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Sevilleja v Marex Financial Ltd [2020]

Sevilleja v Marex Financial Ltd [2020] UKSC 31 was a significant case concerning company law and specifically addressed the application of the rule against reflective loss. This rule, which prevents shareholders from claiming losses that merely reflect the company's losses, was scrutinised in this decision to determine if it also barred creditors from making similar claims against third parties that have wronged the company.


The case arose when creditors sought to claim against a third party who had stripped assets from the company, thereby raising the question of whether their claims were precluded because the company was the proper plaintiff under the rule in Foss v Harbottle. The Supreme Court unanimously decided that the rule against reflective loss did not apply to creditors, allowing their claims to proceed. However, the main focus of the judgment was on refining the rule against reflective loss itself, leading to a split decision where the majority of the judges opted for reform rather than abolishment.


The rule against reflective loss has traditionally stated that the proper claimant for a wrong done to a company is the company itself. Shareholders, therefore, cannot claim for losses which are a reflection of a loss to the company, such as a diminution in the value of shares or failure to receive dividends. This principle was reevaluated in the context of whether it should extend beyond shareholders to other parties like creditors.


Significantly, the court affirmed that the rule should remain but only apply to shareholders. They clarified that the rule does not extend to creditors, thereby narrowing its application. This decision marked a critical development in company law, offering clearer boundaries for when the rule against reflective loss applies, especially in the complex landscape of modern financial and corporate transactions. The judgment's refinement of this rule has implications for shareholders and creditors alike, ensuring that the latter can pursue claims independently of the company's right to sue, which is particularly relevant in situations where companies are asset-stripped or otherwise financially manipulated by third parties.


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