Claim Right To Be Struck Out On The Principle That Reflective Loss Cannot Be Recovered (Burnford And Ors v Automobile Association Developments Limited)

• Published date: 23 November 2022
• Law Firm: Gatehouse Chambers
• Author: Mr Phillip Patterson

The Court of Appeal has upheld the decision of HHJ Paul Matthews striking out a claim on the basis that the loss claimed was reflective loss which could not be recovered. In so doing, the Court of Appeal has given a useful summary of the relevant authorities in this area.

Burnford and ors v Automobile Association Developments Limited [2022] EWCA Civ 1943

What are the practical implications of this case?

This decision offers a useful summary of a number of recent authorities, including the decision of the Supreme Court in Marex Financial Ltd v Sevilleja [2020] UKSC 31 concerning the circumstances in which a claim can be made for the recovery of reflective loss. Seven points were noted. 1. The "reflective loss" principle applies where a shareholder brings a claim "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"; 2. A shareholder cannot escape the "reflective loss" principle merely by showing that he has an independent cause of action against the defendant. He must also have suffered "separate and distinct" loss, and the law does not...