The stolen cigarettes were worth £72,512. The excise duty triggered by their theft was £449,557. Whether the carrier had to meet the larger bill turned on the meaning of “other charges” in the international convention on road carriage. It also raised a question about precedent. Would the Supreme Court overturn a House of Lords decision merely because a different reading of the treaty was persuasive?
How the duty came to be claimed
In March 2019 companies in the Japan Tobacco International group contracted with a Polish road haulier to carry 1,429 cases of cigarettes from Gostkow to Crewe. The cigarettes were moving under a European excise-duty suspension arrangement. Duty was suspended unless an irregularity, such as theft, meant that they were treated as released for consumption.
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On 8 March 2019 the driver parked overnight at Clacket Lane Services on the M25. Thieves cut into the vehicle and stole 289 cases, which were not recovered. Their market value, excluding duty, was £72,512. HM Revenue and Customs assessed the English company for £449,557, on the basis that the stolen cigarettes were deemed to have entered circulation in the United Kingdom. The duty was paid on 11 April 2019.
The carriage was subject to the Convention on the Contract for the International Carriage of Goods by Road 1956, the CMR, which has the force of law in the United Kingdom. The cargo interests claimed the value of the cigarettes, wasted freight, survey fees and the duty. All but the duty was settled. For the appeal, it was agreed that they had title to sue. The remaining issue was whether article 23.4 made the carrier liable for the duty.
The two readings of article 23.4
The Convention compensates for the value of lost goods at the place and time they were accepted for carriage, normally subject to a weight limit. Article 23.4 separately requires a refund of carriage charges, customs duties and other charges incurred in respect of the carriage. Beyond the specified sums, it excludes further damages. The cargo interests therefore had to bring excise duty within that separate provision.
On the broad reading, other charges include charges caused by the way the goods were actually carried and lost, so excise duty on goods stolen in transit is recoverable. On the narrow reading, the words cover only charges that would have been incurred if the carriage had been performed without incident, such as packing, insurance or a certificate of quality. In Buchanan, another theft case, the House of Lords adopted the broad reading by three votes to two. Lord Wilberforce treated the language as wide enough to cover the way in which the goods were carried, miscarried or lost. Judge Pelling KC was bound by that decision. He certified a direct appeal, and the carriers asked the Supreme Court to depart from Buchanan under the 1966 Practice Statement.
Why the Court would not depart from Buchanan
Lord Hamblen, with whom the other six Justices agreed, accepted that there was considerable force in the narrow reading. The compensation scheme is deliberately limited: it uses dispatch value rather than the owner’s full loss, and duty of this kind may greatly exceed that value. Even so, an interpretation will not be overruled merely because another reading is possible. The carriers had to show that Buchanan was untenable or manifestly wrong and that departure was appropriate.
The broad reading was tenable. “In respect of” is commonly understood as “in connection with”, and a loss during the journey, resulting from the way the carriage was performed, can be connected with that carriage without reading in extra words. The same view had been taken by the judges in Buchanan, other than the dissenters, and by courts in several other CMR states, including the supreme courts of Denmark, the Czech Republic and Lithuania and the Italian Court of Appeal. Courts in Germany, the Netherlands, Sweden and Austria have adopted the narrow reading. There is no settled international meaning.
The practical criticisms were also overstated. The parties’ joint statement showed that international road-haulage contracts do not seek to avoid Buchanan, and that cargo and carrier insurers already recognise and underwrite the risk of liability for the full value of excise goods, including duty. Reversing the decision would not remove uncertainty: other countries apply the wider reading or have no known approach, and both the place of litigation and the treatment of wilful misconduct can take liability beyond the ordinary CMR measure. Excise duty of this kind is a reasonably foreseeable charge. Because only a charge is recoverable, article 23.4 still excludes ordinary claims for lost profit.
There had been no material change since 1977. Academic criticism was neither unanimous nor, in the Court’s view, a material change in itself. Foreign decisions continued to point both ways. An amendment to the related rail convention, now excluding suspended excise duty, might lead the CMR states to consider a protocol, but it did not alter article 23.4. No such change was made when that article was revised in 1978, after Buchanan. Nor had the decision been shown to work unsatisfactorily or to produce manifestly unjust results.
Verdict: The Supreme Court unanimously dismissed the carriers’ appeal. The wider reading in Buchanan was tenable, and there was insufficient reason to depart from it. The £449,557 excise duty was recoverable. The Court left open whether the later Sandeman case itself had been correctly decided.
Source: JTI POLSKA Sp. Z o.o. and others v Jakubowski and others [2023] UKSC 19
