I recently dealt with a case involving an appeal against a condemnation order made by the Magistrates Court in connection with the importation of two pallets of cannisters of nitrous oxide (about 48,000 8g cannisters); while the cannisters have a legitimate use in connection with food preparation and catering they are also widely used for the psychoactive effects of the gas(which is used as an anaesthetic and is commonly known as “laughing gas”) and with various street names including “Hippy Crack”, “Whippets”, “Chargers” and “Noz”.
The goods were seized at the docks on arrival in the UK when Border Force officers were not satisfied about the intended use of the goods given that the company named as the consignee in the transport documents did not exist, the address for delivery was a “Vaping and Smoking Accessories” outlet, and the consignor had had several previous shipments of such cannisters seized. The officers formed the view that the goods were “likely to be consumed [for their] psychoactive effects” under section 55(2)(b) Psychoactive Substances Act 2016 (“PSA 2016”) and were therefore liable to forfeiture under section 139 Customs and Excise Management Act 1979 (“CEMA 1979”) and were seized.
An appeal against the seizure was entered by a company (not the consignee) who asserted that the cannisters were going to be used to create CBD-infused fizzy drinks for sale via a café and/or in kit form so customers could enjoy the product at home and so they were food items and therefore “exempted substances” under Schedule 1 to the PSA 2016. Condemnation proceedings were therefore commenced in the Magistrates Court pursuant to Schedule 3 CEMA 1979.
At the Magistrates Court a preliminary point was raised regarding ownership of the goods – paragraph 10(1) of Schedule 3 CEMA 1979 requires “the claimant or his solicitor shall make oath that the thing seized was, or was to the best of his knowledge and belief, the property of the claimant at the time of the seizure” and under paragraph 10(3) “If any requirement of this paragraph is not complied with, the court shall give judgment for the Commissioners [i.e. Border Force]”. The use of the mandatory “shall” means that there is no discretion to the court under paragraph 10(3); it must make the condemnation order if it is not satisfied (to the civil standard) that the claimant owned the goods at the relevant time.
Ownership of the goods was in issue because the claimant company was not the consignee, was not connected to the delivery address and the only document produced in support of the claim of ownership purported to be a nil-rate VAT invoice from the consignor to the claimant company which did not identify the goods involved and was dated more than a fortnight after the seizure and referred to a payment of about €20,000.
The director of the claimant company gave evidence about ownership of the consignment which was not accepted by the court and, as required by paragraph 10(3) above, because the Court were not satisfied that the claimant company owned the goods at the time of seizure the goods were condemned (and the claimant company was ordered to pay the Border Force’s costs of about £2,500).
The claimant company appealed and, in due course, the matter was listed for a hearing in the Crown Court; the claimant company instructed solicitors just before the hearing, and the company’s application for an adjournment was granted (subject to the company paying Border Force’s costs of the hearing). A costs schedule was submitted by the company in advance of that hearing which indicated that their own costs of the appeal were about £7,500.
The matter eventually came back to Court (Covid had delayed the progress of the case by a further 18 months) and the matter was listed for hearing; the same preliminary point was taken i.e. did the claimant company own the goods at the time of the seizure. The company had submitted further documents with its appeal which indicated that the director of the company had paid, from his personal bank account, another company (“X”) the sum of £5,000 several weeks after the date of both the seizure and the invoice from the consignor. On the day of the hearing the director emailed the court to say that he had resigned as the sole director of the claimant company the day before and that Mr Y had been appointed in his place.
Mr Y duly attended court and affirmed on oath that he was now the director of the claimant company and gave an account that he (as a director of X) had paid for the goods a week or so before the seizure and that he had transferred them to the claimant company and that the payment from the previous director to X (after the seizure) had been a part payment for the goods. He also stated that if the claimant company had not paid him he would have retrieved the goods from the delivery address (he had arranged the use of that address as a suitable location for the storage of the goods and the intended re-packaging of the cannisters into the kits). He produced a document purporting to be a transfer of €50,000 from X to the consignor a week or so before the seizure but was unable to produce any documentation relating to the transfer of ownership to the claimant company or bank statements, etc. confirming any of the relevant transactions.
The Crown Court was unimpressed with the evidence of ownership from the claimant company and, even applying the civil standard (i.e. more likely than not), was not persuaded that the claimant company was the owner of the goods at the time of seizure and indicated that the evidence suggested that either X, or possibly Mr Y, were most likely to have been the owner at the relevant time but they had not challenged the seizure within the time allowed (i.e. within one month of the seizure – CEMA 1979, Schedule 3, paragraph 3).
In the circumstances the appeal was dismissed; the original condemnation order was upheld and the claimant company was ordered to pay the Border Force’s costs of the appeal of a further £2,000.
In some ways it was a bit frustrating that the court did not need to consider whether the gas amounted to “food” under schedule 1 to PSA 2016 and was an Exempted Substance or to determine the intended use of the goods (i. e. whether the gas was “likely to be consumed by any individual for its psychoactive effects”), but the case demonstrates the importance of clarifying (and evidencing) ownership of goods in condemnation proceedings. If you cannot clear that hurdle you may end up facing a significant costs bill regardless of the merits (or not) of the intended use of the products which have been seized.
Members of Becket Chambers have considerable experience in condemnation and forfeiture hearings; please contact the clerks on 01227 786331 or by email at clerks@becket-chambers.co.uk for further information.
