Wednesday 15 July 2020

UK: The Supreme Court decides - the reflective loss principle in company law and beyond

The Supreme Court - a panel of seven justices - gave judgment today in Sevilleja v Marex Financial Ltd [2020] UKSC 31: see here or here (pdf). The court's summary of its decision is available here (pdf). The judgment provides a wide-ranging review of what has become known as the reflective loss principle and its place within company law and more widely. The court unanimously held that the principle did not operate to prevent a creditor from bringing a claim for damages in tort against a third party where the company had a concurrent claim for damages.

Of note is the fact that a minority of the justices disagreed with the majority's position on the significance of Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 in establishing a principle precluding shareholders from bringing a claim where the company has suffered loss resulting in the fall in the value of its shares or distributions.

The Supreme Court's decision is summarised in the below video by Lord Reed PSJ; he begins by noting that the appeal "raised one of the most important and difficult questions of law to become before the court for some time" and, towards the end, he refers to the "radical approach" adopted by the minority in its position regarding Prudential.

No comments: