118C(2) of the Customs and Excise Management Act 1979 (“the 1979 Act”) and inspected consignments of alcoholic goods. Documentary evidence of duty payment could not be produced, so the goods were detained while enquiries into supply chains were carried out. Most goods were subsequently seized and condemned as forfeit; the remainder were returned after inconclusive enquiries. Eastenders sought judicial review of the detention of the returned goods.

In the First Stop case, officers entered warehouse and retail premises under section 112(1) of the 1979 Act. They detained a large quantity of alcoholic drinks of unclear provenance pending enquiries. Written notices referred to detention “pending evidence of duty status (CEMA 1979, section 139)”. Most of the detained goods were later seized.

Issues

The core issues were:

• Whether the phrase “any thing liable to forfeiture” in section 139(1) of the 1979 Act requires goods to be actually liable to forfeiture, or whether reasonable suspicion of such liability suffices.
• Whether, if section 139(1) requires actual liability, there exists any other power enabling officers to detain goods pending investigation into their duty status.
• Whether section 144(2) of the 1979 Act protected the Commissioners from awards of costs where detention was found unlawful.

Arguments

The Commissioners contended primarily that section 139(1) authorised detention where goods were of a kind legally capable of being forfeited, or on reasonable suspicion. Alternatively, they submitted that the statutory powers of examination in sections 112 and 118C(2) authorised detention pending the completion of enquiries, relying on Jacobsohn v Blake and Compton (1844).

Eastenders and First Stop argued that section 139(1) required actual liability to forfeiture, and that Jacobsohn was confined to imported goods held in customs warehouses or turned on technicalities of trespass. First Stop further argued that the Commissioners had expressly relied on section 139(1) as the source of their power and could not now rely on the examination powers.

Judgment

Construction of section 139(1)

The Court held that “liable to forfeiture” in section 139(1) means actually liable to forfeiture, determined by objectively ascertained facts. The Court gave five reasons: (i) the draftsman used “reasonable grounds” language expressly elsewhere in the Act; (ii) the phrase “liable to forfeiture” is used consistently throughout the Act to denote actual liability; (iii) the same precondition governs both seizure and detention under section 139(1), and seizure clearly requires actual liability because it triggers Schedule 3 condemnation proceedings; (iv) the Commissioners’ alternative reading (goods legally capable of forfeiture) would confer an unrestricted power; and (v) section 144(2) presupposes that officers may incur tortious liability where detained goods turn out not to be liable to forfeiture.

An ancillary power of detention

The Court held, however, that this construction did not leave officers powerless. Reviewing Jacobsohn v Blake and Compton (1844) 6 Man & G 919 and Irving v Wilson (1791) 4 Durn & E 485, the Court concluded that a power to detain goods for a reasonable period, as a necessary incident of the statutory power of examination, had long been recognised. In Jacobsohn, Tindal CJ held the officers had acted lawfully because they detained the goods “under a real and honest doubt that they were subject to forfeiture”, and Coltman J held that officers were entitled to detain goods for a reasonable time to determine liability. This approach was mirrored in R v Secretary of State for the Home Department, Ex p Labiche [1991] Imm AR 263.

The Court held that the enactment of an express statutory power of detention in section 275(1) of the Customs and Excise Act 1952 (now section 139(1) of the 1979 Act) did not impliedly abolish the earlier common law power arising from examination. The two powers are temporally and functionally distinct: examination-based detention operates before liability to forfeiture has been determined, while section 139(1) detention operates after that determination as an alternative to seizure. There was nothing in the legislative history suggesting Parliament intended to restrict existing powers.

Application to the appeals

In Eastenders, the officers’ inspection under section 118C(2) had not been completed on mere visual examination; the inspection extended to determining whether duties had been paid, which required enquiries into supply chains. The officers were entitled by virtue of section 118C(2) to detain the goods for a reasonable period to complete those enquiries. Similarly, in First Stop, the power of examination under section 112 impliedly included an ancillary power of detention for a reasonable time pending enquiries. The Commissioners’ erroneous reference to section 139(1) did not vitiate the lawfulness of the detention, since lawfulness depends on the existence of a power, not on correct identification of its source.

Costs

Since the detentions were in fact lawful, the applications for judicial review should have been dismissed, and section 144(2) was inapplicable. The costs orders below had proceeded on a mistaken basis and were set aside for reconsideration.

Implications

The decision clarifies the structure of HMRC’s detention powers under the 1979 Act. Section 139(1) authorises detention only where goods are objectively liable to forfeiture, but a separate, implied power exists to detain goods for a reasonable period as an ancillary incident of the statutory powers of examination in sections 112 and 118C(2), where officers require time to complete enquiries such as tracing supply chains. This preserves the practical enforceability of the excise regime, avoiding the concern noted by Sales J that owners might frustrate enforcement by obfuscating the duty status of goods at inspection.

The judgment also confirms that reliance on the wrong statutory provision does not render otherwise lawful administrative action unlawful, provided the power in fact exists and adequate reasons for the action have been given. The compatibility of section 144(2) with Convention rights and EU law did not fall for decision, since detention grounded in the examination powers is lawful and does not engage section 144(2). The decision is significant for revenue traders, customs practitioners, and enforcement officers, and reflects a longstanding judicial recognition, dating from at least Jacobsohn, that statutory investigatory powers carry with them such ancillary powers of temporary control over goods as are reasonably necessary to make them effective.

Verdict: The Supreme Court allowed the Commissioners’ appeal in the Eastenders case and dismissed First Stop’s substantive appeal, holding that the detentions were lawful under the statutory powers of examination in sections 118C(2) and 112 respectively. The appeals in relation to costs were allowed, and the costs orders below were set aside for reconsideration.

Source: R (on the application of Eastenders Cash and Carry plc & Ors) v Revenue and Customs [2014] UKSC 34