Sevilleja v Marex Financial Ltd: Reflective Loss and the Autonomy of Company Law
| Published date | 01 January 2022 |
| Author | Jonathan Hardman |
| Date | 01 January 2022 |
| DOI | http://doi.org/10.1111/1468-2230.12663 |
bs_bs_banner
Modern Law Review
DOI:10.1111/1468-2230.12663
Sevilleja vMarex Financial Ltd: Reective Lossandthe
Autonomy of Company Law
Jonathan Hardman∗
In Sevilleja vMarex Financial Ltd the Supreme Court considered the ambit of the prohibition on
a shareholder recovering losses from third parties for the reduction in the value of their shares
or loss of dividend income arising from a wrong suered by the company.This prohibition
on ‘reective loss’had been growing in scope in recent years, leading to a lack of clarity as to
whether it is taxonomically situated in company law or in private law.The major ity in this case
situated the prohibition rmly within company law.This note argues that the majority judgment
did not go far enough and explores the impact of this case on company law more broadly.
INTRODUCTION
‘Reective loss’is a company law1term for resulting loss suered by sharehold-
ers when a company suers a wrong.It can manifest by reduction in the value
of shares or reduction in the dividend income caused by this wrong.2Company
law has long held that the company is the correct party to sue for a wrong done
to it (and therefore the shareholders are not).3Similarly,it has held that share-
holders are prohibited from recovering reective loss.4This principle will be
referred to as “the prohibition”throughout this case commentary.The extent
of theprohibition, however, was notclear. Three key issueswere unresolved.
First, the boundaries of the prohibition were unclear: whether it only aects
shareholders, or equallyapplies toother constituencies.5Second, whether the
∗Lecturer inInternational Commercial Law, School ofLaw, University ofEdinburgh. The author
is grateful to the anonymous peer reviewer for their comments on the prior version of this case
commentary.All errors and omissions remain the sole responsibility of the author.
1We use the term ‘company law’widely in this case commentary, to include all business organ-
isations. It has been correctly pointed out that a number of authorities in this eld do not
arise in the context of companies, but in the context of other forms of legal entities such
as tradeunions –seeP.L. Davies, ‘Reecting on “Sevillejav MarexFinancial”’ Oxford Busi-
ness Law Blog,5 August 2020 at https://www.law.ox.ac.uk/business-law-blog/blog/2020/08/
reecting-sevilleja-v-marex-nancial (last accessed 7 May 2021).
2SeeG.Morseetal,Palmer’s Company Law (London: Sweet &Maxwell, Release168,2020)para
8.3719;P.L.DaviesandS. Worthington,Gower Principles of Modern Company Law (London: Sweet
& Maxwell, 10th ed, 2016)paras17.34-17.38.
3Foss vHarbottle (1843) 2 Hare 461.
4Prudential Assurance Co Ltd vNewman Industries Ltd (No 2) [1982] Ch 204.
5Gardner vParker [2004] EWCA Civ781,[2004]6 WLUK502;B. Hannigan, ‘Drawing bound-
aries between derivative claims and unfairly prejudicial petitions’[2009] Journal of Business Law
606; P.W.Lee, ‘Creditors’ claimsforreective loss’ [2008]Journal of Business Law 479;J. Mukwiri,
‘The no reective loss principle’ (2005) 26 The Company Lawyer 304.
© 2021The Author s. The Modern Law Review published by John Wiley & Sons Ltd on behalf of Modern Law Review Limited.
(2022)85(1)MLR 232–246
Thisis an open access ar ticle under the terms of the CreativeCommons Attr ibution License,which permits use,distr ibution and reproduction
in any medium,provided the original work is properly cited.
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting