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UK Courts’ Authority in Ongoing Fraud Cases

Author: Nicola Sharp  8 March 2021
4 min read

Posted in: Commercial Litigation.

Nicola Sharp of Rahman Ravelli outlines a case that clarifies when jurisdiction can be triggered 

On 1 March 2021, in Manek & Ors v IIFL Wealth (UK) Ltd & Ors, the UK Appeal Court (CoA) overturned a lower court’s decision, reviving the fraud lawsuit relating to a deal involving Wirecard; commenting that Wirecard’s purchase of Indian company Hermes I-Tickets Private Ltd was a “continuing fraud”.

This case is of particular interest as the CoA clarified that UK courts’ jurisdiction under the tort gateway can be triggered at any point in an “ongoing fraud case”.  It is not limited to the “last misrepresentation or threat” which could amount to the material event for the purposes of the claim in deceit. 

Case Background 

The appellants, Prashant Hasmukh Manek, Sanjay Chandi And Eagm Ventures (India) Private Limited, allege that they were defrauded out of millions of dollars when selling their shares at an undervalue. They claim that in 2015 they were misled into selling their shares in the Indian company, Hermes i-Tickets Private Limited (Hermes), for around $40 million to the company EMIF. It is the appellants' case that, unbeknownst to them, the respondents, Ramu Ramasamy and  Palaniyapan Ramasamy, had arranged for Hermes to be immediately sold on by EMIF to a German company, Wirecard AG, for around €250 million. Although the appellants have not yet ascertained who owned or controlled EMIF, they say that the respondents benefitted from the sale. In this way, the appellants claim to have been cheated out of the true value of their shares in Hermes as they were told additional and repeated misrepresentations by the respondents.

The appellants brought their claims against the respondents in the Commercial Court in London, alleging deceit. The first and fourth defendants in the proceedings accepted jurisdiction, but the respondents to the appeal challenged jurisdiction on the basis that they are domiciled in India 

On 2 February 2018, Andrew Baker J granted permission to serve the claim form and particulars of claim on the respondents outside the jurisdiction. Thereafter, on 14 March 2018, they were the subject of a worldwide freezing order made by Robin Knowles J. The respondents subsequently applied to set aside those orders, on the basis that the Commercial Court did not have the jurisdiction to hear the claims against them. 

In a judgment dated 11 December 2019, the lower court rejected the appellants' claim under the tort gateway, on the basis that they had not shown that sufficiently "substantial or efficacious" acts had been committed within the jurisdiction of the English courts. Specifically, misrepresentations made at meetings which took place in the UK in August 2015, were not, in the court’s view “substantial or efficacious” to the deceit. It is that part of the judge's judgment which was the subject of the appeal.  

At the appeal hearing on 4 February 2021, the CoA heard the parties on the tort gateway issue. At the end of the parties' submissions, the court indicated that the appeal on the tort gateway would be allowed. The court would hear at a later date the arguments on the remaining appeal issues. 

Relevant Law

The tort gateway is set out at paragraph 3.1(9) of 6BPD as follows: 

  • "(9) A claim is made in tort where - …
  • (b) damage which has been or will be sustained results from an act committed, or likely to be committed, within the jurisdiction."

If jurisdiction is disputed under this gateway, the test to be applied by the court is that set out in Metall und Rohstoff v Donaldson. This was a judgment of the court, which included Bingham LJ (as he then was). The relevant passage reads: 

  • "Condition (c) prompts the inquiry: what if damage has resulted from acts committed partly within and partly without the jurisdiction? This will often be the case where a series of acts, regarded by English law as tortious, are committed in an international context. It would not, we think, make sense to require all the acts to have been committed within the jurisdiction, because again there might be no single jurisdiction where that would be so. But it would certainly contravene the spirit, and also we think the letter, of the rule if jurisdiction were assumed on the strength of some relatively minor or insignificant act having been committed here, perhaps fortuitously. In our view condition (c) requires the court to look at the tort alleged in a common sense way and ask whether damage has resulted from substantial and efficacious acts committed within the jurisdiction (whether or not other substantial and efficacious acts have been committed elsewhere): if the answer is yes, leave may (but of course need not) be given. But the defendants are, we think, right to insist that the acts to be considered must be those of the putative defendant, because the question at issue is whether the links between him and the English forum are such as to justify his being brought here to answer the plaintiffs' claim." 

This test has been approved and applied in a number of subsequent cases including ABCI v Banque Franco-Tunisienne and Newsat Holdings Limited v Zani

The Judgement 

In the judgement of 1 March 2021, the CoA judges concluded that the misrepresentations made at the meetings in August 2015 were “’on any view, substantial; they embraced all the major elements of the alleged fraud.” They were too “efficacious” as they were “ultimately the reason why the appellants sold their shares”. 

Further, they stated “it is wrong in law to suggest that … it was only the last misrepresentation or threat … that could amount to the material event for the purposes of the claim in deceit”. The CoA concluded it is “sufficient if the misrepresentation substantially contributed to the ultimate deception”: In this way, the CoA concluded that the misrepresentations made at the meeting were substantial and efficacious acts committed within the jurisdiction, accordingly granting jurisdiction and reviving the law suit. 

This judgement is of significance as it demonstrates that the UK courts’ jurisdiction under the tort gateway can be triggered at any point in an “ongoing fraud case” provided the misrepresentation made in the jurisdiction substantially contributes to the overall dishonesty. 

Nicola Sharp C 09983

Nicola Sharp

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Nicola is known for her fraud, civil recovery and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.

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