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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.

Key points

  • 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.

The full 20 Essex Street bulletin is attached. 

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