E01094
EXCISE – Jurisdiction and Practice – Restoration refusal – Direction in E1038 for further review following hearing – Review Officer disregarding Tribunal's conclusions – New appeal – Application by Customs for direction for third Review – Objection by Appellant – Application heard in Customs' absence – Decision E1083 dismissing application and allowing appeal – Application under Rule 26(3) to set aside E1083 – Jurisdiction of Tribunal under FA 1994 s.16(4)(a) – Direction for new review under s.16(4)(b) – Appeal allowed with costs
LONDON TRIBUNAL CENTRE
BOXTON LTD Appellant
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents
Tribunal: THEODORE WALLACE (Chairman)
Sitting in public in London on 19 February 2008
Steven Meyerhoff, of Backhouse Jones, for the Appellant
Rupert Jones, instructed for the Solicitor for Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2008
DECISION ON APPLICATION
- This was an application by Customs to set aside the decision of the Tribunal in E1083 allowing the appeal which was given after a hearing on 11 January 2008 when Customs failed to appear. Mr Meyerhoff took part in this hearing by telephone from Clitheroe, Lancashire.
- The application under Rule 26(3) was made on the basis that Customs were not informed of the hearing on 11 January 2008. This was misconceived since the Tribunal records hold a receipt from Customs for the hearing notice which was issued on 21 December 2007.
- Nevertheless I proceeded to consider the application on its merits.
- The appeal arose out of the seizure on 15 April 2006 at Dover of two Scania Topline vehicles which were returning from the continent with vehicles full fuel tanks, both being fitted with two non-standard tanks. Customs refused to restore the vehicles and the Appellant appealed against a review decision dated 3 July 2006.
- Following a hearing on 15 February 2007 at which both parties were represented by counsel, the Tribunal (Miss Jill Gort, chairman) in Decision E1038 released on 18 April 2007 directed that Customs conduct a further review.
Paragraph 39 of the Decision reads as follows:
"In all the circumstances, particularly given the mis-statement and misapplication of the [Respondents'] policy, the failure properly to consider whether non-restoration was proportionate, or to take account of all those circumstances which would be relevant to that matter, we do not consider that the decision was such that the Commissioners could reasonably have arrived at. The appeal is allowed and we direct that the Commissioners conduct a further review of the original decision, properly taking account of the above matters."
- The Review was carried out by Raymond Brenton, of the same office as the original review officer, David Harris. In a 12 page Review letter dated 8 June 2007, Mr Brenton concluded that the vehicles should not be restored. At page 9 of his review Mr Brenton said this,
"With the overwhelming evidence I am of the opinion that the statement [of the Tribunal at paragraph 34]:
'We accept the Appellant's submission that the warning letter issued in October 2005 does not make clear that it is the size of the tank that is the offending matter.'
is one that a reasonable Tribunal body could not have reached."
Later in his Review Mr Brenton said this:
"Referring to the Tribunal Decision – Reasons for Decision paragraph 38:
'Nowhere does Mr Harris set out the financial implications of the seizure. He makes no reference to the loss of income of £1,000 per day for the loss of two vehicles …'
It appears that your client has provided no evidence to substantiate this claim either by production of documentation or at the Tribunal."
Further on Mr Brenton wrote,
"I refer again to your unsubstantiated claim that your client was losing 'daily revenue of approximately £1,000'."
- It is clear from reading the Tribunal decision that the conclusions at paragraphs 34 and 38 of the Tribunal decision were among the matters of which the Review officer was directed to take account.
- Mr Brenton disagreed with those conclusions. It would have been open to Customs to appeal to the High Court against the decision to direct a new review or against the basis on which the review was directed. However once Customs had decided not to appeal, the Review Officer was bound as a matter of law to comply with the Tribunal's directions and with the conclusions of both of fact and law on which the Tribunal's decision was based. It is a matter of concern that an officer carrying out a second review directed after a contested Tribunal hearing should have so misunderstood his powers and duties.
- On 17 July 2007 the Appellant's solicitor served a very full notice of appeal the grounds of which included that the Review Officer erred in law in that he failed to fully understand his role as a Review Officer and to take account of the Tribunal's findings (paragraph 4.1.1).
- On 10 August 2007 Customs asked for an extension of time to 28 September 2007 for serving the Statement of Case; on 28 September Customs asked for a further extension to 2 November; both applications were on the grounds that more time was needed for the officer to assimilate papers for the Solicitor's office. Both applications were granted subject to any objection from the Appellant. The Appellant did not object.
- On 2 November 2007, again on the last possible day, Customs asked for an extension to 30 November to take instructions from counsel. Again the Appellant did not object.
- On 20 November 2007 Customs applied for a direction for a new review pursuant to section 16(4)(b) of the Finance Act 1994. The grounds were stated as follows:
"the review subject to this appeal did not take certain facts into account and the Commissioners need to prepare one that does."
- I observe at this point that the grounds were, to put it at its lowest, uninformative and were insufficient to comply properly with Rule 11(2).
- The application was served on the Appellant which objected. The notice of objection included the following,
"No details of those facts have been provided and despite our request for this information to be provided, the Commissioners have refused the request."
That notice of objection was notified to Customs on 20 December 2007.
- The hearing on 11 January 2008 was notified to Customs on 21 December 2007 together with a batch of other hearing notices. As already stated, Customs acknowledged receipt, the notice being ticked along with all other notices and returned to the Tribunal.
- The failure of Customs to attend on 11 January 2008 can only be attributed to inefficiency in handling communications received from the Tribunal. It is to be noted that Customs also asserted that they did not receive the decision of 17 January for which there was also an acknowledgement on the Tribunal's file. On the morning of 11 January Customs were telephoned by the Tribunal clerk who received no response to an inquiry as to whether anyone was attending either at the hearing time or later in the day.
- When the matter came before Mr Howard Nowlan on 11 January 2008 Customs were of course not present and he recorded that Customs had to date refused to indicate what further evidence had been wrongly ignored and how that evidence might influence the decision on the second Review. Mr Meyerhoff had travelled from Lancashire to represent the Appellant and was clearly the source of that observation. The Tribunal proceeded under Rule 26(2) to hear the matter in Customs' absence.
- Mr Nowlan decided at paragraph 7 of Decision E1083 to refuse Customs' application for a direction for a new review and to allow the appeal against the Review decision. He went on to state, "The result of this should be that the Appellant's lorries are restored to the Appellant."
- He pointed out at paragraph 8 that the very premise of the application by Customs under section 16(4) of the Finance Act 1994 was that the second review decision was unreasonable. He referred at paragraph 10 to Customs' failure to attend, to their failure to inform the Appellant of the nature of the new material and to the lack of response when telephoned by the Tribunal on the day.
- At paragraph 11 he said this,
"Whilst I appreciate that a Review can sustain an officer's original decision or seizure on different grounds than those originally given by the officer, I do find it extraordinary that officers of HMRC can implicitly make an original decision and then review it twice, first in a way that this Tribunal has criticised and secondly (following guidance by this tribunal) in a way which they concede to be unreasonable, only to return on a 'third time lucky' basis to seek to advance other grounds."
- In the following paragraph Mr Nowlan went on to observe in relation to proportionality that the Appellant had already been penalised by being deprived of the use of the lorries for two years. He recorded that the Appellant had consented to repeated extensions of time for the Statement of Case before sending in a well prepared statement expressing its loss of patience and had not been "given the slightest indication of the alleged new evidence or the grounds on which implicitly HMRC would seek to sustain the original seizure on a third Review." The reference to the original seizure should of course have been to the non-restoration. His last observation was a recognition of the fact that if Customs were willing to restore the vehicles it was open to them to do so at any time without a Review.
- Earlier at paragraph 7 he said this,
"I have decided to give my decision on the Application and to reject it, and also to allow the Appellant's appeal against the second Review decision, notwithstanding that the Respondents were not present. The result of this should be that the Appellant's lorries are restored to the Appellant."
- At the outset Mr Jones produced a skeleton argument which was not prepared by him dated 11 February which had not been served on the Appellant. This explained for the first time that the Review Officer had disregarded the earlier Tribunal's conclusions. Mr Jones in applying to set aside the decision of Mr Nowlan correctly said that the Tribunal has no power to order restoration, its powers being specifically laid down in section 16(4). This is clear from Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766; [2002] STC 588 although he did not cite it. I return to that decision later.
- It is clear however on a full reading of his decision that Mr Nowlan did not direct restoration. His observation that restoration should follow was not a direction but a statement of what ought to follow in the circumstances.
- Section 16(4) reads as follows:
"(4) In relation to any decision as to an ancillary matter, 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;
(c) in the case of a decision which has already been acted upon 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 repetition of the unreasonableness do not occur when comparable circumstances arise in the future."
- Mr Jones did not suggest that the prerequisite for a direction under section 16(4), namely the review decision was unreasonable in the legal sense, was not satisfied. This was of course the premise of the application. The ambit of the precondition to section 16(4) is confirmed by the decision of the Court of Appeal in Golobiewska v Customs and Excise Commissioners [2005] V&DR 267; [2005] EWCA Civ 607 at [16] and [17] and indeed in Lindsay.
- In those circumstances it was necessary for the Tribunal to decide whether to make a direction under one or more of sections 16(4)(a), (b) or (c). Section 16(4)(c) was not in point because the vehicles could still be returned. In making a direction the choice could only be between (a) and (b). In allowing the appeal without directing a further review, the Tribunal could only have been acting under (a) which empowered it to direct that the decision shall cease to have effect.
- The issue which arises on the present application is whether the decision to refuse to direct a new review and to allow the appeal should be set aside or varied. This involves further consideration of the powers of the Tribunal under section 16(4) and in particular how those powers should be used.
- The skeleton argument did not address the powers of the Tribunal. Mr Jones submitted that it is not appropriate for the Tribunal to use its powers under section 16(4)(a) above when section 16(4)(b) is available. He said that a direction under section 16(4)(a) would not resolve the matter and would potentially give rise to further litigation in the courts. If he is correct in this submission, then the choice lies between granting his application and directing a new Review and dismissing the application leaving the appeal against Mr Brenton's review to proceed to a full hearing the outcome of which would inevitably be a direction at that stage for a new review.
- The only case of which I am aware in which the jurisdiction of the tribunal under section 16(4) has been considered is Lindsay [2002] 1 WLR 1766 which was primarily concerned with proportionality. The Court of Appeal affirmed the Tribunal's decision that the Review decision could not stand because the review officer failed to have regard to all material considerations, referring in particular to the need for proportionality. The Court then turned to consider the direction by the Tribunal that the vehicle should be restored and that if it had been disposed of the parties could apply to the tribunal if the amount of compensation could not be agreed. Lord Phillips of Worth Matravers MR said this,
"[68] The tribunal directed that Mr Lindsay's vehicle should be restored to him and that, if this were not possible, the commissioners should pay him compensation. In so doing they purported to be exercising jurisdiction conferred by s.16(4) of the 1994 Act. That subsection expressly spells out the powers of the tribunal in the circumstances of this case. They include the power to direct that the decision appealed against ceased to have effect and to require the commissioners to conduct a further review of the original decision in accordance with the directions of the tribunal. Mr Baker sought to persuade us that that was all that the tribunal had done. The decision appealed against was that the vehicle should not be restored. If that decision ceased to have effect, it followed, inevitably, that the vehicle would have to be restored and the tribunal had done no more than give this direction.
[69] I do not agree. The tribunal have done more than direct that Mrs Florence's decision ceased to have effect. They have purported to reverse it. That is something that they had no jurisdiction to do. To make this plain it is only necessary to contrast subsection (4) of s.16 with subsection (5), which provides:
"In relation to other decisions, the powers of an appeal tribunal on appeal under this sections hall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal."
[70] I consider that the appropriate order is that the commissioners conduct a further review of Review officer Florence's decision in the light of the decision of the tribunal and this judgment."
- The Court of Appeal thus set aside the decision of the Tribunal directing that the vehicle be restored with compensation if this was no longer possible. The basis of the Court's decision was that the Tribunal had no jurisdiction to reverse Mrs Florence's decision. At [69] Lord Phillips said that the tribunal had done more than direct that the decision ceased to have effect but had purported to reverse it. The direction to restore the vehicle reversed the decision to refuse restoration.
- When analysed, the conclusion of Lord Phillips at [69] was that the power under section 16(4)(a) did not go beyond a power to direct that the decision cease to take effect. It was not that the Tribunal had no jurisdiction to make a direction under section 16(4)(a). It would not be possible to conclude that there is no jurisdiction to make a direction under section 16(4)(a) since the Act expressly confers power to make a direction under one or more of paragraphs (a), (b) or (c). Lord Phillips referred in terms to the power to direct that the decision cease to have effect.
- Having concluded that the Tribunal had no jurisdiction to reverse the review decision, Lord Phillips stated in paragraph [70] what he considered to be the appropriate order. As expressed, this was an exercise of judgment, rather than a decision that as a matter of law it was the only possible order.
- Returning to the statute, a tribunal has power when it is satisfied as to the precondition to make a direction or declaration under one or more of paragraphs (a), (b) and (c).
- It seems to me that, when Lord Phillips decided at [70] that the appropriate order was to direct a new review in the light of the decision of the tribunal and the judgment of the Court, he was exercising a judgment on the facts of that case. Earlier at [64] he had stated that the Commissioners have a wide range of lesser sanctions that would enable them to impose a sanction that is proportionate where forfeiture (by which he must have meant non-restoration) is not justified. On reading the judgment in Lindsay there was no suggestion that restoration was the only possible reasonable decision. There are cases which come before the Tribunal when on the facts found by the Tribunal having heard the evidence a continued refusal to restore goods which have been seized would be perverse. It may well be that the intention of Parliament was that a direction under paragraph (a) should be available in such a case rather than that a further review should be required which would be no more than a formality. Lindsay however was not such a case.
- In my judgment, therefore, Lindsay did not decide that the Tribunal has no jurisdiction to direct that a decision not to restore a vehicle will cease to have effect, but rather than the Tribunal had no power to direct restoration and that on the facts of that case it was appropriate to direct a further review. Clearly the judgment of the Court in Lindsay as to what was appropriate in that case is highly persuasive in any similar case.
- It should not be forgotten that the decisions within section 16(4) cover a wide spectrum of matters involving the exercise by the Commissioners of management powers most, if not all, of which involve an element of discretion. If, as a matter of principle, the Tribunal should always direct a further review when there is any element of discretion exercisable by the Commissioners, it is difficult to think of any circumstances when a direction under paragraph (a) would be appropriate unless coupled with a direction under paragraph (b). Mr Jones was not able to suggest any class of decision where a paragraph (a) direction would be appropriate rather than one under paragraph (b). Unless there is a class of case where a direction under paragraph (a) alone would be appropriate, the reference in section 16(4) to "one or more of the following" is otiose.
- I conclude, therefore, that as a minimum the power to direct that a decision shall cease to have effect without a new review must be exercisable where on the facts no real exercise of discretion remains to be exercised by the Commissioners. This would be the case where the decision was literally one which the Commissioners could not reasonably have arrived at because the only possible decision was the reverse. An example would be an appeal against refusal to restore a vehicle where the Tribunal concludes after hearing the evidence that the owner of a vehicle was wholly unaware that a passenger was smuggling.
- The case now under consideration is not a case where the only possible decision was the reverse of that reached. It does however involve an entirely different factor in that, the original review decision having been set aside after a full hearing in Decision E1038, when carrying out the further review directed by the Tribunal the Review Officer took it upon himself to reconsider the material before the Tribunal and to disregard conclusions of the Tribunal. The Appellant has clearly lost faith in the Review process and Mr Meyerhoff said, "It could go on for ever." There must come a point where the Tribunal proceedings reach finality.
- The application now before me arises of course in relation to the appeal against the review by Mr Brenton. When the application for a direction for a new review came before Mr Nowlan in January it would have been open to him to refuse the application and to leave that appeal to go to a full hearing following which the Tribunal would have been able to make additional findings of fact, although it is doubtful whether the Tribunal could properly have set aside any of the findings by the first Tribunal.
- As a matter of record the Tribunal receives a considerable number of applications by Customs for directions for a further review in cases where the first review decision is under appeal to the Tribunal. Any such application implicitly accepts that the first review was unreasonable in law. In such cases the practice has been to direct a further review if the Appellant does not object. If the Appellant does object, a hearing is listed since any dispute as to the facts is a matter for the Tribunal.
- When an appeal is heard by the Tribunal the fact that the decision under appeal was unreasonable in the legal sense is not decisive, since, if the Tribunal concludes that the decision would inevitably have been the same if the review officer had not acted unreasonably but had taken account of all relevant material and disregarded all irrelevant factors, the appeal will dismissed, see Customs and Excise Commissioners v John Dee Ltd [1995] STC 941, CA. This is a stringent test.
- In the present case, where there has already been a hearing on the facts, I do not consider that it would be appropriate to leave the appeal against Mr Brenton's review to go to a further Tribunal hearing. Neither party requested this. The choice lies between (a) a direction under section 16(4)(a) by reason of the fact that having been directed to carry out a further Review by the first Tribunal the Commissioners failed to discharge their duty properly and (b) a direction for a further Review in accordance with further more stringent directions.
- To my mind it is relevant that, albeit belatedly, Customs did take the initiative in drawing the attention of the Tribunal to the defects in Mr Brenton's report. I do not consider that it would be appropriate to act on the assumption that any further Review would not be properly carried out. I do however consider that it is important that justice be seen to be done and that the integrity of the appeal and Review process under the Finance Act 1994 is upheld. On the other hand, as pointed out at paragraph 39, it is not a case where there would be only one possible conclusion on a new review.
- On balance I have decided to set aside or vary the decision on E1083 and to require the Commissioners to conduct a further review in accordance with the following directions:
(1) The Review shall be carried out by an officer not previously involved in the matter and from a different office to the previous Review Officers;
(2) The Review Officer will be bound by the conclusions in Decision E1038 released on 18 April 2007;
(3) The Review Officer shall take account of the fact that the Appellant has been deprived of the use of the vehicles since 16 April 2006 and that a substantial part of this period is attributable to the failure by Mr Brenton to carry out a proper review, the failure to serve a statement of case promptly and the failure to give proper reasons for this Application until the hearing on 19 February 2008;
(4) The further Review shall be served both on the Tribunal and the Appellant within 21 days of the Release of this Decision;
(5) If dissatisfied with the result of the further Review the Appellant will have a further right of appeal to the Tribunal.
- The result is that a further Review having been directed under section 16(4)(b) the appeal is allowed. The Appellant is entitled to the costs of the appeal and of this application. I direct that the Appellant serves a Schedule of costs on the Tribunal and the Respondents within 21 days and that the Respondents serve any notice of objection with reasons on the Tribunal within 21 days thereafter.
THEODORE WALLACE
CHAIRMAN
RELEASED: 7 March 2008
LON 2007/8130
