Scottish Sheriff Court Decisions

SHERIFFDOM OF TAYSIDE, CENTRAL AND FIFE AT FALKIRK

 

B762/10

THE ADVOCATE GENERAL FOR SCOTLAND, FOR AND ON BEHALF OF THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Pursuer;   against   ALEXANDER CLARKSON, residing at Whiteside Farm, Slamannan, Falkirk, FK1 3BX   Defender: __________

Act: Mr Artis, Advocate

Alt: Ms Rodger, Advocate

 

 

Falkirk, 31^st August 2011

The Sheriff, having resumed consideration of the cause, repels the defender's pleas-in-law, sustains the pursuer's pleas-in-law and pronounces decree de plano as craved; finds the defender liable to the pursuer in the expenses of the action; and certifies the cause as suitable for the employment of junior counsel.

 

NOTE

Background and Statutory Framework

1.1 On 10 November 2009 officers of the Road Fuel Testing Unit of HM Revenue & Customs entered Whiteside Farm, Slamannan, Falkirk. Fuel was tested in due course. The relevant vehicles were seized and uplifted. In August 2010 the defender paid a "restoration penalty" sum of £6,320 to the pursuer. On 27 August 2010 the relevant vehicles were duly returned to the defender.

1.2 The statutory basis for forfeiture is located in the Hydrocarbon Oil Duties Act 1979, Section 13(6). Provisions as to detention, seizure and condemnation of goods in the circumstances are located in the Customs and Excise Management Act 1979, Section 139. Although the target of the Revenue and Customs is the fuel, any vehicle containing that fuel is liable to forfeiture and Section 141 of this Act makes this explicit. Further, Schedule 3 of the Act contains in paras. 3-5 a deeming provision to the effect that if on the expiration of a one month period (from the date of the notice of seizure or date of seizure), no notice of challenge is intimated, the item will be deemed to have been duly condemned as forfeited. In this case a challenge was made, accordingly triggering para. 6 of Schedule 3 in terms of which where notice of claim in respect of an item is duly given: "the Commissioners shall take proceedings for the condemnation of that thing by the court, and if the court finds that the thing was at the time of seizure liable to forfeiture the court shall condemn it as forfeited".

1.3 In terms of para. 16 of Schedule 3 the Commissioners have discretion to deliver relevant items to any claimant on payment by that claimant of a sum fixed by the Commissioners, being a sum not exceeding that which in the opinion of the Commissioners represents the value of the item, including any duty or tax chargeable thereon (which has not been paid). A restoration provision is specifically conferred by Section 152, granting the Commissioners discretion to restore an item subject to conditions.

1.4 Against that background the pursuer seeks declarator that the vehicles (the goods) were liable to be condemned as forfeit, and to condemn them as such. Forfeiture will allow title to pass from the defender to the HMRC in the event that declarator is granted. The defender has assembled a variety of preliminary pleas by way of challenge. In the course of the debate that it became clear that the plea of relevancy and specification was not being insisted on (plea-in-law 5) by the defender's counsel, and accordingly at the stage of avizandum that plea was repelled of consent. The live pleas-in-law advanced at debate were effectively therefore personal bar, mora, equity, and a challenge in terms of Article 1 of Protocol 1 to the Convention referred to in plea-in-law 4.

 

Defender's Submissions

2.1 Personal Bar: Counsel for the defender referred to production 6/2/1 being a Seizure Information Notice dated 10 November 2009 and to paragraph 1 of the accompanying explanatory note therein which stated as follows:

"You must make your claim in writing to Revenue and Customs within one month of the date of seizure making it clear that you wish to challenge the validity of the seizure. Revenue and Customs will then commence court proceedings within 6 months that will enable your claim to be heard at a magistrates court, or, in Scotland, a Sheriff Court or the Court of Session."

2.2 Put short, the defender's counsel contended that, the action having not been raised within the six month period specified in paragraph 1 to the said explanatory note, the defender's plea to personal bar should be sustained, the pursuer being bound by that statement which was expressly put in writing in an official notice. Counsel referred to William Grant & Sons Limited v Glen Catrine Bonded Warehouse Limited 2001 SC 901 and in particular to the remarks of Lord President Rodger at 913F-914A (para. 29). In the instant case HMRC stated in terms of production 6/2/1 that proceedings would be raised within six months and then failed to do just that. In so far as the defender could be said to have relied on the terms of the notice to his prejudice, it was admitted by his counsel that the defender was not in a position to deal with the matter due to the statutory framework and instead required to rely on the pursuer dealing with the matter (the question of title) for him. Counsel further referred to Banks v Mecca Bookmakers (Scotland) Limited 1982 SC 7, referring to this matter as a case which established that it was not necessary for a tenant to aver or show prejudice to himself when he was alleging waiver by the landlord of his right to a rent review rather than personal bar. The passage referred to by counsel at pages 12-13 referred to the issue of waiver rather than personal bar, the analysis being that where an issue is concerned with an alleged abandonment of a right (the essence of waiver), prejudice need not be averred. Counsel submitted that the seizure notice set out in production 6/2/1 was not a contract between the parties, but was rather an express statement of how HMRC proposed to act and that on expiry of the six month period they had waived their right thereafter to proceed. Intimation of the defender's challenge to the legality of seizure was made on 7 December 2009, starting the six month period which accordingly expired on 7 June 2010. Warrant to cite in this action was granted on 4 August 2010 and service effected on the defender on 13 September 2010. Counsel submitted that there is a substantial cross-over between personal bar and waiver and that the court should treat them as related. In these particular circumstances, counsel submitted, prejudice was not required, HMRC having waived a right to proceed.

2.3 As an esto argument, counsel suggested that any prejudice has arisen from the fact that condemnation proceedings were not raised, leaving the defender in "limbo". Condemnation proceedings deal with ownership and title, counsel contended, as what is sought by the pursuer is forfeiture to HMRC and here the vehicles had been returned to the defender. The vehicles were restored on 27 August 2010 prior to the date on which service was effected, a sum having been paid in terms of the schedule of restoration annexed to HMRC's letter of 16 August 2010 (production 6/2/4). While both parties aver that the vehicles were restored, restoration cannot be said, counsel contended, to have resolved the question of title, as condemnation proceedings have been raised and are still live. Counsel noted that para. 16 of Schedule 3 refers to delivery. Counsel's position, on behalf of the defender, was accordingly that HMRC having taken the vehicles and there having been a challenge on behalf of the defender, HMRC had possession but no title. The question of title cannot be determined until conclusion of the Crown proceedings. The vehicles had been returned to the possession of the defender. There is accordingly a "question mark", she submitted, over title and this question mark amounts to prejudice. The (admitted) fact that the vehicles were returned, did not, counsel submitted, mean that there was no prejudice, the question of title not having yet been determined. In any event, the matter ought to have been resolved earlier than it was and counsel founded specifically on the express terms of the said explanatory note. Counsel accepted that there was no provision for a time limit in the Sheriff Court with regard to the raising of the action, but submitted that this did not mean that the Commissioners could delay for as long as they chose before raising the action. Were that to be the case, delay could be inordinate and Schedule 3, para. 6 (dealing with the requirement on the Commissioners to take proceedings where a challenge is made) should be read in that context. Counsel further sought to make an amendment of the defender's first plea-in-law to include waiver on the basis that personal bar can, on counsel's submission, incorporate waiver. This motion was made at the close of the debate and was opposed as too late and being without pleadings to support a plea of waiver. I determined to allow the amendment. All these issues were clearly at large before the Court and amendment would allow a global decision to be made on all points raised in the course of the debate.

3.1 Mora: Counsel submitted there was a real overlap between her arguments on personal bar and mora. She advanced the plea on mora, accepting that while the delay was not considerable, the six month period having expired in June, service was nevertheless effected some three months later. In so far as the plea of mora includes issues of unfairness, counsel formally adopted her submissions on prejudice advanced supra in respect of personal bar.

4.1 Protocol 1 Article 1: Counsel then turned to her argument on the right to peaceful enjoyment of possession set out in Article 1 to Protocol 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms. Counsel submitted that there had been interference in the defender's right to peaceful enjoyment to property which could not be justified. Counsel accepted that the events to date did not amount to deprivation of property, on the basis that if the defender's challenge is successful, title will remain with him. Deprivation must be definitive and include irrevocable loss of property rights: Raimondo v Italy (1994) 18 EHRR 237 at 259-260 and Handyside v The United Kingdom 1 EHRR 737. The submission was focused on interference in the defender's right to peaceful enjoyment of his possessions. The purpose of seizure, counsel submitted, was deterrence and accordingly there could be said to be a legitimate aim being pursued which could be justified in the public interest. Here the interference was, however, disproportionate, under reference to Lindsay v Customs and Excise Commissioners [2002] 1 WLR 1766, per Lord Phillips of Worth Matravers MR at 1784-5 and in particular at 1784C: "The action taken must, however, strike a fair balance between the rights of the individual and the public interest. There must be a reasonable relationship of proportionality between the means employed and the aim pursued".

4.2 On that basis counsel submitted that the seizure and subsequent condemnation proceedings in a case which amounted effectively to a case of "the wrong diesel", were disproportionate to the aim pursued. The averments in particular in Answers 2 and 8 disclosed investigative steps taken on behalf of HMRC and three negative samples were referred to in the report of the Oil Lab, Oil Analysis Service dated 7 January 2011 (production 6/2/5), all factors to be taken into account when considering the question of proportionality. Standing the return of the vehicles and payment of a considerable proportion of penalty and costs related to uplift and storage, the proceedings could be said to be disproportionate in terms of the Protocol. It was further of note that there were no arrears of duty listed in Part C of the Schedule of Restoration Terms annexed to HMRC letter of 16 August 2010 (6/2/4). Accordingly ex facie there appeared to be no evidence supporting any aim to secure taxes.

5.1 Equity: The final challenge to the action on behalf of the defender was set out in his plea to equity, which counsel accepted was a short point. She submitted that the sum paid, though not insignificant to the defender, could not be said to be significant to the pursuer. Further, the vehicles have been returned to the defender and an inference could be said to be taken that the pursuer has therefore no interest in the vehicles and did not have such an interest at the time that they were returned. In relation to the payments made under the Schedule of Restoration (6/2/4), there were no arrears of duty provided for in the Schedule and it must therefore be the position that the vehicles were not being used as a medium to recover taxes by HMRC. The majority of the costs indeed were uplift and storage (Part B of the Schedule) (£3,820), the remainder comprising £1,250 respectively in terms of the penalty provisions of the Hydrocarbon Oil Duties Act 1979, Section 13(1). Further, the defender's position in Answer 2 was that one week prior to 10 November 2009 the fuel was found to be negative for euromarkers (although it must be noted that this averment is "not known and not admitted" by the pursuer in Article 2.

5.2 Counsel's short point on this plea was that all of the factors listed above indicated that the only purpose of the action was to preserve sums paid to the pursuer by the defender, namely £6,320. The vehicles will remain with the defender. If the Court grants decree as craved (as sought by the pursuer) HMRC will keep that sum and the defender will keep the vehicles. Accordingly, if the Court was not with the defender in respect of preliminary pleas 1, 2 and 4, the Court could exercise discretion in terms of plea 3 and deem it inequitable to find in favour of the pursuer and thereby dismiss the action.

6.1 The Defender thereby sought dismissal of the action, but contended that in the event that the Court was against his position on all preliminary pleas, the court should still resist the pursuer's application for decree de plano on the basis that the defences do disclose a defence and the appropriate order by the court should accordingly be in those circumstances for proof before answer.

 

 

Pursuer's Submissions

7.1 Counsel for the pursuer sought to emphasise throughout his submissions that the action was raised as a matter of obligation by the pursuer standing the statutory framework already examined in the 1979 Act and, in particular, Schedule 3. HMRC required to undertake investigations including the interviewing of the defender and this placed any alleged delay in context. In particular, para 6 of schedule 3 makes it clear by its peremptory terms that there is no discretion in the hands of the Commissioners in the taking of proceedings once a challenge is intimated. Further, in terms of the same paragraph, if the court finds that the item was at the time of seizure liable to forfeiture there can be no discretion in the hands of the court and the court must condemn the item as forfeited. These vehicles were liable to forfeiture and so this court, counsel argued, had no discretion but to condemn the vehicles as forfeited. Schedule 3 para 7 goes on to have the effect of taking the point of forfeiture back to the date when liability to forfeiture arose (date of seizure). A further deeming provision in schedule 3, namely para 13, was further of note in the pursuer's case, providing that in any proceedings arising out of seizure, the fact, form and manner of the seizure shall be taken to have been as set both in the process without further evidence thereof, unless the contrary is proved. The terms of Schedule 3 have been recently looked at in the Court of Appeal in HM Revenue & Customs v Jones [2011] EWCA Civ 824, and at para 71(4) and (5), Mummery LJ addresses the deeming procedure set out in terms of the express language of para 5 of Schedule 3, ie the goods require to be taken as "duly condemned" if the owner does not challenge the legality of seizure in the allocated court by invoking and pursuing the appropriate procedure. Counsel submitted that in terms of Schedule 3 para 6 this court in this action could only find the items forfeit or not. Any questions of judicial review would be properly directed instead to the First Tier Tax Tribunal. This action, however, is an action in rem in respect of the goods themselves and either they are forfeit or they are not. Dismissal of the action, as sought by counsel for the defender, did not relieve the pursuers of their duty to bring the action under para 6 of Schedule 3.

7.2 With regard to the defender's submissions on personal bar, the fact that the framework allows the pursuer no discretion not to take proceedings was critical in the context of any discussion on personal bar even if developed into waiver. Counsel referred to Lord Advocate v Meiklam (1860) 22 D 1427 at 1432-1433, the Second Division holding in that case that a plea of mora cannot be maintained against the Crown. Counsel further referred to Lord Advocate v Miller's Trustees (1884) 11 R 1046 for the dictum R 1053 "It is the privilege of the Crown not to be bound by the omissions, neglect, and blunders of their officers." This point was developed in Reid v Department of Health for Scotland 1938 SC 601, under reference to the opinion of Lord President Normand at 607 in the following terms:

"The other point argued by counsel for the appellant was that the Department had barred itself from exercising its jurisdiction under the Act and from denying the referee's jurisdiction. The answer to this is that the Department has a statutory duty which his officials have no power to waive... Although I regret that the appellant should have found herself involved in procedure which turns out to be aborted through a misleading notice issued by the Department, the statutory jurisdiction of the Department remains, and the Department is bound to exercise it."

7.3 Counsel accordingly submitted that even where the Crown is subject to judicial review (and these proceedings are not judicial review proceedings), only the most categorical assurances, given within the limits of the Crown's statutory authority under the full knowledge of the circumstances, can lead to the Crown being seen to have waived an entitlement: R v Inland Revenue Commissioners, ex p M.F.K Underwriting Agents Ltd [1990] 1 WLR 1545, see Bingham LJ at 1669 B-G:

"The taxpayers' only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law".

7.4 In the present case the defender did not indicate that he was being damaged in some way by the delay and no positive assurances were ever given by the Revenue. The reference to six months is the relevant provision for proceedings in the Magistrates Court in England (Magistrates Courts Act 1980, section 127). The question of delay can only therefore be considered as a question of personal bar which in the light of the said authorities could not stand against the Crown in this case. With regard to waiver, this would require a positive assertion, or circumstances inferring in the clearest terms the abandonment of an entitlement. For any party to be held to have abandoned an entitlement, counsel submitted that there must be necessarily an entitlement. In the present case the Crown had no entitlement; rather there was and remained an obligation upon the Crown. It was of note that the plea was not taken in respect of the Crown's right to seize the goods but against the failure to raise proceedings within six months. It could not be said that there was a necessary inference that the Crown was in any sense abandoning an entitlement, there being no entitlement in the light of the statutory framework. Counsel further referred to Gatty v Maclaine 1921 SC (HL) 1 on personal bar and submitted that there could not be said to be in any sense a substantial prejudice on the part of the defender in circumstances where he had his goods back. He had invoked the benefit of a statutory right of challenge and had been the subject of delay for a little longer than might otherwise have been the case. In such circumstances a plea of personal bar could not competently be founded upon against the Crown. It was not, in any event, the subject of relevant averment.

7.5 Turning to the plea of mora, counsel submitted that more than mere delay was required and further that the delay in this case was not of itself undue delay. Specifically, all three elements of the plea must be present with supporting averments and the defender has only pled delay. As an illustration of his point counsel submitted that this was not a situation in which, say, the defender had a buyer for vehicles and the sale was imperilled by these proceedings and the short delay involved. He founded on Somerville v Scottish Ministers 2007 SC 140 at 182 (para 94). Further reference was made to R v East Sussex C.C [2003] 1 WLR 348 per Lord Hoffmann at paras 32 to 35. In his speech Lord Hoffmann observed that he considered it unhelpful to introduce private law concepts of estoppel into planning law and drew the analogy between a private law estoppel and the public law concept of a legitimate expectation created by a public authority. Counsel drew from these dicta that there should be no further extension of such private law concepts into public law. The difficulty with the approach of the defender in the instant case could be located here. The Court was being invited to exercise jurisdiction on what was effectively an action in rem, ie whether the goods are liable to forfeiture. The defender was, in these submissions, seeking to introduce public law considerations which would properly apply before the First Tier Tax Tribunal, and to attack the legality of seizure by arguments of personal bar and acquiescence/mora was simply not competent.

7.6 The proportionality point submitted under the Protocol required close analysis of what these proceedings were about. It was submitted by counsel that condemnation in these proceedings did engage Article 1 but that seizure (which has happened) did not engage Article 1. Schedule 3, para 6 of the 1979 Act was no more than a mechanism, counsel submitted, for the defender to raise objections in the proper context. In the present case a carefully discriminating schedule of penalties in terms of section 13 of the Hydrocarbon Oil Duties Act 1979, including the costs of the detaining exercise, had been prepared and was lodged. The fact that no duty was charged in addition was neither here nor there; the penalties were a reflection of the defender introducing red diesel into his vehicles.

7.7 Counsel for the pursuer marshalled all these arguments in moving the court to grant decree de plano, there being no relevant defence to the craves of the action. He emphasised that there had been no suggestion during submissions by the defender that the pursuer's pleadings were short of facts to support the crave. The Court should be reluctant to accede to the defender's request effectively to "rear up" a prescription of six months on the basis of the back of form sent out to the defender (6/2/1). Further, seizure preserved property pending condemnation, in the event that proceedings are invoked; it does not of itself engage Article 1 of Protocol 1. The defender's property has always been his own property, counsel submitted, and it requires the step of condemnation for that property to transfer to the Crown. The oil lab report referred to had no bearing on the raising of the action. It was dated January 2011 and can form no part of the matrix of facts informing the raising of the action by the pursuer. In all of these circumstances counsel urged the Court to repel the s whole pleas and sought decree de plano.

Discussion and Disposal

8.1 A vital starting point in considering parties' submissions is the provisions of para 6 of Schedule 3 of the Customs and Excise Management Act 1979: "Where notice of claim in respect of any thing is duly given in accordance with paragraphs 3 and 4 above, the Commissioners shall take proceedings for the condemnation of that thing by the court, and if the court finds that the thing was at the time of seizure liable to forfeiture the Court shall condemn it as forfeited." I also take as read the respective deeming provisions of paras 5 and 13 of schedule 3 of the 1979 Act, referred to supra. Having additionally considered the framework of pleadings I am satisfied that, having heard counsel for the defender at length, there is ultimately no challenge of substance to the factual basis to the pursuer's pleadings which would support the crave sought. Against that background the various pleas advanced for the defender can be dealt with respectively in fairly short compass.

8.2 The plea of personal bar/waiver must fail. The action is raised as a matter of obligation by the pursuer rather than entitlement. An obligation of that nature on the part of a Crown body simply cannot be waived in non-judicial review proceedings, which these are. Where there is a statutory duty on the part of the pursuer, erroneous reference to a time limit in the seizure information notice cannot elide the statutory jurisdiction and obligation bearing upon that Crown body: Reid v Department of Health for Scotland 1938 SC 601, Lord President Normand at 607. I accordingly hold the plea to personal bar to be incompetent and on the (amended) matter of waiver to be unsupported by relevant averments on record.

8.3 The plea to mora was but briefly argued by counsel for the defender and I dispose of this plea in a similar manner under reference to Somerville v Scottish Ministers 2007 SC 140 at 182 (para 94). It is clear from that authority that all three elements of the plea must be present with supporting averments and in the instant case this essential requirement is not met on the face of the pleadings. I accordingly hold that there are no relevant averments to support this plea, and under reference to the authorities canvassed in respect of the arguments on the first plea, also hold this plea to be incompetent in the present action.

8.4 The plea to equity also cannot stand, in the light of the statutory framework set out in Schedule 3 of the 1979 Act, in particular paras 5 and 6. Put short, this Court has no discretion in terms of paragraph 6 of Schedule 3, which is a schedule containing sundry deeming provisions which must be given effect to: Mummery LJ in Commissioners for HM Revenue and Customs v Jones [2011] EWCA Civ 824 at para 71(4). Where provisions state in terms that if the vehicles are liable to forfeiture, the court shall condemn these as forfeited, there can be no scope for a plea of equity in such non-judicial review proceedings as the present.

8.5 The plea directed to Article 1 of the Protocol was focussed in the submissions of the defender's counsel on the issue of proportionality. In my opinion, the correct understanding of Schedule 3, paras 5 and 6 is that these provide a mechanism for a party challenging the actions of the Revenue in this area to raise objections in the fairly narrow confines of actions such as the instant action whereby the issue is simply this: are the goods liable to forfeiture or are they not? I find it instructive to consider the further observations of Mummery LJ in Commissioners for HM Revenue and Customs v Jones at para 71(8) and (9), in the latter sub-paragraph expressing the following opinion: "The Convention concerns expressed in Gascoyne are allayed once it has been appreciated, with the benefit of the full argument on the 1979 Act, that there is no question of an owner of goods being deprived of them without having the legal right to have the lawfulness of seizure judicially determined one way or other by an impartial and independent court or tribunal: either through the courts on the issue of the legality of the seizure and/or through the FTT on the application of the principles of judicial review, such as reasonableness and proportionality, to the review decision of HMRC not to restore the goods to the owner." The argument advanced by counsel for the defender on proportionality in the context of Article 1 of the Protocol is in essence an argument of judicial review and has no place before this court. Accordingly I reject counsel's arguments in support of that plea and repel it along with all other pleas for the defender. There accordingly being no relevant defence to the crave of the writ, I pronounce decree de plano as craved.

8.6 Counsel were agreed that expenses should follow success and that the Court should sanction the cause as suitable for the employment of junior counsel. I do so without hesitation, noting that aspects of complication were recognised by both parties in the case by their employment of counsel and having regard to the nature of the submissions heard before me. These findings are reflected in the accompanying interlocutor. On the subject of the contribution of counsel, I wish to close this Note by expressing my thanks to both counsel for their considerable assistance.