OWD Ltd v The Commissioners for Her Majesty’s Revenue and Customs [2019] UKSC 30

OWD Ltd trading as Birmingham Cash and Carry (In Liquidation) and another v Commissioners for Her Majesty’s Revenue and Customs [2019] UKSC 30 concerned appeals to the Supreme Court by both parties against elements of the Court of Appeal’s decision relating to interim relief for wholesalers whose applications for approval under the Alcohol Wholesaler Registration Scheme had been refused pending determination of appeals to the First-tier Tribunal. The Supreme Court allowed HMRC’s appeal and dismissed the wholesalers’ appeal.

The Finance Act 2015 had introduced a regulatory scheme requiring wholesalers supplying duty-paid alcohol to be approved by HMRC under section 88C of the Alcoholic Liquor Duties Act 1979. Approval could only be given if HMRC were satisfied that the person was fit and proper to carry on the activity. The three appellant wholesalers, OWD, Hollandwest and Budge Brands, were already trading when the scheme was introduced and each applied for approval to continue trading. HMRC refused approval in each case because they were not satisfied that the wholesalers were fit and proper. The wholesalers appealed those decisions to the First-tier Tribunal and invited HMRC to permit them to continue trading whilst the appeals were pending. When HMRC refused, the wholesalers brought judicial review proceedings in the High Court challenging that refusal and seeking orders permitting them to carry on trading until the determination of the FTT appeals. They failed in the High Court but obtained partial relief in the Court of Appeal, subject to terms they did not find satisfactory. Both they and HMRC appealed to the Supreme Court.

The Supreme Court delivered a judgment by Lady Black, with whom Lord Reed, Lord Sumption and Lord Briggs agreed, and a concurring judgment by Lord Hughes, with whom Lord Sumption agreed. Two principal questions arose. The first concerned whether HMRC had power to permit wholesalers to carry on trading pending determination of a First-tier Tribunal appeal against refusal of approval under section 88C of ALDA. The Court of Appeal had held that temporary approval could be granted under section 88C but not under section 9 of the Commissioners for Revenue and Customs Act 2005, and that hardship and the impact on appeal rights were irrelevant to the decision whether to grant temporary approval. The second question concerned what interim relief, if any, the High Court could grant to prevent an appeal to the FTT being thwarted by the wholesaler ceasing business whilst awaiting its determination.

Section 88C of ALDA provided that a UK person might not carry on a controlled activity otherwise than in accordance with approval given by the Commissioners under that section. The Commissioners could only approve a person to carry on a controlled activity if they were satisfied that the person was a fit and proper person to carry on the activity. They could approve a person for such periods and subject to such conditions or restrictions as they might think fit or as prescribed. The wholesalers had sought approval after the scheme was introduced. The relevant version of Excise Notice 2002 set out how HMRC would assess whether an applicant was fit and proper, stating that HMRC must be satisfied the business was genuine and that all persons with an important role or interest were law-abiding, responsible and did not pose any significant threat in terms of potential revenue non-compliance or fraud. It made clear that if HMRC considered a wholesaler was not fit and proper to be approved, approval would be refused rather than allowing the wholesaler to trade subject to conditions.

The Court of Appeal had concluded that HMRC had power under section 88C(3) to grant temporary approval pending appeal if they concluded that a person was fit and proper for that limited period, perhaps with additional conditions, even where general approval had been denied. Hardship and the impact on appeal rights would, however, be extraneous considerations. The focus of a decision would remain whether the person was fit and proper but for the more limited purpose. Burnett LJ held that to the extent HMRC apprehended they had no power to grant what was asked, they had erred. The Court of Appeal therefore quashed HMRC’s decisions that they had no power to grant temporary approval and remitted the question to them for reconsideration.

Lady Black rejected the Court of Appeal’s conclusion on section 88C. HMRC submitted that they could not properly conclude someone was not fit and proper to carry on the controlled activity even on conditions including a limited time approval, yet then separately conclude that the same business might be fit and proper to carry on the controlled activity pending appeal. Lady Black noted that the wholesalers appeared to interpret HMRC’s argument as contending that whether a person was fit and proper was an absolute question that must be determined without considering whether a time limit or conditions might make approval possible. If HMRC were advancing that thesis, it would be untenable. But HMRC were not doing so; they were addressing the situation where, as here, they had concluded that no conditions or limitations would enable them to be satisfied that the person was fit and proper. The power to incorporate conditions or limitations was always present, but where HMRC had concluded that the wholesalers were not fit and proper for even a limited period, that held good whatever purpose the time-limited approval would be designed to achieve. The Court of Appeal was right to conclude that considerations of hardship and the impact that maintaining the decision would have on the efficacy of the appeal were not to the point. Section 88C operated through HMRC being satisfied that the person was a fit and proper person to carry on the activity, and the impact upon the person or his business of a refusal was not material to that evaluation.

The wholesalers invited attention to HMRC’s practice, prior to 27 March 2017, of allowing a winding-down period to a business whose approval was revoked. They submitted that such temporary approval was granted under section 88C and demonstrated the existence of the power HMRC now denied. Lady Black held that the practice could not prove the existence of the power for which the wholesalers contended. It might provoke closer examination of the scope of section 88C, but if after exacting inspection the conclusion was reached that it did not encompass the power to grant temporary approval pending appeal, the fact that HMRC may have proceeded in the past on a looser construction did not alter that conclusion. Notwithstanding the earlier practice, Lady Black remained of the view that section 88C did not permit the temporary approval for which the wholesalers argued.

The wholesalers’ primary argument had been that HMRC had power to grant approval pending appeal under section 9 of the 2005 Act, which permitted the Commissioners to do anything they thought necessary or expedient in connection with the exercise of their functions. The Court of Appeal had not accepted that this permitted the temporary approval sought, concluding that such action could not be either necessary or expedient in connection with the exercise of HMRC’s functions nor incidental or conducive to it, and would be inconsistent with the statutory scheme. Lady Black held that section 9 concerned ancillary powers which were necessary or expedient in connection with the Commissioners’ exercise of their functions or incidental or conducive to that exercise, not ancillary powers which undermined or contradicted those functions. She did not accept that recourse could be had to it to provide an alternative route to time-limited approval supplementing section 88C, not only because of the terms of section 88C itself, which permitted authorisation only under that section, but also because of the attributes of the whole scheme. Rather than assisting the Commissioners’ exercise of their functions under the scheme, such use would undermine it.

By section 88C(1), a person might not carry on a controlled activity otherwise than in accordance with approval given by the Commissioners under section 88C. By subsection (2), the Commissioners could only give the required approval if they were satisfied that the person was a fit and proper person to carry on the activity. Where, as here, they were not so satisfied, they could not give approval under section 88C, and without approval under that section the person might not carry on the controlled activity. If he did, he would be guilty of an offence. It could hardly be said to be necessary or expedient to the exercise of functions under that tightly drafted scheme for the Commissioners to be able to draw upon ancillary powers in section 9 to grant approval to someone in relation to whom they were not satisfied, nor could that be said to be incidental or conducive to the exercise of their functions. Furthermore, approval granted under section 9 would not be of practical assistance unless the wholesaler were put on the register of approved persons under section 88D. By sections 88F and 88G, buying from an unapproved person was an offence and persons would need to consult the register to confirm status before buying. By using section 9 powers to enter the wholesaler on the register, HMRC would appear to be holding out as fit and proper a person in relation to whom they had formed the opposite view.

Lady Black was not persuaded by the argument that HMRC’s functions as a whole, including their role in the review and appeal process, justified using section 9 to grant temporary approval. With certain other types of relevant decision, HMRC did have a role in facilitating appeals to the FTT by relaxing the normal requirement for duty to be paid, being able to waive the standard security on grounds of hardship, with the FTT able to intervene if HMRC refused. It could not be said that the review and appeal provisions were drafted without heed to the possibility that HMRC or the FTT might need powers to allow relief pending appeal, but when it came to ancillary decisions such as the present, there was nothing in sections 13A–16 of the Finance Act 1994 or in the relevant Tribunal Procedure Rules conferring any power on either HMRC or the FTT to suspend or circumvent the consequences of the decision pending appeal. Lady Black considered that R (Wilkinson) v Inland Revenue Commissioners [2005] 1 WLR 1718 offered insight. Section 9 should not be construed as conferring on HMRC a power to grant temporary approval pending appeal which Parliament could have conferred through Part 6A or the Finance Act 1994 but did not.

On the second question, in the Court of Appeal it had been common ground that the High Court had power to grant injunctive relief to assist a wholesaler pending his appeal to the FTT. That court had drawn heavily upon its earlier decision in CC & C Ltd v Revenue and Customs Commissioners [2014] EWCA Civ 1653; [2015] 1 WLR 4023. That case concerned wholesale trade in duty-suspended goods where HMRC had revoked registration on the basis that the company was no longer fit and proper. The company appealed to the FTT and commenced proceedings in the Administrative Court to obtain interim relief. Underhill LJ, with the agreement of the other members of the court, had no doubt that the court had jurisdiction under section 37(1) of the Senior Courts Act 1981 to make the order sought. However, he held that where Parliament had enacted a self-contained scheme for challenging decisions, it would normally be wrong for the High Court to permit challenges by way of judicial review. Where Parliament could have made provision for suspensory orders pending appeal to the FTT but had not done so, the court was not entitled to intervene simply on the basis that there was a pending appeal with a realistic chance of success. He held that where the challenge was not simply that the decision was unreasonable but that it was unlawful on some other ground, the case fell outside the statutory regime and there was nothing objectionable in the court entertaining judicial review or granting interim relief. Such cases would, of their nature, be exceptional.

In the present case, Burnett LJ analysed the ratio of CC & C Ltd and concluded that the High Court had jurisdiction to grant an injunction maintaining registration pending appeal where a parallel challenge was made in judicial review proceedings. However, the jurisdiction should not be exercised simply because a pending appeal had a realistic chance of success. If the decision was challenged only on the basis that HMRC could not reasonably have come to it, the case fell within section 16 of the Finance Act 1994 and the court should not intervene. If the challenge was on some other ground outside the statutory regime, the court might entertain judicial review or grant interim relief. The wholesalers accepted their cases did not fall within the exceptions identified in CC & C Ltd but submitted that interim relief should be granted because otherwise their article 6 and article 1 of Protocol 1 ECHR rights would be violated. Burnett LJ concluded that a statutory appeal which was unable to provide a remedy before an appellant had been forced out of business, rendering the appeal academic, was capable of giving rise to a violation of article 6 which the High Court would be entitled to prevent by granting injunctive relief under section 37 of the Senior Courts Act 1981. To that extent, the exceptions in CC & C Ltd could be expanded to include cases in which a claimant could demonstrate to a high degree of probability that the absence of interim relief would violate its ECHR rights. Such an injunction need not be ancillary to a claim for judicial review. He stressed that compelling evidence would be required and that circumstances in which such relief would be appropriate would be rare. The evidence in the present cases had not satisfied the judges at first instance that the appeals would be rendered nugatory without interim relief.

The wholesalers sought permission to appeal against the Court of Appeal’s decision on various grounds, but permission was granted only on the ground that challenged the conclusion that section 9 of the 2005 Act did not give HMRC power to permit temporary trading. Both parties proceeded before the Supreme Court on the basis that the High Court had power to grant injunctive relief where article 6 rights would otherwise be infringed by the business ceasing to be viable before the FTT could consider the matter, and that the circumstances in which the power would be exercised were as set out in CC & C Ltd. The refusal of permission to appeal on the other grounds immunised that position from challenge. During the hearing, however, a question arose about what form the High Court’s order could legitimately take. The parties both adhered to the position that the Court of Appeal was correct, and submitted that an order could be made requiring HMRC to give the wholesaler provisional approval under section 88C or, alternatively, to exercise their power under regulation 10 of the 2015 Regulations to exclude certain sales from ALDA.

Lady Black expressed unease about the form that the High Court’s order might legitimately take. Section 88C approval depended on HMRC being satisfied that the wholesaler was fit and proper to carry on the controlled activity. Where HMRC had concluded they were not satisfied, even for a limited period, ordering HMRC to grant temporary approval would be requiring HMRC to be satisfied when they were not satisfied, and Lady Black questioned how that could properly be done. More fundamentally, the High Court’s power to order a person to do something by mandatory injunction was generally exercisable for the purpose of making that person do something he had it within his powers to do and should have done but had failed to do. Here, HMRC in fact had nothing which they could properly do in the exercise of their statutory functions. In such circumstances, a conclusion that the High Court could nonetheless grant an injunction looked worryingly like endorsing the exercise of inherent authority to override an Act of Parliament on the basis that the end justified the means. The absence of debate between the parties made it undesirable to make definitive pronouncement as to whether an appropriate form of order might be found. Since the case for relief was not made out on

Ltd v Revenue and Customs Comrs [2014] EWCA Civ 1653; [2015] 1 WLR 4023
Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1
R (Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718
Harley Development Inc v Comr of Inland Revenue [1996] 1 WLR 727
Preston v IRC [1985] 2 All ER 327, [1985] AC 835

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