On 8th May 2019, the Supreme Court heard the case of Sevilleja v Marex Financial Limited, an appeal  against the Court of Appeal’s judgment that a claim by a company’s creditor against an asset-stripping director was precluded by the rule against reflective loss.  The hearing lasted a full day and the panel consisted of seven Justices: Lady Hale, Lord Reed, Lord Hodge, Lady Black, Lord Lloyd-Jones, Lord Kitchin, and Lord Sales.  The Supreme Court heard submissions from the parties with the All Parliamentary Group on Fair Business Banking appearing as an intervener.

Ever since the House of Lords restated the rule in Johnson v Gore-Wood [2002] 2 AC 1 the precise scope of this doctrine has been the subject of debate, with hard cases being decided in what may be seen as an inconsistent manner.  For example in Giles v Rhind [2003] Ch 618 the Court of Appeal had found that a director who prevented a claim against the corporation was not protected by the rule.  However more latterly the Courts have applied the doctrine more liberally, in St Vincent General Partner v Robinson (2018) finding that the rule precluded a claim against a director who not only asset stripped but then who brought about the dissolution of the company concerned.  In the Court of Appeal in Marex Flaux LJ held that the Court of Appeal was bound to follow Gardner v Parker [2004] 2 BCLC and hold that a creditor’s claim was barred by the rule.

In this breakfast seminar Paul Downes QC and Emily Saunderson will examine the scope of the rule and, based on the proceedings before the Supreme Court, seek to anticipate the fate of the appeal.