Manek & Ors v IIFL Wealth (UK) Ltd & Ors

For the tort gateway governing service outside the jurisdiction, the court asks in a common-sense way whether the alleged damage resulted from substantial and efficacious acts committed within England. Substantial acts abroad do not diminish qualifying acts within England.

In an evolving fraud, a representation may substantially contribute to the ultimate deception although it produces no immediate reliance, repeats an earlier representation, or is later embellished. Acts undertaken through participants in the alleged fraud may also be material. Efficacy is assessed only up to the irrevocable decision producing the loss; subsequent acts cannot have caused that decision.

The appellants alleged that the respondents fraudulently induced them to sell minority shares in an Indian company for far less than their true value. They relied on representations and documents presented during two meetings in London as acts committed within the jurisdiction.

The Commercial Court, in [2019] EWHC 3361 (Comm), held that those events were not substantial and efficacious acts for the tort gateway and set aside permission for service outside the jurisdiction and a worldwide freezing order. The appellants challenged that conclusion. The central question was whether they had the better argument that damage resulted from substantial and efficacious acts committed within England.

1. Appeal allowed on the tort gateway. Applying Metall und Rohstoff v Donaldson [1990] 1 QB 391, the alleged tort had to be considered in a common-sense way. The question was whether the damage resulted from substantial and efficacious acts committed within the jurisdiction, irrespective of whether other substantial and efficacious acts occurred elsewhere.

2. The first London meeting contained much more than a representation about the company’s poor performance. The presentation and discussion of a proposed sale agreement conveyed that the intermediary was the ultimate purchaser, that all shareholders were being treated alike and that the appellants faced no disadvantage by selling their shares to the respondents’ company. Those representations embraced the principal elements of the alleged fraud and substantially contributed to the eventual sale.

3. An evolving fraud need not produce immediate reliance upon each representation. It is sufficient that a representation substantially contributes to the ultimate deception, consistently with Hayward v Zurich Insurance Co Plc [2016] UKSC 48 and BV Nederlandse Industrie Van Eiprodukten v Rembrandt Enterprises Inc [2019] EWCA Civ 596. Repetition, later embellishment and delay before reliance did not extinguish the legal potency of the London representations.

4. The judge had wrongly compared the London events with allegedly more important conduct abroad. The gateway does not require the court to identify the geographical location containing the most causatively significant event. The substantial nature of an overseas act is irrelevant to whether an English act independently meets the test.

5. The second London meeting was also part of the evolving fraud. The updated sale agreement reinforced the impression that there was no onward transaction and that all shares were being sold at equivalent prices. The respondents’ alleged use of other participants to present the document did not prevent the meeting from being a substantial and efficacious act attributable to the alleged fraudulent scheme.

6. Events after the appellants’ irrevocable decision to sell were immaterial to efficacy. The later execution of replacement agreements and onward sale could not have caused that decision.

7. The appellants therefore had the better argument that substantial and efficacious acts were committed within the jurisdiction. The remaining arbitration, forum conveniens and non-disclosure issues were validly raised by the respondents’ notice. They were retained for a later hearing before the same constitution, without any view being expressed on their merits.

1. Court of Appeal (Civil Division): In [2021] EWCA Civ 264, allowed the appeal on the tort gateway. It retained the arbitration, forum conveniens and non-disclosure issues for a later hearing before the same constitution.

2. High Court, Commercial Court: In [2019] EWHC 3361 (Comm), rejected both relied-upon service gateways and set aside the orders permitting service outside the jurisdiction and imposing a worldwide freezing order. The appeal concerned only the ruling on the tort gateway.