FORBEARANCE AS CONSIDERATION AFTER DENNING V ARCEM RESOURCES [2026] EWHC 2426 (CH)
In Mark Denning v Arcem Resources Limited & Anor [2026] EWHC 2426 (Ch) (“Denning”), the English High Court considered whether a lender’s decision not to sue amounted to consideration for a promise to provide security. The Court explained that the lender must have held off because of that promise. Simply showing that no proceedings were brought was not enough (Denning at [112]–[115] and [125]).
Background
The Claimant lent US$1 million to Arcem Resources Limited, the Defendant, in December 2019. Mr Main, the Second Defendant, guaranteed repayment. The loan was due in March 2020, but it remained unpaid despite demands for repayment (Denning at [2]–[5]).
In June 2021, the parties signed a security letter (the “Security Letter”). It required the Defendant to provide security over assets and included a clause providing for disputes to be heard only in the English courts (Denning at [27], [32] and [73(a)]).
The Claimant later claimed about US$2.9 million in principal and interest. He relied on that clause to serve proceedings on the defendants outside England without first obtaining the Court’s permission (Denning at [6]–[8]).
The Defendants challenged the Court’s jurisdiction. They argued that the Security Letter lacked consideration: it imposed obligations on them, but the Claimant gave nothing in return. The loan had already been advanced (Denning at [73]).
The Claimant argued that he had given consideration by holding off on suing. He also relied on the parties’ agreement to bring disputes before the English courts (Denning at [74]).
When does holding off on suing amount to consideration?
The Court explained that consideration means giving something in exchange for a promise. A promise alone does not make a contract where nothing is given in return, whether by benefiting the person making the promise or by taking on a burden (Denning at [72]).
Holding off on suing, known as “forbearance”, can amount to consideration. But the creditor must have done so because of the debtor’s promise. The debtor may have asked expressly or implicitly for the creditor to wait. There must, however, be evidence to support that connection (Denning at [112]–[115]).
The Claimant relied on the order of events: he demanded repayment, the parties signed the Security Letter, and he then made no demands and brought no proceedings. He argued that this showed forbearance and gave the defendants a practical benefit (Denning at [114]).
The Court rejected that argument on the evidence before it. The Claimant had already held off on suing before the Security Letter was signed. His witness evidence did not explain why he had waited, either before or after the letter. The order of events alone was not enough to show that he had waited because of the promise of security (Denning at [118]–[119] and [125]).
The Court was careful about the scope of its decision. It did not finally decide that the Security Letter was unenforceable. It held that, at this stage, the Claimant had not shown a “good arguable case” that his forbearance amounted to consideration (Denning at [128]).
Could the jurisdiction clause provide consideration?
The Claimant also argued that the promise to sue only in England had value to the Defendants and therefore provided consideration for the Security Letter (Denning at [129]).
The Court disagreed. A jurisdiction clause cannot, by itself, provide consideration for an agreement that otherwise lacks it. Adding a clause about where disputes will be heard does not solve the problem of missing consideration (Denning at [130]–[132]).
The Defendants’ jurisdiction challenge therefore succeeded. However, the Claimant separately obtained permission to serve proceedings abroad because the original loan agreement was governed by English law and the Court found England to be the appropriate place for the trial (Denning at [133], [143] and [153]).
Key takeaway
The practical lesson is to keep a clear record of why a creditor agrees to wait. If holding off on suing is what the creditor gives in return for security, the evidence should show that connection. Merely pointing to the promise of security and the absence of proceedings may not be enough (Denning at [112]–[113], [119] and [125]).
Nor should parties assume that a jurisdiction clause will make up for missing consideration elsewhere in the agreement (Denning at [130]–[132]).
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