The No Reflective Loss Principle in Marex v Sevilleja: One Step Forward, One Step Back

Abstract

In Sevilleja v Marex Financial Ltd, a seven-member panel of the Supreme Court undertook a root-and-branch re-examination of the no reflective loss principle. While the Supreme Court's unanimous rejection of the unprincipled expansion of the rule to creditors represents a welcome development of the law, it was held by a bare four to three majority that a shareholder is not entitled to pursue a personal claim to recover loss flowing from the diminution in share value and a reduction in distributions which the claimant receives as a shareholder. This note questions the majority's claim that the no reflective loss principle is doctrinally rooted in the rule in Foss v Harbottle, explains why the policy considerations cited in support of the principle do not warrant a bright-line exclusionary rule, and argues that the majority's approach should - in the final analysis - be eschewed in favour of the minority's.

Keywords: Company Law, Reflective Loss, Corporate Insolvency, the Rule in Foss v Harbottle