CL-2024-000271 - [2025] EWHC 2162 (Comm)

Fecha: 15-Ago-2025

Discussion and conclusions

Discussion and conclusions.

43.

In my judgment, TCR suffered its loss, not because its shares were reduced in value, but because it was induced to purchase those shares in the first place. Its claim is not one for the diminution in value of its shareholding, within the rule against reflected loss as enunciated in Marex.

44.

Put another way, TCR’s loss was not suffered in its capacity as a shareholder in TCI, but in its capacity as an investor in TCI.

45.

Moreover, TCR did not suffer its loss at a time at which it had committed to following the fortunes of TCI, within the rule in Foss v Harbottle. As noted, TCR was induced to follow the fortunes of TCI by reason of the conduct of the Defendants which, for present purposes, I must assume to have been fraudulent.

46.

Overall, therefore, I hold that TCR’s claims in relation to what have been termed the stage 1 losses would not have been barred by the rule against reflected loss.

47.

I do not think that the date on which the loss was suffered affects this conclusion one way or the other, although I would accept the submission that the relevant date for these purposes was the date on which the SPA was entered into by TCI. I would have reached this conclusion for the following reasons:

I start with the decision in Forster v Outred. In that case, the Plaintiff executed a mortgage charging her property as security for a loan made to her son, who subsequently went bankrupt. A claim was made on the security on January 1 1975, and the loan was repaid. The Plaintiff sued the solicitors who advised her in relation to the transaction, with the writ being issued in January 1977. After a defence had been served, no steps in the action were taken by the Plaintiff until December 1979, when a notice of intention to proceed was served. An application to dismiss for want of prosecution was issued by the Defendant, and a second writ was issued by the Plaintiff on March 25 1980. The Court of Appeal decided that the cause of action in tort was not complete until damage was suffered, which was in February 1973, when the mortgage was entered into, rendering the Plaintiff potentially liable for financial loss, even though that liability did not mature until later; and the Court therefore held that the action begun by the second writ was time barred, so that the decision of the judge below to strike out the action begun by the first writ was justifiable.

I turn then to the decision in Sephton v Law Society. In that case, a solicitor engaged accountants to sign off on his accounts, which the accountants did for a number of years between 1990 and 1996. The accountants had acted negligently, and the solicitor was able to misappropriate £750,000 of client money. The solicitor’s fraud was discovered and he was struck off the roll. Claims were then made against the Solicitors’ Compensation Fund by clients of the solicitor, and various payments out of the Fund were made. The Law Society then sued the accountants in 2002, claiming that it had relied on the accountants’ reports in deciding not to investigate the solicitor. On a preliminary issue, the first instance judge held that the Law Society’s claim was time barred, because the relevant cause of action had accrued when the Law Society was exposed to the risk of a claim, which was when it received and acted on the accountants’ report. The Court of Appeal and House of Lords reversed that decision, holding that a contingent liability did not constitute damage until the contingency occurred.

48.

In the second of these two cases, Lord Hoffman explained the difference between Sephton and Forster v Outred by quoting the decision of the Australian High Court in Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514:

“17.
The High Court said, at pp 529, 531, 532, that Forster v Outred & Co was explicable:
“by reference to the immediate effect of the execution of the mortgage on the value of the plaintiff's equity of redemption… It has been contended that the principle underlying the English decisions extends to the point that a plaintiff sustains loss on entry into an agreement notwithstanding that the loss to which the plaintiff is subjected by the agreement is a loss upon a contingency. For our part, we doubt that the decisions travel so far. Rather, it seems to us, the decisions in cases which involve contingent loss were decisions which turned on the plaintiff sustaining measurable loss at an earlier time, quite apart from the contingent loss which threatened at a later date… If… the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred.
18.
I say at once that I am in complete agreement with this analysis, which provides the answer to this appeal.”

49.

In my judgment, therefore, the first question is whether there was damage at the moment that TCI entered into obligations, albeit obligations which were subject to conditions subsequent, in December 2008, or whether that damage was only suffered when those various conditions were satisfied in early April 2009. It is my view that TCI suffered loss and damage when it became a party to a potentially onerous contract in the form of the SPA in December 2008, even though it might have been released from the obligations in that contract if the various conditions subsequent were not satisfied or waived. TCR (which is the relevant party, as the alleged assignor of the claim to the Claimant) then suffered loss because it was induced to invest in TCI on 1 January 2009 at the latest by reason of the fraud of the Defendants, which must be assumed to have been committed for the purposes of the present application.

50.

However, I would reiterate that I take the view that this timing point is really of no relevance. I prefer to base my decision on the fact that TCR’s loss is not reflective within the rule against reflective loss.