LAW REPORT : Duty-free claim was time-barred

Regina v Customs & Excise, ex parte Eurotunnel plc and others. Queen's Bench Divisional Court (Lord Justice Balcombe and Mr Justice Tucker). 17 February 1995. An application by channel tunnel operators for judicial review to challenge the way the Customs & Excise continue to permit ferry operators to sell duty free on channel crossings failed because the proceedings were launched too late.

The Queen's Bench Divisional Court set aside the leave, granted ex parte by Mr Justice Tucker on 8 July 1994, which would have enabled the applicants, Eurotunnel plc, the Channel Tunnel Group Ltd, Eurotunnel SA and France Manche SA, to apply for judicial review of the validity of government orders implementing European directives exempting sea and air carriers, for a transitional period up to 1999, from the abolition of duty-free sales within the EU following the establishment of the internal market.

The application was opposed by various ferry companies and air operators, the Association of Suppliers to Airports Aircraft and Shipping, and Dover Harbour Board.

David Vaughan QC and Sarah Lee (Slaughter & May) for the applicants; Lord Lester of Herne Hill QC and Eleanor Sharpston (Customs & Excise) for the respondents; Kenneth Rokison QC and David Anderson (Lovell White Durrant) for the ferry companies; Gerald Barling QC and Nicholas Green (McKenna & Co) for the air operators; Peter Duffy and Paul Stanley (Watson Farley & Williams) for the suppliers; Mark Brealey (Mowll & Mowll, Dover) for the harbour board.

LORD JUSTICE BALCOMBE said the European Council had adopted three directives (91/680/EEC, 92/12/EEC and 94/4/EC) permitting some duty and tax-free purchases on journeys between member states for a transitional period until 30 June 1999, notwithstanding the establishment of the "internal market" as from 1993. The directives were implemented in the UK by the VAT (Tax Free Shops) Order 1992 (SI 3131), the Excise Duties (Personal Relief) Order 1992 (SI 3135) and the VAT (Tax Free Shops) Order 1994 (SI 686).

It was the validity of these orders which Eurotunnel sought to challenge. But the Rules of the Supreme Court provided by Order 53 rule 4(1) that "An application for leave to apply for judicial review shall be made promptly and in any event within three months from the date when grounds for the application first arose unless the court considers that there is good reason for extending the period".

Although leave had already been granted ex parte, that did not prevent it being set aside under Order 32, rule 6, though it was a procedure to be used sparingly. The main ground relied on by the objectors was delay in bringing the proceedings.

Prima facie, the dates when "grounds for the application first arose" were the dates when the three orders were made, in which case the application, which was initiated on 30 June 1994, was outside the three-month limit, since the last order was made on 9 March 1994. Even if time only began to run when the orders came into force, the application still came 18 months after the two main orders came into force, and was only one day within the limit for the third order, which came into force on 1 April 1994. The application was clearly not made promptly in the case of any of the orders, so unless there were grounds for extending the period, the leave granted on 8 July should be set aside.

The applicants argued, inter alia, that the cases raised issues of considerable importance. That could not be denied, but the objectors argued that to extend the period now could cause severe prejudice. They had taken important commercial decisions, committing large sums in anticipation of the continuation of duty-free allowances until 1999. Under English law, a declaration that the orders were invalid would operate retrospectively, which might result in them having to pay VAT and duty on goods already supplied since January 1993.

Paul Magrath, Barrister