Reflective loss
Reflective loss

The following Dispute Resolution guidance note provides comprehensive and up to date legal information covering:

  • Reflective loss
  • Summary of the rule against reflective loss
  • Reasons for the rule
  • How the rule has evolved
  • Practical considerations
  • Further reading

This Practice Note considers the scope of the reflective loss rule. It addresses the background to and implications of the rule against reflective loss with reference to the key decisions responsible for its development, including Prudential Assurance v Newman Industries, Johnson v Gore Wood, Giles v Rhind and Garcia v Marex. It also sets out a number of practical issues concerning the rule which it is sensible to have in mind in the event that you are acting for a shareholder or creditor and/or are involved in a claim where the rule might be relevant.

For further details on key and/or illustrative cases concerning the rule against reflective loss, see Practice Note: Reflective loss illustrated—key decisions.

Summary of the rule against reflective loss

The rule has its origins in the principle derived by the case Foss v Harbottle, ie where an actionable wrong has been done to a company, the company is the proper claimant to recover any loss resulting from such wrong. In other words, where a breach of duty owed to a company causes it loss, only the company may sue in respect of that loss.

Where an individual has also suffered loss stemming from that wrong, the courts will consider whether that loss might be made good if the company pursued the claim available to it. If so, then