Sevilleja v Marex Financial Ltd

JurisdictionEngland & Wales
CourtSupreme Court
JudgeLord Reed,Lady Hale,Lord Sales,Lady Black,Lord Lloyd-Jones,Lord Hodge,Lord Kitchin
Judgment Date15 July 2020

[202] UKSC 31

Supreme Court.

Lady Hale, Lord Reed, Lord Hodge, Lady Black, Lord Lloyd-Jones, Lord Kitchin and Lord Sales.

Marex Financial Ltd.

George Bompas QC and Sophie Weber (instructed by Memery Crystal LLP) for the appellant.

David Lewis QC and Richard Greenberg (instructed by Mackrell Turner Garrett) for the respondent.

Peter Knox QC, Simon Reevell, Richard Samuel, Amit Karia and Chloe Shuffrey (instructed by Trowers and Hamlins LLP) for the All Party Parliamentary Group on Fair Business Banking, intervening.

The following cases were referred to in the judgment:

Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518; [2000] CLC 1604.

Alico Life International Ltd v Thema International Fund plc [2016] IEHC 363.

Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656.

Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221; [1998] CLC 520.

Barings plc v Coopers & Lybrand [1997] 1 BCLC 427.

Birch v Cropper (1889) 14 App Cas 525.

Chen v Karandonis [2002] NSWCA 412.

Christensen v Scott [1996] 1 NZLR 273.

Creative Finance Ltd (in liquidation), Re (2016) 543 BR 498.

Duncan Fox & Co v North & South Wales Bank (1880) 6 App Cas 1.

Edwards v Halliwell [1950] 2 All ER 1064.

Foss v Harbottle (1843) 2 Hare 461; 67 ER 189.

Freeman v Ansbacher Trustees (Jersey) Ltd [2009] JRC 003; [2009] JLR 1.

Gardner v Parker [2004] EWCA Civ 781; [2004] 2 BCLC 554.

George Fischer (Great Britain) Ltd v Multi Construction Ltd [1995] 1 BCLC 260.

Gerald Cooper Chemicals Ltd, Re [1978] Ch 262.

Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443.

Giles v Rhind [2002] EWCA Civ 1428; [2003] Ch 618.

Golden Strait Corp v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] UKHL 12; [2007] 1 CLC 352; [2007] 2 AC 353.

Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215.

Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286.

Halcyon Skies, The [1977] QB 14.

Heron International Ltd v Lord Grade [1983] BCLC 244.

Hodges v Waters (No. 7) (2015) 232 FCR 97.

International Leisure Ltd v First National Trustee Co UK Ltd [2012] EWHC 1971 (Ch); [2013] Ch 346.

Johnson v Gore Wood & Co [2002] 2 AC 1.

JT Stratford & Son v Lindley [1965] AC 269.

Latin American Investments Ltd v Maroil Trading Inc [2017] EWHC 1254 (Comm); [2017] 2 CLC 45.

Lee v Sheard [1956] 1 QB 192.

Liverpool (Owners) (Steamship Enterprises of Panama Inc) v Ousel (Owners) (The Liverpool) (No. 2) [1963] P 64.

Lumley v Gye (1853) 2 El & Bl 216; 118 ER 749.

Macaura v Northern Assurance Co Ltd [1925] AC 619.

Moule v Garrett (1872) LR 7 Ex 101.

O'Neill v Phillips [1999] 1 WLR 1092.

O'Sullivan v Williams [1992] 3 All ER 385.

OBG Ltd v Allan [2007] UKHL 21; [2008] AC 1.

Peak Hotels and Resorts Ltd v Tarek Investments Ltd [2015] EWHC 3048 (Ch).

Perry v Day [2004] EWHC 3372 (Ch); [2005] 2 BCLC 405.

Primeo Fund v Bank of Bermuda (Cayman) Ltd (Court of Appeal of the Cayman Islands, 13 June 2019).

Prudential Assurance Co Ltd v Newman Industries Ltd (No. 2) [1981] Ch 257; [1982] Ch 204 (CA).

Salomon v A Salomon & Co Ltd [1897] AC 22.

Shaker v Al-Bedrawi [2002] EWCA Civ 1452; [2003] Ch 350.

Short v Treasury Commrs [1948] 1 KB 116 (CA); [1948] AC 534 (HL).

Stein v Blake [1998] 1 All ER 724.

Swynson Ltd v Lowick Rose LLP [2017] UKSC 32; [2017] 1 CLC 764; [2018] AC 313.

Townsing v Jenton Overseas Investment Pte Ltd [2007] SGCA 13; [2008] 1 LRC 231.

Waddington Ltd v Thomas [2008] HKCU 1381; [2009] 2 BCLC 82.

Xie Zhikun v Xio GP Ltd (Cayman Islands Court of Appeal, 14 November 2018).

Service Out Of Jurisdiction — tort — company Law — reflective Loss Principle — foreign Exchange Trading — appellant Broker Obtained Judgment Against Bvi Companies Owned And Operated By Respondent Individual For Foreign Exchange Trading — appellant Alleging That Respondent Procured Transfer Of Companies' Funds Offshore So That They Could Not Satisfy Judgment — appellant Brought Proceedings Against Respondent For Torts Of Procuring Companies To Act In Wrongful Violation Of Rights Under Judgment And Intentionally Causing Loss By Unlawful Means — whether Appellant's Claim As Creditor Barred By Rule Against Reflective Loss.

This was an appeal against a decision ([2018] EWCA Civ 1468;[2018] 2 CLC 150) that the appellant's claims were barred by the ‘reflective loss principle’ identified inPrudential Assurance Co Ltd v Newman Industries Ltd (No. 2)[1982] Ch 204 (CA)and explained inJohnson v Gore Wood & Co[2002] 2 AC 1.

The respondent individual was the owner and controller of two companies incorporated in the British Virgin Islands, which he used as vehicles for trading in foreign exchange. The appellant company, Marex, obtained judgment against the companies for more than US$5.5m with costs of £1.65m. Before the judgment was handed down, the respondent procured that more than US$9.5m was transferred offshore from the companies' London accounts and placed under his personal control. The companies then went into insolvent liquidation in the BVI.

Marex brought proceedings against the respondent seeking damages in tort for inducing or procuring the violation of its rights under the judgment and intentionally causing it to suffer loss by unlawful means. It claimed the amount of the judgment debt, interest and costs, and costs incurred by it in seeking to obtain payment of the judgment debt.

The respondent applied to set aside an order giving permission for service of the proceedings on him out of the jurisdiction. He argued that Marex did not have a good arguable case against him because the losses which Marex was seeking to recover were merely reflective of loss suffered by the two companies which had concurrent claims against him. The judge held that Marex had a good arguable case that its claim was not precluded by the ‘reflective loss’ principle, and therefore dismissed the respondent's application: [2017] EWHC 918 (Comm); [2017] 4 WLR 105. On appeal, the Court of Appeal accepted that the ‘reflective loss’ principle applied to the major part of Marex's claim:[2018] EWCA Civ 1468; [2018] 2 CLC 150; [2019] QB 173. The result was that Marex could pursue its claim only as regards the part of its alleged losses which were conceded not to be ‘reflective’.

The issues on appeal were whether the no reflective loss rule applied to claims by creditors, and whether there was an exception where there would otherwise be injustice to the claimant through inability to recover.

Held, allowing Marex's appeal:

(Per Lord Reed, Lady Black, Lord Lloyd-JonesandLord Hodge)

1. It was necessary to distinguish between (i) cases where claims were brought by a shareholder in respect of loss which he had suffered in that capacity, in the form of a diminution in share value or in distributions, which was the consequence of loss sustained by the company, in respect of which the company had a cause of action against the same wrongdoer, and (ii) cases where claims were brought, whether by a shareholder or by anyone else, in respect of loss which did not fall within that description, but where the company had a right of action in respect of substantially the same loss. In cases of the first kind, the shareholder could not bring proceedings in respect of the company's loss, since he had no legal or equitable interest in the company's assets. It was only the company which had a cause of action in respect of its loss. Where a company suffered actionable loss, and that loss resulted in a fall in the value of its shares, or in its distributions, the fall in share value, or in distributions, was not a loss which the law recognised as being separate and distinct from the loss sustained by the company. For that reason that it did not give rise to an independent claim to damages on the part of the shareholders. (Foss v Harbottle(1843) 2 Hare 461; 67 ER 189applied;Macaura v Northern Assurance Co Ltd[1925] AC 619andShort v Treasury Commrs[1948] AC 534followed;Prudential Assurance Co Ltd v Newman Industries Ltd (No. 2)[1982] Ch 204explained;Johnson v Gore Wood & Co[2002] 2 AC 1considered.)

2. In cases of the second kind, there was no conflict with the rule in Foss v Harbottle and, where the risk of double recovery arose, how it should be avoided would depend on the circumstances. The rule in Prudential was limited to claims by shareholders that, as a result of actionable loss suffered by their company, the value of their shares, or of the distributions they received as shareholders, had been diminished. Other claims, whether by shareholders or anyone else, should be dealt with in the ordinary way. (Giles v Rhind[2002] EWCA Civ 1428; [2003] Ch 618, Perry v Day[2004] EWHC 3372 (Ch); [2005] 2 BCLC 405andGardner v Parker[2004] EWCA Civ 781; [2004] 2 BCLC 554overruled.)

3. The rule in Prudential had no application to the present case, since it did not concern a shareholder, and no question arose of a possible exception to the rule. It followed that Marex should be permitted to pursue the entirety of its claim.

(Per Lord Sales, Lady Hale and Lord Kitchin) The reasoning in Johnson, in so far as it endorsed the reflective loss principle identified in Prudential as a principle debarring shareholders from recovery of personal loss which was different from the loss suffered by the company, ought not to be followed. Even if the principle was to be preserved in relation to claims by shareholder claimants, it should not be extended to exclude otherwise valid claims made by a person who was a creditor of the company. Thus, the reflective loss principle, if it existed, would not apply to the claims of Marex.

Lord Reed (with whom Lady Black and Lord Lloyd-Jones agreed):

1. This appeal concerns the supposed principle that ‘reflective loss’ cannot be recovered. Before describing the factual background, or entering into the details of the legal issues, it may be helpful to begin by considering some basic principles of our law.


2. It is not uncommon for two persons, A and...

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