“In HMRC’s view, a sensible way to progress this matter would be with an amended and pared down case. With this in mind, we have prepared the attached draft amended statement of case for your consideration.”
“HMRC maintain their argument that the appellant has not shown that it was acting as agent under the relevant governing law of the contracts (and therefore has not shown that it was acting solely as intermediary) with respect to transactions involving one or more of the following features. As noted above, in relation to the circumstances set out below, HMRC reserve the right to rely on the matters listed in the previous section. a) The absence of contractual documentation containing terms and conditions and/or any terms and conditions stating that the appellant is appointed as agent, whether such documentation is missing/incomplete or unsigned (see Further Information paragraph 23). b) Written agreements governed by foreign law as well as or instead of English law (see Further Information paragraph 26). c) Agreements that are only “rate sheets” and do not refer to the terms and conditions between the parties (see Further Information paragraph 23). d) Agreements where the “rate sheets” do refer to terms and conditions but do not expressly identify the terms and conditions (see Further Information paragraph 23).” 32. The matters which HMRC said they were no longer relying on were various factual matters and contractual terms that, in their view as set out in their original statement of case, demonstrated that the appellant was not acting as a disclosed agent under English law principles. 33. On16 January 2017 the appellant responded to HMRC stating that they appeared to be to conceding that the appellant was, as a matter of English law, acting as a disclosed agent subject only to the matters specified above. The appellant asked HMRC to file and serve a single revised statement of case as soon as possible. The appellant rejected HMRC’s suggestion that the parties should agree an agreed statement of facts and suggested that HMRC should agree with the witness statement of the appellant’s witness, Mr Shuker, or specifically identify those paragraphs of the statement that were not agreed. The appellant made a number of points on the issues above including that they were prepared to accept that the issue of whether the contracts relied on by appellant are governed by foreign law as well as or, instead of, English law was an issue which should properly be determined by the tribunal. 34. In their reply of23 January 2017 HMRC noted the appellant’s comments on the revised statement of case and confirmed that HMRC would file their amended statement of case with the tribunal very shortly which they did that day. At the hearing HMRC said that they understood the request for the amended statement of case to be filed as soon as possible to mean that the appellant agreed with the way forward of filing the amended statement of case. 35. On30 January 2017 the appellant filed and served its skeleton argument, which included arguments on parts of HMRC’s case that HMRC said in the amended statement of case they were no longer pursuing. On the same day the appellant wrote to the tribunal requesting that HMRC provide a further single revised statement of case. 36. On31 January 2017 the tribunal wrote to the parties confirming that the tribunal had approved the amended statement of case noting that the tribunal understood the appellant had no objection (having not had sight at that point of the appellant’s objection). On the same day the appellant wrote to the tribunal setting out its objections. 37. HMRC said that their position, as confirmed in a letter to the tribunal on3 February 2017 , was that there was no need to provide a further statement of case. The appellant was insisting on undue and needless formality. HMRC had confirmed in open correspondence that it no longer relied on a number of issues between the parties. On7 February 2017 the appellant wrote to the tribunal maintaining its objections and in addition applying for the amended statement of case to be struck out. 38. HMRC asserted that the appellant has been aware of the points HMRC intends to pursue for a long time, noting the following: (1) On5 March 2015 HMRC requested further information from the appellant including as regards whether the contracts relied on by the appellant were in writing, signed and retained by the appellant. On21 October 2015 the appellant responded to the request and acknowledged that some contracts were not signed. (2) In February 2016 HMRC provided further information (the “further information”) to clarify their case which included noting the following: “ Before turning to the differences in contractual terms, it is worth noting that a significant number of the contracts provided to the Revenue by way of sampling process are in fact either unsigned or are rate sheets that do not refer at all to terms and conditions. Even those which do refer to terms and conditions do not expressly identify these as being those of the appellant. It will be a matter of evidence which contracts in fact governed how many of the supplies and which were agreed to be the applicable terms and conditions. This is in contrast to the position in Secret Hotels2 where the parties were agreed that the two contracts considered in that case were the applicable contracts. The further contrast with Secret Hotels2 is that a number of the contracts supplied by the appellant appear to be governed by both English law and the law of the place where the relevant accommodation is situated.” 39. HMRC asserted that they took the decision to narrow their case reasonably and entirely consistently with the overriding objective governing the Rules. HMRC said this was not intended to a replacement for HMRC’s statement of case and further information, it was simply intended to clarify their position so that the appellant was entirely clear about the points that were and were not maintained by HMRC. HMRC said the application for the amended statement of case to be struck out was surprising given the appellant’s position is that the amended statement of case has not been accepted and given that Rule 8 of the Rules does not give the tribunal any power to strike out a statement of case on the basis it prejudices the other side. 40. HMRC noted that the appellant has been aware of HMRC’s case since it received the further information in February 2016 as set out above (and HMRC raised the issue in relation to the unsigned contracts as early as March 2015) and has known precisely what arguments HMRC still relies on since9 January 2017 . The appellant’s witness evidence was not produced until June 2016 so it had every opportunity to deal with the points made by HMRC in the further information in its witness evidence and, indeed, it purported to do so. Further, its skeleton argument produced on30 January 2017 responds to and deals with the arguments in the further information. So there cannot be any suggestion that the appellant was acting on the basis that it did not think matters set out in the further information were at issue. At no stage has the appellant suggested that it was prejudiced by having to respond to the matters set out in HMRC’s further information. There is no such prejudice to the appellant. 41. HMRC noted that the tribunal has already accepted the amended statement of case and submitted that the decision should not be reviewed or the original decision should merely be confirmed. 42. The appellant responded that it is not a mere formality for HMRC to state their case. The taxpayer is entitled to know the case which it is expected to meet, and in particular, to know the extent of the burden of proof that it is required to discharge. In order to introduce these new arguments HMRC must amend its statement of case; this is not something to be dealt with piecemeal in correspondence leaving the appellant and the tribunal to work out what HMRC’s case is. The appellant emphasised that HMRC was seeking to introduce new argument at this late stage; it was quite clear HMRC had abandoned its original case. 43. The appellant noted that whether or not HMRC should be allowed to amend its case is ultimately a matter for the tribunal’s discretion (under Rule 5(3)(c) of the Rules). The appellant asserted that there are a number of important principles the tribunal should have in mind in exercising that discretion, as established in case law in the context of the Civil Procedure Rules, which contains a similar overriding objective to that in the Rules, of dealing with cases fairly and justly. The appellant referred to CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd and others (No 3)[2015] EWHC 1345 (TCC) and, in particular, the following summary at [19]: “In summary, therefore, I consider that the right approach to amendments is as follows: (a) The lateness by which an amendment is produced is a relative concept…. An amendment is late if it could have been advanced earlier, or involves the duplication of cost and effort, or if it requires the resitting party to revisit any of the significant steps in the litigation… which have been completed by the time of the amendment. (b) An amendment can be regarded as “very late” if permission to amend threatens the trial date…, even if the application is made some months before the trial is due to start. Parties have a legitimate expectation that trial dates will be met and not adjourned without good reason… (c) The history of the amendment, together with an explanation for its lateness, is a matter for the amending party and is an important factor in the necessary balancing exercise…. In essence, there must be a good reason for the delay… (d) The particularity and/or clarity of a proposed amendment then has to be considered because different considerations may well apply to amendments which are not tightly drawn or focused… (e) The prejudice to the resisting parties if the amendments are allowed will incorporate, at one end of the spectrum, the simple fact of being mucked around…, to the disruption of and additional pressure on their lawyers in the run-up to trial…., and the duplication of cost and effort… at the other. If allowing the amendments would necessitate the adjournment of the trial, that may be an overwhelming reason to refuse the amendments… (f) Prejudice to the amending party if the amendments are not allowed will, obviously, include its inability to advance its amended case, but that is just one factor to be considered…. Moreover, if that prejudice has come about by the amending party’s own conduct, then it is a much less important element of the balancing exercise….” 44. The appellant made the following points applying the above principles: (1) The amendment is plainly late. It was prompted by the judgment of the Supreme Court in Secret Hotels2 , which made HMRC’s original pleaded case untenable, and the tribunal’s decision in the Hotels4u.com Ltd v The Commissioners for Revenue and Customs[2016] UKFTT 718 (TC) , where HMRC’s attempts to re-argue the points that they had argued in Secret Hotels2 were unsuccessful. These decisions were released in March 2014 and October 2016 respectively. On any view, it would have been obvious to HMRC that their case, as originally pleaded, had no prospect of success, and, if they were to continue to maintain their defence, they needed to amend the basis of their challenge. (2) HMRC has offered no real explanation for the lateness of the application. (3) The amended pleading is entirely lacking in terms of clarity and particularity. It appears HMRC are trying to dress up the amendments as an attempt to narrow the issues, when in reality it is a completely new case. They refer to four points only but reserve their position on points previously raised. It is impossible to see how the previous points concerning the contractual terms can be relevant to HMRC’s new case, namely, that the agreed contractual terms are inapplicable because the contracts either do not exist or the contracts are governed by foreign law. The other factors concern invoicing arrangements and Eighth Directive claims are again are not relevant to the new case. It is obvious from HMRC’s skeleton argument that they are not relying on these factors at all. (4) There is clear prejudice to the appellant as HRMC’s position now is that the appellant bears the burden of proof. Their case is that it is for the appellant to show that the contracts applied and the nature of the applicable foreign law. The appellant’s view is that HMRC are wrong about the evidential burden but that does not detract from the fact that the appellant should not be subject to an entirely new burden of proof issue at this stage. (5) There is no prejudice to HMRC in striking out the statement of case. The effect will be that HMRC will essentially have to concede the position as a matter of domestic law on the basis that their argument is untenable now in light of Secret Hotels2 and Hotels4u.com . That is not any great hardship, because it was open to HMRC to amend at a much earlier point if it regarded this as a key cornerstone of its remaining case. In truth, the battle has already been lost for HMRC as far as the domestic law position is concerned. Their real challenge is in relation to article 306 as regards their application to get a reference to CJEU. 45. The appellant asserted that HMRC had not in fact flagged up these points in the further information provided in March 2016. (1) The reference to the points about whether the contracts were signed was raised merely as an evidential point; they were not raised as forming part of HMRC’s case. Mr Shuker’s witness statement addressed this very point and the appellant was perfectly entitled to assume that, upon receipt of Mr Shuker’s witness statement in June 2016, HMRC no longer held any concerns on these matters or that, if they did, they would have amended their statement of case. (2) As regards the statement about governing law, HMRC did not say that the burden of proof was on the appellant to show that foreign law produces the same result as English law. (3) HMRC did raise points they acknowledged would require an amendment to the statement of case but these related to different matters relating to differences in the contractual terms compared with Secret Hotels2 and the making by the appellant of Eighth Directive claims. 46. The appellant concluded by emphasising the prejudice to the appellant if HMRC is permitted to amend their statement of case at this stage (having known they would need to do so if they wanted to change the basis of their position) by introducing new issues in the guise of attempting to narrow the issues. The appellant noted that these appeals are over six years old. They were stayed pending the decision in Secret Hotels2 on the basis that the parties understood that the matter would be dispensed with by Secret Hotels2 , so similar were the facts. HMRC’s pleaded case is now untenable. The appropriate course of action is for HMRC to concede the relevant issues so that the tribunal can focus on the real issues, which is to find the necessary facts, and then for HMRC to make their application for a reference to the CJEU. 47. HMRC replied that: (1) The amendments to the case were not sought as a result of the Secret Hotels2 litigation. In fact it was in light of the tribunal’s decision in Hotels4u.com that HMRC decided to narrow its case (as stated in the amended document). HMRC reiterated that the arguments now being pursued were raised in February 2016. (2) There is no prejudice to the appellant as shown by the fact that the appellant has not applied for an adjournment. As noted issues regarding unsigned and incomplete contractual documentation were dealt with in Mr Shuker’s witness statement and in the appellant’s skeleton argument. The foreign law argument was noted in the further information and the appellant also dealt with the foreign law point in the skeleton argument and, as set out above, accepted on30 January 2017 that that point was to be determined by the tribunal. Moreover it is clear from their comments in that letter that they were aware of the issue of the burden of proof. HMRC does not have to plead in its statement of case where the evidential burden of proof falls. (3) It cannot simply be assumed that Mr Shuker’s evidence was not in dispute. If the appellant genuinely believed that all of his witness evidence was agreed and not in dispute, then there would be no reason to bring him to give evidence (noting he was called under a witness summons). HMRC do not consider the appellant assumed the evidence was agreed but, in any event, there was no reasonable basis for the making of such an assumption. Conclusion on amended statement of case 48. Overall we considered that it was in the interests of justice and fairness for HMRC’s to be permitted to refine their case by reference to the amended statement of case. 49. We note that HMRC were to some extent seeking to narrow their case rather than to expand it, which was evidently in the appellant’s favour. In that context, we cannot see any basis for refusing to allow the voluntary withdrawal of the relevant points, however late that may occur in proceedings. 50. The amended statement of case was not drafted helpfully in that, as the appellant noted, HMRC referred to reserving the right to rely on the matters listed but they related to aspects of the case that were being dropped. We queried this with HMRC at the hearing and they clarified that they were not relying on these matters in relation to their English law case and any reservation was only intended in relation to their CJEU referral case. Our view was that the amended statement of case should be admitted, therefore, subject to the deletion of the relevant wording. We do not consider that any confusion created, however, was sufficient to prevent the appellant taking on board HMRC’s other points. Clearly the appellant did take the points on board as they were covered in the appellant’s skeleton argument 51. The appellant argued that HMRC was taking a new position in asserting that the burden of proof was on the appellant as regards the applicability of the relevant contracts and foreign law. 52. It did not appear to be disputed that, as is usual in tax cases, the burden was on the appellant to prove its case to the required standard (although, as set out below, the appellant argued that it had provided a sufficient case such that the evidential burden shifted to HMRC in certain respects). An essential part of the evidence put forward by the appellant to discharge that burden is the documentary evidence. It is an inherent part of the proceedings that evidence put forward by one party may well be challenged by the other party. It is not necessary for a party to be able to make such a challenge for it specifically to plead that it intends to do so. 53. In any event, the appellant was clearly put on notice that it was HMRC’s intention to challenge the quality of the documentary evidence when HMRC provided further information in February 2016. We cannot see any basis for the appellant simply assuming that HMRC agreed to Mr Shuker’s comments on the documentary evidence in his witness statement which was produced in June 2016. Again it is an accepted and usual part of the proceedings for a party to have the opportunity to challenge witness evidence by cross examining the other party’s witnesses. 54. As regards the foreign law issue, we note that HMRC’s original statement of case was predicated on the basis that English law principles were in point as regards the interpretation of the relevant contractual arrangements. This case was stayed behind Secret Hotels2 , a case which was to be decided on English law agency principles. HMRC noted in the further information that a further distinction, in their view, between this case and that in Secret Hotels2 is that a number of the contracts supplied by the appellant were stated to be governed by both English law and foreign law. They did not draw any conclusion on their stance on that issue and, it appears, they did not make any further point on this until they produced the revised statement of case on9 January 2017 . Until that time, therefore, the significance and extent of HMRC’s argument on the foreign law point was not clear given, in particular, that their case remained predicated on the basis that English law principles were applicable. We accept, therefore, that HMRC were late in raising this point in an express and clear way. 55. At the hearing the appellant argued that it was prejudiced by HMRC raising this point at this stage because, whilst its case was that the burden of proof as regards foreign law was on HMRC, the appellant would not have had time to ascertain what any applicable foreign law position was. We note, however, that following receipt of the revised statement of case, the appellant agreed in correspondence with HMRC that the foreign law issue should be dealt with by the tribunal. That indicated they saw no difficulty with dealing with that point in the available time prior to the hearing. It appears that the appellant did not intend to deal with the foreign law point by obtaining views on the construction of the documents under foreign law, whether time permitted or not. On that basis any prejudice is theoretical only. We do not consider that a sufficient basis to prevent the issue being raised and dealt with by the tribunal given that it is clear from Secret Hotels2 that the relevant contracts must be construed according to the proper law of the contract (as set out below). Evidence 56. We have based our findings on the material in the bundles produced to the tribunal and the witness evidence of Mr Jamie Paul Shuker who attended the hearing to give evidence on behalf of the appellant. 57. Mr Shuker confirmed that he worked for the appellant for a long period of time and left the company in September 2014 on a formal basis. He explained that, as there was a quite a bit of change in personnel and staff at the appellant, it was felt he was best positioned to submit a witness statement, having had such a long tenure at the company. In terms of the method of preparing the witness statement, the appellant’s legal team helped collate some information. They sat down with him for a number of question and answer sessions and produced a number of drafts of the witness statement and eventually it was one that “I felt was representative of the truth, and that was the witness statement that was submitted to the court”
“But clearly it’s written in some legalese. I’m not a lawyer, so I couldn’t say that I had written this witness statement and these are purely my own words, no.” 58. He confirmed he became a managing director of the appellant’s business in April 2010 and held that position for eight months of the period in question, from1 January 2006 to31 December 2010 . For the remainder of the period he was marketing director or IT director. He confirmed that during that time he was not in day-to-day control of the section of the business which dealt with concluding contracts but had an awareness of how it worked. Even when he was managing director he personally would not have signed a contract with an hotelier and probably he would not have read individual agreements in a great deal of detail. But he was aware of the issues, in particular, from the tax enquiries and had “a reasonable understanding of what the issues at stake were”
“I may offer an opinion on it in a board meeting or we may chat about it informally in an office, but I wouldn't have put pen to paper on behalf of the company.” 59. He agreed that the relevant purchasing director would be better placed than him to speak to the details of individual contracts. He said that if he was shown an individual contract then possibly it would not be that helpful but he questioned whether, with the passage of time, anyone’s recollection would actually be that helpful as regards that level of detail. He said that as regards the “process of signing contracts of the company’s overall position in agency/principal, I would have a general understanding”. 60. HMRC seemed to suggest that we should draw an adverse inference from the fact that the appellant did not call other witnesses who may have been more closely involved in the contract negotiation and signing process. They noted that Mr Shuker was, with the exception of the eight month period referred to above, responsible for marketing or IT. He did not have responsibility for negotiating and signing these contracts. They asserted he was simply unable to provide the detail needed to work out what was being agreed. However, we found Mr Shuker to be a credible witness who was clear as to what he could and could not say from his own knowledge as regards the operation of the appellant’s business. We have accepted his evidence as set out below except where expressly stated otherwise. Facts Nature of the business – overview 61. The appellant is a travel agent based in the UK specialising in the marketing and supply of low cost flights and holiday accommodation to UK travellers principally through its website. The appellant’s target market is leisure travellers. At the relevant time round 95% of bookings made through the website were made by private individuals and the remainder through other travel agents acting as agents for UK individuals. 62. When it was first incorporated the appellant operated as a principal in purchasing EU accommodation for resale to UK consumers. It accounted for VAT on sales made on that basis under TOMS. In late 2005 the appellant decided to move to a business model where it acted as agent of the EU accommodation providers (the “ provider ”). A significant driver for this change was the opportunity to reduce risk exposure. For example it understood that if it acted as a disclosed agent it would not primarily be liable for health and safety issues at the accommodation which would bring a saving to the premium payable by the appellant for its associated liability insurance policy. Also a result of the lower risk profile of operators using the agency model is that costs of BTA and CAA membership and requirements were reduced, as, for a time, were the regulatory fees payable to the CAA. 63. The appellant was also aware from its advisers that a number of operators within the industry had changed to an agency model and that, in doing so, they did not have to account for VAT in respect of supplies of EU accommodation. The appellant did not want to be uncompetitive although it was not able to predict how great any VAT saving would be in practice (as the EU suppliers might pass on the additional VAT burden through an increase in the net room rate and the frequent changes in rate made such an analysis unlikely to be accurate). 64. Mr Shuker explained that at the same time the appellant’s business evolved from one where initially it dealt with a few wholesalers only to one where it dealt with individual hotels directly. This was because it perceived it could obtain a more advantageous price by dealing with providers directly. So the appellant selected its better-selling hotels and approached them directly. 65. The appellant implemented the change in its business model by changing its contractual arrangements with the providers and with travellers. Mr Shuker said in his witness statement that, with the exception of a very small number of providers, the appellant was only prepared to offer accommodation to UK consumers through the website on the basis that it was engaged by the provider as a disclosed agent. He noted that almost all of the providers were agreeable to contracting with the appellant on that basis. 66. The appellant wrote to HMRC on6 February 2006 seeking confirmation that following its restructuring it would be treated as an agent for VAT purposes. On24 February 2006 HMRC responded stating that it considered the appellant to be acting as an agent on the basis of the documentation provided. On27 October 2010 HMRC wrote to the appellant stating that it had been acting as principal and therefore was liable to UK VAT on the relevant supplies. On23 December 2010 HRMC issued an assessment for under declared VAT in respect of the accounting period ending 12/06. Further VAT assessments were received by the appellant for annual VAT accounting periods ending 12/07 to 12/10 inclusive. 67. Mr Shuker stated in his witness statement that every supply of EU accommodation facilitated by the appellant was governed by the written terms agreed between the appellant and the provider, essentially being those set out in the examples in the bundles (the “ standard provider terms ”), and the booking terms and conditions displayed on the website (the “ website terms ”). All of those terms refer to the appellant acting as agent. He said that, except where indicated otherwise in his statement, those written terms accurately reflected the appellant’s relationships with the parties and its business practices throughout the relevant period. We have commented further on the applicability of the standard provider terms in the discussion section below. 68. He noted, however, that the appellant reluctantly agreed to act as principal in its arrangements with eight wholesalers on the basis that there was a perceived commercial advantage in having access to the large volume of accommodation owned or accessible by those particular providers, who were major established wholesalers. It was thought that increasing the volume and variety of EU properties offered on the website would increase the volume of visitors to the site resulting in an increase in the volume of agency sales. As a result of an oversight the appellant failed to produce separate booking terms and conditions to govern these relationships. So even in cases where the appellant accepts it was acting as principal it did so on the standard provider terms. As it accepted that it was acting as principal, it accounted for VAT on relevant supplies under TOMS. The advertised price for the relevant accommodation included the UK VAT that the appellant was liable for. These supplies comprised a small proportion (0.12%) of the appellant’s total sales of EU accommodation during the relevant period. 69. Mr Shuker confirmed that this was the case at the hearing; the appellant used the same standard booking conditions as when it claimed it was acting as agent. He said “we accept that was an oversight” and “it wasn’t correct”
“unless it was an extremely large hotel group or….frequently US companies would always want [the appellant] to be the principal, largely for health and safety and litigation reasons. But most of the time, I’d say nearly all of the time, the [standard provider terms] were accepted and all of the [the appellant’s] competitors were contracting with agency terms and conditions too”. 78. He said in his witness statement that the position was different with wholesalers, whose greater market position meant that the appellant could not always insist on the use of its standard terms, and it might have to adopt specific terms required by them. Any such terms did not typically result in a material departure from the standard terms but instead included specific non-standard processes for matters such as the remittance of funds and cancellation fees. The decision as to what terms were acceptable varied according to the value the appellant placed on securing the contract with the particular wholesaler. Applicability of contracts/contractual terms 79. As noted, it was a key part of HMRC’s case that the appellant had not proven on the balance of probabilities that contracts with providers were made on an agency basis given a number of the agreements in the bundles were unsigned and/or comprised front sheets with no actual terms or conditions attached. Mr Shuker was cross-examined on the applicable provider terms at some length. 80. He was asked how he could be sure that version two of the standard provider terms was the final version and not a draft as it stated at the top of the first page: “NB: There will be a front page. Once below wording is approved we’ll put it all together. The front page is the same as on the other contract attached in email.”
“Hoteles Benidorm SA is a small hotel group, and there might be rates for six hotels with the same terms and conditions. There would have been six front sheets or seven front sheets, plus standard agency terms and conditions. That’s speculation. Again, I think, the - you know, the documentary archive at Alpha may confirm that”. 86. He clarified in re-examination that this hotel may have owned six hotels or apartments and the appellant “may have signed effectively six rate sheets with the revenue manager at that particular hotel group in one visit to that particular hotel group, so it would have then been six rate sheets and then the terms and conditions.”
“ I don’t know if these are perhaps pre-printed contracts where we’ve got the standard terms and conditions that we’ve seen on three pages, I think. I don’t know if these originally came from perhaps a pre-printed sheet or something like that that had the terms and conditions on the two pages instead”. 92. He was shown a front sheet which was not that of the appellant and it was put to him that in that case it could be assumed that it would not have been the appellant’s standard provider terms attached. He said: “I’m not sure that’s a fair assumption, really. I probably think in the absence of anything else it is difficult to say, but the contractor might sign that rate sheet for expediency, or the hotelier might have just given him it. So it’s hard to say I think.” 93. It was put to him that it could not be safely assumed that version three or indeed any version of the standard provider conditions applied to these transactions. He said “in the absence of any other information, no. On the balance of probabilities, I would say it would, but there’s no documentary evidence to support that.” 94. He also put forward as an explanation for the fact that a front sheet had no reference to the number of pages that “someone could have scanned it and it might not have said the page numbers. It’s a different copy of a front sheet”
“ I’m not sure there were any other terms and conditions. I think the hotel just sent us the prices….We had a standard agency agreement imposed with Hotetur, so that would have been one of the standard agency agreements. But I don’t think there was a separate set of terms and conditions to vary that. The hotelier ….wouldn’t have been particularly bothered about that. So they would just want - they were more interested in financial commitment from the rooms”. 96. It was put to him that, to summarise, it follows from the particular rate sheets that he had been taken through that it is not the case that, as he suggested in his witness statements, that all of the agreements that the appellant entered into with hoteliers were governed by one of the three versions of the standard provider terms. He said: “I don’t feel as if anything you’ve put forward completely invalidates that statement. So there’s clearly a contract format where there are only two pages of the terms and conditions. But I don’t think that necessarily disproves the fact that there wasn’t one of those sets of terms and conditions. And then there are some contracts with more pages in, but we don’t really know without looking at the information in more detail if there were more pages in there because there were more room rates, because there were more hotels in that particular group or because it was a different set of standard terms and conditions.” 97. It was put to him that it was not correct to suggest that the content of the provider terms accurately reflected the relationship between the appellant and the providers and the appellant’s business practice throughout the relevant periods, due to the absence of actual terms attached to the front sheets such that in many cases it was wholly unclear what terms applied, in particular, as so many front sheets refer to being one of three pages. He replied that to the best of his knowledge there were no other terms and he did not think it could be assumed that different terms applied due to the different number of pages attached in some cases; there was merely a different format: “I think I agree that there’s perhaps a lack of support maybe to that argument that there’s - those were the three sets of terms and conditions. Probably what I perhaps disagree about is that there was some hidden or extra set of terms and conditions or some variance of the terms and conditions that the court or I haven’t necessarily seen. So to the best of my knowledge, I don’t think there were any other sets of terms and conditions. I think what you’ve put to me shows that there may be a different format of them. You know, I don’t think it is beyond the realms of possibility perhaps that there’s a slightly different iteration of them for those – for sets of contracts that you showed me at the front where it was one of three. But what I would probably take issue with is the fact that because there’s a different number of pages in some of those faxes that, therefore, there was a different set of terms and conditions. I’m not sure that we can go from one to the other. I think we could say that the documentation is unclear, perhaps inconclusive, and I would agree with that, but I don’t think you can automatically infer there’s another set of terms and conditions, let alone another set of non-agency terms and conditions.” 98. He later said, on being asked a similar question, that: “to the best of my knowledge there were no other terms and conditions that were standard and above the three or that we haven’t highlighted as specific variances or different contracts, really. So I appreciate the documentary record isn’t - is a long distance from being perfect, and we can’t disprove that there were further terms and conditions, but all I can say is to the best of my knowledge I don’t think there were any.” 99. In re-examination, he said that he thought that the most likely explanation for the rate sheet which stated it was one of five pages was that that the provider probably did own more than one property. As regards rate sheets referring to one of three pages, he was taken to an agreement with JM Hoteles, and it was noted that the terms and conditions, which in that case were included with that contract, were similar to the standard provider terms. So it appeared to be a slightly different iteration, as he had described. The position was similar as regards a contract with Edrichton and D’Or hotels. He said it “does appear to be in general that the pages one of three copies of the contracts indicate a separate iteration of the terms and conditions, but presumably they are a kind of change we made to the form or something like that”. 100. It was noted to Mr Shuker that the earliest of the rate sheets which stated it was one of four pages was dated15 July 2008 and most of them were dated 2009/2010. The latest of the rate sheets which stated it was one of three pages was dated18 November 2008 , and most of those versions were dated 2007. Mr Shuker said that in the period when the three page version was in use the appellant had another company in the group called Vacenza.com, a wholly-owned subsidiary of the appellant, and the Vacenza logo is on the actual contract, and: “it would have been possibly an indication to the hotelier that the contracted rate would appear on both websites, effectively……and then there’s an absence of the Vicenza logo on the later contracts, the one of four contracts, so that could be the reason for the difference. But, again, without revisiting every contract and personally looking at it, I couldn’t say with 100 per cent accuracy, but that’s perhaps a reasonable explanation for the difference.”
“ I think in general, yes, to the best of my knowledge we would have aimed for a signed document. Having said that……at the time when a lot of these arrangements were put in place, you know, the fact is that in terms of how the company was run probably a signature wasn’t seen as being crucial if a hotelier sent us the rates.” 103. He was asked if hotels did not sign, he would have expected them to have informed the appellant in another way that agreed to the terms. He said he would at least have expected a disagreement: “ So I think if the hotelier or the accommodation provider disagreed with the terms and conditions as they stood, they would have proposed alternatives or fundamentally not traded with us. I think by the fact they traded with us there was a tacit acceptance of some basis to the relationship in place……Yes, because we couldn’t do business, I don’t think, if it was absolute silence. I think if they rejected the terms and conditions, the relationship wouldn’t have continued, I guess.” 104. He agreed he would have expected an agreement to be signed and added: “The other scenario that perhaps may have happened, just to complicate things further, is that the rates here in the front sheet was ultimately loaded on to an electronic system and the hotelier or the accommodation provider would vary the rates throughout the year, depending on how full the hotel was, and it may have been the case that that particular hotelier was set up on that system and ….. it would be quite easy for us to make a data entry mistake when we were copying the numbers in - into the system, and perhaps it was the case that the contractor in this instance loaded the rates in and then the hotelier effectively accepted the rates and the terms and conditions when they logged in to check the system. So it is kind of another scenario that I can offer as to why it perhaps wasn’t signed.” 105. He was asked if this meant there was a whole subset of data that had not been disclosed. He said “Yes….I think because it is maybe an old system I wouldn’t even know if [the appellant] had access to it”. 106. On the particular unsigned contract he was shown he noted that the provider, the Ambassador, was one of the appellant’s best-selling hotels. It would have been in the top four of five hotel sales every year but he did not know if the appellant could produce contemporaneous records to say these were the terms and conditions signed. He thought, however, that this agreement definitely was in place because “it’s a very notable, popular hotel and it would have sold an awful lot”
“So, again, there would have definitely been some kind of trading relationship there” although he could not say precisely what that was. He commented similarly on another unsigned agreement with a set of apartments that this was perhaps the “best seller in that particular year, and the company or group had maybe five or six hotels. So it might have been the case that they were under one set of terms and conditions rather than terms and conditions with every single rate sheet”. 107. It was put to him that in his witness statement he suggested that the standard terms and conditions would be attached to every front sheet but he seemed to be saying that in relation to some providers there would just be one contract. He said: “It’s a possibility. I can’t really remember - well, yeah, not in 2008, no, about one contract.”
“The only assumption I can make about it really is if they wanted to litigate against us, they would do in the Switzerland, and if we wanted to litigate against them we would do it in the UK. But I wouldn’t think there – there’s not a Swiss part to it nor an English part to it, I assume. I can only think in the negotiations Sun Hotels says, I don't know, “Can we have Swiss?”
“I think it is the same answer as previously, my recollection was it wasn’t intended that any particular clauses were governed by one jurisdiction over and above a different jurisdiction. I think the clause was such as it was to, you know, just what both parties agreed”
“ In accordance with this agreement the Principal hereby appoints the Agent as its selling agent [or in version three, non-exclusive selling agent] and the Agent agrees to act as such. The Agent undertakes to deal accurately with the requests for bookings and relay all monies which it receives from the Principal’s clients, which are due to the Principals under the terms of this agreement, but shall have no further commitment to the Principal under this agreement.”
“In no way should the allocation offered by construed as commitment or guaranteed rooms”
“This agreement shall be constructed in accordance with and jointly governed by English and Supplier Host Nation law, and the parties hereby submit to the exclusive jurisdiction of the competent courts of England and Supplier Host Nation.”
“A cooling off period of 48 hours will apply to accommodation bookings made more than 72 hours in advance of the arrival date. Cancellations notified directly to the accommodation will not be effective. All cancellations or amendments must be made directly to [the appellant.]”
“The accommodation providers reserve the right to change your accommodation to an alternative of the same or superior standard within the same resort. Occasionally the accommodation providers may have to offer alternative accommodation of a lower standard or in a different resort…in these circumstances compensation may be offered to you by the accommodation providers. When accommodation providers are unable to confirm a suitable alternative, we reserve the right to cancel the booking…”
“Once the contract is made, it is the accommodation providers’ responsibility to provide you with what you have booked and it is your responsibility to pay for the accommodation”. 150. It was also stated: “As we are acting only as a booking agent we have no liability for any of the accommodation arrangements and in particular any liability for any illness, personal injury, death or loss of any kind, unless caused by our negligence. Any claim for damages for injury, illness or death arising from your stay in the accommodation, must be brought against the owner of the accommodation and will be under the jurisdiction of the law of the country in which the accommodation is based.” 151. It was stated that on booking : “ you accept responsibility for any damage to property or accommodation caused by you or a member of your party. The [provider] reserves the right to terminate ….your holiday … due to misconduct … In these circumstances full cancellation charges will apply and no refund will be given…the [provider] shall be under no obligation to pay compensation or meet any costs or expenses you may incur as a result of your accommodation being terminated. You agree to indemnify us against any claims (including legal costs) made against us or on behalf of the owner….finally you are also liable to make a reimbursement to the [provide] for any damage caused, before you end your stay.”
“If you have a complaint while you are staying at the accommodation in question, you must inform the accommodation management immediately, in order to give them chance to resolve the problem. You may lose your right to compensation, if you fail to do so. If the issue is not resolved to your satisfaction, you should contact our UK office on 08700 670030 from the resort. We will act as an intermediary to try to rectify the problem. In the event that we are unable to do so and you wish to take the matter further, you must do so directly with the [provider] concerned. It is only if “your problem is concerning [the appellant] that you must put your complaint in writing to our Customer Relations Department within 14 days of your return of travel.” 153. Under some versions if the provider was unable to investigate a complaint, the appellant offered to try and do so, and it would then investigate and report back to the traveller. Mr Shuker explained that the appellant “would try and expedite that process. Sometimes accommodation providers’ standards of customer service might not be always what a UK client is used to”
“If you book a hotel room with us and then find a lower price on the Internet, subject to terms and conditions we will refund you the difference.”
“the [provider] may have instructed us to set the price at a certain rate so that they had the same prices in the market. So some of the [providers] would not necessarily want an agent undercutting their own rates, so they would try……and protect …..it is a bit like an RRP, they would try and give the same rate to all the market.” 170. In theory the appellant could request whatever level of commission it liked but in practice the final selling price was driven by the market given that most accommodation offered on the website was typically available on competitors’ websites. 171. He noted that the later versions of the standard provider terms included a provision whereby the appellant was liable to the provider where it failed to comply with its obligation as agent to properly collect sums due from the customer and pass them over to the provider. In the later versions the appellant also provided the provider with an indemnity in the event of breach of the agency agreement by the appellant. He said this recognised that the appellant’s compliance with the terms produced a quantifiable benefit to the provider and exposed it to risk of financial loss in the event of failure by the appellant to carry out its duties. 172. There was no obligation in any of the versions of the standard provider terms for the appellant to inform providers of the price at which accommodation was sold to customers. In his witness statement Mr Shuker said the provider was informed of the final total selling price. At the hearing he confirmed that was his recollection but he could not remember when that came into place. We note that the providers would certainly have been aware of the total price once the appellant started to issue invoices for their commission although the precise date when that started it not known. 173. In re-examination Mr Shuker was asked to explain further how the net room rates are set. He said essentially this was a matter of initial negotiation between the provider and the appellant although the provider frequently changed the price during the contract term. The provider would usually supply the prices and the person managing the relationship “would have an idea really of if we could actually make any money from those room rates and if they were competitive or not” and the appellant had its own large database of those rates from other providers, and also knew the position from other competitor websites, which gave an idea “if those room rates were going to be competitive”
“No, certainly not always, no….In some ways I would say quite rarely because if we didn’t remit the monies to principals reasonably quickly, they would ultimately stop distributing via our platform. So there was a kind of - you know, we couldn’t just not pay principals whenever we wanted to. They had to be paid at some point and some principals would say that they - if we didn’t have very – you know, if a particular principal didn’t trust – didn’t have a great deal of trust in us, for whatever commercial reason, they may insist on monies sooner than another principal who may give [the appellant] some credit”. 177. He confirmed that travellers’ payments received by the appellant were not lodged in an escrow or other account held jointly with or on behalf of the providers but were entered into the appellant’s bank accounts. It was from the appellant’s bank account that payments of amounts due to the providers were made. Interest earned on those amounts held in the appellant’s bank account was kept by the appellant. 178. He confirmed that the appellant set its own conditions about the deposits required by customers and when deposits would be payable or forfeited most of the time but not all of the time: “Probably in terms of the dispute maybe 90 – probably 95% of the time.”
“No, that very rarely if ever happened. There might have been the odd scenario where, you know, there was a room price to£50,000 on our website it might have been by a honeymoon suite or something. It may be someone found it for£1 on someone else’s website because it was a pricing error, but it’s not a general case that we would cancel the room rather than not, and….the rates of people actually calling in the price promise were minuscule I believe….I mean, the amount of price promises actually made was tiny, so less than 5%…..I don’t know, 0.001 per cent, it is absolutely tiny in the context of the business. And I think most of the time under my jurisdiction I would have rather have given the customer the money because it would have been - you know, if we have to deal with one complaint over a negative bit of PR it kind of easily exceeds what that cost might have been, so for commercial expediency we would have taken the loss in that particular instance, I think.”
“Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations.” 214. In their view, the appellant has not proved the existence of binding contracts, because there is no evidence that any offer (of the written terms) was accepted noting the following. (1) An offeree is not bound by an offer if he does nothing in response to that offer (Chitty, 32nd Ed, 2-068). (2) If a party has a right to sign a contract before being bound, it is open to it by clear and unequivocal words or conduct to waive the requirement and to conclude the contract without insisting on its signature: Oceanografia SA de CV v. DSND Subsea AS (The Botnica)[2006] EWHC 1360 (Comm) ; [2007] 1 All E.R. (Comm) 28 at [94], per Aikens J. (3) Further, if the requirement for a signature is for the benefit of both parties to a contractual document, it must be clear that both parties have waived it: see Reveille Independent LLC v Anotech International (UK) Ltd[2016] EWCA Civ 443 , para 41. HMRC noted that the appellant relies on the earlier High Court decision in Reveille International v Anotech International[2015] EWHC 726 (Comm) . (4) Acceptance of an offer can be communicated by conduct which as a matter of objective analysis shows an intention to accept the offer: Brogden v Metropolitan Railway Co(1877) 2 App Cas 666 ; Reveille Independent LLC v Anotech International (UK) Ltd[2016] EWCA Civ 443 , para 40. 215. They said that, in this case, there is no evidence of the waiver of the requirement for a signature, that all of the terms were agreed, or of any subsequent clear and unequivocal words or conduct evidencing the acceptance of an offer. As such, the tribunal cannot find that the unsigned written contractual documents have contractual force. This argument was successfully made by HMRC in the recent Hotels4u.com case (see [265] and [413]). The position in this case is different from Secret Hotels2, where the parties were agreed that the contracts before the court were the applicable contracts. 216. HMRC continued that it can be assumed that the sample contracts in the bundle were the best versions that the appellant could find and yet the state of the contractual documentation is wholly unsatisfactory. The appellant’s own evidence undermines their case that the written terms represented the entire and true nature of the contractual relationship: (1) Mr Shuker said, for example, that the Hotelbeds contract was not signed by the parties because all of those terms and conditions were not agreed. It follows that the parties must have agreed between themselves some other terms, not the written terms, on which they were prepared to continue to do business with one another. (2) It is not known, in almost all of the cases, what terms the two parties agreed on or what law governed the contract. Even if the tribunal were to accept that the provider standard terms governed the various contractual relationships it is not known which version of the standard terms was in use at any particular time. (3) Many of the front sheets are unsigned and Mr Shuker said that he would have expected the contracts to be signed if they were agreed, and, as noted, as regards Hotelbeds, they were not signed. (4) Many of them refer to “terms overleaf”, which are not in fact overleaf, although Mr Shuker thought that some of them might be on the electronic system that the appellant has not produced. (5) Many of them say they are one of three pages, but Mr Shuker’s evidence referred to standard terms that were four pages long. Some of them say they are one of ten pages but we do not have the other nine pages. 217. HMRC noted that Ms Shaw suggested to Mr Shuker in re-examination that at some stage there had been a three-page set of standard provider terms in existence, even though Mr Shuker had not referred to this in his witness evidence. They noted that in the bundle there were four-page long standard terms that were being used in August 2008 and it is clear that three page contracts were still being used well into late 2008. 218. HMRC said that whilst acceptance of an offer can take place in a number of different ways including by conduct, Mr Shuker said he expected acceptance to be by way of signature. In any event, the tribunal would need to receive detailed witness evidence of clear and unequivocal conduct to prove that any offer was accepted by way of conduct. In fact there was simply silence from the provider in the face of an offer. For very important public policy reasons the courts have historically found and still find that silence cannot be equated to acceptance. The position on that is clearly set out by Chitty under the subheading “Silence”: “An offeree who does nothing in response to an offer is not bound by its terms. This is so even though the offer provides that it can be accepted by silence.” 219. The appellant acknowledged that there were a handful of instances where the contracts were not signed but in each case, as Mr Shuker said, the terms agreed between the parties were the provider standard terms, and it was pursuant to those written terms that the parties acted. In such circumstances, the absence of a signature is irrelevant. The contract does not need to be signed in order to be binding as was held by the High Court in Reveille where, at [23], the court said: “The signature of the parties to a written contract is not a precondition to the existence of contractual relations as a contract can equally be accepted by conduct ...” 220. The appellant noted that there was no dispute in that case that the parties had acted on the agreement. The wrinkle in the Reveille case was, as the court said at [20]: “The deal memorandum which recorded the terms agreed between the parties stated on its face that it was not to be binding on Reveille until signed by both parties.”
“The question arises to as whether a court faced with a contract containing a choice of law is required to apply that law if that law is neither pleaded nor proved by either party. The use of the word 'shall' in the first sentence of Article 3.1 appears to carry a mandatory connotation. However, the English rule that foreign law must be pleaded and proved, failing which English law will be applied, is a rule of evidence or procedure and as has been pointed out above, such matters are excluded from the scope of the Convention by Article 1.2(h). It is suggested that the practice of the common law remains unchanged and that the court is not bound to apply a foreign applicable law which is neither pleaded nor proved by the parties. However, this conclusion cannot be free from doubt in the light of the potential lack of harmony which it might introduce into the application of the Convention amongst the contracting states.” 235. The appellant interpreted this as meaning that, whilst the matter is not free from doubt, the better view is that, if foreign law is not pleaded or not proved, then as a matter of English evidence and procedure rules, the court should simply apply English law. The appellant asserted that this is supported by Dicey & Morris, chapter 9 (as referred to in a footnote in Chitty) at 9-002, 9-003 and 9-004: “In any case to which foreign law applies the law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means. In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case. The principle that in an English court foreign law is a matter of fact has long been well established : it must be pleaded and it must be proved……..It also said to follow that if the parties elect not to prove the content of foreign law, a case will be decided by the application of English domestic law as though the case were a wholly domestic one and this is generally true. But in recent years there have been increasing signs that this cannot invariably follow, and in cases where it would be wholly artificial to apply rules of English law to an issue governed by foreign law, a court may simply regard a party who has pleaded but who has failed to prove foreign law with sufficient specificity as will allow an English court simply to apply it, as having failed to establish his case without regard to the corresponding principle of domestic law [and there was a footnote reference to the Shaker case referred to below]……..Foreign law must be pleaded. The general rule is that if a party wishes to rely on a foreign law he must plead it in the same way as any other fact. Unless this is done, the court will in principle decide a case containing foreign elements as though it were a purely domestic English case…..English courts take judicial notice of the law of England and of notorious fact but not of foreign law. Consequently foreign law must be proved in each case…..” 236. The appellant also referred to the following passage in Dicey & Morris at 9-011: “The treatment of foreign law as a question of fact to be pleaded and proved by either or both of the parties means that the question of the applicability of foreign law in a case involving the conflict of laws may ultimately depend in England on the rules of procedure and evidence, since it is to that legal category that the question belongs once this approach is accepted. The consequences may be illustrated by an example. According to [the Rome Convention], “a contract shall be governed by the law chosen by the parties”
“This conclusion cannot be free from doubt in the light of the potential lack of harmony which it might introduce into the application of the Rome Convention amongst the contracting states.” 241. The parties had different views on the effect of the decision in Shaker v Al-Bedrawi and others; Shaker v Masry and another; Shaker v Steggles Palmer (a firm) and others[2002] EWCA Civ 1452 , the case which was referred to in the passages from Dicey and Morris set out above. HMRC said that in fact it is clear from this that the starting point is that English law does not have to be applied because a party has either chosen not to prove or failed to prove the law which is otherwise applicable (citing the words in italics set out in the passage from that case in [213] below). 242. The issue in Shaker was whether a provision of theCompanies Act 1985 , which only applies to companies registered under the Companies Act, could nonetheless be applied to a US incorporated company. The question arose in the context of whether a distribution which had been made by the US company was an unlawful distribution. The court at first instance decided, by reference to the relevant provisions of the Companies Act, that the distribution was unlawful because of the English statutory requirement that the company must have requisite accounts to show that the distribution is made out of distributable reserves. On appeal the Court of Appeal considered the propriety of that application and said at [66] and [67]: “Furthermore, in the present situation, the 1985 Act cannot be applied literally to the Pennsylvanian company, since Part VIII is only applicable to companies registered under the Companies Acts, and the statutory requirement to produce “relevant accounts” in a particular form…….. cannot apply to it…… The starting point must be that not every English statute is to be applied to a transaction because a party has either chosen not to prove or failed to prove the law which is otherwise applicable . On the face of it, Part VIII is inapplicable to a company not registered under the Companies Act. Thus, the judge was correct to seek to satisfy himself that Part VIII did not represent some merely domestic rule of English law. He did so by asking whether the requirements of Part VIII with which he was concerned represented a generally applicable rule of company law. As we have said, Mr Lyndon-Stanford has made his submission on the basis that this requirement has to be met, and we are content also to accept that as the test in the circumstances of this case. However, if a rule of English statute law has to be adapted in the way explained above before it can apply, then although it is not necessary to express a final view on this point on this appeal, it may well be that that factor alone is a sufficient indication that the case falls within the class of case where English statute law creates some special institution and thus cannot be applied simply because a party has failed to prove the relevant law.”
“ For instance, the court does not apply English law to a foreign transaction to which it would not otherwise be applicable simply because a party fails to prove the applicable foreign law in a situation where English law creates some special institution…….. Nor does the principle apply in prosecutions generally in respect of acts committed abroad where the acts in question may be lawful under the law of the place of the performance. Nor need it be applied in summary judgment…..In certain circumstances the court does not apply the principle where it is asked to construe a document governed by foreign law……These authorities show that the principle is not applied inflexibly…. We further note that in Carl Zeiss Stiftung v Rayner & Keeler Ltd… Lord Wilberforce described the principle as one “never more than a fragile support” in the context of an issue as to the effect of a foreign judgment where its effect under foreign law was not proved.” 245. The appellant responded that this principle of evidence and pleading is not an immutable rule but there must be a compelling reason, as there was in the Shaker case, as to why it should not apply. In the present case there is no such reason. And, furthermore, there is every reason to apply English law in this case because the contracts themselves state they are subject to English law. There is even more justification for applying English law here in the absence of any evidence as to foreign law. That is not contrary to the Rome Convention. The Rome Convention excludes matters of evidence and procedure (in Article 1(e)). 246. The appellant said that the Court of Appeal was saying that if the concern is with an element of domestic law which is unique to domestic law such that it creates some “special institution”, then it is not appropriate to apply English law in the absence of evidence as to foreign law. Here the concern is the interpretation of a contract, specifically a contract which states on its face that the appellant is an agent and the provider is a principal. The issue is whether that contract establishes a relationship of agency or principal, according to the common law of agency and the common law of contractual interpretation. There is no reason to suppose that the English rules create some special institution that it is simply unnatural to apply it. Conclusion on foreign law issue 247. From Secret Hotels2 it is clear that we must construe the relevant contracts in this case in accordance with the proper law. However, we do not consider that decision tells us anything more on that aspect than just that. It was not disputed in that case that the proper law of the contract was English law. Lord Neuberger was not concerned, therefore, with any issue as to how the proper law is to be determined, which party must demonstrate the proper law or how the matter is to be dealt with where the proper law is foreign law. He was simply saying that the proper law, whatever that may be, is the applicable law under which the contracts must be construed. 248. In this case, the majority of the sample contracts with providers in the bundles state that they are governed by English law. It is not disputed that in those cases English law is the proper law of the contract, as the law clearly chosen by the parties (in accordance with the Treaty of Rome). The issue is that five of the sample contracts are stated to be governed by both English law and foreign law. We note that HMRC also pointed to two sample contracts which referred only to foreign law law but one of those was a guarantee contract, which is not within the scope of the dispute and one was the second draft contract with Hotelbeds which was never put in place. The initial Hotelbeds contract, which we accept, remained in place at the relevant time, stated it was governed by English law. 249. We note that the standard provider terms stated that English law applied, in version one, were silent on governing law in version two and stated that both English and foreign law applied in version three. As the documents in the bundles are a sample only and we have accepted that the contracts with providers were concluded on the standard provider terms, it is possible that there were other applicable contracts which referred to foreign law. 250. Where the laws of two countries are stated to apply, we do not know what the intention was behind referring to two countries. Mr Shuker noted that it could be the case that the parties could not agree on a single country because they each thought they would want to rely on the laws of the country in which they were carrying on business, in any contractual dispute with the other party. HMRC suggested that it must be the case that the parties intended the two country’s laws to apply to different parts of the contract. 251. The fact is that in those cases where both English law and foreign law is referenced there is no clear choice single choice by the parties. We note that in the Treaty of Rome there are provisions for allocating the laws of one country as the applicable law where there is no clear choice. The parties did not make any submissions on the applicability of those provisions. HMRC submitted that the appellant has failed to show which parts were intended to be governed by English law and which by foreign law. The appellant submitted that the clauses may simply be invalid. 252. In any event, our view is that it is appropriate to apply the rule of evidence set out in the authorities and adopted in the courts, namely, that if neither party pleads and proves what the potentially applicable foreign law is, the court or tribunal can apply English law. This is an established principle, although the authorities refer to it as a flexible rather than an inviable rule which, as stated in Dicey and Morris, has been held not be applicable in cases where it would be “wholly artificial” to apply rules of English law to an issue governed by foreign law. 253. We do not consider that the Shaker case affects our ability to apply English law in this case. The Court of Appeal was not saying that the general position is that this rule of evidence and procedure should not be applied. They were saying, as the appellant noted, that it cannot be assumed that it applies in all cases. It may not apply in some cases such as, in particular, where, in line with the guidance in Dicey & Morris, to apply English law would be artificial in the sense that it creates a special institution (or in the other circumstances they identify). In other words it does not necessarily apply where there is a good reason for that to be the case. We do not consider that it would be artificial to apply English law in this case for the reasons set out by the appellant in its submissions (nor are any of the other exceptions in point). 254. We note that in effect that means that English law applies by default. The appellant said that it was content to rely on English and, therefore, did not need to plead and prove foreign law. The appellant considered that it was for HMRC to plead and prove foreign law given they were the party who wished to rely on it as a factual matter. HMRC said that, on the contrary, under the normal burden of proof rules it was for the appellant to establish the foreign law position. 255. We note that the authorities indicate that we may adopt the position that English law applies rather than simply deciding that the relevant party has not made out its case due to a failure to establish what the relevant foreign law is. However, in any event, we consider that the appellant has established its cases sufficiently, that the evidential burden on this point passed to HMRC. 256. We were not referred to any authority on the meaning of burden of proof other than the Perenco case, but the general meaning is well-established. According to Phipson on Evidence (18th edition), at 6-01, that expression is used to describe the duty which lies on a party either to establish a case or to establish the facts upon a particular issue. At 25 6-03, Phipson says that one effect of the burden of proof is that, if the party bearing the burden has not pleaded a positive case, the other party need not plead and prove that alternative states of affairs do not exist. The case of Seashore Marine SA v Phoenix Assurance Plc (The Vergina) (No.1)[2001] 2 Lloyd’s Rep 719 is cited as authority for that proposition. 257. In tax cases, once HMRC has raised an assessment, it is accepted that the legal burden is generally on the taxpayer to prove, on the balance of probabilities, that the assessment is not correct. In this case, therefore, the legal burden is on the appellant to demonstrate that it is not within article 306(a) according to the contractual effect of the arrangements. As the effect of the contractual arrangements has to be assessed in accordance with the proper law of the contract, it would seem to follow that, for the appellant to discharge this burden in these circumstances, it must demonstrate what the correct construction is under that proper law, whether it is English law or proper law. 258. However, it is also established that if a person has established a prima facie legal case, the evidential burden may shift to the other party. That this principle applies in tax cases, as in other matters, was recognised by the tribunal in the Perenco case to which the appellant referred. 259. In Perenco , the tribunal was referred to the decision in Wood v Holden[2006] STC 443 (see [100]). The issue in that case was whether the taxpayers were liable to capital gains tax on the sale of shares in a company which depended on whether the holding company which sold the shares was resident in the UK, as HMRC argued, or in the Netherlands, as the appellant argued. The High Court and the Court of Appeal held that the Special Commissioners erred in law in holding that the taxpayers had not established that company was not resident in the UK for tax purposes. One of the reasons was that they had incorrectly applied the burden of proof rules. It was not disputed that it was for the taxpayers to show that the amendments made to their self-assessments imposing capital gains tax had been wrongly made. The Commissioners had failed to recognise, however, that the taxpayers had produced sufficient evidence to make a prima facie case that the company was resident in the Netherlands such that the evidential burden had shifted to HMRC. As HMRC provided no positive evidence to demonstrate that residence was instead in the UK, they failed to discharge that evidential burden. 260. As set out by the Court of Appeal (at [31] and [32]) Park J said in the High Court at [35], “there plainly comes a point where the taxpayer has produced evidence which, as matters stand then, appears to show that the assessment is wrong. At that point the evidential basis must pass to the Revenue.”