Short Summary:
- Two of the most recent cases dealing with the complicity of operators in smuggling sit rather uncomfortably together.
- Although complicity is not a statutory or even common law term under CEMA 1979, it is of such importance in these cases that it ought to be more directly addressed.
- Border Force are setting great store by the previous conduct of drivers in smuggling cases. As such, there should be a disclosure scheme set up by the Border Force which can be used by operators to check that drivers have no previous adverse encounters.
- Border Force policy should be extended to include a category of reckless or negligent operators. This will occupy the middle ground between entirely innocent operators and those who are clearly complicit.
- Border Force appear to be deciding these restoration cases reasonably and prudently. However, consistency and predictability in law is, constitutionally at least, of the utmost importance. Either formal guidance should be published, or judicial or legislative clarification of the test to be used in determining complicity will be needed.
I. The Issue
A recent case of the Upper Tribunal concerning the forfeiture of a HGV which was involved in smuggling cigarettes into the UK drew attention to a potential conflict of authorities in the definition of complicity under the Border Force’s policy of vehicle restoration under their discretion to do so under section 152 of the Customs and Excise Management Act 1979 (CEMA).
The Upper Tribunal (UT) circumnavigated this difficulty by distinguishing one of the authorities and ‘preferring’ the other. This issue will therefore arise at some stage again and calls for a short article due to issues of consistency and predictability of the law.
The legislative framework around forfeiting a vehicle, challenging that forfeiture or requesting restoration is spread across a number of provisions in various Acts. This is outlined at the end of the article.
II. Border Force Policy for Restoring Forfeited Vehicles.
Of the various statutory provisions listed infra, the most extensive – by some distance – is section 152 of CEMA. Subject to an appeal and up to the threshold of Wednesbury, the Border Force may make any conditions they think proper. This only applies if they exercise their discretion to restore the vehicle. This author will not be the first to observe how extensive a power this is,[1] compounded by the absence of any statutory requirement to publish and be bound by policy.
Regrettably, the Border Force does not publish the policy document which they use in deciding the fate of vehicles under section 152(b) of CEMA.[2] However, various decisions of the FTT and the Upper Tribunal (UT) cite sections of it. The policy section on complicity between operators and drivers appears to be as follows:
B. If the operator provides evidence satisfying Border Force that the driver, but not the operator, is responsible for or complicit in the smuggling attempt then:
(1) If the operator also provides evidence satisfying Border Force that the operator took reasonable steps to prevent drivers smuggling, then the vehicle will normally be restored free of change unless:
a. The same driver is involved (working for the same operator) on a second or subsequent occasion in which case the vehicle will normally be restored for 100% of the revenue involved in the smuggling attempt (or for the trade value of the vehicle if lower) except that
b. If the second or subsequent occasion occurs within 12 months of the first, the vehicle will not normally be restored.
(2) Otherwise,
a. On the first occasion the vehicle will normally be restored for 100% of the revenue involved in the smuggling attempt (or for the trade value of the vehicle if lower).
b. On a second or subsequent occasion the vehicle will not normally be restored.
From this extract, a number of points can be distilled:
1. When a vehicle is forfeited, there is, in essence, a rebuttable presumption (the authorities state that it is merely a reverse burden) that the operator was either responsible or complicit.
2. It is the operator, in rebutting this presumption, who must provide evidence that the driver is responsible for the smuggling.
3. Once this presumption has been rebutted, the operator must then prove that it took reasonable steps to prevent the driver from smuggling.
III. Complicity of operators.
Perhaps unsurprisingly, the exercise of the section 152 discretion has proven to be fertile ground for litigation by operators seeking to get their vehicles restored for a reduced amount; or indeed get them back at all.[3] Central to these cases are whether they can prove to the Border Force that they were not complicit in the smuggling.
A prudent and responsible operator is expected to make certain checks to avoid situations where drivers can go rouge and engage in smuggling. These include requesting references from the driver’s previous employers, checking collection addresses and ensuring customers are reputable, checking delivery addresses and ensuring that company is reputable, keeping track of drivers’ hours at all times in combination with tracker data to ensure drivers are where they are meant to be at certain times, regularly checking tractor units and trailers to check that they have not been fitted with compartments suitable for smuggling etc.
Much like the oft-maligned bus service, three significant cases have come along at almost at once. In PHU Greg-Car[4]the Upper Tribunal (in hearing an appeal from a decision of the FTT) held that a failure to perform reasonable checks does not, of itself, demonstrate complicity in smuggling.[5] A failure to conduct such checks could be explained by incompetence, inexperience, ignorance, laziness or lack of time etc.[6] At first instance, the FTT agreed with the reviewing officer that the fact PHU Greg-Car did not perform reasonable checks was sufficient to say that, on balance, they were complicit. The decision of the FTT was set aside and the matter remitted to the FTT.
A little over one month later, a differently constituted Upper Tribunal heard the appeal of Everpol.[7] At first instance, the FTT decided that a failure to carry out basic checks (or a failure to ask questions when things did not look right) meant that the appellant could be considered to be complicit in the smuggling. UT held that the FTT did not err in deciding that complicity could be evidenced by the existence of circumstances which ought reasonably to have given rise to suspicion of smuggling.[8] The case of PHU Greg-Car was not argued in Everpol due to the proximity of the hearing dates.
Although there are important factual differences between PHU Greg-Car and Everpol such as the latter involved an owner-driver (the operator and driver were one person) whereas in the former, the driver and operator were two different people. However, considering the significance of section 152 CEMA, any divergence in case law regardless how minor, warrants attention.
The dichotomy was briefly dealt with by the FTT in Klevienes.[9] The tribunal had recognised the potentially conflicting authorities, outlining that Szymanski was a rather more stringent test in terms of reasonable checks. [10] The tribunal went on to set great store on the differing factual matrices in the index case and Szymanski, ultimately preferring PHU Greg-Car in allowing the appeal and directing a fresh review by the Border Force of its decision.
The reasoning in Klevienes (at [38]) appeared to be more along the lines of a distinguishing of Szymanski. Needless to say, the FTT faced the same issue any lower court faces when dealing with conflicting case law of a higher body – has the earlier authority been impliedly reversed by the later decision or not? Regardless, although Klevienes had followed PHU Greg-Car in its decision, Szymanski still remains good law for the definition of complicity.[11]
IV. Towards a new test for complicity
It would be a step too far to suggest that PHU Greg-Car has shifted the goalposts of establishing complicity. But it is significant, not for suggesting what definition is, but what complicity is not. It significantly reduces the importance of administrative processes of operators in determining their complicity in smuggling.
However, the decision in PHU Greg-Car stands in stark contrast to a rich jurisprudence of the UT and FTT in holding that complicity can and will turn on the absence of such administrative precautions.[12] None of these previous cases were mentioned in PHU Greg-Car. As such, there is a risk that PHU Greg-Car will come to be isolated on its facts, as opposed to applied for its legal definition of complicity.
It is submitted that one of two things ought to happen to resolve this conflict. First, the decision in PHU Greg-Car should be affirmed. The paradigm prayer proffered by authors in seeking clarity is there should be an appeal to the Court of Appeal or ideally, an amendment to CEMA to codify the test in PHU Greg-Car which adopts a more conservative definition – can the operator truly be said to be complicit?
There are two issues with this. First, any appeal of a decision of the UT will be confined to a judicial review. Secondly, this is compounded by the fact that the UT are deciding whether the finding of complicity by the Border Force was itself Wednesbury unreasonable. As such, it would be difficult to see how such a case would be granted permission to appeal.
Alternatively, the Border Force should adjust their policy. Complicity should be retained; however, where it is found, the conditions attached to restoration will be something approaching the market value for the forfeited vehicle, or 20% of the potential lost revenue (whichever is less). The discounted penalties should only be offered to operators who can bring themselves within a new category of reckless or negligent operators. It is under the umbrella of reckless or negligent operators that many of the old elements of the complicity test will remain, such as not checking consignee companies on Companies House or failing to check employment references of drivers.
Another potential solution here is the introduction of a disclosure scheme, whereby HMRC will keep a small database with details of adverse encounters with drivers at UK border points who have attempted to smuggle goods. Operators, on hiring a new driver, will simultaneously seek references from previous employers and a disclosure from the Border Force. This seems entirely reasonable considering the importance the drivers’ antecedents play in whether a lorry is restored to an otherwise innocent operator.
V. Seizing a vehicle under section 141 of the Customs and Excise Management Act 1979
The legislative framework around forfeiting a vehicle, challenging that forfeiture or requesting restoration is spread across a number of provisions of different Acts. We can consider this as a seven-stage test:
1. Section 49(1)(a)(i) of the Customs and Excise Management Act [CEMA] provides that goods which are improperly imported (such as tobacco or alcohol in which excise duty has not been paid) are liable to forfeiture.
2. Section 141(1)(a) of CEMA provides for the forfeiture of a vehicle, vessel or aircraft where it has been involved in the carriage of goods which are liable to forfeiture.
3. Schedule 3, paragraph 3 of CEMA provides the mechanism for challenging the legality of the seizure. The owner must write to the Border Force within one month to challenge the seizure. The Border Force must then, pursuant to Schedule 3 paragraph 6, commence condemnation proceedings in the Magistrates’ or High Court.
4. If the owner of the vehicle does not challenge the legality of the seizure within one month, then the vehicle is condemned as forfeit under Schedule 3 paragraph 5.
5. At this point, legal ownership of the vehicle vests in the Crown. However, section 152 of CEMA gives the Border Force a discretionary power to restore the vehicle to the owner subject to conditions (if any) as they think proper.
6. If the Border Force refuse to restore the vehicle to the owner, or if the owner disagrees with a condition of the restoration (such as the payment of a fee), they can request an internal review under section 14 of the Finance Act 1994.
7. If the owner of the vehicle is not satisfied at the result of this review, they may appeal to the First-tier Tribunal (FTT) under section 16 of the Finance Act 1994.
a. The FTT when seized of a such an appeal must first consider if the result of the internal review could not have been arrived at reasonably.
b. If the decision could not have been reasonably arrived at, the FTT can:
i. Direct that the decision ceases to have effect; or
ii. require another internal review to be conducted in accordance with directions from the FTT; or
iii. if a decision has already been acted on, to declare the decision to have been unreasonable.
As such, the FTT does not have any powers to order the restoration of a vehicle, or to set conditions of its own. Its powers broadly follow those of a judicial review and the test is broadly one of Wednesbury.
[1] Phil Rimmer, ‘Developments in the means of challenging a HMRC seizure’ (2014) De Voil Tax Intelligence 37, 38.
[2] This existence of this policy is not a requirement under CEMA or the Finance Act 1994. As such, the Border Force is not under an obligation to follow it.
[3] Numbers?
[4] Grzgorz Sczepaniak T/A PHU Greg-Car v The Director of Border Revenue [2019] UKUT 295 (TCC).
[5] Ibid at [23].
[6] Ibid.
[7] Jacek Szymanski T/A Everpol v The Director of Border Revenue [2019] UKUT 343 (TCC).
[8] Ibid at [78].
[9] Klevienes v Director of Border Revenue [2020] UKFTT 510 (TC).
[10] Ibid at [37].
[11] In fact, an orthodox application of the stare decisis doctrine would have it that PHU Greg-Car has indeed been impliedly reversed by Szymanski.
[12] See Danny McConnell t/a Donegal Express Freight Limited v Director of Border Revenue [2012] UKFTT 677 (TC); Logistika Peklaj AS [2012] UKFTT 355 (TC); McGeown International Limited v HMRC [2011] UKFTT 407 (TC); DWP & Sons Limited v The Director of Border Revenue [2017] UKFTT 82 (TC); Leadsham Trading Company Limited v Commissioner for HMRC [2012] UKFTT 426 (TC); Vaughan Transport Systems Limited v Director of Border Revenue [2013] UKFTT 390 (TC); Martin O’Callaghan v Revenue and Customs Commissioners [2008] 11 WLUK 611.
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