Double Recovery in UK Law

The problem can be resolved only by close scrutiny of the pleadings at the strike-out stage and all the proven facts at the trial stage: the object is to ascertain whether the loss claimed appears to be or is one which would be made good if the company had enforced its full rights against the party responsible, and whether (to use the language of Prudential at page 223) the loss claimed is "merely a reflection of the loss suffered by the company."

If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. This is a matter of principle; there is no discretion involved.

As Hobhouse L.J. observed in Gerber (at p. 471), if the company chooses not to exercise its remedy, the loss to the shareholder is caused by the company's decision not to pursue its remedy and not by the defendant's wrongdoing. By a parity of reasoning, the same applies if the company settles for less than it might have done.

Indeed, the diminution in the value of Mr and Mrs Christensen's shares in the company is by definition a personal loss and not a corporate loss. That loss is reflected in the diminution in the value of Mr and Mrs Christensen's shares. They can no longer realise their shares at the value they enjoyed prior to the alleged default of their accountants and solicitors.

He should recover from the tortfeasor no more and no less than he has lost. The two well-established categories of receipt which are to be ignored in assessing damages are the fruits of insurance which the plaintiff himself has provided against the contingency causing his injuries (which may or may not lead to a claim by the insurer as subrogated to the rights of the plaintiff) and the fruits of the benevolence of third parties motivated by sympathy for the plaintiff's misfortune.

The need for such reasoning in a case of subrogation has been questioned by Chadwick J. in the Bristol and West B.S. case, at pp. 223–8 in a penetrating analysis to which I am indebted. Parry v. Cleaver itself was a case of contingency not indemnity insurance. The principle it recognised was formulated in response to an objection that the claimant would be making a double recovery.

The four aspects or considerations justifying the rule which emerge from the authorities, in particular Lord Millett's speech in Johnson v Gore Wood, are: (i) the need to avoid double recovery by the claimant and the company from the defendant: see per Lord Millett at 62E-F quoted at [18] above; (ii) causation, in the sense that if the company chooses not to claim against the wrongdoer, the loss to the claimant is caused by the company's decision not by the defendant's wrongdoing: see per Lord Millett at 66D-F quoted at [20] above and Chadwick LJ in Giles v Rhind at [78]; (iii) the public policy of avoiding conflicts of interest particularly that if the claimant had a separate right to claim it would discourage the company from making settlements: see per Lord Millett at 66F-G again quoted at [20] above; and (iv) the need to preserve company autonomy and avoid prejudice to minority shareholders and other creditors.