Naibu Global International Company PLC & Anor v Daniel Stewart & Company PLC & Anor

On an application for strike out or summary judgment, the court must assess whether the claim has a realistic prospect of success without conducting a mini-trial. Where the issue turns on a short point of law or construction, it should decide the issue if the evidence is sufficient.

An implied solicitor-client retainer may arise from conduct where, objectively, the parties’ conduct is consistent only with that relationship. The reflective loss rule bars a shareholder’s claim for diminution in share value or distributions consequent on loss suffered by the company, regardless of whether the losses are pleaded as arising at different times. The rule does not bar distinct expenditure incurred by the shareholder itself.

A claimant owing duties directly to it does not claim under or through another party merely because the duties resemble those owed to that other party.

Naibu Jersey, the holding company of Naibu HK, claimed damages against Pinsent Masons for alleged negligence and breach of duty in connection with the preparation of Naibu Jersey’s flotation on AIM. Naibu HK accepted that its claim should be stayed under the arbitration clause in its retainer with Pinsent Masons.

Pinsent Masons sought strike out or summary judgment of Naibu Jersey’s claim, arguing that there was no implied retainer or tortious duty, that most of the alleged loss was reflective of Naibu HK’s loss, and alternatively that the claim should be stayed because Naibu Jersey claimed under or through Naibu HK. Naibu Jersey sought permission to amend its Particulars of Claim.

The court therefore considered whether the amended claim had a realistic prospect of success, whether the reflective loss rule applied, and whether the arbitration agreement extended to Naibu Jersey.

1. Strike out and summary judgment. The court applied the approach in Easyair v Opal [2009] EWHC 339 (Ch). The claim had to be more than merely arguable, but the court was not to conduct a mini-trial. It could decide a short legal or construction point where the evidence was sufficient.
2. Implied retainer. The relevant question was whether, objectively, the parties’ conduct was consistent only with Pinsent Masons having been retained as Naibu Jersey’s solicitors. The formal flotation documents repeatedly described Pinsent Masons as acting for Naibu Jersey, and internal documents indicated that Naibu Jersey had been opened as a client. Those matters gave the claim a real prospect of success. The strike-out and summary-judgment applications on the implied retainer point were dismissed. It followed, by concession, that the alternative duty-of-care claim also had a real prospect of success.
3. Reflective loss. The court applied the majority reasoning in Sevilleja v Marex Financial [2020] UKSC 31. The decisive question was the nature of the loss claimed by the shareholder, not whether the company’s loss and the shareholder’s loss were identical in amount or arose at precisely the same time. Naibu Jersey’s claimed diminution in the value of its shareholding in Naibu HK, including the alleged loss represented by disbursed flotation proceeds, was reflective loss. Repleading the losses as arising at different stages could not avoid the rule. The claim was therefore struck out except for the costs of steps taken to assert control over and investigate losses suffered by Naibu HK and Naibu China.
4. Arbitration. Section 82(2) of the Arbitration Act 1996 did not apply. Naibu Jersey was not enforcing a right transferred from, or arising under, Naibu HK’s retainer. Its claim was based on duties owed directly to Naibu Jersey, whether under an implied contract or in tort. Similarity between the duties owed to the two companies was insufficient. Pinsent Masons’ application for a stay under section 9 was dismissed.
5. Permission was granted to amend the Particulars of Claim in respect of the three surviving categories of expenditure and investigation costs. Amendment in respect of the struck-out losses was refused.

First-instance decision. No appellate history is stated in the judgment.