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

I reject the first and second alternative cases because in my judgment Mr Nielsen’s job was indeed, in relevant respect, mechanistic and unthinking.

So far as Ms Rømer was concerned, if there was a correctly completed Form and the documentation it asked for was provided, Accounting II’s function, and therefore Mr Nielsen’s job, was to process the claim as approved, meaning it would be paid by SKAT. It follows, and this was in any event the clear tenor of her and Mr Nielsen’s oral evidence overall, that it was no part of Accounting II’s function, or of Mr Nielsen’s job, to have an opinion about, or think about, what (if anything) a properly completed Form accompanied by a CAN said about the factual or legal circumstances of the claim being processed. SKAT submitted that Mr Nielsen was “a thoughtful man who did his job with care [and who] understood the essential requirements for a valid refund and … relied on the Core Representations in processing the WHT Applications.” In my view, it was not an exaggeration for Mr Jones KC to submit, as he did during closing argument on Day 80, that this made it appear that SKAT’s representatives had attended a different trial. I respectfully agree with Mr Jones, continuing, that:

“… Mr Nielsen was, with respect to him, a man who operated at the most basic level of document processing, considering up to 80 applications a day or thereabouts, based on out-of-date training which had occurred 30 years earlier, whose dedication to his employer was such as to lead him to steal from that employer over a lengthy period of time, and fail to cooperate with that employer when they wanted to investigate how he had done his job.”

(I would add, though, that Mr Nielsen’s involvement in ‘stealing’ from SKAT was his participation in a fraud against SKAT unrelated to cum-ex trading or any of the parties involved in it, and was only peripherally relevant as possibly going to credit.)

I summarise the management structure of SKAT at paragraphs 568 to 571 below. As a result of it, Ms Rømer had no effective supervision from any of her superiors in relation to dividend tax. For his part, in practice Mr Nielsen had no real supervision even from Ms Rømer. The retirements of Ms Rømer and Mr Cramer made no difference to Mr Nielsen or his work, as he had been doing it alone for a long time. He never met Ms Held and had no need to contact Ms Madsen in the course of his work. (Mr Cramer, Ms Held and Ms Madsen are all mentioned below.)

Mr Nielsen joined SKAT in about October 1970, after four years in shipping, without academic, professional or vocational training or background in finance, law or tax. He began dealing with dividend tax reclaims in around 1985-1986 with only very basic training, given informally by his then manager, Mr Boding, from whom he learned on the job by being told what he had to do to process a claim. Mr Boding gave Mr Nielsen a rudimentary notion that an applicant was supposed to have owned shares in the relevant company, received a dividend and paid too much tax. However, he was given no instruction as to what share ownership meant, either at all or as a matter of Danish tax law, on what was required to establish share ownership, or on what it meant to say that a dividend had been received. If it had been any part of the job to consider and assess, as a matter of fact, general law and/or tax law, the conformity of dividend tax refund claims against criteria for eligibility, Mr Nielsen would have needed proper training in those matters. There is no reason to suppose he would not then have been given it. He was not given it, I infer, because it was not part of the job to consider such matters.

As a result, Mr Nielsen had no knowledge of equity lending, short selling, omnibus accounting, the existence or possible impact of trading around a dividend date or of different settlement periods, or the possibility that a payment credited by a custodian in respect of a dividend might not involve the custodian passing on cash received (indirectly) from the company declaring the dividend. Whether such things might occur was, for Mr Nielsen, a technical matter that it was not necessary for him to know about or understand to carry out his job. He had no notion even that what mattered for tax purposes was a right to a dividend and not a payment.

Mr Nielsen’s witness statement asserted that, although he was not a lawyer, he was aware of the requirements which governed whether or not a claimant was entitled to a refund of dividend tax. His oral evidence confirmed that he had in truth no real notion at all about those requirements, nor needed one to do his job. He was not even aware that SKAT published a legal guide on its website, and had never read it.

By the relevant period, and for many years before, Mr Nielsen was processing dividend tax reclaims alone and with minimal (and no effective) supervision. Two new employees or trainees, Ms Bidstrup and Ms Fridberg, processed a limited number of tax reclaims under Mr Nielsen’s supervision, to gain a general awareness of the work; so it is impossible to say whether Mr Nielsen alone processed every one of the 4,170 reclaims with which I am concerned. But that might have been the case in fact, and anyway it might as well have been the case since he certainly processed personally well over 90% of the dividend tax refund claims received by SKAT under the Form Scheme during the relevant period, and Ms Bidstrup and Ms Fridberg will only have been replicating Mr Nielsen’s process if they did deal with any of the reclaims that are now before me.

The volume and value of tax reclaims submitted to SKAT under the Form Scheme, and therefore processed by Mr Nielsen (or possibly in a few cases under his supervision), grew hugely during the relevant period:

Assuming (say) 46 working weeks (230 days), processing 6,000-7,000 claims would mean averaging c.25-30 a day; 10,000 would be 44 per day on average (and indeed Mr Nielsen agreed in evidence that by 2012 he was processing 40-50 reclaims a day); 16,000 would be an average of 70 per day (and again, to the best of his recollection, Mr Nielsen said he thought that 70-80 reclaims a day by 2015 was about right).

That rate of processing was possible because the task was purely clerical. Accounting II was operating a simple bookkeeping, data recording function, not any kind of claims assessment or claims control function. If a function of that kind was carried out, it had to have been elsewhere within SKAT, and in truth SKAT adduced no evidence that it was being carried out at all during the relevant period. My conclusion, below, when considering SKAT’s alternative case of systemic reliance is that, at the time, SKAT was simply not enquiring whether what was reported by claimants as net dividend amounts received by them was connected in any way to any tax withheld by the Danish company in question.

Mr Nielsen’s introduction to the job by Mr Boding in the mid-1980s left him with a simple notion that dividends are paid to shareholders and therefore only a shareholder would receive a document like a CAN. But that was not relevant to the job he performed at SKAT. It had no influence on whether, why or how he processed claims, so that they came to be paid by SKAT. Furthermore, I am satisfied that he did not think at the time, as the witness statement he adopted as his evidence in chief claimed, that a CAN said anything about share ownership, or about the basis upon which the dividend-related payment reported by it had been made to the client to whom it was addressed.

Mr Nielsen gave evidence in cross-examination about what he would have understood example CANs to convey. Some of it was not even of superficial assistance to SKAT. For example, in one answer he said of an ex-date stated in a CAN, “We didn’t use that information. What was important to us was the year because that was the relevant tax year” (by which he meant the financial year of the Danish company in respect of which the referenced dividend was declared). Or again, he said of the example NCB CAN reproduced in Appendix 5, below, that he would not have understood it to be conveying any information about ownership of shares (even though in fact the NCB form of CAN did say something about that, albeit it did not make the tax ownership representation alleged by SKAT).

Other answers Mr Nielsen gave were more superficially helpful to SKAT. For example, he said of that NCB CAN that he would have understood it to be conveying information about the withholding of tax from the dividend the subject of the CAN: “What I see here is that the amount has been distributed as dividends to Grace Bay and that 27% has been withheld in tax.” On that point, Mr Nielsen’s evidence was less clear and possibly less seemingly helpful to SKAT in relation to other forms of CAN, although there was also more than a touch of general confusion on his part about it. For example, he agreed of a Lindisfarne CAN that he did not understand it to be talking about any payment so far as Danish tax law was concerned, and said of an Indigo CAN that he saw it no differently, but then also gave these answers about that Indigo CAN:

“Q: You didn’t understand this one to be making any statement to you about the deduction of tax from this particular credit?

A: That appears from the numbers.

Q: But again you don’t understand this to be making any statement about the Danish company withholding the tax described in this particular advice?

A: It doesn’t appear that tax has been withheld, but at some point in time the custodian has received dividends and has -- has received the net dividends.

Q: You are not suggesting – sorry, you did not understand at the time that this credit advice showed the receipt of a dividend from the company itself?

A: We know which company distributed dividends but of course they did not distribute dividends directly to DWM Pension Plan [the client named in the CAN he was being shown].

Q: … to clarify … an answer you gave earlier … when we [were] looking at [an SCP CAN] …:

“Question: So you did not understand this dividend credit advice to be making statements to SKAT about the withholding of tax or the payment of dividend, did you?”

And your answer was:

“Answer: He received it from his custodian and tax had been withheld.”

… It is right, isn’t it, that you didn’t understand the [SCP] credit advice to be making statements about the withholding of tax from the credit identified in the statement?

A: If it appears from the CAN the tax has been withheld, we had to trust that.

Q: You didn’t understand the [SCP] credit advice to be talking about the payment or receipt of the dividend, did you?

A: As I remember it, it shows the distributing company and what has been withheld in taxes.”

My assessment was that, for the most part when giving evidence about all of this, Mr Nielsen was engaging in a mental exercise he did not undertake at the time, and that it is not realistic to try to disentangle from within his various answers how much, if any, of them might be recollection of contemporaneous thought. Most pertinently, I am clear that that exercise, if or to whatever extent undertaken by him at the time, was irrelevant to Mr Nielsen’s task during the relevant period. If the correct Form had been used (and even that has to be qualified by the continued acceptance of a misuse of the outdated Form), and there was a document calling itself a ‘dividend credit advice’ or similar recording that the applicant (or its client if the applicant was a Tax Agent) had been credited with a payment referable to a dividend, being a dividend from which tax would have been withheld by the company, Mr Nielsen’s job was simply to process the claim by checking the consistency of the figures and that there was evidence of the tax favoured status of the payee in a jurisdiction covered by a Danish DTT (and a power of attorney, if the Form had been submitted by a Tax Agent).

That is why the Tax Agent’s cover letters are irrelevant. It was not part of Mr Nielsen’s task to consider their content, so he did not do so; and it was not part of his task to consider their content because it was not part of his task to give thought to what the tax reclaim documents submitted to SKAT did or did not communicate. His was a clerical task in a bookkeeping department whose functions and responsibilities did not extend to deciding, or even knowing, the criteria upon which SKAT considered that tax refund claims should be paid, or assessing whether those criteria were met, claim by claim, or at all. If asked at the time, he would have said he had a general understanding that shareholders received dividend payments and it they were tax favoured foreign shareholders they might be entitled to a partial or total refund based on a DTT; but that was irrelevant to, and played no part in, the job he was charged with doing and did. If he had had a more sophisticated, or just different, or no, understanding about those matters, his job and the outcome on the facts of the case would have been the same.

I therefore reject the claim that Mr Nielsen relied on any of the representations alleged by SKAT to have been made by the documents submitted to it.