Andrew Breeze and Dominic Wilson v The Chief Constable of Norfolk Constabulary

The reflective loss rule is a narrow company-law rule which prevents a shareholder recovering a diminution in share value or distributions where the loss reflects loss suffered by the company. The Giles v Rhind exception was no longer available after the Supreme Court’s decision in Sevilleja v Marex Financial Ltd. Re-labelling the loss as sale proceeds, a loss crystallising on dissolution, or a loss transferred on dissolution does not create a separate recoverable loss. Claims for remuneration may proceed where they concern employment rights independent of share ownership.

The claimants, former directors and majority shareholders of companies providing private mental-health care, brought claims in malicious prosecution and misfeasance in public office following their acquittal on conspiracy-to-defraud charges. They claimed substantial business losses said to arise from the destruction and insolvency of the corporate group.

The defendant applied to strike out reliance on the Giles v Rhind exception to reflective loss. The claimants sought permission, many years after issue, to re-amend their Particulars of Claim to recast losses as losses from a favourable sale, extinguished shares, former shareholdings, indirect shareholdings, remuneration and reputational damage.

1. The defendant’s strike-out application succeeded insofar as it concerned reliance on Giles v Rhind. The Supreme Court in Sevilleja v Marex Financial Ltd had treated the issue as one for determination and held that no such exception existed.

2. The proposed claim for loss of a favourable sale was not separate and distinct from diminution in share value. Losses could not be avoided by re-labelling them as sale proceeds or losses on dissolution. The forward-looking approach in Primeo Fund also prevented conversion of an irrecoverable shareholder loss into a recoverable one.

3. The proposed former-shareholder claims had no reasonable grounds in the factual circumstances. The approach in Nectrus Ltd v UCP plc was not accepted, and the factual circumstances in Allianz Global GmbH v Barclays Bank plc were materially different.

4. The indirect-shareholder claims were not shown to be bound to fail on strike out, but lacked the realistic prospects and clarity required for permission to amend.

5. The proposed remuneration claims had a realistic prospect of success where they concerned employee, director or executive remuneration independent of share ownership. They were allowed to proceed in a properly circumscribed form.

6. The proposed reputational-loss claims were vague, insufficiently particularised and lacked a realistic prospect of success. They were refused.

7. Minor uncontroversial corrections and clarifications were allowed. The remaining amendments were refused because of poor prospects, delay, lack of clarity and disproportionate use of court resources.