CL-2018-000297, CL-2018-000404, CL-2018-000590, - [2025] EWHC 2364 (Comm)

Having mentioned this already in passing at paragraph 478 above, I can say immediately that the tax representation, if thus made (considering the matter objectively), did not induce SKAT in any way. In those instances, it could only be said that the representation was made at all, taking an objective approach, because that approach effectively assumes that attention would be paid to the Tax Agent’s cover letter, potentially influencing what might be gleaned from the documents sent to SKAT, taken as a whole. But SKAT’s process, as implemented by Mr Nielsen, treated the cover letter as irrelevant; and Mr Nielsen in fact paid what was or was not said in the cover letter no attention at all. As I said in paragraph 477 above, my finding is that if the cover letter had just said, “Herewith completed Form 06.003, for your attention”, the tax refund claim would have been treated in exactly the same way. What each Tax Agent chose to say in its cover letter had no influence at all on what occurred.

The result is that SKAT’s claims in these proceedings all fail, without the need to explore in any greater detail how it dealt with tax refund claims during the relevant period and whether, therefore, its case on inducement was made out at trial. I deal with that fully nonetheless, below, to explain why I concluded that indeed SKAT’s case on inducement was not made out.

I made some initial observations about the requirement of inducement when introducing this main section of the judgment (paragraphs 424 to 431 above). I consider that Zacaroli J stated the legal test accurately, and sufficiently for the present case, when he said as follows in Farol Holdings at [216] (but, again, I generalise it from the particular case of inducing entry into a contract):

“… the representee must in fact have been induced to take action … in reliance on the representation. The misrepresentation need not be the only reason for the representee’s decision to [act as it did], but the representee will have no cause of action if it would have [acted as it did] even if the representation had not been made. If it is proved that a false statement is made which was material – in the sense that it was likely to induce [the action said to have been induced] – then there is an evidential presumption (of fact, not law) that the representee was so induced. The presumption is stronger if the representation was made fraudulently.”

Of the strength of the presumption of inducement where a representation has been made fraudulently, i.e. where the representor (or party responsible for a representation made through another) intended the representation to induce the claimant to act and knew the representation to be false (or was reckless as to its falsity, not caring whether it was true or false), it has been said that:

The existence and strength of the presumption explains why it has long been recognised that there is no rule of law that the relevant decision-maker(s) must be called to give evidence and swear that they acted upon the inducement: see Smith v Chadwick (1889) 9 App Cas 187 (HL), in which, at 196, Lord Blackburn explained (again generalising away from the particular case of inducing entry into a contract) that “… if it is proved that the defendants with a view to induce the plaintiff to [act] made a statement to the plaintiff of such a nature as would be likely to induce a person to [act in that way], and it is proved that the plaintiff did [so act], it is a fair inference of fact that he was induced to do so by the statement.” The present case does not give rise to any issue about how close a match there must be between the (type of) action likely to be induced and the action in fact taken by the claimant. The case concerns the approval by SKAT, and therefore payment, of the submitted tax refund claim in each instance; and if representations were made with intent to induce SKAT to act, obviously that was the intended outcome.

Powerful though the presumption is, it remains a factual presumption only, not reversing the burden of proof, and the evidence in any given case may paint a sufficiently clear picture of how a decision was made, or why some action was taken (or not taken), that the finding is that a misrepresentation, though material, and even if fraudulently made, in fact had no influence, and the same decision would have been made, the same action would have been taken (or not taken), without it.

That is the position, and my finding, in the present case, for the reasons set out in the remainder of this part of the judgment.

Before turning to the facts, I should mention one other aspect of the law, namely that it recognises the possibility of mechanistic or automatic reliance that may be sufficient, so that there is inducement, although the making of the individual decision said to have been induced does not involve thought being applied by any human mind to what is or is not being conveyed by the words and/or conduct constituting or giving rise to the representation. In that regard, SKAT referred me to: Renault v Fleetpro (Renault UK Ltd v Fleetpro Technical Services [2007] EWHC 2541 (QB), noted by Clerk & Lindsell at f.n.176 in the passage quoted at paragraph 425 above; Grant & Mumford, “Civil Fraud: Law, Practice & Procedure”, 1^st Supplement (2022) to the 1^st Edition (2018), at 1-133A; de Verneuil Smith & Day, “Reliance: a comparison between the common law and s90A FSMA” (2021) 6 JIBFL 389 at 291; and Day, “Recent travails of fraudulent misrepresentation” [2021] LMCLQ 636 at 644.

Those references all consider the possible conundrum of machine (computer) processing, and conclude (rightly, in my view) that there is no real conundrum, so that, for example and as SKAT submitted, if within an online application a box is ticked such that (objectively speaking) a representation is made by the applicant, and the system is coded to reject any application in which that box is not ticked, it would only be “an orthodox view of the law” (per Day, supra) to conclude that the representation induced the (computerised) acceptance of the application. The point of principle (if rightly described as such) is that an output generated by the routine operation of a system that produces such outputs in response to inputs obtained from another may properly be held to have been induced by a representation by that other, made by the provision of those inputs with a view to obtaining the output, if the system was designed to deliver that output from those inputs because the view was taken that the provider of the inputs would make that representation by providing them. The system design, on the basis of that view, can be seen as anticipatory reliance on representations that will be made, which is completed to create an individual instance of actual reliance when a particular application is routinely processed.

Furthermore, if documents required to be submitted for a payment claim to be processed by the party to whom it is made will necessarily make a representation material to a decision whether to pay the claim (interpreting the purport of the documents objectively, in context), and evidence shows that individual claims are processed more or less unthinkingly through some automated system, it may be no more than an orthodox application of the presumption of inducement in the particular case to say that the representation is likely to have induced the claim payment. The inevitability that a material representation will be made may render it inherently likely that the system was designed to respond as it does on the view that the representation would be so made.

The logic of paragraphs 531 to 533 above is not confined to machine processing, in my view. Suppose in the example posed by SKAT, the application checking was not automated but was nonetheless a mechanistic clerical exercise that did not require the checker to apply their mind to (the meaning of) the contents of the completed form, but rather required them just to verify that a certain set of boxes was ticked. If the application would have been rejected if the box had been left unticked that, by being ticked, created the representation (speaking objectively), again it would be orthodox to say that the representation induced the (clerical, mechanistic) acceptance of the application. Moreover, that would be so, other things being equal, even if the checker was called to give evidence and said, as might be expected, that they gave no thought to what the completed form said. Indeed, that would still be so, other things being equal, if the checker gave evidence that they did give thought to that and, having done so, understood the completed form to be saying something that bore no relation to the representation objectively made by it, perhaps even that it was saying something quite inconsistent with the representation objectively made.

That is all so because, in the adapted example: (i) the checker’s understanding, if they had any, of what was conveyed by the completed form is irrelevant to the approval of the application; and (ii) other things in the case being equal would result in the drawing of a fair inference that those who designed the process made the ticking of the box in question a pre-requisite because by ticking it the applicant would be stating that which, objectively speaking, ticking it would be taken to represent. In the nature of such a presumptive inference as to the facts, other evidence in the case might rebut it. For example, suppose, in the most extreme version of the example, the checker’s evidence was that their (objectively wild) understanding of what the completed form conveyed came from what they had been told by a more senior person, who set the system up, that the online form was designed to elicit from the applicant.

I therefore do not accept submissions that were made by defendants that there can only be systemic reliance (to give it a convenient label) of the type found in Renault v Fleetpro, supra, in the context of machine processing or decision-making. For example, the DWF Ds submitted that the representations alleged here “are not wholly express, simple or clear and are not the result of specific questions asked. They require interpretation by a human mind to discern their meaning alleged to be implicit in the words used and which on any realistic view are not the only potential interpretation of the (limited) words used.” I agree with all of that. It followed, the DWF Ds submitted, that Renault v Fleetpro and the commentators’ views on this point were irrelevant, incapable of application. I do not agree with that. All must depend on the facts; but I see no difficulty in principle in a finding of inducement based on, say, evidence that the view was taken by those with authority over the matter that documents such as those routinely submitted did involve pertinent statements being made, which they regarded as required to justify a payment being made, and that is why a clerical process involving a document checker who did not have to think about such things was adopted and regarded as acceptable, or (in a suitable case) based ultimately on a conclusion that a presumption of inducement was not rebutted.

That is also why, in particular, it does not without more defeat a case of systemic reliance, as the DWF Ds argued, if the document checker does in fact read the documents and make something, in their own mind, of what they read. If that had a bearing on whether they processed the documents as approved, that would drive the court away from the possibility of systemic reliance and the focus would be on whether the way in which their interpretation of the material affected their actions established that they had been induced by an alleged misrepresentation; but if it had no bearing on their relevant conduct, then causally speaking that internal consideration of what the documents were saying may as well not have happened and, as it seems to me in principle, systemic reliance would be capable of being found if justified by the evidence taken in the round.

The sufficiency in law of systemic reliance mattered in the present case because, on the evidence of Mr Nielsen and Ms Rømer, I find that Mr Nielsen was tasked with and performed a mechanistic clerical task of the kind I have just discussed. He was billed by SKAT’s pleadings, and by the witness statement he adopted as his evidence in chief, as a man whose job it was to consider what, if anything, was conveyed by the tax reclaim documents he processed, as regards the factual basis upon which tax refund claims were being made, who performed that job, and who concluded that the documents conveyed that the Tax Agent’s clients had been shareholders for Danish tax purposes on the dividend declaration date who by virtue thereof had received dividends for the purposes of Danish tax law, and a payment net of tax in respect of that entitlement, and that the payments by reference to which claims were made had been received by the Tax Agent’s clients net of tax withheld by the respective Danish companies, in the sense contended for by SKAT in its pleading of the tax representation. In my judgment, that bears no relation to the reality of Mr Nielsen’s role or approach.