Reno Elektro Sp zoo v Director of Border Revenue

The Appellant, Reno Elektro Sp. z o.o. (Reno) appeals against the refusal by the Respondent (who we shall refer to for convenience as Border Force) to restore a refrigerated trailer which was seized at Dover in February 2023.

Reno accepts that the trailer had been adapted for the purpose of concealing goods but says that it had only recently purchased the trailer and knew nothing about this.

The main reason given by Border Force for refusing to restore the trailer was that the adaptation could not be removed by its approved contractor.

Reno puts forward a number of points in relation to its challenge to the refusal to restore the trailer. However, the two most significant points relate to Reno’s assertion of innocence and its view that the adaptations can be removed economically having found a company in Germany which says it is able to do the work for approximately €4,500.

The Tribunal did not initially have any evidence that Mr Varshavskyy had been authorised by Reno to represent it at the hearing. Mr Varshavskyy explained that he was a friend of Artur Hasko, the president of Reno’s management board, that Mr Hasko could not leave Ukraine as a result of the war and that, as Mr Varshavskyy lived in the UK and Poland, Mr Hasko (on behalf of Reno) had appointed him to represent Reno at the hearing.

Mr Varshavskyy produced a power of attorney dated 5 January 2024 giving him general authority in relation to a wide range of matters on behalf of Reno including “representing the company before courts of all instances”. We were therefore satisfied that Mr Varshavskyy had authority to represent Reno in this appeal.

Although Mr Varshavskyy had not brought with him the documents bundle and the authorities bundle which had been produced by Border Force, he confirmed that he had received copies of these and had read them. Fortunately, Border Force had brought spare copies of these bundles which were provided to Mr Varshavskyy for the purposes of the hearing.

Mr Varshavskyy did not speak English but the Tribunal had arranged for a Ukrainian interpreter to be available. We were satisfied that, as a result of this, Mr Varshavskyy was able to participate fully in the proceedings. We would like to record our thanks to the interpreter for the quality of the service which she provided.

On 20 February 2025, Border Force made an application for the appeal to be struck out either on the basis that the Tribunal does not have jurisdiction (Rule 8(2)(a) of the Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009) or alternatively on the basis that there is no reasonable prospect of the appeal succeeding (Rule 8(3)(c) of the Tribunal Rules). The application notice also included Border Force’s statement of case in relation to the substantive appeal.

As a result of this, the Tribunal had directed that the strike-out application should be dealt with at a hearing but that, if the strike-out application was refused, the substantive appeal should be decided at the same hearing.

The first point we therefore need to deal with is the strike-out application but, before doing that, it will be helpful to summarise the legal principles we need to consider and the relevant background facts.

There was no dispute about the relevant legal principles which should be applied by the Tribunal and which were set out by Border Force in its statement of case.

The starting point is section 88 of the Customs & Excise Management Act 1979 (CEMA) which provides that a vehicle arriving at a port in the UK whilst adapted for the purpose of concealing goods is liable to forfeiture.

Section 139 CEMA permits Border Force to seize a vehicle which is liable to forfeiture.

If the seizure of the goods is not challenged in accordance with the provisions of schedule 3 to CEMA, paragraph 5 of schedule 3 to CEMA deems the goods to have been duly condemned as forfeited. The effect of this is that an appellant cannot, in a subsequent appeal to the First Tier Tribunal against a refusal to restore the goods, contest the legality of the seizure itself (see Revenue & Customs Commissioners v Jones [2011] EWCA Civ 824 at [71]).

As we have already noted, Reno did not (and does not) contest the legality of the seizure as it accepts that the trailer was adapted for the purpose of the concealment of goods and was therefore liable to forfeiture when it arrived in Dover.

Section 152 CEMA gives Border Force discretion to restore goods which have been seized. The right of appeal against a refusal to restore goods and the ability to request a review of the decision are contained in sections 14 and 15 Finance Act 1994 (FA 94) respectively.

Section 16 FA 94 provides the right of appeal to the First Tier Tax Tribunal. The powers of the Tribunal in relation to such an appeal are contained in section 16(4) FA 94 which (to the extent relevant) 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; and

(c)…”

Although the parties did not make any submissions on the point, we acknowledge that, in accordance with section 16(8), section 13A(2)(a)-(h) and paragraph 2(1)(r) of schedule 5 to FA 94, an appeal against a refusal to restore goods is an “ancillary matter” for the purposes of section 16(4) FA 94.

As can be seen, the Tribunal’s powers depend on it being satisfied that the Border Force officer who made the relevant decision “could not reasonably have arrived at it”. This is therefore a supervisory jurisdiction. The Tribunal cannot exercise the powers given to it in section 16(4) FA 94 just because it would have reached a different decision.

As Lord Lane noted in Customs & Excise Commissioners v JH Corbitt (Numismatists) Limited [1981] AC 22 at [60H], where the Tribunal has a power to review a discretionary decision:-

“It could only properly do so if it were shown that the [decision maker] had acted in a way in which no reasonable [decision maker] could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight.”

Mr Jeremy accepts, on behalf of Border Force, that the Tribunal may consider evidence that was not before the decision maker and may reach factual conclusions based on that evidence such that the decision under appeal may be found by the Tribunal to be reasonable or unreasonable, as the case may be, as a result (see Gora v Customs & Excise Commissioners [2003] EWCA Civ 525 at [38-39]).

In relation to all of this, the burden of proof is on Reno to show that the decision is not one that the decision maker could reasonably have arrived at. The decision under appeal in this case is the review decision made by the Border Force review officer, Scott Matthews on 5 March 2024.

Subject to the inferences which can be drawn from the facts as to the extent of Reno’s knowledge of the adaptations made to the trailer and its possible involvement in any wrongdoing (which we deal with below), there is no real disagreement as to the facts which we summarise here and which are therefore findings of fact which we have made.

Reno was founded in January 2021 by Mr Hasko. Although Mr Hasko is Ukrainian, the company carried out construction projects in Poland. It had approximately 10 employees who were mostly Ukrainian.

Due to the war in Ukraine in 2022, Reno had to cease its activities as men of conscription age were prohibited from travelling abroad.

As a result of this, in late December 2022, Reno purchased a trailer in Poland for €9,500. The intention was to rent out the trailer to provide an income for Mr Hasko. The purchase of the trailer was dealt with on behalf of Reno by Mr Varshavskyy under the terms of a power of attorney given by Mr Hasko on behalf of Reno. Reno did not however physically inspect the trailer prior to the purchase.

The trailer was rented to another business in Poland, MP Trans Sp. z o.o., for 12 months from 12 January 2023.

The trailer made one trip to the UK in January 2023, following which it was taken to a garage in Poland for repairs and servicing costing approximately £5,000.

On 26 February 2023, the trailer was brought to the UK for a second time. The vehicle was intercepted by Border Force officers at the docks in Dover. On examination, the Border Force officers discovered that channels had been created under the floor of the trailer where the insulation would normally have been placed and that these channels were fitted with pulleys enabling goods to be concealed.

There were however no goods concealed in these channels, which contained polystyrene blocks. There was also no issue with the load being carried. The result of this was that the tractor unit and the load were released but the trailer was seized as it was adapted for concealing goods.

Following the seizure, on 20 March 2023, Reno and MP Trans terminated their lease agreement by mutual agreement.

Mr Hasko wrote to Border Force on 24 March 2023 requesting restoration of the trailer asserting that he had no knowledge of the modifications and noting that the adaptations were not obvious from a visual inspection. At the request of Border Force, Mr Hasko provided some further information in June and July 2023.

During September and early October 2023, a significant amount of correspondence took place internally within Border Force relating to the carrying out of an assessment of the viability of removing the adaptations. As part of this, a Border Force officer in Dover noted that the trailer had been “extensively modified” and suggested that “the amount of work needed to put this trailer back to factory specification would easily run into tens of thousands of pounds”.

Discussions then took place between Border Force and their authorised contractor with a view to the contractor physically inspecting the trailer. Due to logistical problems and cost, this did not prove possible, but the authorised contractor did review photos of the trailer sent to them by Border Force and expressed the view that the “trailer requires the work of a main dealer or body repair shop as the floor has not been adapted or moved but the insulation has been removed”.

In the light of this, the Border Force officer dealing with the matter decided to refuse restoration on the basis that the Border Force approved contractor was unable to remove the adaptation.

Mr Hasko responded to Border Force saying that he had found a company in Germany which was able to remove the adaptation at a cost of approximately €4,500. He offered to pay a security deposit as a guarantee that the work would be done properly.

Border Force treated this as a request for a review. It initially refused to conduct a review as the request had been made three days late. It did however then relent and carried out a review which concluded on 5 March 2024, again refusing to restore the trailer.

The review letter explained Border Force’s policy that a vehicle may exceptionally be restored but that any adaptation for concealing goods must be removed prior to releasing the vehicle and that the work must be carried out by approved Border Force contractors so that Border Force can check that the work is done satisfactorily.

The review letter does however note that “each case is considered carefully on its individual merits so as to decide whether exceptions should be made”, although the reviewing officer, Mr Matthews goes on to say that “in some circumstances I am limited to the action I can take”.

The reason given for the refusal of the restoration was that the approved contractors “consider that the changes made are so large it is not possible to remove them”. We note in passing that this was not accurate as the contractor had said that the adaption could be removed by a main deal or body repair shop but that they could not do it themselves.

Although Mr Matthews noted in his letter that Reno had found a company in Germany that had said it would be able to do the work, he explained that Border Force could not permit the trailer to be released to a third party for the adaptation to be removed. He therefore concluded that there were no exceptional circumstances to vary the policy of non-restoration in this particular case.

Reno’s appeal to the Tribunal was made on 9 April 2024 which was five days outside the 30 day time limit. Border Force do not however object to the late appeal.

As we have noted above, whilst the Tribunal has jurisdiction to review Border Force’s discretionary decision as to whether or not to restore the trailer, it has no jurisdiction to consider the legality of the seizure which could only be done in the Magistrates Court in accordance with the procedure set out in schedule 3 to CEMA.

Mr Jeremy submits that Reno is “in substance” contesting the legality of the seizure. This submission is based on Reno’s assertion that it was unaware of the adaptation.

In our view, this does not follow. The trailer was liable to forfeiture as a result of the fact that it was adapted for the purposes of concealing goods. The liability for forfeiture does not depend on whether the owner knew about the adaptation. This cannot therefore be a basis for challenging the legality of the seizure. On the other hand, it is however clear that the innocence or otherwise of the person seeking restoration is a factor to be taken into account in deciding whether goods should be restored.

In the light of this, and taking into account the points put forward in Reno’s notice of appeal and Mr Varshavskyy’s skeleton argument, we are satisfied that the appeal is based on the reasonableness of the decision to refuse to restore the trailer and is not based on the legality of the seizure itself. The Tribunal does therefore have jurisdiction and we decline to strike out the appeal under Rule 8(2)(a) of the Tribunal Rules.

The second ground on which Border Force seeks to strike out the appeal is that it has no reasonable prospect of succeeding.

Having reviewed the documentary evidence and read the skeleton arguments of both parties, we did not consider that it could be said that there was no realistic prospect of Reno’s appeal succeeding. We could not conclude that the points put forward in support of the appeal were merely fanciful.

In any event, in circumstances where the parties were ready to provide full submissions in relation to the substantive appeal, we did not consider it appropriate to strike out the appeal without hearing those submissions and also hearing the evidence to be given by Mr Matthews on behalf of Border Force.

The strike-out application was therefore refused and we went on to hear the substantive appeal.

As we have said, Mr Matthews was the reviewing officer who made the decision which is now being appealed. He provided a short witness statement confirming the documents he relied on when making his decision and that the reasons for his decision were set out in the review letter.

Mr Matthews was asked a number of questions both by Mr Varshavskyy and by the Tribunal. He was clearly doing the best to answer the questions to the best of his ability and to explain the reasons for the decision which he reached and we have no hesitation in accepting his evidence at face value.

The only issue for determination is whether Mr Matthews’ review decision is one which he could reasonably have arrived at. As we have explained, this requires the Tribunal to consider whether he took into account all relevant factors, whether he took into account any irrelevant factors and, even if he took into account all of the correct factors, whether his decision was one which a reasonable officer could have reached in the circumstances.

Mr Varshavskyy, on behalf of Reno, focuses on the impact of the war in Ukraine, meaning that Mr Hasko could not travel internationally, could not oversee the purchase and that, as a result, that Reno was unaware of the modifications. He also relies on the fact that the modifications can be removed at an acceptable cost, Reno having obtained a quote for such work from a firm in Germany. He suggests that it is disproportionate in these circumstances for Border Force to deny restoration.

Mr Jeremy’s position is that Mr Matthews took into account all relevant considerations but that he was constrained by the Border Force policy that the removal of any adaptations had to be carried out by an approved contractor. He argues that where the approved contractor had confirmed that they were unable to do the work, Mr Matthews (and, indeed, the original decision maker) had no option but to refuse restoration. Mr Jeremy notes Mr Matthews’ explanation of the purpose of this policy which is to ensure that the modifications can be removed safely, at no expense to the Crown and can be inspected prior to release.

Mr Jeremy also draws attention to the fact that Mr Matthews confirmed in his oral evidence that he had considered everything contained in the bundle of evidence provided to the Tribunal in reaching his decision and that he had therefore taken into account all the relevant factors.

As far as the innocence (or otherwise) of Reno is concerned, Mr Jeremy drew attention to the fact that Mr Matthews explained in his oral evidence that he had concerns about this given that the trailer had been bought remotely and had not been physically inspected and that the lease of the trailer was terminated by mutual agreement. Mr Jeremy suggests that there is no evidence to support Reno’s assertion that it was unaware of the modifications.

Turning to the use of an external contractor, Mr Jeremy referred to Mr Matthews’ evidence that he had considered this but had identified that there were a number of logistical problems including:-

In the light of all of this, Mr Jeremy submits that the refusal to restore is within the range of reasonable responses. He speculated that, even if the Tribunal ordered a further review, it would be difficult for another officer not to reach the same conclusion.

In answering this question, it is, in our view, necessary to reach a decision as to whether Reno was in fact unaware of the modifications to the trailer given that it was clear from Mr Matthews’ evidence that he had concerns about this and that it was a factor in his decision not to restore the trailer.

Having considered the evidence available to us, we have concluded that it is more likely than not that Reno was unaware of the modifications and that it was an innocent purchaser of a vehicle which, unknown to it, had been adapted to enable goods to be concealed.

It is important to recall that Reno was originally a construction company. It had no previous involvement in the transport business and there is no suggestion that Mr Hasko had any experience in this area. The trailer was purchased with a view to renting it out to provide an income given the inability of the construction business to be continued due to the war in Ukraine. In these circumstances, there is no reason to suppose that Reno would knowingly purchase a vehicle adapted to smuggle goods.

It is also relevant that Mr Hasko was not able to oversee the purchase personally and, in particular, could not physically inspect the trailer. In any event, it appears from the description given by the Border Force officer in Dover that the modifications would not have been apparent to somebody who was not looking carefully for them and who was not an expert. He notes for example that “the factory bumpers do look correct externally” and concludes that the modifications are “a nice bit of engineering to appear factory”.

We note that Reno appointed Mr Varshavskyy to deal with the purchase of the trailer and that Mr Varshavskyy was in Poland and could therefore presumably have inspected the trailer. There is however no evidence that he did so and, even if he did, given what Border Force have said about the nature of the modifications, a lack of awareness of the modifications remains consistent with the statements made by Mr Hasko.

Mr Varshavskyy also drew attention to the fact that the trailer underwent a major service at the end of January 2022. In his correspondence with Border Force, Mr Hasko makes the point that the garage did not raise any issues about modifications. We accept that this provides some support for Mr Hasko’s assertion that Reno knew nothing of the modifications. There was no need for Mr Hasko to have mentioned the service of the trailer to Border Force. The fact that he voluntarily did so lends credibility to his explanation of the position.

A further factor which, in our view, supports the conclusion that Reno was not aware of the modifications is that the vehicle was not in fact being used for smuggling when it was seized. It is of course possible that this was just a test run (something suggested by Mr Matthews in his evidence) to see whether the modifications would be spotted. This is however pure speculation. In addition, we note that the vehicle had already come to the UK in January 2023 and so, to the extent that any test was needed, this could already have taken place.

Although the fact that the vehicle was not in fact being used for smuggling can be explained in a way which is consistent with dishonesty does not in any event provide a sufficient basis for us to infer dishonesty (or to lead us not to infer innocence based on the other evidence) given that the lack of any attempted smuggling is entirely consistent with Reno’s assertion that it was not aware of the modifications.

It is, in our view, also relevant that the vehicle had only just been purchased by Reno. Although Mr Jeremy suggested that the modifications could have taken place after the purchase, Mr Hasko observes in his correspondence with Border Force that it is clear from the photographs provided by Border Force that the modifications were done some time ago given the appearance of the metal in the photographs. Having looked at the photographs, we agree that this is clearly borne out.

One other reason given by Mr Matthews in his oral evidence for his concerns was that the lease of the trailer between Reno and MP Trans was terminated on 20 March 2023, shortly after the seizure. We do not however understand why this should give rise to any concerns about wrongdoing on the part of Reno as it is not obvious why such wrongdoing would provide a reason for terminating the lease. Instead, we consider it more likely, as suggested by Mr Varshavskyy, that the lease was terminated by agreement simply because the trailer was no longer available for rental.

In the light of all of this, we consider that the question as to whether the decision was reasonably arrived at must be approached on the basis that Reno was an innocent purchaser, unaware of the modifications.

Clearly this is a finding of fact which was not available to Mr Matthews at the time he made his decision. Indeed, as we have said, he had concerns about whether Reno was aware of the modifications. The result of this is that Mr Matthews took into account an irrelevant factor (that Reno may have been aware of the modifications) and failed to take into account a relevant factor (that Reno was an innocent purchaser of a vehicle which already had modifications and of which Reno was unaware).

The other main factor relied on by Mr Varshavskyy on behalf of Reno is the ability to have the adaptations removed at a reasonable cost, as evidenced by the quote from the garage in Germany.

In relation to this, it is clear that both Mr Matthews and the original decision maker considered themselves bound by the Border Force policy that the removal of any adaptations should be undertaken by an approved contractor. It emerged during Mr Matthews’ evidence that Border Force in fact only has one approved contractor.

Having considered the photographs provided by Border Force, that contractor concluded that it could not do the work and that it would need to be done by a main dealer or another body repair shop. Mr Matthews confirmed that, having received this advice, he was obliged to refuse restoration in accordance with the Border Force policy.

In the light of this, and despite the logistical reasons given by him for rejecting the proposal that the trailer should be released to the garage in Germany so that the modifications could be removed, it is apparent to us that Mr Matthews did not give any real consideration to this option or, indeed, to the possibility of the removal of the adaptations being carried out by some other third party contractor in the UK. There was also no suggestion that Mr Matthews gave any serious thought to Reno’s proposal that it should provide a security deposit so that Border Force could be satisfied that the work was done properly.

Border Force clearly accepts that its policies cannot be rigid and inflexibly applied as Mr Matthews acknowledges in his review letter that each case is considered on its own merits with the possibility of exceptions being made.

We do not criticise the Border Force policy as it is important to ensure that, where there are adaptations, they are properly removed, that this is done securely and that Border Force can ensure that everything is in order before the vehicle is released.

However, in circumstances where:-

It is clear to us that, in refusing to restore the trailer, Mr Matthews gave no thought to any alternatives and did not for example investigate with his own approved contractor who might be able to do the work and what the cost would be. Instead, he followed the letter (but perhaps not the spirit) of the Border Force policy.

Our conclusion therefore is that the decision made by Mr Matthews to refuse restoration was not reasonably arrived at as he failed to take into account relevant factors, being the innocence of Reno of any wrongdoing (and, in particular, the fact that it was unaware of the modifications) and the failure to consider any alternative options for the satisfactory removal of the modifications.

Having reached this conclusion, we have power to direct that Mr Matthews’ decision should cease to have effect and that Border Force should conduct a further review. We have considered carefully whether to exercise these powers. We note Mr Jeremy’s warning that it is difficult to see how another officer could come to a different conclusion. It would of course be pointless setting aside Mr Matthews’ decision if it is inevitable that another officer will reach the same conclusion.

However, whilst it is perfectly possible that another officer will reach the same conclusion, we do not consider that this is inevitable. The Border Force policy could for example be complied with by appointing another approved contractor capable of carrying out the work. This may or may not be feasible but it has not been considered.

In the light of our conclusion set out above, we therefore made the following directions at the end of the hearing:-

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.