In a special two-part NLJ series, Richard Samuel considers the history & likely future of the court’s rulings on shareholder action & reflective loss
- The Supreme Court is due to review the rule on reflective loss this year in Sevilleja Garcia v Marex Financial Ltd.
- The orthodox view is that the rule as currently formulated in the House of Lords’ decision Johnson v Gore Wood is an inflexible rule of law..
- Richard Samuel offers a heterodox view of Johnson as affirming the rule as one of procedure, which should be applied flexibly.
In Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, [1982] 1 All ER 354 at pp222H–223B, the Court of Appeal first established the rule on reflective loss as a means of imposing structure on out-of-control first instance litigation brought by a company’s shareholders as a combination of derivative action and direct action: ‘In our judgment the personal claim is misconceived … what [the shareholder] cannot do is to recover damages merely because the company in which he is interested has suffered damage. He
