26/06/2018

A will o’ the wisp recedes: the rule against reflective loss applies to claims by an unsecured creditor

Carlos Sevilleja Garcia v Marex Financial Limited [2018] EWCA Civ.1468

David Lewis QC and Richard Greenberg report on a significant judgment concerning the rule against reflective loss (the “RL Rule”).

The Court of Appeal has resolved the “as yet undecided question whether the [RL Rule] applies to claims by unsecured creditors who are not shareholders of the relevant company” [1]. The RL Rule now applies to claims by any unsecured creditor of a company.

• The rule against reflective loss bars claims against wrongdoers by any creditors of a company where their loss reflects the company’s loss.
• The rule applies irrespective of the creditors’ cause of action against the wrongdoer, instead focusing on the nature of the loss.

The only exception to the rule is where the wrongdoer has directly caused it to be impossible for the company to bring a claim against the wrongdoer.

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