By Bryan De Verneuit-Smith, Damian Evans
The English Court of Appeal has clarified in Garcia v Marex Financial Ltd (“Marex”)  EWCA Civ 1468 that the rule against reflective loss does apply to claims by unsecured creditors who are not shareholders in the relevant company.
Marex, a foreign exchange broker, claimed that Mr Sevilleja was the ultimate beneficial owner of two BVI companies who were clients of Marex. Marex sued the two BVI companies and obtained a judgment in its favour against them in excess of US $5million which was handed down on 26 July 2013. It obtained a freezing injunction against them on 14 August 2013 but the disclosure of assets pursuant to the order revealed insufficient assets to satisfy the judgment. Marex claimed that Mr Sevilleja had asset stripped the companies between the date of judgment and the freezing injunction. By doing so Marex claimed that he had committed two torts of knowingly inducing and procuring the companies to act in wrongful violation of Marex’s rights and of intentionally causing loss to Marex by unlawful means. Marex obtained permission to serve proceedings based on these causes of action on Mr Sevilleja outside the jurisdiction. On 5 October 2016 Mr Sevilleja issued his application to set aside service disputing the jurisdiction. In his judgment deciding the jurisdiction challenge Knowles J made two findings which were appealed. The first finding was that Mr Sevilleja had committed the torts as alleged. The second was that Marex was not barred from showing a completed cause of action in tort by the rule against reflective loss. Mr Sevilleja appealed both findings but was only given permission to appeal the second finding relating to the rule against reflective loss.