Fraudulent Inducement to Forbear: Damage Occurs Where the Debt Should Have Been Paid (Service Out under PD 6B)

1) Introduction

The Court of Appeal addressed when England is the place where “damage was sustained” for the purposes of service out of the jurisdiction in fraud-based claims alleging that a creditor was induced to delay enforcement of a debt, during which time the debt became irrecoverable.

The respondent/claimant, Sucden Financial Limited (an English commodities/derivatives broker), sued a Swiss metal trader (the first defendant) and its Dubai-based director/shareholder (the second defendant) alleging deceit/fraudulent misrepresentation and unlawful means conspiracy. The alleged fraud concerned a bill of lading said to evidence high-value nickel cathodes which, when inspected, proved to be low-value material. Sucden’s core case was that it would have recovered its debt earlier, but for the misrepresentations which induced forbearance; by the time the truth emerged, recovery had materially deteriorated.

The appeal concerned only jurisdictional gateways for service out on the second defendant. Other challenges (serious issue to be tried, forum conveniens, alternative service) were not in issue on the appeal.

Key issues

• Whether inducing a creditor to forbear enforcement can constitute “damage” (as opposed to a mere risk) under PD 6B para 3.1(9)(a) (the Tort Damage Gateway).
• Where such damage is sustained: England (place of payment/expected receipt) or Switzerland (debtor’s domicile / alleged “situs” of the debt).
• Whether Sucden could additionally rely on PD 6B para 3.1(9)(b) (the Tortious Act Gateway) for the first time on appeal, based on an allegedly fraudulent representation at a London meeting.
• Consequences for PD 6B para 3.1(9)(c) (the Tort Applicable Law Gateway) via Rome II, Article 4(1).

2) Summary of the Judgment

The Court of Appeal dismissed the appeal and upheld jurisdiction to serve out.

• Tort Damage Gateway (PD 6B 3.1(9)(a)): A good arguable case was established that damage was sustained in England. The Court clarified that the relevant damage was not “delay” itself, but the alleged loss of recoverability of a debt that would otherwise have been recovered, manifesting as non-recovery where payment should have been made (England).
• Eurasia Sports Ltd v Aguad distinguished: unlike reversible extension of credit/overdraft-type exposure, the pleaded case asserted actual loss (a once-recoverable debt becoming irrecoverable) rather than mere risk.
• Tort Applicable Law Gateway (PD 6B 3.1(9)(c)): For the same reasons, the tort was governed by English law via Rome II, Article 4(1) (place where the damage occurs).
• Tortious Act Gateway (PD 6B 3.1(9)(b)): Sucden was permitted to rely on this gateway on appeal (no prejudice), and there was a good arguable case that the London meeting involved a fraudulent misrepresentation that was a substantial and efficacious cause of loss, applying Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc.
• The Court did not determine the Necessary or Proper Party Gateway (PD 6B 3.1(3)), leaving it for a case where it is decisive.

3) Analysis

A. The jurisdictional framework and the “good arguable case” standard

Service out required Sucden to show a good arguable case that the claim fell within at least one PD 6B gateway. The Court’s analysis reflects a practical approach to cross-border economic torts: it focused on the pleaded harm and where it directly materialised, rather than formal classifications (such as the “situs” of a debt for enforcement mechanics).

Although jurisdictional disputes often turn on fine distinctions in financial loss cases, the Court reiterated the caution expressed in Kwok and others v UBS AG [2023] EWCA Civ 222 that these questions are highly fact-dependent.

B. Precedents cited and their influence

1) Eurasia Sports Ltd v Aguad [2018] EWCA Civ 1742

The second defendant relied on Eurasia to argue that forbearance/delay is not “damage” but merely exposure to risk. In Eurasia, the extension of credit was treated as “prefatory” because the claimant could reverse course before an irrevocable loss (damage crystallised when bets were placed and losses occurred).

The Court of Appeal distinguished Eurasia on the pleaded facts: Sucden alleged a completed loss—a recoverable debt became irrecoverable during the induced period of non-enforcement. That is not a reversible exposure akin to granting an overdraft (also discussed in MX1 Ltd v Farahzad and Hillside (New Media) Ltd v Baasland), but an alleged permanent deterioration of the creditor’s position.

2) The “non-receipt / interference with obligations” line: Dolphin Maritime Services v The Swedish Club and successors

The Court treated Sucden’s loss as falling within the logic of cases where harm is the non-receipt of money/property that ought to have been received in a given place:

• Dolphin Maritime Services v The Swedish Club [2009] EWHC 716 (Comm): damage located where funds should have been received; Christopher Clarke J’s “what would have happened but for the tort?” question assisted in identifying where harm occurred.
• AMT Futures v Marzillier [2014] EWHC 1085 (Comm): Popplewell J’s (uncriticised) articulation that non-receipt damage occurs where money ought to have been received, and that courts must identify direct/initial damage rather than consequential effects.
• Pan Ocean Chartering Inc v UNIPEC UK Co Ltd [2016] EWHC 2774 (Comm): Carr J applied the non-receipt approach in a Rome II context.
• Lakatamia Shipping Company v Su [2021] EWHC 1907 (Comm): Bryan J located damage where a judgment debt should be paid and where impairment of payment ability is felt.

These authorities supported the Court’s core conclusion: where the pleaded harm is that a payment due in England became unrecoverable (because of induced delay), the direct damage is suffered in England.

3) Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391

This authority supplied the test for PD 6B 3.1(9)(b) where acts are partly within and partly outside the jurisdiction: jurisdiction should not rest on minor/fortuitous acts, but may rest where damage results from “substantial and efficacious acts” committed within the jurisdiction.

Applying that test, the Court held it was arguable that a London meeting involving senior decision-makers and culminating in agreement to move towards a pledge-based forbearance regime was substantial and efficacious in causing continued non-enforcement and the alleged ultimate loss.

4) New points on appeal: Singh v Dass [2019] EWCA Civ 360

Sucden had not relied on the Tortious Act Gateway below. The Court applied Singh v Dass and allowed the new point because it did not require new evidence and caused no unfairness: evidence already addressed the London meeting (including admissions in the first defendant’s defence and the second defendant’s materials in other procedural contexts), and the question of “substantial and efficacious” causation was largely evaluative.

5) The “situs of debt” argument: Hardy Exploration & Production (India) Inc v Government of India [2018] EWHC 1916 (Comm)

The second defendant’s submission that loss was suffered where the debt is “situated” (debtor’s domicile) drew on principles used in third party debt order contexts. The Court rejected that transposition: the issue here was not where a debt is located for discharge/enforcement mechanics, but where damage occurs for tort jurisdiction and applicable law purposes.

6) Other cited materials

• Case C-12/15 Universal Music International Holding BV v Schilling [2016] QB 967: referenced (via academic commentary) in relation to “irreversibility” and identifying direct damage.
• Surzur Overseas Ltd v Koros [1999] 2 Lloyd's Rep 611: used illustratively to show the impracticality of making place-of-damage hinge on the “mechanics” of the wrong where inducement and dissipation may be intertwined.
• Trafigura Pte Ltd v Gupta and others [2026] EWHC 159 (Comm): contextual background showing parallel allegations of similarly fraudulent arrangements affecting the creditor’s recovery prospects.

C. Legal reasoning: locating “damage” where induced forbearance leads to irrecoverability

1) Re-characterising the damage

The Court agreed with the result below but refined the analysis: describing damage as “delaying pursuit” risked treating the case as merely “prefatory” (and thus vulnerable to Eurasia). On the pleaded case, the damage was that a debt that could and would have been recovered became unrecoverable during the induced period.

2) England as the place where the direct harm materialised

The Court’s decisive move was to treat the harm as non-recovery of a debt payable in England. Using the Dolphin Maritime “counterfactual” lens, absent the wrongdoing, the debt would have been paid where due—England. Therefore, England was the place where the harmful effects were directly produced.

3) Rejecting a “mechanics-driven” approach

The Court refused to make place-of-damage depend on whether the wrong operated through (i) dealings with the debtor (e.g., inducing breach, dissipation) or (ii) dealings with the creditor (fraudulently inducing forbearance). In substance, both routes can culminate in the same direct harm: the creditor does not receive money where it should have been received.

D. The Tort Applicable Law Gateway (Rome II, Article 4(1))

The parties proceeded on the basis that Rome II, Article 4(1) applied (place where the damage occurs), and the Court refused a late attempt to invoke Article 4(3). Because the damage was in England, English law governed the tort claims, satisfying PD 6B 3.1(9)(c).

E. The Tortious Act Gateway: substantial and efficacious London conduct

Two steps mattered:

1. Permission to raise the gateway on appeal: granted because no procedural unfairness or evidential prejudice was shown.
2. Merits under Metall und Rohstoff: the London meeting was arguably pivotal—moving from payment demands to an arrangement that later became a structured forbearance (the MOD) in exchange for a pledge; it was therefore capable of being a substantial and efficacious cause of the continuing non-enforcement and the alleged ultimate loss.

F. The Necessary or Proper Party Gateway left open

Although the first instance judge had noted “arguable obstacles” to PD 6B 3.1(3) (including service mechanics and whether a reasonable claim remained against the first defendant after summary judgment), the Court of Appeal deliberately declined to decide those points because other gateways were dispositive.

4) Impact

• Fraud inducing forbearance is not automatically “prefatory”: where the claimant pleads and can arguable show that a debt moved from recoverable to irrecoverable during induced delay, that is capable of being present damage, not mere exposure to risk.
• Place of damage in debt-recovery fraud: this decision strengthens the position that the place of damage can be the place where the debt should have been paid/received (and where non-recovery is felt directly), even if the debtor is incorporated abroad and the defendant is overseas.
• Reduced traction for “situs of debt” analogies: arguments derived from third party debt order jurisprudence are less likely to determine place of damage for tort jurisdiction/applicable law.
• Gateway flexibility on appeal (within limits): respondents may be permitted to invoke an additional gateway on appeal where evidence is already on the record and no prejudice arises, applying Singh v Dass.
• Practical litigation consequence: claimants in England alleging cross-border fraud impacting receivables may more readily establish PD 6B 3.1(9)(a)/(b)/(c), especially where key inducement meetings or reliance steps occurred in London and payment was due here.

5) Complex concepts simplified

• Service out “gateways” (PD 6B): listed connections that justify serving proceedings on a foreign defendant. Here: (a) damage sustained in England; (b) tortious act committed in England that substantially caused damage; (c) tort governed by English law.
• “Good arguable case”: not a final merits decision; the court asks whether the claimant has a plausibly strong case that the gateway requirements are met.
• Direct vs consequential loss: courts focus on the first/primary harmful effect of the wrong. In non-receipt cases, that is often where the money should have been received.
• “Prefatory” acts and irreversibility: exposing oneself to risk (e.g., granting a revocable credit line) may not be “damage” until loss crystallises. By contrast, an alleged irreversible worsening of recoverability can be damage.
• Rome II Article 4(1): generally selects the law of the country where the damage occurs (not necessarily where the misrepresentation was made).
• “Substantial and efficacious” acts: under Metall und Rohstoff, a real and meaningful part of the tortious conduct must have occurred in England; trivial links do not suffice.

6) Conclusion

Sucden Financial Ltd v TMT Metals AG & Ors [2026] EWCA Civ 986 confirms that, for service out and Rome II purposes, a fraud claim alleging induced forbearance can locate “damage” in England where the pleaded harm is that a debt payable here became irrecoverable during the induced delay. The Court rejected a technical “situs of debt” approach and preferred a substance-based characterisation aligned with the Dolphin Maritime line: the direct harm is non-receipt where payment should have occurred. It also illustrates a measured willingness to permit an additional jurisdictional gateway to be raised on appeal where doing so causes no prejudice and the evidential landscape would not have been different.