The Commissioners for HMRC v Martyn Glen Perfect

The respondent, Mr Martyn Perfect, is a lorry driver. On 6 September 2013, he collected from Calais a lorry which was loaded with 26 pallets of beer and with which there was documentation referring to an “Administrative Reference Code” (or “ARC”). When he reached Dover, Mr Perfect was stopped by UK Border Force officers who found that the ARC had been allocated to a previous consignment and that excise duty had not been paid on the goods he was carrying. In the circumstances, both the beer and the lorry were seized and the appellants, HM Revenue and Customs (“HMRC”), subsequently assessed Mr Perfect to excise duty in the sum of £22,779 pursuant to regulation 13 of the Excise Goods (Holding Movement and Duty Point) Regulations 2010 (“the 2010 Regulations”). HMRC also imposed a penalty on Mr Perfect.

Mr Perfect appealed to the First-tier Tribunal (“the FTT”), which allowed his appeal and discharged both the excise duty assessment and the penalty. The FTT made findings to the effect that:

Mr Perfect had no interest of his own in the beer, was not part of any conspiracy and had simply followed instructions;

The only information that Mr Perfect had was to be found in the documentation he collected when he picked up the goods;

That documentation appeared to be consistent with the movement of goods subject to a valid duty-suspended arrangement; and

Mr Perfect had no means of checking whether the ARC on the documentation had been used or not.

HMRC appealed to the Upper Tribunal (“the UT”). The appeal was dismissed, but HMRC then appealed to this Court. In a judgment given on 19 March 2019, Baker LJ, giving the judgment of the Court (which also included Patten LJ and Nugee J), dismissed the appeal in so far as it concerned the penalty which HMRC had sought to impose on Mr Perfect. As regards the assessment to excise duty, the Court concluded that the appeal raised a question of European Union (“EU”) law which was not acte clair and so should be referred to the Court of Justice of the European Union (“the CJEU”).

The CJEU received the reference on 3 April 2019. Advocate General Tanchev delivered his opinion on 21 January 2021 and judgment was given on 10 June 2021: see Case C-279/19 Commissioners for Her Majesty’s Revenue and Customs v WR EU:C:2021:473. The matter was then listed for a further hearing in this Court, which took place before us on 23 February 2022. In the event, Mr Perfect was neither present nor represented at that hearing. Mr David Bedenham of counsel prepared a skeleton argument on Mr Perfect’s behalf in December 2021 in which he addressed in appropriately measured terms, first, whether the fact that the United Kingdom has withdrawn from the EU has the consequence that this Court is not bound by the CJEU’s decision and, secondly, if not, whether the Court should take a different approach to the CJEU. On 17 February 2022, however, Mr Perfect’s solicitors informed the Court that, in the light of the decision of Nugee LJ, sitting as a first instance Judge, in Wilson v McNamara [2022] EWHC 243 (Ch), Mr Perfect no longer sought to resist HMRC’s appeal on the excise duty issue.

The judgment which this Court gave on 19 March 2019 ([2019] EWCA Civ 465, [2020] STC 705) explains the history much more fully. This judgment supplements that one.

At the material times, regulation 13 of the 2010 Regulations provided:

“Excise duty point”, as used in regulation 13(1) of the 2010 Regulations, was defined by section 1 of the Finance (No. 2) Act 1992 to mean “the time when the requirement to pay any duty with which goods become chargeable is to take effect”.

The 2010 Regulations were designed to transpose chapters I to V of Council Directive 2008/118/EC concerning the general arrangements for excise duty and repealing Directive 92/12/EEC (“the 2008 Directive”). Recital 8 to the 2008 Directive explains that, “[s]ince it remains necessary for the proper functioning of the internal market that the concept, and conditions for chargeability, of excise duty be the same in all Member States, it is necessary to make clear at Community level when excise goods are released for consumption and who the person liable to pay the excise duty is”. Article 33, the key provision in the present context, states so far as relevant:

Having regard to the FTT’s unchallenged findings to that effect, the UT correctly proceeded on the basis that Mr Perfect had had neither actual nor constructive knowledge of the fact that the beer in his lorry was being smuggled. However, HMRC appealed to this Court on the ground that Mr Perfect’s innocence did not matter. HMRC contended that liability for excise duty is strict: in other words, that an individual in physical possession and control of excise goods need not be aware that excise duty is being evaded to be “holding” or “making … delivery of” the goods for the purposes of regulation 13 of the 2010 Regulations and article 33 of the 2008 Directive.

In its 2019 judgment, this Court saw considerable force in HMRC’s submissions. It said in paragraphs 66-68:

The CJEU judgment of 10 June 2021 accords with the views which this Court was inclined to favour in its 2019 judgment. The CJEU ruled that article 33(3) of the 2008 Directive:

The CJEU explained in its judgment:

As a result of the United Kingdom’s withdrawal from the EU, Courts in this jurisdiction are not generally bound by decisions of the CJEU made after 31 December 2020: see section 6(1) of the European Union (Withdrawal) Act 2018 (“the 2018 Act”). Section 6(2) of that Act states that a Court “may have regard” to such decisions.

However, the agreement between the United Kingdom and the EU setting out the arrangements for the United Kingdom’s withdrawal from the EU (“the Withdrawal Agreement”, Treaty Series No. 3 (2020)) provides for judgments of the CJEU handed down after 31 December 2020 to have “binding force in their entirety on and in the United Kingdom” if given in respect of references made by United Kingdom Courts and Tribunals before the end of 2020. Thus:

article 86 of the Withdrawal Agreement, headed “Pending cases before the Court of Justice of the European Union”, states in article 86(2), “The Court of Justice of the European Union shall continue to have jurisdiction to give preliminary rulings on requests from courts and tribunals of the United Kingdom made before the end of the transition period”; and

article 89 of the Withdrawal Agreement, headed “Binding force and enforceability of judgments and orders”, states in article 89(1), “Judgments and orders of the Court of Justice of the European Union handed down before the end of the transition period, as well as such judgments and orders handed down after the end of the transition period in proceedings referred to in Articles 86 and 87, shall have binding force in their entirety on and in the United Kingdom”.

The other relevant provision of the Withdrawal Agreement is article 4, headed “Methods and principles relating to the effect, the implementation and the application of this Agreement”. So far as relevant, article 4 reads:

It follows that, under the terms of the Withdrawal Agreement, judgments of the CJEU on references from United Kingdom Courts and Tribunals made before the end of 2020 are to have “binding force in their entirety on and in the United Kingdom” even if handed down in 2021 or later. Further, the United Kingdom is required by article 4(2) to ensure compliance with article 4(1) “through domestic primary legislation”.

As the explanatory notes in respect of it confirm, section 5 of the European Union (Withdrawal) Act 2020 was designed to give effect to article 4 of the Withdrawal Agreement. Section 5 provided for the insertion into the 2018 Act of a new section 7A. Section 7A states:

Ms Jessica Simor QC, who appeared for HMRC, argued that section 7A of the 2018 Act operates to make the CJEU’s judgment on the 2019 reference binding within the United Kingdom regardless of its withdrawal from the EU. That submission is consistent with Wilson v McNamara, where, as Nugee LJ explained in paragraph 41 of his judgment, there was no dispute that judgments given by the CJEU on references made before the end of 2020 are binding.

Someone wishing to construct an argument to the contrary might focus on the words “without further enactment” in section 7A of the 2018 Act, as amended. Section 7A provides for the recognition and enforcement of such rights and obligations “as in accordance with the withdrawal agreement are without further enactment to be given legal effect or used in the United Kingdom” (emphasis added). It might be suggested that article 4(2) of the Withdrawal Agreement confirms that CJEU judgments on pre-2021 references are not to be treated as binding “without further enactment”, but rather that the United Kingdom was to ensure compliance with article 4(1) “through domestic primary legislation”.

Such an interpretation of section 7A would make no sense, however. The point of section 7A is evidently to make provisions of the Withdrawal Agreement effective in the United Kingdom. Were, however, the reference to “without further enactment” to mean that section 7A is applicable only where no “further enactment” is necessary, it would be redundant. The very fact that an enactment such as section 7A was needed would mean that the section could not apply. On that basis, the United Kingdom would have failed to comply with its obligation under article 4(2) of the Withdrawal Agreement to put in place legislation ensuring compliance with article 4(1).

In the circumstances, Ms Simor must, I think, be correct that, despite the inclusion of “without further enactment”, section 7A of the 2018 Act serves to make CJEU judgments such as that in point in the present case binding in the United Kingdom. The fact that section 7A speaks of aspects of the Withdrawal Agreement being given legal effect “without further enactment” cannot imply that, wherever domestic legislation is requisite for the Withdrawal Agreement to be effective within the United Kingdom, the provision does not operate. The draftsman will have been well aware that, as a matter of domestic law, international obligations such as those which the United Kingdom undertook in the Withdrawal Agreement are not directly applicable (see e.g. Halsbury’s Laws, volume 20, at paragraph 556) and so that implementation of the Withdrawal Agreement would necessitate legislation. The reference to “without further enactment” must therefore, as it seems to me, relate not to the domestic position, but to that on the international plane, as between the parties to the Withdrawal Agreement, namely, the United Kingdom, the EU and the European Atomic Energy Community. If, by the Withdrawal Agreement, the United Kingdom has undertaken an unconditional obligation, which is not under the terms of the Withdrawal Agreement itself to be the subject of “further enactment” as between its parties, section 7A will be in point, in my view.

That being so, it seems to me that we are bound by the CJEU’s judgment of 10 June 2021 to hold, as was anyway this Court’s inclination in 2019, that article 33 of the 2008 Directive and, hence, also regulation 13 of the 2010 Regulations:

It follows that the fact that Mr Perfect had neither actual nor constructive knowledge of the smuggling of the beer he was carrying cannot exempt him from liability from excise duty.

I would allow HMRC’s appeal as regards the excise duty issue.

I agree.

I also agree.