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Marex Financial Ltd v Sevilleja

Marex Financial Ltd v Sevilleja

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Trinity Term

[2020] UKSC 31
On appeal from: [2018] EWCA Civ 1468

Appellant Respondent

George Bompas QC David Lewis QC

Sophie Weber Richard Greenberg

(Instructed by Memery

(Instructed by Mackrell

Crystal LLP) Turner Garrett)

Intervener (All Party

Parliamentary Group on Fair Business Banking)
Peter Knox QC
Simon Reevell
Richard Samuel
Amit Karia

Chloe Shuffrey

(Instructed by Trowers & Hamlins LLP (London))

LORD REED: (with whom Lady Black and Lord Lloyd-Jones agree)

1. This appeal concerns the supposed principle that “reflective loss” cannot be recovered. Before describing the factual background, or entering into the details of the legal issues, it may be helpful to begin by considering some basic principles of our law.

Introduction

2. It is not uncommon for two persons, A and B, to suffer loss as a result of the conduct of a third person, C. If that conduct was in breach of an obligation owed by C to A, then A will in principle have a cause of action against C. If the conduct was also in breach of an obligation owed by C to B, then B will also have a cause of action against C. A and B are both at liberty to sue C whenever they please, subject to rules as to limitation and prescription, and C is normally liable to compensate them both for the loss which they have suffered. If A obtains and enforces a pecuniary award against C, and some time later B also seeks a similar award but C is unable to pay it, then in principle that is B’s misfortune. However, where C is insolvent at the time when the first claim is made against him, the law of insolvency protects the position of both A and B by imposing a regime for the distribution of C’s assets among his creditors which ensures that they are treated equally, after the claims of secured or preferred creditors have been met.

3. The position can become more complicated where A and B have concurrent claims in respect of losses which are inter-related in such a way that a payment by C to one of them will have the practical effect of remedying the loss suffered by the other. The general position in situations of that kind was described by Brandon J in The Halcyon Skies [1977] QB 14, 32:

“There is no reason, as a matter of law, why two different persons should not have concurrent rights of recovery, based on different causes of action, in respect of what is in substance the same debt. The court will not allow double recovery or, in a case of insolvency, double proof against the insolvent estate: The Liverpool (No 2) [1963] P 64. Subject to this, however, either of the two persons is entitled to enforce his right independently of the other.”

4. The principle that double recovery should be avoided does not prevent a claimant from bringing proceedings for the recovery of his loss. But the court will have to consider…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] UKSC 31
Decision Date

CaseChat Overview and Summary

This appeal concerns the principle that "reflective loss" cannot be recovered. Marex Financial Ltd brought proceedings against Sevilleja, the owner of two companies, Creative Finance Ltd and Cosmorex Ltd, for losses arising from the Companies' insolvency. The Companies had been found liable to Marex for more than US$5.5 million and Marex had obtained judgment against them. However, Mr Sevilleja had transferred more than US$9.5 million from the Companies' accounts offshore, preventing Marex from receiving payment. Marex brought proceedings against Mr Sevilleja, claiming damages for inducing or procuring the violation of its rights under the judgment and order of Field J dated 25 July 2013, and intentionally causing it to suffer loss by unlawful means. Mr Sevilleja argued that Marex's claim was barred by the "reflective loss" principle. The Court of Appeal held that the principle applied to about 90% of Marex's claim. Marex appealed to the Supreme Court.

The Supreme Court considered the legal issues, which were whether the "reflective loss" principle applied to claims by company creditors and whether there was any scope for permitting claims where there would otherwise be injustice to the claimant through inability to recover, or practical difficulty in recovering, genuine losses intentionally inflicted on the claimant by the defendant. The Court discussed the "reflective loss" principle, which was established in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) and Johnson v Gore Wood & Co. It concluded that the principle was not as broad as the Court of Appeal had interpreted it and that it did not apply to claims by creditors of a company. The Court held that Marex's claim against Mr Sevilleja could proceed.

The Supreme Court's decision clarifies the scope of the "reflective loss" principle and provides guidance on when claims by creditors of a company can proceed despite the company also having a claim against the same defendant. The Court's judgment highlights the importance of distinguishing between claims by shareholders and claims by creditors, and that the "reflective loss" principle does not apply to claims by creditors. This decision provides certainty for creditors of companies who have suffered loss due to the wrongful acts of a third party.

Orders