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

Fecha: 15-Ago-2025

TCR’s claims: stage 1

TCR’s claims: stage 1.

31.

TCR’s pleaded claims have been divided into two temporal periods.

The first concerns the claims which TCR had as a result of funding TCI’s initial purchase of GMI’s shares.

The second is the claims which TCR had as a result of entering into the accelerated agreement to purchase Mr Townsley’s shares in TCI.

32.

As the parties have done, I will look at each stage in turn, starting with the first period.

33.

The Third Defendant argued that any loss suffered by TCR in relation to this first stage of the transaction was irrecoverable by virtue of the rule against reflective loss.

34.

I start with the law on this topic. As explained by Lord Reed in Sevilleja v Marex at [79-84], there is a distinction to be drawn between two types of cases:

“79.
Summarising the discussion to this point, it is necessary to distinguish between (1) cases where claims are brought by a shareholder in respect of loss which he has suffered in that capacity, in the form of a diminution in share value or in distributions, which is the consequence of loss sustained by the company, in respect of which the company has a cause of action against the same wrongdoer, and (2) cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss.
80.
In cases of the first kind, the shareholder cannot bring proceedings in respect of the company's loss, since he has no legal or equitable interest in the company's assets: Macaura and Short v Treasury Comrs . It is only the company which has a cause of action in respect of its loss: Foss v Harbottle . However, depending on the circumstances, it is possible that the company's loss may result (or, at least, may be claimed to result) in a fall in the value of its shares. Its shareholders may therefore claim to have suffered a loss as a consequence of the company's loss. Depending on the circumstances, the company's recovery of its loss may have the effect of restoring the value of the shares. In such circumstances, the only remedy which the law requires to provide, in order to achieve its remedial objectives of compensating both the company and its shareholders, is an award of damages to the company.
81.
There may, however, be circumstances where the company's right of action is not sufficient to ensure that the value of the shares is fully replenished. One example is where the market's valuation of the shares is not a simple reflection of the company's net assets, as discussed at para 32 above. Another is where the company fails to pursue a right of action which, in the opinion of a shareholder, ought to have been pursued, or compromises its claim for an amount which, in the opinion of a shareholder, is less than its full value. But the effect of the rule in Foss v Harbottle is that the shareholder has entrusted the management of the company's right of action to its decision-making organs, including, ultimately, the majority of members voting in general meeting. If such a decision is taken otherwise than in the proper exercise of the relevant powers, then the law provides the shareholder with a number of remedies, including a derivative action, and equitable relief from unfairly prejudicial conduct.
82.
As explained at paras 34-37 above, the company's control over its own cause of action would be compromised, and the rule in Foss v Harbottle could be circumvented, if the shareholder could bring a personal action for a fall in share value consequent on the company's loss, where the company had a concurrent right of action in respect of its loss. The same arguments apply to distributions which a shareholder might have received from the company if it had not sustained the loss (such as the pension contributions in Johnson ).
83.
The critical point is that the shareholder has not suffered a loss which is regarded by the law as being separate and distinct from the company's loss, and therefore has no claim to recover it. As a shareholder (and unlike a creditor or an employee), he does, however, have a variety of other rights which may be relevant in a context of this kind, including the right to bring a derivative claim to enforce the company's rights if the relevant conditions are met, and the right to seek relief in respect of unfairly prejudicial conduct of the company's affairs.
84.
The position is different in cases of the second kind. One can take as an example cases where claims are brought in respect of loss suffered in the capacity of a creditor of the company. The arguments which arise in the case of a shareholder have no application. There is no analogous relationship between a creditor and the company. There is no correlation between the value of the company's assets or profits and the “value” of the creditor's debt, analogous to the relationship on which a shareholder bases his claim for a fall in share value. The inverted commas around the word “value”, when applied to a debt, reflect the fact that it is a different kind of entity from a share.”

35.

I was also referred in this context to the discussion of the rule in Premio Fund v Bank of Bermuda [2021] UKPC 22 which reiterated the law as set out in Marex.

36.

Building on this, the Third Defendant submitted as follows:

The earliest time at which loss could have been suffered by TCI was when it entered into the GMI SPA, i.e. 18 December 2008. It was submitted, as I have noted, that I should infer that by this time TCR had acquired the entire issued share capital in TCI, namely 2 paid up shares. Certainly, it was said, I was in as good a position as any trial judge to determine this since there would be no further material available at trial. Accordingly, if TCI suffered loss as at that date, because it was committed to purchasing shares in GMI which were not worth what it was obliged to pay for them, then TCR was already the sole shareholder in TCI and their loss mirrored, or reflected, that of TCI.

In fact, said the Third Defendant, neither TCI nor TCR suffered loss upon TCI entering into the GMI SPA, because the GMI SPA was subject to conditions, many of which were within the control of third parties. It was only, said the Third Defendant, when the conditions were all satisfied (or waived) and the contract became unconditional, that the loss was suffered. Before that, there was no definite loss and no accrued cause of action: see Sephton v Law Society [2006] UKHL 22. By that time, following the injection of the further cash in April 2009, TCR had clearly become the sole shareholder of TCI. Indeed, it is because that cash was injected, that TCI was in a position to proceed with the purchase of the GMI shares.

Therefore, TCR was already the sole shareholder of TCI before TCI suffered loss as a result of the Defendants’ alleged deceit – whether that loss was suffered on 18 December 2008 when the GMI SPA was entered into, or on or around 6 April 2009 when the conditions of the GMI SPA required to be met for its completion were met. As such, TCR had already committed to following the fortunes of TCI as its sole shareholder by the time TCI suffered loss as a result of the Defendants’ alleged deceit, whether that was on 18 December 2008 or on or around 6 April 2009.

37.

For its part, the Claimant submitted as follows:

TCR suffered damage when it:

Entered into the Option agreement on 18 December 2008 to acquire the Seller Consideration Shares for a sum not less than £15,863,000; and

ii.

Acquired its interest in TCI on 6 April 2009 for the sum of £21,919,000.

At neither of those stages was TCR a shareholder of TCI - in both instances TCR was either becoming a shareholder or contracting to become a shareholder. For the avoidance of doubt, the fact that TCR became a shareholder of TCI later does not engage the rule against reflective loss retrospectively.

38.

Neither are TCR’s losses merely reflective of the diminution in the value of TCI’s shares. On the pleaded case, had it known the truth TCR would not have entered into those transactions or entered into them on much reduced terms. Paying more for shares than they are worth is not a diminution in the value of those shares but an immediate, separate and distinct loss.

39.

Finally, the fact that TCI would undoubtedly have had its own causes of action against the Defendants (and that such causes of action might well have involved substantially similar losses) is immaterial.

40.

That merely requires the Court to manage recovery to ensure no double recovery (not relevant here given TCI’s liquidation) and is the second category of case in Lord Reed’s analysis in Marex.

41.

Overall, therefore, the short answer to the Defendant’s point was that, irrespective of the “timing” points, TCR’s claims (which had been assigned to the Claimant) did not come within the first of Lord Reed’s categories in paragraph 79 of Marex. These were not claims made by a shareholder in respect of the diminution in value of its shareholding caused by a wrong in respect of which the company had a cause of action, and which had to be pursued by the company and not the shareholder by reason of the rule in Foss v Harbottle. Instead, these claims fell within the second of Lord Reed’s categories. The nub of the claim was that TCR had been induced to inject money into TCI and buy shares in order to enable TCI to make a purchase of the GMI shares, which injection would never have been made had it not been for the deceit practised on TCR (a deceit which, for the purposes of this application, I must assume was indeed practised).

42.

As regards the timing points, these were in reality irrelevant. However, insofar as they were of any relevance:

TCI’s loss was suffered at the time it became committed to purchase the GMI shares in December 2008. This was so despite the fact that the various conditions might not have been satisfied, because a loss was suffered simply upon the entering into of a potentially onerous transaction: see Forster v Outred [1982] 1 WLR 86.

At that moment, the principal loss claimed by TCR as at stage 1 (i.e. the further cash injection into TCI in April 2009) had not been suffered. Accordingly, it could not be the case that the causes of action of principal and subsidiary were the same.

In April 2009, the losses suffered by TCR were due to the continuance of the deceit being practised upon it.