Golobiewska v Customs & Excise

"Where --

(c)

a vehicle is or has been within the limits of any port . . . .

while constructed, adapted, altered or fitted in any manner for the purpose of concealing goods, that . . . vehicle shall be liable to forfeiture."

Section 139(1) is also relevant:

"Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard."

The section goes on with ancillary and consequential provisions.

"The Commissioners may, as they see fit . . .

(b)

restore, subject to such conditions (if any) as they think proper, any thing forfeited or seized under those Acts [that is to say, the customs and excise Acts]."

That was the restoration that was sought by Mrs Golobiewska or on her behalf and refused by the letter of 18th February 2000.

"This section applies to the following decisions, not being decisions under this section or section 15 below, that is to say . . . .

(c)

so much of any decision by the Commissioners that a person is liable to any penalty under any of the provisions of this Chapter, or as to the amount of his liability, as is contained in any assessment under section 13 above . . .

(d)

any decision by the Commissioners or any officer which is of a description specified in Schedule 5 to this Act.

Schedule 5, paragraph 2(1)(r) brings within the ambit of that provision:

"any decision under section 152(b) as to whether or not anything forfeited or seized under the customs and excise Acts is to be restored to any person or as to the conditions subject to which any such thing is so restored."

Section 14(1), therefore, says to what decisions the provision applies. Subsection (2) gives the person affected by the decision the right to give notice in writing to the Commissioners requiring them to review the decision The section goes on with ancillary provisions as to such a review.

"Where the Commissioners are required in accordance with this Chapter to review any decision, it shall be their duty to do so and they may, on that review, either --

(a)

confirm the decision; or

(b)

withdraw or vary the decision and take such further steps (if any) in consequence of the withdrawal or variation as they may consider appropriate."

It was on that basis that the first and, in due course, the second reviews were conducted.

"Subject to the following provisions of this section, an appeal shall lie to an appeal tribunal with respect to any of the following decisions, that is to say --

(a)

any decision by the Commissioners on a review under section 15 above (including a deemed confirmation on under subsection (2) of that section) . . . "

Only the person who required the review is able to appeal.

"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 . . . "

They can direct that the decision is to cease to have effect, or require the Commissioners to conduct a further review, or to declare the decision to be unreasonable. An ancillary matter is explained by subsection (8) and the matter at issue in the present case is plainly an ancillary matter.

"Whether the goods have been properly seized, and whether the particular appellant has or has not been innocent or acted with diligence, are all real and substantial considerations based on primary facts to be taken into account by the person taking the decision. The Tribunal cannot decide whether the decision qualifies as reasonable in the relevant sense unless it examines the facts asserted by both parties and substantiates whether those facts exist."

Later he says at paragraph 58:

"It follows from what I have said so far that if the hearing under section 16(4) of the Finance Act 1994 properly construed is to be Article 6 compliant, the Tribunal must have the capacity both to find all relevant primary facts and to determine the issue on reasonableness grounds. In this class of case there will usually, if not always, be both substantial elements of policy and substantial elements of primary fact involved in the decision-making process. I recognise Laws LJ's observation in paragraph 43 [that is to say of the case of Runa Begum v Tower Hamlets [2002] AER 668] that the statutory scheme in question is either compliant with Article 6 or it is not, and that its compliance or otherwise cannot vary case by case according to the degree of factual dispute arising. That, he said, would involve a wholly unsubstantiated departure from the principles of legal certainty.

However, it is in the nature of cases involving decisions under section 152(b) that most, if not all, involve both fact and policy. Thus, a decision that the Tribunal's jurisdiction is Article 6 compliant in restoration appeals because it has this dual capacity to waive a disputed decision on 'reasonableness grounds' and by reference to the accuracy of the underlying facts, will not compromise legal certainty."

He continued at paragraph 59:

"There is nothing in the wording of section 16(4) of the Finance Act 1994 which prevents the Tribunal from examining the underlying and primary facts. The Tribunal has been given a flexible procedure which enables it to do so . . . The Tribunal has in practice always been astute to examine all the relevant facts. It hears evidence from both sides, it satisfies itself that the primary facts upon which the Commissioners have based their decision are correct. The rules of the Tribunal and its procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals."

"If in any subsequent appeal against a further decision an issue arose as to whether the applicants were blameworthy, subject to the provision referred to below, the Tribunal's role would be as the Tribunal held in the Gora case: 'the Tribunal satisfies itself that the primary facts upon which the Commissioners have based their decision are correct. The rules for the Tribunal and procedures are designed to enable it to make a comprehensive fact-finding exercise in all appeals'. Strictly speaking, it appears that under section 16(4) of the 1994 Act the Tribunal would be limited to considering whether there was sufficient evidence to support the Commissioners' finding of blameworthiness. However, in practice, given the power of the Tribunal to carry out a fact-finding exercise, the Tribunal could decide for itself this primary fact. The Tribunal should then go on to decide whether, in the light of its findings of fact, the decision on restoration was reasonable."

That was a quotation from the Commissioners' document which was put before the court. Pill LJ at paragraph 39 accepted that, subject to a qualification which matters not. I should say that in the present case it is clear that the Tribunal knew of the Gora case because it is referred to in paragraph 53 of its decision.

"On an appeal under this section the burden of proof as to --

(a)

the matters mentioned in subsection (1)(a) and (b) of section 8 above ...

shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established."

Miss Calder submits that section 16(6)(a) applies to the present case because the matters mentioned in section 8(1)(a) and (b) are relevant, so I must read that section as follows:

"Subject to the following provisions of this section, in any case where --

(a)

any person engages in any conduct for the purposes of evading any duty of excise; and

(b)

his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person shall be liable to a penalty of an amount equal to the amount of duty evaded or, as the case may be, sought to be evaded."

whether the Tribunal's decision was wrong in law as regards --

(i)

the burden of proof; or

(ii)

the standard of proof; and

whether the Tribunal failed to give adequate reasons for the finding of fact that Mrs Golobiewska knew of Mr Terlecki's intention to use the car for smuggling.

I should say that these points seem to have featured hardly, if at all, in argument before Laddie J.

Whether or not Mr Terlecki used the vehicle for smuggling.

If so, whether or not Mr Terlecki borrowed the car for the purpose being or including the purpose of using it for smuggling.

If so, whether or not the appellant was aware that Mr Terlecki borrowed the car for such a purpose.

Whether or not the purpose of the change to the petrol tank was to release space for smuggling.

If so, whether or not the appellant was aware that such was the purpose of the change to the petrol tank."

In the end, the fourth and fifth points matter only in the sense that the Tribunal accepted Mrs Golobiewska's evidence that generally, so far as she was concerned, the purpose of the change to the petrol tank was not to release space for smuggling but because the conversion to use of liquid petroleum gas was a good idea in Poland, having regard to the relative cost of fuel.

The next issue (c) is whether or not the Appellant was aware that Mr Terlecki borrowed the car for such a purpose. In her evidence, the Appellant said that she did not know about the cigarettes, which Mr Terlecki brought into the United Kingdom. The had made one journey in the car to the United Kingdom before the journey on which the car was seized. That earlier journey had been in December 1999. On that occasion she, Mr Terlecki and another friend of Mr Terlecki (a Mr Geniek) had been in the car. The car had been stopped by Customs. She had known Mr Terlecki about 5 years. Although Mr Terlecki had described the Appellant in questioning on 27th January 2000 as 'my ladyfriend', she said in evidence that their friendship was due to the fact that Mr Terlecki was the business partner of a friend's husband. After the seizure of the car and cigarettes and the imprisonment of Mr Terlecki, the Appellant made two journeys to England to try to recover the car. On the second of these, as she states in her Witness Statement 'on 28th March 2000 I was permitted to take Peter [Mr Terlecki] from HMP Elmley' to a meeting with Customs officers at Dover.

The conversion of the car to LPG was something which the Appellant decided to have done on Mr Terlecki's advice, and they were both involved in commissioning the works involved. As a result of the evidence, we are left with no clear idea of why the Appellant let Mr Terlecki take the car back to England (less than two months after the original journey and at a time when the conversion to LPG was only half complete). She said in evidence that she needed the car for her business (as a beautician or manicure artist). Mr Terlecki said that the Appellant 'knew that I was going on a short trip, as she told me that as she was going to attend a funeral, she would need the car and I would not have the car for any length of time'. However, the Appellant's evidence was that she attended the funeral on 28th January 2000, the day after the seizure of the car at Dover on the morning of 27th January 2000. We conclude on the basis of the evidence that the Appellant and Mr Terlecki were at the material time on terms of close friendship. On the balance of probabilities we conclude that the Appellant was aware that Mr Terlecki borrowed the car to use it for smuggling (either as his main, or a subsidiary, purpose)."

"We have found that the car was adapted for smuggling, but by reason of the hole being made in the panel behind the back seat by Mr Terlecki, without the knowledge of the Appellant. However, we have also found that the Appellant lent her car to Mr Terlecki, being aware that he was borrowing it for the purpose of smuggling. We bear in mind that the Appellant (in the company of Mr Terlecki and Mr Gierek) had travelled to the United Kingdom in the car less than two months before the seizure and had on that occasion been stopped by Customs. In these circumstances, it seems to the Tribunal that the Appellant is almost in the same position as someone who deliberately uses her car to further a fraudulent venture in the knowledge that if she is caught, her car will be liable to forfeiture and who cannot reasonably be heard to complain if she loses her vehicle - see: Lindsay at paragraph 63."

The Tribunal's conclusion was that a further review was needed because the review officer should be considering, not whether the Commissioner's decision was or was not reasonable but whether or not it was right. But they directed that the review should be on the basis of facts which they set out at paragraph 59:

"(a)

The car was used by Mr Terlecki for the purpose of smuggling;

(b)

Mr Terlecki borrowed the car from the Appellant for that purpose;

(c)

The Appellant was aware that Mr Terlecki borrowed the car for that purpose;

(d)

The Appellant's purpose in commissioning the change to the petrol tank was not to conceal goods (ie, not for smuggling);

(e)

But Mr Terlecki's purpose in making the hole through the panel behind the back seat of the car was to conceal goods (ie, for smuggling);

(f)

Mr Terlecki made that hole without the Appellant's knowledge;

(g)

The car was adapted for the purpose of smuggling at the time of its seizure."

The judge's conclusion was, in essence, that he could not say that this was a perverse finding in the sense of one contrary to the evidence, especially given that the Tribunal had seen Mrs Golobiewska and Mr Terlecki give evidence.

Thus, the case has developed and changed in a number of ways in its course up to date. I will deal first with the related points now taken as to the burden and standard of proof, before coming on to the question of the adequacy of the Tribunal's reasoning.

The Tribunal expressly refers to the civil standard of proof in making its finding, as I have read, that Mrs Golobiewska was aware of the intended use of the car. It does not expressly indicate on whom it regarded the burden of proof as lying. It seems to me that the natural reading of the relevant passage in the decision is that it regarded the burden of proof as lying on the Commissioners. In the absence of an express reference, perhaps because the point may not have been argued, it may, however, be consistent with the tribunal having regarded Mrs Golobiewska as having the burden of proof, that is to say, as having to show on the balance of probabilities that she did not know of Mr Terlecki's intention to use the car for smuggling.

The question of burden of proof is governed by section 16(6) of the 1994 Act. Relevantly, the question before the Tribunal was whether the decision by Mr Devlin, the reviewing officer, was or was not one that he could reasonably have arrived at (see section 16(4)) and whether it was soundly based factually, for which purpose the Tribunal conducted its hearing at which evidence was given. Since the review decision was based, in part, on the proposition that she knew of the intended use of the car to smuggle, the Tribunal had to examine the facts as to that.

Miss Calder says that this contention amounts to saying that Mrs Golobiewska, by lending Mr Terlecki her car knowing that he intended to use it for smuggling, was engaged in conduct for the purpose of evading any duty of excise, and that conduct involved dishonesty. On that basis she says that the facts lie within the scope of section 8(1) of the 1994 Act concerned, as I have said, with the imposition of civil penalties, and that it follows under section 16(6)(a) that the burden of proof is on the Commissioners.

This point requires a brief examination of section 8 and of its place in the legislation. The section imposes liability to a civil penalty on a person who engages in conduct within its terms, even if there is no criminal conduct. The section contains a number of ancillary provisions, to one of which I will turn in a moment, but I note that under subsection (8) if a person is convicted of an offence by reason of conduct within subsection (1), that conduct does not give rise to a liability to a civil penalty. Section 13 provides for the Commissioners to assess the amount due by way of penalty where any person is liable to a penalty under section 8 or under certain other provisions including section 9. By virtue of section 14(1)(c), a decision of the Commissioners that a person is liable to a penalty, or as to the amount of the liability contained in an assessment under section 13, is subject to the review procedure under sections 14 and 15. In turn, any decision by the Commissioners on such a review is subject to appeal to the Tribunal under section 16.

Coming back to section 8, by subsection (4) if a person is liable to a penalty, the Commissioners or an Appeal Tribunal may reduce the penalty, even to nil, and if the penalty is reduced by the Commissioners the Tribunal may cancel all or part of the reduction. But of course the review and the eventual appeal may be as to liability to the penalty as well as in relation to its amount.

In that context, it seems to me that the natural reading of section 16(6)(a) is that the burden of proof lies on the Commissioners on the appeal to the Tribunal if, and only if, the appeal is as to liability to a penalty under section 8, so that the question whether the facts mentioned in section 8(1) are proved is directly in issue. It does not seem to me that it is proper to apply section 16(6)(a) to a case where the appeal does not concern liability to a penalty under section 8.

Mr O'Connor showed us that section 16(6)(b) and (c) relate to particular cases under other legislation in which liability to civil penalties may arise under section 9. That confirms the view that section 16(6)(a) is concerned (even though it does not in terms say so) only with appeals against penalties arising under section 8.

I therefore do not propose to consider whether, in any event, Mrs Golobiewska's conduct as found by the Tribunal does fall within section 8(1). I note that Mr Terlecki's conduct clearly did but that, having been convicted of an offence, section 8(1) would not apply to him in any event. I would therefore hold that the true effect of section 16(6) is that it was for Mrs Golobiewska to show that the grounds on which her appeal was sought to have been established, or in other words, the burden of proof lay on her. It seems to me that that is indeed a natural position. She was the applicant to the Commissioners for them to exercise their power of restoration under section 152(b). She sought to demonstrate to the Appeal Tribunal that their decision was wholly unreasonable. It therefore seems to me natural and appropriate that it should be for her to show why the car should have been restored.

A number of different issues might be relevant on such an appeal, as Mr Oliver indicated in the passage cited from his judgment in the Gora case. They may include the innocence of the owner of the vehicle. They may include questions of proportionality. They may include questions of hardship. Many, perhaps most, of those questions are likely to be matters within the knowledge of the appellant and it accordingly seems to me entirely appropriate that, subject to the particular exceptions made by section 16(6), the burden of proof should lie on the appellant.

The standard of proof applied by the Tribunal was the civil standard. If, as I consider, the burden lies on Mrs Golobiewska, there would be no issue as to the standard of proof required. What I say, therefore, as regards standard beyond that is unnecessary to the decision, but since both Miss Calder and Mr O'Connor have addressed us to some extent on the question of standard, I will say something about it, at the risk of lengthening this judgment unnecessarily.

If the Commissioners bore the burden of proof Miss Calder's submission is that the standard applied by the Tribunal is too low and the criminal standard applies. In Gora the Court of Appeal held that an appeal to the Tribunal in relation to a refusal by the Commissioners to restore forfeited goods did not involve a criminal charge. Miss Calder nevertheless submits that having regard to the serious and effectively penal consequences for the owner of the vehicle, the criminal standard should be applied. She sought to rely by analogy on R (McCann) v Manchester Crown Court [2002] UKHL 39, [2003] 1 AC 787, concerning antisocial behaviour orders. Proceedings for an ASBO were held to be civil by the House of Lords, both under domestic law and under the European Convention, but it was held that the conduct alleged should be proved to the criminal standard since it was in its nature criminal or quasi-criminal conduct. That seems to me to be a very different case from the present.

Miss Calder also relies on the words of Neuberger J (as he then was) in Gascoyne v Customs and Excise Commissioners [2003] EWHC 257, [2003] Ch 292, a case concerned with whether 10,000 cigarettes and 32 kilos of rolling tobacco were imported for personal use or not. In that case too the question was as to the Commissioners' refusal to restore a vehicle and the goods carried in it. Mr Gascoyne was the person importing the goods in the vehicle and he claimed that the goods were for his personal use, despite being way in excess of the guide level maximum. The personal reliefs order, then in force but since repealed, relieved the goods from duty if they were not held or used for a commercial purpose, but put the burden of showing that they were not so held or used on the person claiming the relief.

This allocation of the burden of proof had been held to be inconsistent with the relevant European directive by the Divisional Court in R (Hoverspeed Limited) v Customs and Excise Commissioners [2002] EWHC Admin 1630, [2003] QB 1041, a point not challenged on the appeal to this court. The Divisional Court in Hoverspeed and Neuberger J in Gascoyne pointed out that in many cases the question of burden would make no difference. If the importer has 20,000 cigarettes and gives no evidence that they were for his personal use, the Tribunal is likely to be able to infer that they were held or used for commercial purposes. If he does give evidence the question will depend on whether his evidence is believed.

In the present case the personal reliefs order is not relevant and it is not being suggested that section 16(6) is incompatible with European law the or European Convention. Instead, Miss Calder argues that on its true construction it casts the burden on the Commissioners. If, as I have held, that is wrong, there is no other basis for saying that it is for the Commissioners to disprove the factual basis of her appeal rather than for her to establish it. In those circumstances, the observations of Neuberger J in Gascoyne, at paragraphs 107 and 108 of that judgment, as to the burden of proof do not appear to be relevant to the present case and the same is true, consequently, as regards what he said in that passage about the standard of proof. If it is for Mrs Golobiewska to establish the necessary facts to the satisfaction of the Tribunal, it cannot be necessary for her to do so to a higher standard than the balance of probabilities. I should record that Mr O'Connor reserved the Commissioners' position as to the correctness of paragraphs 107 and 108 of Neuberger J's judgment in Gascoyne, quite apart from their relevance to the present case. I do not need to say anything more about that. I should also say that that point was not touched on in the subsequent appeal in Gascoyne to this court.

Mr O'Connor showed us two cases, one in this court and one very recently in the High Court in which it has been said that, even where the burden of proof does lie on the Commissioners by virtue of section 16(6)(a) or equivalent provisions in relation to Value Added Tax penalties, the standard of proof is the civil standard, albeit admitting the flexibility of that standard to the extent that if the allegation is of serious misconduct, the civil standard may require more cogent evidence than otherwise. Those cases are Han v Customs and Excise Commissioners [2001] EWCA Civ 1840, [2001] 1 WLR 2353 and the very recent decision of Hart J on 19th April, Khan v Customs and Excise Commissioners [2005] EWHC 653.

So I come to the third point in the appeal, that is to say whether the Tribunal failed in its duty to provide Mrs Golobiewska, and for that matter the Commissioners, with a fair hearing by not giving adequate reasons for its finding that she did know of Mr Terlecki's intention to use the car for smuggling. The point is based on English v Emery Reimbold & Strick Ltd [2002] EWCA Civ 605, [2002] 1 WLR 2409. That case develops the principle on which a previous decision of this court was based, Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377. Lord Phillips MR giving the judgment of the court in English at paragraph 6 quoted from the judgment of Henry LJ in Flannery, a passage which is well worth bearing in mind and which I therefore myself quote:

"'(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties -- especially the losing party -- should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in Ex p Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not. (2) The first of these aspects implies that want of reasons may be a good self-standing ground of appeal. Where because no reasons are given it is impossible to tell whether the judge has gone wrong on the law or the facts, the losing party would be altogether deprived of his chance of an appeal unless the court entertains an appeal based on the lack of reasons itself. (3) The extent of the duty, or rather the reach of what is required to fulfil it, depends on the subject matter. Where there is a straightforward factual dispute whose resolution depends simply on which witness is telling the truth about events which he claims to recall, it is likely to be enough for the judge (having, no doubt, summarised the evidence) to indicate simply that he believes X rather than Y; indeed there may be nothing else to say. But where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence; but it is not necessarily limited to such cases. (4) This is not to suggest that there is one rule for cases concerning the witnesses' truthfulness or recall of events, and another for cases where the issue depends on reasoning or analysis (with experts or otherwise). The rule is the same: the judge must explain why he has reached his decision. The question is always, what is required of the judge to do so; and that will differ from case to case. Transparency should be the watchword.' (See [2000] 1 All ER 373 at 377-378, [2000] 1 WLR 377 at 381-382.)"

Lord Phillips MR went on to consider a number of decisions of the European Court of Human Rights and decisions of various common law jurisdictions and later he said this:

"(19)

It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the judge reached his decision. This does not mean that every factor which weighed with the judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the judge's conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, it may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon."

"(21)

When giving reasons a judge will often need to refer to a piece of evidence or to a submission which he has accepted or rejected. Provided that the reference is clear, it may be unnecessary to detail, or even summarise, the evidence or submission in question. The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the judge's decision."

Order: Appeal allowed and remitted to differently constituted Tribunal. Appellant awarded 50% costs.