[1987] 3 All ER 1050

The taxpayer companies were the manufacturers of well-known sports cars in the United Kingdom. In 1978, through their directors, they became involved in the development and manufacture by D of a sports car in Northern Ireland and various arrangements were entered into, whereby, inter alia, on 1 November 1978 DLMC, a Northern Ireland company controlled by D, contracted with GPD, a Panamanian company controlled in Switzerland, for services for design work on the new car, and on the same day the taxpayer companies also contracted with GPD that they would perform the necessary design and development work on the car. GPD subsequently received $17á65m advance payment from DMLC and an American company controlled by D and shortly thereafter made a payment of $8á5m to D. The taxpayer companies duly performed their obligations under their contract and were paid by DLMC on the receipt of invoices. The Revenue made estimated alternative assessments to corporation tax on the taxpayer companies for the accounting periods ending in December 1978 and 1979. All the assessments were made in due time. The Revenue contended that, as the taxpayer companies alone had done the contractual work for DLMC, they alone must have been entitled to the balance of $9á15m of the advance payment to GPD and therefore the $9á15m remained part of the taxpayer companies' profits. The General Commissioners discharged the assessments, holding that there was no evidence before them of the alleged payments being made or becoming due to the taxpayer companies and that if in fact the payments were made or due to be made then the contract between the taxpayer companies and GPD must have been fraudulent and if that was so then it was incumbent on the Revenue to prove such fraud, which they had not done. The Crown appealed, contending that the commissioners had misdirected themselves in law, and sought an1050 order remitting the case to the commissioners and directing them to hear further evidence which had come to light in liquidation proceedings shortly before the hearing of the appeal and which showed, inter alia, that in November 1978 GPD had paid very large sums in US dollars to accounts in the names of C (who had since died) and B, who were then the directors in control of the taxpayer companies. The judge allowed the appeal, holding that the commissioners had misdirected themselves in law since the burden of proving that the assessments were wrong lay throughout on the taxpayer companies, and he remitted the case to the Special Commissioners for a complete rehearing. The taxpayer companies appealed.

Held - The appeal would be dismissed for the following reasons-
   (1) Where an assessment to income or corporation tax was made in time, the burden to displace the assessment lay on the taxpayer throughout; and, even where an assessment had been made for the purpose of making good to the Crown a loss of tax wholly or partly attributable to the fraud, wilful default or neglect of any person, there was no onus on the Crown to prove fraud, wilful default or neglect to support the assessment itself. Since the commissioners had misdirected themselves in law over the onus of proof when they made their decision and since it could not be said that the evidence was such that they would necessarily have reached the same conclusion if they had directed themselves correctly, the judge had been right to remit the case for a rehearing (see p 1055 c f, p 1056 b c, p 1057 f to h, p 1058 d j to p 1059 a e f, p 1060 b to e, p 1061 h, p 1062 d f to j and p 1063 f, post); T Haythornthwaite & Sons Ltd v Kelly (Inspector of Taxes) (1927) 11 TC 657 and dictum of Pennycuick J in Hudson v Humbles (Inspector of Taxes) (1965) 42 TC at 384 applied.
   (2) (Mustill LJ dissenting) Although fresh evidence would not ordinarily be admissible on a remission of a case to the General or Special Commissioners, the existence of special circumstances could justify or indeed require its admission. Such special circumstances were created when, as appeared to be the case with B, a party had deliberately misled the court in a material matter and that deception had probably (or might reasonably have) tipped the scale in his favour and it would be wrong to allow him to retain the judgment thus unfairly procured (see p 1056 g h, p 1057 d to f and p 1063 a b e f, post); Meek v Fleming [1961] 3 All ER 148 applied.
   Decision of Sir Nicolas Browne-Wilkinson V-C [1987] 2 All ER 674 affirmed.

Notes
For the jurisdiction of the High Court in cases stated in tax appeals and for amendment and remission of cases stated, see 23 Halsbury's Laws (4th edn) paras 1626-1628.

1051

Appeal
Group Lotus Car Cos Ltd and Lotus Cars Ltd (the taxpayer companies) appealed against an order of Sir Nicolas Browne-Wilkinson V-C ([1987] 2 All ER 674) dated 18 October 1986 whereby on a case stated (set out at [1987] 2 All ER 675-681) at the request of the Crown by the Commissioners for the General Purposes of the Income Tax for the division of Wymondham in the county of Norfolk it was directed that the matter be remitted to the Commissioners for the Special Purposes of the Income Tax Acts for rehearing with liberty to each party to adduce new evidence. The grounds of the appeal were (1) that the Vice-Chancellor had misdirected himself and erred in law regarding the burden of proving fraud, wilful default or neglect and (2) that there was no justification for remitting the case for rehearing or for ordering that on such rehearing there should be any liberty to adduce fresh evidence. The facts are set out in the judgment of Dillon LJ.

31 July 1987. The following judgments were delivered.

DILLON LJ. Group Lotus Car Cos plc and Lotus Cars Ltd (the taxpayer companies) appeal against a decision of Sir Nicolas Browne-Wilkinson V-C ([1987] 2 All ER 674), given on 18 December 1986 whereby on a case stated at the request of the Crown under s 56 of the Taxes Management Act 1970 by the General Commissioners for the Wymondham division of Norfolk the Vice-Chancellor directed that the matter be remitted to the Special Commissioners for rehearing with liberty to each party to adduce fresh evidence.
   The issues debated in argument before the Vice-Chancellor and in this court have been essentially issues of procedure and onus of proof. What lies behind them, however, is the desire of the Crown to get in, if possible, certain fresh evidence which the Crown obtained for the first time after the commissioners had given their decision and which could not have been obtained with reasonable diligence for use at the hearing before the commissioners.
   Since the only appeal to the High Court against a decision of the commissioners, Special or General, in a tax case is an appeal by case stated on a question of law, it is accepted by the Crown that new evidence cannot in general be received in the High Court or in this court on a tax appeal, even if the three well-known conditions laid down in Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489 are satisfied. It is submitted, however, for the Crown that if it can be shown that there has been error of law on the part of the commissioners such that the matter should be remitted for rehearing then it may be appropriate, and would in the present case be appropriate, for new evidence to be admitted on the rehearing. The particular error of law relied on in the present case is, it1052 is said, and the Vice-Chancellor held, that the commissioners misdirected themselves in law in relation to the onus of proof on the questions which they had to consider.
   In the years down to 1978 the taxpayer companies had been engaged with some success in the manufacture of high quality sports cars and in building specialised cars designed for the racetrack. The driving force behind the taxpayer companies, until his death on 16 December 1982, was a Mr Colin Chapman, who, according to the case stated, had virtually complete control of the companies and had built up an international reputation as a designer and for the development of motor cars in all their aspects, with particular reference to cars of a sporting nature. Mr Chapman's right-hand man for many years was a Mr F R Bushell. Mr Bushell is one of Mr Chapman's executors, and on Mr Chapman's death he became managing director of Lotus Cars Ltd. At the time of the hearing before the commissioners he was chief executive of the taxpayer companies, though he is not now, and he was one of the principal witnesses for the taxpayer companies during that hearing.
   In 1978 the taxpayer companies became involved in the notorious affair of the De Lorean motor car. There were three relevant agreements, all dated 1 November 1978. The first was an agreement between De Lorean Research Ltd Partnership of America, De Lorean Motor Cars Ltd of Northern Ireland and a company called GPD Services Inc (GPD). GPD agreed to provide its services for design, test and calculation work for the purpose of developing a sports car, the DMC 12, and it was provided that Lotus Cars Ltd and Mr Chapman himself would be engaged in doing the work. The second was a letter of agreement whereby Lotus Cars Ltd warranted and guaranteed to De Lorean Research Ltd Partnership and De Lorean Motor Cars Ltd the timely and full performance of each and every obligation of GPD under the first agreement. The third was an agreement between GPD and Lotus Cars Ltd whereby Lotus Cars Ltd agreed to carry out research, design and development work in connection with the DMC 12 prototype sports coupŽ which was to be manufactured by De Lorean Motor Cars Ltd. Under this third agreement a good faith deposit of £2m was paid to Lotus Cars Ltd on 6 November 1978, but was refunded in April 1979.
   GPD was a Panamanian company controlled by a M and Mme Juhan of Geneva in Switzerland, who apparently acquired it off the shelf. It had an address in Geneva and a bank account, but neither facilities nor experience for research, design or development work on sports cars. It received, however, on the signing of the first agreement, a total of some $17á65m from De Lorean Motor Cars Ltd and the De Lorean Research Ltd Partnership. It is now known that some $8 ¹/₂m were paid out to Mr De Lorean personally, but a balance of $9á15m or thereabouts remained unaccounted for.
   Since it was plain that the work which GPD had contracted to do for De Lorean Motor Cars Ltd and the De Lorean Research Ltd Partnership had in fact been done by Lotus Cars Ltd, the Revenue were concerned to inquire whether any of the moneys thus received by GPD had come to the hands of the taxpayer companies or either of them, or their officers, in addition to sums for work done admittedly received by the taxpayer companies directly from De Lorean Motor Cars Ltd. The Revenue consequently carried out a lengthy investigation into the books of the taxpayer companies. In the upshot, on 16 December 1983 the Revenue made a number of estimated assessments on the taxpayer companies for the accounting period ended 31 December 1977, and subsequent years. Some have since been withdrawn but at the end of the hearing before the commissioners two remained outstanding, each in a sum of £9m.
   The taxpayer companies appealed against the assessments and it was those appeals which the commissioners heard in April 1984. They correctly formulated the point at issue in para 5 of the case stated as follows ([1987] 2 All ER 674 at 678):

The three commissioners who sat to hear the appeal all agreed that the two outstanding assessments on the taxpayer companies ought to be discharged, and they ordered accordingly. They reached that conclusion, however, by somewhat different routes. Their reasoning is set out in the following passages in the case stated ([1987] 2 All ER 674 at 680):

   Their view thus was that the outstanding assessments could only be justified if there had been fraud on the part of the taxpayer companies or their officers, that, if fraud was in question, the onus was on the Revenue to prove the fraud and that the Revenue had failed to discharge that onus. Therefore the assessments were discharged.
   The question of onus is thus crucial. Indeed in their case stated the commissioners formulated the question of law for the opinion of the court as being whether their decision that the onus of proof fell on the Revenue was correct in law.
   At this juncture it is important to note that all the assessments raised by the Revenue on 16 December 1983 were raised in due time, viz as provided by s 34 of the 1970 Act, 1054at a time 'not later than six years after the end of the chargeable period to which the assessment relates'.
   Section 36 of the 1970 Act provides:

   ie even after the expiration of six years after the end of the chargeable period. With such out-of-time assessments, the onus is clearly on the Revenue to prove the fraud or wilful default: see Hillenbrand v IRC (1966) 42 TC 617 and Hudson v Humbles (Inspector of Taxes) (1966) 42 TC 380 esp at 384 per Pennycuick J.
   Where the assessments are made in time, however, as these were, the burden lies on the taxpayer from the start to displace the assessments: see Hudson v Humbles (at 384) and T Haythornthwaite & Sons Ltd v Kelly (Inspector of Taxes) (1927) 11 TC 657, a decision of this court. This ruling on onus was founded on the statutory provisions for appeals against assessments, now in s 50 of the 1970 Act and especially in sub-s (6) of that section: see the statement of Lord Hanworth MR in T Haythornthwaite & Sons Ltd v Kelly (at 667):

   Estimated assessments may be made by an inspector where the taxpayer has failed to make any return at all and the inspector has no idea what the taxpayer's taxable income truly is or they may be made where the inspector suspects that the taxpayer has concealed part of his income whether by fraud, wilful default or mere mistake. In either case, if the assessment is made in due time, the onus to displace the assessment is on the taxpayer throughout.
   There are certain complications in the 1970 Act. Section 39 sets out in relation to corporation tax, with which these assessments were concerned, certain provisions which are to be found in s 37 of the 1970 Act in relation to income tax and capital gains tax. The effect is that where, for the purpose of making good to the Crown a loss of tax wholly or partly attributable to the fraud, wilful default or neglect of any person, an assessment to corporation tax for any accounting period has been made on him not later than six years after the end of that accounting period, assessments to tax may be made for earlier accounting periods or years of assessment even though they would otherwise be out of time. Section 39 has, however, never had any application to the present case since, because of the timing of the De Lorean venture, the Revenue have never sought to go back before the calendar year 1977 for which the assessments made on 16 December 1983 were in time.
   More importantly, s 88 of the 1970 Act provides that, where an assessment has been made for the purpose of making good to the Crown a loss of tax wholly or partly attributable to the fraud, wilful default or neglect of any person, the tax charged by the assessment, or such part thereof as corresponds to the part so attributable, shall carry interest from the date on which the tax ought to have been paid. With this section in mind (so we were told by counsel for the Crown) the Revenue wrote on 14 December 1983 to the taxpayer companies' accountants telling them that the assessments were1055 going to be made and that they were going to be made on the basis that there had been fraud, wilful default or neglect on the part of, or on behalf of, the taxpayer companies. In the event, as the assessments were discharged by the commissioners, no question of interest arose. It may well be that the onus would be on the Crown to prove fraud, wilful default or neglect if and when the time came for claiming interest on the tax assessed. But it does not follow, in my judgment, that that puts the onus on the Crown to prove fraud, wilful default or neglect to support the assessment itself.
   I agree therefore with the Vice-Chancellor that the commissioners misdirected themselves in law over the onus of proof when they made their decision. It cannot be said that the evidence was such that they would necessarily have reached the same conclusion if they had directed themselves correctly. Therefore, since the High Court hearing a tax appeal by way of a case stated on a question of law has no power to find facts or make further findings of fact, it must follow that the case must be remitted for further hearing. Ordinarily the remitter of a tax appeal would be to the same body of commissioners who had originally heard the case, but in the present case there was a difficulty in that one of the commissioners who heard the taxpayer companies' appeals had retired and another was about to retire. It was therefore agreed before the Vice-Chancellor that, if he concluded that the case had to be remitted, it ought to be remitted to the Special Commissioners.
   What is in issue, however, is whether the remitted case should be heard by the Special Commissioners merely on the evidence which was before the General Commissioners or whether, as the Vice-Chancellor held, there should be power to adduce fresh evidence.
   The particular new evidence which the Crown wants to put in on a rehearing is evidence which the Crown has obtained since the hearing before the commissioners, and could not with reasonable diligence have obtained before. It shows that, out of the moneys received by GPD from the De Lorean Research Ltd Partnership, as above mentioned, GPD made the following payments, namely: (i) on 14 November 1978 $90,000-odd to a numbered account at CrŽdit Suisse, Zurich in the name of Mr Bushell and $723,000 to another numbered account at CrŽdit Suisse, Zurich in the name of Mr Chapman and (ii) on 6 December a further $400,000 to Mr Bushell's numbered account at CrŽdit Suisse and a further $3á6m-odd to Mr Chapman's numbered account. These payments are of obvious relevance to the taxpayer companies' tax appeal, having regard to the commissioners' formulation of the issue in that appeal set out in para 5 of the case stated. It is the contention of the Revenue, on the validity of which we are not at this juncture required to pronounce, that, if directors intercept and appropriate moneys due to their company so as to be accountable to the company for those moneys, then the moneys concerned rank as receipts of the company and may be taxable accordingly.
   The general rule, described by Pennycuick J in Bradshaw v Blunden (Inspector of Taxes) (No 2) (1960) 39 TC 73 at 80 as 'a well-established and salutary rule' is that the parties to a tax appeal to the High Court should not, in the absence of special circumstances, be enabled to go back to the commissioners and call fresh evidence on issues which were raised in the original proceedings and as to which they had full opportunity of calling such evidence as they might be advised.
   So far as I am aware there has been no attempt to define what may be held to be 'special circumstances' for this purpose. I would for my part have been disposed to think that, if there was fresh evidence which satisfied the conditions in Ladd v Marshall [1954] 3 All ER 745, [1954] 1 WLR 1489, that would amount to 'special circumstances' which would warrant the court in allowing that fresh evidence to be used on the rehearing when a tax appeal has been remitted to the commissioners for further hearing. But the Vice-Chancellor was not prepared to go so far; he did not think that the mere fact that the requirements of Ladd v Marshall were satisfied was sufficient to justify the court, on a tax appeal, directing the commissioners to receive on a rehearing fresh evidence which complies with the requirements of Ladd v Marshall, and there has been no respondent's notice from the Crown challenging this ruling.

1056

   The Vice-Chancellor, however, allowed the fresh evidence to be adduced on the rehearing of the remitted case on what he described as another and more fundamental principle than that in Ladd v Marshall. That was the principle exemplified in Meek v Fleming [1961] 3 All ER 148 at 154, [1961] 2 QB 366 at 379, where Holroyd Pearce LJ said:

   Counsel for the taxpayer companies submits that there is no evidence that Mr Bushell ever knew that there were Swiss bank accounts in his name and in the name of Mr Chapman or ever knew that GPD had paid moneys into those accounts. He also submits that the error of law on the part of the commissioners is adventitious. If the commissioners had directed themselves correctly in law, their decision on the facts discharging the assessments would have been final and conclusive against the Crown and the Crown would, he submits, not have been able to use the evidence it has now discovered except possibly in an action to set aside the commissioners' decision on the ground that it was obtained by the taxpayer companies by fraud. He therefore submits that it would be wrong to allow the Crown to profit from the evidence just because there happens to have been, in the view of the court, an error of law on the part of the commissioners.
   I strongly suspect that Mr Bushell deceived the court when he gave evidence to the commissioners. If he did, it would be wrong that the decision he obtained from the commissioners should stand. Compared with that, the factor that in the absence of error of law on the part of the commissioners there would be no means of getting in the new evidence short of a separate action alleging fraud is of relatively minor significance. I see no good reason why the Special Commissioners should be required to approach their task in blinkers, denied the benefit of the new evidence which is now known to be available. The present case is a fortiori to the ordinary case where fresh evidence which satisfies the requirements of Ladd v Marshall becomes available after a trial. The Vice-Chancellor was right in my judgment, in the circumstances of this case, to allow fresh evidence to be adduced on the rehearing, and I would dismiss this appeal.

MUSTILL LJ. This appeal raises two issues. As to the first, which concerns the burden of proof, I feel no doubt that Sir Nicolas Browne-Wilkinson V-C was right to find a misdirection on the part of the General Commissioners. The starting point is an ordinary appeal before the commissioners. Here, however unacceptable the idea may be to the ordinary member of the public, it has been clear law binding on this court for sixty years that an inspector of taxes has only to raise an assessment to impose on the taxpayer the burden of proving that it is wrong: see T Haythornthwaite & Sons Ltd v Kelly (Inspector of Taxes) (1927) 11 TC 657. The taxpayer companies do not dispute this principle but maintain that they have done everything which it requires by tendering senior officials and the auditors of the taxpayer companies to give evidence and producing the taxpayer companies' accounts and records to show that there is nothing in them to justify the raising of an assessment in respect of the sums which the inspector has asserted were wrongfully diverted from the taxpayer companies' funds. They go on to say that the burden of displacing this evidence rested on the Revenue, given that the case against them was fundamentally one of fraud, a case which the party asserting it must always be under a heavy burden to prove.
   I believe that when analysed this proposition has two quite different aspects. The first is based on the way in which the Revenue approached the matter in correspondence. In a letter of 14 December 1983 the inspector notified the taxpayer companies that a number of assessments would be made and went on to say that he had decided to make1057 them 'on the basis that there has been fraud, wilful default or neglect' on the part of the taxpayer companies. It would, I believe, have been natural to read this letter as an intimation that the Revenue were proposing either to claim lost tax out of time under s 36 of the Taxes Management Act 1970 by proving fraud or wilful default or to use an in-time assessment based on fraud, wilful default or neglect as a springboard for subsequent out-of-time assessment under s 39. If this had indeed been the basis on which the hearing had been conducted before the commissioners, it would indeed have been perfectly clear on general principle, without the need for recourse to specialist revenue law, that the burden of proof would rest on the Crown; and, if authority were needed on this particular field, Hudson v Humbles (Inspector of Taxes) (1965) 42 TC 380 at 384 is only one example of cases which could be called up in support. We have, however, had the benefit of an explanation of the way in which the dispute was actually conducted before the commissioners. We are told that, whatever the letter may have said, the Revenue were concerned only to protect their right to interest under s 88, and that, when it came to the hearing before the commissioners, no attempt was made to advance a case under ss 36 and 39. Rather, the matter was approached, so far as the Revenue were concerned, on an ordinary Haythornthwaite basis. If this is so, and the contrary has not, as we understand it, been asserted, the formal burden of proof was not assumed by the Revenue. The commissioners had no ground for approaching their fact-finding functions on any other basis than that it was for the taxpayer companies to make the running.
   It is, however, contended that there is a quite different reason why the commissioners were right in their general approach, namely that once the taxpayer companies had produced their books and had called their auditors to say that the books were in order the Revenue could displace the taxpayer companies' case only by putting in contention a rival account of events which necessarily involved an allegation that the taxpayer companies, or one or more of their senior officers, were guilty of fraud. Such an allegation, even if never explicitly articulated, must be a matter which the Revenue should prove as the party which had brought it into the arena. To express the same notion in different words, once the taxpayer companies had made out a prima facie case that the returns were soundly based, the evidentiary burden of proof passed to the Revenue.
   References to a shifting burden of proof can be found in many cases. The expression may have more than one significance. In some cases it signifies that, in order to reach a conclusion on the entire dispute, the court must successively decide two or more issues, in respect of which the burden is not consistently on the same party. An example is furnished by Slattery v Mance [1962] 1 All ER 525, [1962] 1 QB 676. Under an insurance against the risk of 'fire' the insured must prove that the subject matter was lost as a result of a fire. The right of recovery is, however, qualified by the general rule that an insured has no right of indemnity against his own deliberate and wrongful act. The claim will therefore fail, even on proof of a loss by fire, if it is shown that the insured wilfully caused or connived in the loss. This is, however, something for the insurer to prove, not the insured to disprove. Accordingly, when the judge comes to arrive at a decision he must proceed by two stages: first, to decide whether the subject matter is lost by fire; if this is not proved, the claim fails; then to decide whether, if so, the loss was brought about by the wilful act of the insured; if this is not proved, the claim succeeds. Thus, it may be said in one sense that the burden of proof shifts as the judge passes through the successive stages of his inquiry. In truth, however, this is an inaccurate use of language, for the dispute involves two separate issues, each with its own burden of proof, which remains unchanged throughout the course of the action.
   If the Revenue had pursued before the commissioners the line of attack foreshadowed in the inspector's letter of 14 December 1983, the case would have fallen into this category, with the Haythornthwaite burden of proof on the taxpayer companies and the burden of proof on the Revenue in respect of fraud, successively applied. In fact, however, the only question in issue was whether the taxpayer companies could establish that the1058 assessments were wrong, and the general burden rested on them alone throughout the hearing.
   It is, however, submitted that the concept of a shifting burden has another meaning, relative to what is called the 'evidentiary burden of proof'. Although this term is widely used, it has often been pointed out that it simply expresses a notion of practical common sense and is not a principle of substantive or procedural law. It means no more than this, that during the trial of an issue of fact there will often arrive one or more occasions when, if the judge were to take stock of the evidence so far adduced, he would conclude that, if there were to be no more evidence, a particular party would win. It would follow that, if the other party wished to escape defeat, he would have to call sufficient evidence to turn the scale. The identity of the party to whom this applies may change and change again during the hearing and it is often convenient to speak of one party or the other as having the evidentiary burden at a given time. This is, however, no more than shorthand, which should not be allowed to disguise the fact that the burden of proof in the strict sense will remain on the same party throughout, which will almost always mean that the party who relies on a particular fact in support of his case must prove it. I do not see how this fact of forensic life bears on the present case. It is a commonplace that, if there is a disputed question of fact admitting of only two possible solutions, X and Y, with party A having the burden of proving X in order to establish his case, if A produces credible evidence in favour of X and B produces none in favour of Y, it is very likely that A will win. B must therefore exert himself if he wishes to avoid defeat. But this does not mean that B ever has the burden of proof. So also here. It may well be that, if the taxpayer companies' version does not correspond with the true facts, it must follow that someone was guilty of fraud. This does not mean that, by traversing the taxpayer companies' case, the Revenue have taken on the burden of proving fraud. Naturally, if they produce no cogent evidence or argument to cast doubt on the taxpayer companies' case, the taxpayer companies will have a greater prospect of success. But this has nothing to do with the burden of proof, which remains on the taxpayer companies because it is they who, on the law as it has stood for many years, are charged with the task of falsifying the assessment. The contention that, by traversing the taxpayer companies' version, the Revenue are implicitly setting out to prove a loss by fraud overlooks the fact that, in order to make good their case, the Revenue need only produce a situation where the commissioners are left in doubt. In the world of fact there may be only two possibilities: innocence or fraud. In the world of proof there are three: proof of one or other possibility and a verdict of not proven. The latter will suffice, so far as the Revenue are concerned.
   Once again there is an analogy with the law of insurance. Where a vessel is insured against perils of the seas, it is for the insured to prove that the loss was fortuitous; and fortuity is understood as involving the absence of wrongful participation in the loss on the part of the insured. Thus an insured claiming for a loss by perils of the seas must prove that he was not privy to the loss. If the court is left in doubt, the claim fails: see the authorities collected in Arnould on Marine Insurance (16th edn, 1981) ¤ ¤ 1357-1358. The position is therefore in sharp contrast to that which exists in the case of an insurance against fire. If the insurer refuses to pay the claim on the ground that the vessel was cast away with the privity of the insured, there will often be no middle ground so far as the facts are concerned. Either there was a loss by perils insured against or there was fraud. The insurer throws down the gauntlet and challenges the insured to disprove fraud. Naturally he must set out to support his imputation with evidence or critical comment because, if there really are only two alternatives, the stronger his attack on the case put forward by the insured, the less likely that case is to succeed. But this does not mean that any burden of proof rests on, or is assumed by, an insurer who chooses to conduct his case in this way. If the insured cannot carry his case far enough to enable the trial judge to conclude that his claim is well founded, it must fail, notwithstanding that the judge is equally unable to make a finding of fraud, as happened, for example, in Astrovlanis Cia Naviera SA v Linard [1972] 2 All ER 647, [1972] 2 QB 611.

1059

   Before leaving this part of the case, I should mention the contention that there is a presumption of innocence which operates in any case where the defendant, by controverting the case put forward by the plaintiff, impliedly suggests that he has been guilty of dishonest conduct. I do not accept this argument. The fact that the possibility of fraud is on one side of the case will of course require the tribunal to take particular care when weighing the evidence, given the seriousness of any finding which puts in question the honesty of a party to a civil suit (see Hornal v Neuberger Products Ltd [1956] 3 All ER 970, [1957] 1 QB 247). At the same time, I cannot accept that this bears on the burden of proof. The burden is material only to the question of which party succeeds if the tribunal is left in doubt. I can see no reason why the rule which entails that the taxpayer should fail in such a situation needs to be completely turned round simply because the alternative version of the facts to that advanced by the taxpayer is one which is explicable only on the ground of dishonesty on his part.
   I therefore conclude without hesitation that the commissioners were in error in stating that it was for the Revenue to prove fraud if the taxpayer companies' claim for an adjustment of the assessments was to be defeated. This does not automatically dispose of the relief to be granted, and I have felt some initial doubts about whether the wording chosen to express the decisions of the majority and minority of the commissioners (if the division of opinion amongst them can properly be described in this way) really disclosed a misunderstanding of the position, rather than an inapt choice of language. I have also felt some hesitation whether the misdirection could safely be taken to have had a sufficient influence or possibility of influence on the outcome of the hearing to make it necessary for the High Court to intervene. After hearing argument, however, I am satisfied that the decision cannot properly be allowed to stand, and that the matter must be remitted for reconsideration.
   I now turn to the second aspect of the appeal, which is concerned with the manner in which the remitted hearing should be conducted and in particular with the question whether the Revenue should now be permitted to lead evidence on the renewed hearing to suggest that, contrary to the original findings of the commissioners, the taxpayer companies or one or more of their officers had defrauded either the taxpayer companies or the Revenue or both. The taxpayer companies submit that the Revenue should not have this right for reasons which may be summarised as follows.
   (1) Except where there is a specific right of appeal under statute, the decisions of the commissioners are final: see s 46(2) of the 1970 Act.
   (2) There is no right of appeal on questions of fact, and no right to ask the commissioners to reopen their findings.
   (3) Thus, if it had not been for the remission, there could have been no question of the commissioners hearing any further evidence of their own motion, or of their being ordered to do so by the court: see R A Bird & Co v IRC (1924) 12 TC 785 at 794 and Murphy (Inspector of Taxes) v Australian Machinery and Investment Co Ltd (1948) 30 TC 244.
   (4) The only remedy available to the Revenue would have been to bring an action claiming an order that the decision of the commissioners should be set aside on the ground that they had been deliberately misled by the taxpayer companies in a material particular: see de Lasala v de Lasala [1979] 2 All ER 1146 at 1155-1156, [1980] AC 546 at 561. Perhaps there might also have been scope for a claim for judicial review.
   (5) On any such proceedings being brought, the burden would be on the Revenue to allege and prove with particularity the fraudulent conduct by which the tribunal was misled: see Jonesco v Beard [1930] AC 298 at 300-301, [1930] All ER Rep 483 at 484.
   (6) In the situation which now exists, the fact that the case will have to go back to the commissioners is immaterial. The remission follows from the conclusion that the commissioners failed to adopt the correct legal approach to the assessment of the evidence brought before them. The appropriate remedy for this error is for the commissioners to reassess on the correct basis the evidence which was before them when they made their mistake of law.

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   (7) It would be wrong, on the hearing of the remitted case, to allow the Revenue to put in fresh evidence, for this would not simply give them the right to reargue the facts on the correct legal foundation, but to start the factual inquiry all over again.
   (8) For the reasons previously stated, such a fresh start could not ordinarily be engaged on without proof of fraud in respect of which the burden of proof would rest on the Revenue. It is not enough simply to set out on affidavit various grounds on which it must be suspected that the taxpayer companies had misled the commissioners. The issue of fraud must be tried out, with oral evidence and cross-examination, before any question of reopening the assessment can arise.
   (9) The procedure for which the Revenue now contend is founded on a remission which has nothing to do with the fresh evidence which they wish to adduce. If it is allowed to proceed, the Revenue will have been able, by swearing an affidavit stating grounds of suspicion, not tested in any way and not the subject of any finding by this or any other court, to outflank that part of the orthodox procedure in respect of which they have the burden of proof. Instead they will have proceeded directly to a rehearing where the burden of proof will be on the taxpayer companies. This is not an appropriate use of the powers to make consequential orders under s 56(6) of the 1970 Act on the decision of a case stated on a question of law.
   I have found this a persuasive argument but there are undeniable difficulties in finding a practical way of putting it into effect. The problem is that the solution which would ordinarily be appropriate, namely that the Revenue should institute proceedings for having the commissioners' order set aside, cannot be followed here, since as soon as the order of this court is drawn up there will no longer be in existence any effective order of the commissioners and hence nothing which any originating proceedings by the Revenue could operate to strike down. For my part, however, I would be sorry to think that the court is forced by the undoubted need to give the Revenue an opportunity to air their new evidence into adopting an expedient which must inevitably involve a conflation into one set of proceedings of a process which ought really to take place in two stages, with the burden on the Revenue at the first stage and on the taxpayer companies at the second. I believe that this court should not take away the advantage which the taxpayer companies would ordinarily have at the first stage, and that this unwarranted prejudice can properly be avoided by refusing to order that the Revenue should have as of right the opportunity to adduce further evidence on the remission, but rather that the new hearing should await the outcome of an action by the Revenue for a declaration that the previous decision was improperly obtained. If the action succeeds, the investigation before the commissioners will of course recommence de novo. But, if it fails, the proceedings will recommence only to the extent required by our decision on the question of law, but to no greater extent, since a decision on the question of law is all that was invited by the stating of a case for the opinion of the High Court. I am very conscious of the cumbersome nature of the suggested procedure, and of the inevitability that much of the same ground will have to be traversed twice by the different tribunals. This must however always be the case when a judgment on the facts is challenged on the ground of deception, and for my part I would not regard it as an excessive price to pay for maintaining the correct shape of the dispute in regard to burden of proof.
   Accordingly, I would dismiss the appeal on the question whether the matter should be remitted, but would propose that the terms of the remission should be modified in the way which I have described.

BALCOMBE LJ. The facts of this case are set out in the judgment of Dillon LJ, which I have had the advantage of reading in draft. There are two issues before us: (1) whether the General Commissioners erred in law by misdirecting themselves as to the burden of proof, and (2) if so, whether the appropriate order was to remit the case to the Special Commissioners for a hearing de novo with fresh evidence.

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The first issue: the burden of proof
   Before the commissioners the taxpayer companies accepted that the burden of proof was on them to show that the assessments under appeal were not justified. That is because of the decision of this court in T Haythornthwaite & Sons Ltd v Kelly (Inspector of Taxes) (1927) 11 TC 657. The commissioners so directed themselves, and they also correctly identified the real issue before them as being ([1987] 2 All ER 674 at 678):

However, they were led into error by the submissions on behalf of the taxpayer companies that, once the taxpayer companies had led evidence to show that no part of the money had reached them, this inevitably led to an allegation of fraud on the part of Mr Chapman (and, possibly, others), and that the burden of proof then shifted to the Revenue to prove such fraud. Although the commissioners reached their conclusions by different routes, they all fell into this error.
   In my judgment the burden of proof remained on the taxpayer companies throughout. This was accepted by the taxpayer companies before the Vice-Chancellor and was not seriously contested before us. The main thrust of the argument of counsel for the taxpayer companies before us was that, even if there had been a technical misdirection of themselves by the commissioners, and that only the evidential burden had shifted to the Revenue, the Revenue had not (in the words of the Vice-Chancellor) shown-

(See [1987] 2 All ER 674 at 687.)
   The evidence was all one way, submitted counsel for the taxpayer companies, and, even if the commissioners had correctly directed themselves, they must necessarily have come to the same conclusion as they did.
   I cannot accept this submission. The evidence was not all one way. No valid explanation had ever been given for the payment of $9á15m to GPD for minimal services. The sub-contract apparently provided no profit element for the taxpayer companies. No attempt was made to identify what was the nature of the fraud which caused the burden of proof to shift. Thus, to consider only one possible situation, if the moneys truly belonged to the taxpayer companies, their fraudulent diversion by Mr Chapman and Mr Bushell could not of itself mean that the moneys were not taxable in the hands of the taxpayer companies.
   If the commissioners had properly directed themselves, it is possible that they would have reached the same conclusion. It is also possible that they would have said that they remained in a state of uncertainty and unable to answer the question which they had identified as being the real issue before them. In the latter case the taxpayer companies would not have discharged the onus of proof which remained with them throughout, and the assessments should not be discharged. In my judgment the Vice-Chancellor was correct in his decision on this issue.

The second issue: the remitter with fresh evidence
   As a result of the error of law made by the commissioners, it will in any event be necessary for the case to be remitted. Thus this case is wholly different from those of Jonesco v Beard [1930] AC 298, [1930] All ER Rep 483 and de Lasala v de Lasala [1979] 2 All ER 1146, [1980] AC 546, on which counsel for the taxpayer companies sought to rely. There is no need to bring an action to set aside the decision by the commissioners, even if it be the case that the decision was obtained by improper conduct on the part of1062 Mr Bushell. The real question is: accepting that a remitter is in any event necessary, should the case be remitted with or without a direction as to the admissibility of the further evidence relating to the payments into the Swiss bank accounts in the names of Mr Chapman and Mr Bushell? Ordinarily such further evidence would not be admissible: see Yuill v Wilson (Inspector of Taxes) [1980] 3 All ER 7, [1980] 1 WLR 910. However, there may be special circumstances when a case can be remitted and fresh evidence adduced: see per Pennycuick J in Bradshaw v Blunden (Inspector of Taxes) (No 2) (1960) 39 TC 73 at 80, cited with approval in Yuill v Wilson (Inspector of Taxes) [1980] 3 All ER 7 at 16, [1980] 1 WLR 910 at 921. In my judgment there are here such special circumstances.
   If on a remitter the commissioners are not entitled to receive any further evidence, it is possible that on a proper direction as to the law they will decide that the taxpayer companies have not discharged the burden of proof, and that the assessments must stand. Then cadit quaestio. But, if they then decide that the assessments should be discharged, it is almost certain that the Revenue will then bring an action to have the decision set aside as having been improperly obtained, since the almost irresistible inference from the uncontradicted evidence of the payments into Mr Chapman's and Mr Bushell's Swiss accounts, bearing in mind that Mr Bushell is also one of Mr Chapman's executors, is that Mr Bushell knew of these payments and deliberately failed to disclose them. So there will then have to be further proceedings to set aside the decision for a second time, and assuming that those proceedings are successful, as it seems in the highest degree probable that they would be, a yet further hearing de novo before the commissioners at which this highly material evidence will be admitted. Such a multiplicity of proceedings cannot be sensible, and, if that is what the law requires, then the law must be in a sorry state. I am glad to be able to say that in my judgment the law does not require such a roundabout course to be taken. Section 56(6) of the Taxes Management Act 1970 empowers the court which hears an appeal by way of case stated to remit the matter to the commissioners or to 'make such other order in relation to the matter as to the Court may seem fit'. This clearly gives the court the power to make the order for remitter with further evidence. In my judgment, applying by analogy the principles of Meek v Fleming [1961] 3 All ER 148, [1961] 2 QB 366, there are here special circumstances which enable, indeed require, the court to direct that when the case is remitted it should be with a direction to admit the further evidence which is now available, and which would have been previously available but for the actions of Mr Bushell.
   In my judgment the Vice-Chancellor was right on both issues and this appeal should be dismissed.

Solicitors: Gouldens (for the taxpayer companies); Solicitor of Inland Revenue.