“15…. If the effect of any less advantageous FX transaction was to lower the NAV of the Investment Fund, and an investor’s investment was redeemed or withdrawn in whole or in part at a price affected by the less advantageous FX transaction, that Investment Fund will have avoided all or part of its loss, or alternatively passed on all part of its loss to the investor. 16. Further or alternatively, any Investment Fund does not have standing to sue in respect of any loss which was avoided by being transferred, or alternatively passed on, from the Investment Fund to a former investor. 17. Further or alternatively, in such circumstances, it would be necessary to avoid the risk of recovery by both the redeeming or withdrawing investor and the Investment Fund, which would result in double recovery.”
“It was apparent from the manner in which [the Banks] presented their arguments (and expressly accepted by leading counsel for [the Banks] in his oral submissions) that a successful plea of pass-on required that the person to whom the loss had been passed on had his own right to sue in respect of that loss. This is not a feature of other types of mitigation but is a feature of “pass-on” mitigation.”
“In essence [the Funds] say that whenever an investor redeems or withdraws his investment the only legal entity with title to sue in respect of the alleged wrongdoing by [the Banks] is the investment fund, not the investor. The suggested “pass-on” would therefore entitle [the Banks] to escape liability. This is not accepted by [the Banks] who say that the investors to whom a loss has been passed on have their own cause of action.”
“The reasonable man would regard him as having suffered a loss and I can see no reason why the court should not also regard him as having suffered a loss”. iv) The Judge summarised his conclusion at [79] as follows: “…English law allows a beneficiary to sue where a duty owed to him has been breached and he has thereby been caused to suffer a loss. Article 101 [TFEU] andsection 2 of the Competition Act 1998 provide the relevant duty, it is assumed that it has been broken and, for the reasons I have endeavoured to describe, it has, on the assumptions the court must make on this application, caused the beneficiary to suffer loss.”
“Where a limited partnership has a claim against a third party that claim is a partnership asset which must be brought by the general partner in the name of the partnership as a whole; see Certain Limited Partners v Henderson PFI Secondary Fund[2013] QB 934 at paragraphs 26 and 34 per Cooke J. However, I am concerned with an investor/partner who has redeemed or withdrawn his investment. As with the beneficiary of a trust and as with a shareholder in a company the relevant duty is owed to all persons, including the limited partner. If a wrongdoer causes damage to the partnership the financial interests of the limited partners are also affected and if a limited partner redeems or his withdraws his investment he thereby crystallises his loss. I do not consider that he is disabled in English law from bringing his own claim as an ex-partner. He would not be suing as a partner…”
“A shareholder which suffers a loss in the form of a diminution of value of its shareholding which is not recoverable as a result of the application of the reflective loss rule cannot later convert that loss into one which is recoverable simply by selling its shareholding. It is necessary to focus on the nature of the loss in respect of which the shareholder’s claim is made. It is not enough to consider the position as at the date of the issue of proceedings without regard to the nature of the loss and a consideration of whether it is, in the eyes of the law, separate and distinct from that of the company.”
“…this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to the neglect to take such steps. As James L.J. indicates, this second principle does not impose on the plaintiff an obligation to take any steps which a reasonable and prudent man would not ordinarily take in the course of his business. But when in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.”
“The reason Referring to Bradburn v Great Western Ry. Co. L.R 10 Ex 1. …was that it was not the accident, but a contract wholly independent of the relation between the plaintiff and the defendant, which gave the plaintiff his advantage”
“The general rule is that loss which has been avoided is not recoverable as damages, although expense reasonably incurred in avoiding it may be recoverable as costs of mitigation. To this there is an exception for collateral payments (res inter alios acta), which the law treats as not making good the claimant’s loss. It is difficult to identify a single principle underlying every case. In spite of what the latin tag might lead one to expect, the critical factor is not the source of the benefit in a third party but its character. Broadly speaking, collateral benefits are those whose receipt arose independently of the circumstances giving rise to the loss. Thus a gift received by the claimant, even if occasioned by his loss, is regarded as independent of the loss because its gratuitous character means that there is no causal relationship between them. The same is true of a benefit received by right from a third party in respect of the loss, but for which the claimant has given a consideration independent of the legal relationship with the defendant from which the loss arose. Classic cases include loss payments under an indemnity insurance: Bradburn v Great Western Railway Co (1874-5) LR 10 Ex 1. Or disability pensions under a contributory scheme: Parry v Cleaver[1970] AC 1 . In cases such as these, as between the claimant and the wrongdoer, the law treats the receipt of the benefit as tantamount to the claimant making good the loss from his own resources, because they are attributable to his premiums, his contributions or his work. The position may be different if the benefits are not collateral because they are derived from a contract (say, an insurance policy) made for the benefit of the wrongdoer: Arab Bank Plc v John D Wood Commercial Ltd[2000] 1 WLR 857 (CA), at paras 92-93 (Mance LJ). Or because the benefit is derived from steps taken by the Claimant in consequence of the breach, which mitigated his loss: British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Ltd[1912] AC 673 , 689, 691 (Viscount Haldane LC). These principles represent a coherent approach to avoided loss. In Parry v Cleaver, at p 13, Lord Reid derived them from considerations of “justice, reasonableness and public policy”
“There are sound reasons for taking account of pass-on in the calculation of damages for breach of competition law. Not only is it required by the compensatory principle but also there are cases where there is a need to avoid double recovery through claims in respect of the same overcharge by a direct purchaser and by subsequent purchasers in a chain, to whom an overcharge has been passed on in whole or in part.”
“But the question of legal causation is straightforward in the context of retail business in which the merchant seeks to recover its costs in its annual or other regular budgeting. The relevant question is a factual question: has the claimant in the course of its business recovered from others the costs of the MSC, including the overcharge contained therein? The merchants, having acted reasonably, are entitled to recover their factual loss. If the court were to conclude on the evidence that the merchant had by reducing the cost of its supplies or by the pass-on of all the cost to its customers…transferred all or part of its loss to others, its true loss would not be the prima facie measure of the overcharge but a lesser sum.”
“9…It was decided in the case of Prudential Assurance Co Ltd v Newman Industries Ltd (No 2)[1982] Ch 204 that a shareholder cannot bring a claim in respect of a diminution in the value of his shareholding, or a reduction in the distributions which he receives by virtue of his shareholding, which is merely the result of a loss suffered by the company in consequence of a wrong done to it by the defendant, even if the defendant’s conduct also involved the commission of a wrong against the shareholder, and even if no proceedings have been brought by the company. As appears from that summary, the decision in Prudential established a rule of company law, applying specifically to companies and their shareholders in the particular circumstances described, and having no wider ambit. 10. The rule in Prudential, as I shall refer to it, is distinct from the general principle of the law of damages that double recovery should be avoided. In particular, one consequence of the rule is that, where it applies, the shareholder’s claim against the wrongdoer is excluded even if the company does not pursue its own right of action, and there is accordingly no risk of double recovery. That aspect of the rule is understandable on the basis of the reasoning in Prudential, since its rationale is that, where it applies, the shareholder does not suffer a loss which is recognised in law as having an existence distinct from the company’s loss. On that basis, a claim by the shareholder is barred by the principle of company law known as the rule in Foss v Harbottle (1843) 2 Hare 461: a rule which (put shortly) states that the only person who can seek relief for an injury done to a company, where the company has a cause of action, is the company itself.”
“As I understand [the reasoning in Prudential], what that court meant, put shortly, was that where a company suffers actionable loss, and that loss results in a fall in the value of its shares (or in its distributions), the fall in share value (or in distributions) is not a loss which the law recognises as being separate and distinct from the loss sustained by the company. It is for that reason that it does not give rise to an independent claim to damages on the part of the shareholders.”
“It would be necessary, for example, to take account of the fact that the wrongdoing had resulted in the company’s acquiring an asset, namely its right of action against the defendant, which might have offset any detrimental effect of the wrongdoing on the value of his shares. It would also be necessary to consider the question of double recovery, and how it should be addressed both procedurally and substantively. Those issues might have to be addressed in the context of a proliferation of claims, possibly in different proceedings, at different times, and in different jurisdictions. They would also arise in a context where there might well be conflicts of interest between the shareholder and the company’s directors, its liquidator, other shareholders, and creditors.”
“79. Summarising the discussion to this point, it is necessary to distinguish between (1) cases where claims are brought by a shareholder 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, and (2) cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss. 80. In cases of the first kind, the shareholder cannot bring proceedings in respect of the company’s loss, since he has no legal or equitable interest in the company’s assets…. It is only the company which has a cause of action in respect of its loss: Foss v Harbottle. However, depending on the circumstances, it is possible that the company’s loss may result (or, at least, may be claimed to result) in a fall in the value of its shares. Its shareholders may therefore claim to have suffered a loss as a consequence of the company’s loss. Depending on the circumstances, the company’s recovery of its loss may have the effect of restoring the value of the shares. In such circumstances, the only remedy which the law requires to provide, in order to achieve its remedial objectives of compensating both the company and its shareholders, is an award of damages to the company. 81. There may, however, be circumstances where the company’s right of action is not sufficient to ensure that the value of the shares is fully replenished. One example is where the market’s valuation of the shares is not a simple reflection of the company’s net assets…. Another is where the company fails to pursue a right of action which, in the opinion of a shareholder, ought to have been pursued, or compromises its claim for an amount which, in the opinion of a shareholder, is less than its full value. But the effect of the rule in Foss v Harbottle is that the shareholder has entrusted the management of the company’s right of action to its decision-making organs, including, ultimately, the majority of members voting in general meeting. If such a decision is taken otherwise than in the proper exercise of the relevant powers, then the law provides the shareholder with a number of remedies, including a derivative action, and equitable relief from unfairly prejudicial conduct. 82. …[T]he company’s control over its own cause of action would be compromised, and the rule in Foss v Harbottle could be circumvented, if the shareholder could bring a personal action for a fall in share value consequent on the company’s loss, where the company had a concurrent right of action in respect of its loss. The same arguments apply to distributions which a shareholder might have received from the company if it had not sustained the loss…. 83. The critical point is that the shareholder has not suffered a loss which is regarded by the law as being separate and distinct from the company’s loss, and therefore has no claim to recover it. As a shareholder (and unlike a creditor or an employee), he does, however, have a variety of other rights which may be relevant in a context of this kind, including the right to bring a derivative claim to enforce the company’s rights if the relevant conditions are met, and the right to seek relief in respect of unfairly prejudicial conduct of the company’s affairs.”
“Testing the application of the reflective loss rule at the time when proceedings are brought rather than at the time the relevant loss is suffered would lead to other strange consequences, as Mr Smith pointed out. To say, as R1 and R2 do, that the test applies when the claim is brought by a person who happens to be a shareholder at that time and where there may happen to be some relationship between what he recovers by his claim and what the company recovers by its claim, would produce strange and unprincipled results which in fact undermine the Marex principle itself and the values it protects: (a) what if the shareholder commences proceedings at a time before the company appreciates it has a claim of its own or before it commences its claim? It seems that on Mr Gillis’s argument the shareholder should succeed if its claim can be progressed fast enough, but this is contrary to the point in Marex that the rule is a substantive rule of law; (b) it leads to the conclusion, per Flaux LJ in Nectrus, that the shareholder can sell its shareholding and then seek to vindicate its own causes of action against the wrongdoer; but this would make the reflective loss rule easy to circumvent and would subvert its intended effect, since the wrongdoer would be wary of settling with the company for fear that, by selling its shares, a shareholder and prospective claimant could free itself to pursue its own claims; (c) it would mean that where the company’s claim comes to be statute-barred, the shareholder’s claim can be pursued; but such an event cannot change the proper characterisation of the loss suffered by the shareholder for the purposes of the substantive rule stated in Marex; (d) it would imply that if the company happened to settle its claim quickly, the shareholder could at that point bring its distinct claim; but, again, it is difficult to see how that event could change the proper characterisation of the loss suffered by the shareholder for the purposes of that substantive rule. 63. Overall, to test the application of the reflective loss rule at the time when proceedings are brought rather than when the loss is suffered would have the effect of making the wrongdoer very wary of settling with the company, if the practical outcome of doing so is made uncertain and precarious by the future conduct of the company and shareholder and the vagaries of procedural law. That would undermine the intended effect of the rule (reflecting the rule in Foss v Harbottle), which is to ensure that the company has a full opportunity to decide how to pursue its own cause of action, where properly identified as such, and to obtain as good value from it as is possible. It would also undermine the certainty of effect which the reflective loss rule is intended to achieve, as a bright line rule of law: cf Marex¸ para 38 (Lord Reed).”
“Where….a flawed transaction is objectively less valuable from the start, it seems to me that the cause of action accrues at the outset. If negligence on the part of a solicitor served to reduce the market value of an asset, the claimant cannot, in my view, defer the expiry of the limitation period by pointing out that he was not intending to sell it. It is one thing to say that someone suffered damage because he did not get what he wanted regardless of whether what he got was objectively as valuable; It is another to say that someone who, looking at matters objectively, has sustained a financial loss has not yet suffered relevant damage and so could not bring a claim…Where a claimant can be seen to be “financially worse off”, because an asset has a lower market value, relevant damage will, I think, have been suffered whatever the claimant was intending to do with the asset.”
“The pension fund is not a corporate body but a trust, whose assets are vested in the trustees for the time being. Similar principles apply. If there is a cause of action against a third party for causing loss to the trust fund, it is vested in the trustees for the time being. It can be asserted by them and, normally, only by them. The proceedings commenced in November 2007 were brought on this basis. Exceptionally, if the trustees fail to pursue such a claim, it may be open to a beneficiary to assert the claim in proceedings to which the trustees are also parties as defendants…This has some similarity to a derivative action in company law, but it does not require further consideration here, since the claimant does not say that the trustees have failed to bring proceedings…A beneficiary under a trust does not have a direct cause of action in negligence against a person who may be liable to the trustees: see Parker-Tweedale v Dunbar Bank Plc(No1)[1991] Ch 12 .”
“Beneficiaries under a disposition by way of trust which has already been made before the negligent acts were committed have, like the trustees, a proprietary interest in the trust property. If solicitors instructed by the trustees carry out their work negligently, thereby causing loss to the trust property or putting that property or the interests of beneficiaries in peril, the loss resulting from such negligence will ultimately fall on the beneficiaries, even if it is the trustees who incur it in the form of a diminution of the trust property held by them or in the need to expend money in order to protect the trust. By accepting instructions to act for trustees the solicitors are of necessity assuming to act, to the extent of the matters which they are instructed to deal with, in the affairs of the beneficiaries as well. It seems to me that solicitors who act in these circumstances must be regarded as owing to the beneficiaries the same duties of care in tort as they owe to their clients, the trustees, in both contract and tort.”
“Whilst it is arguable that imposing liability for breach of a responsibility assumed in this way opens the door to direct actions in tort generally by existing beneficiaries of existing trusts against the professional advisers retained by the trustees, it is thought that beneficiaries are entitled to recover directly in tort only in respect of loss which they themselves suffer, beyond the non-recoverable reflective loss which they suffer by reason of a diminution in the value of the trust fund in consequences of negligence of the trustees’ professional advisers, and the consequential diminution in their respective existing interests in the trust fund. In the common case where the negligence has an adverse effect on the trust fund, it is thought that the correct claimants are the trustees, and that the beneficiaries should be entitled to claim only by a derivative action…[citing Webster]. Otherwise the professional advisers would face a multiplicity of actions in respect of the same loss from trustees and beneficiaries which those principles seek to avoid.”
“The trustees are suing for loss or damage to the assets held on trust and an order that the former trustee recoup that loss or damage does not answer the claims of particular beneficiaries. As I see it, the identity of the beneficiaries from time to time is irrelevant to such a claim.”
“The so-called “windfall” is no more than the proper restoration of the trust funds, enuring for the benefit of those who happen for the time being to be the unit holders in these trusts. It cannot be right in principle that the former trustee is no longer bound to make compensation (if otherwise it be so bound) only because the current unit holders have joined the trust after the losses occasioned by those breaches were sustained. Not does that seem to me to be an untoward result. As I said earlier, unit holders have their interest in the trust property as defined by the trust deeds; and just as former unit holders cease to have an interest in the trust property when they relinquish their units, so those who hold the units for the time being have between them – and subject to the trust deeds – the only beneficial interest in the trust property for the time being.”
“It is undisputed that any claim against the Manager is a Partnership Asset, owned jointly by the Partners. Under the provisions of s 6(1) of the LPA and [the partnership agreement], which reinforces the statutory provision, no Limited Partner could, on behalf of the other partners and so as to bind them, sue the Manager, which is a third party. Only the General Partner can manage the business of the Partnership and its assets. Only the General Partner has the right to act for the Partnership in external relations in such a way as to bind the Partnership and therefore to bring proceedings against the Manager. If the General Partner will not do so, and here, under the arrangements made, because the Manager is its sister company, with a resulting conflict of interest for the General Partner, there is in reality no way a suit can be brought by the Partnership, unless a new General Partner is brought in who will pursue that cause of action, or the Court permits a derivative suit of some kind by Limited Partners in the name of the Partnership.”
“25. As regards the possibility of seeking compensation for loss caused by a contract or by conduct liable to restrict or distort competition, it should be remembered from the outset that, in accordance with settled case-law, the national courts whose task it is to apply the provisions of Community law in areas within their jurisdiction must ensure that those rules take full effect and must protect the rights which they confer on individuals… 26. The full effectiveness of Article 85 of the Treaty and, in particular, the practical effect of the prohibition laid down in Article 85(1) would be put at risk if it were not open to any individual to claim damages for loss caused to him by a contract or by conduct liable to restrict or distort competition. 27. Indeed, the existence of such a right strengthens the working of the Community competition rules and discourages agreements or practices, which are frequently covert, which are liable to restrict or distort competition. From that point of view, actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community. 28. There should not therefore be any absolute bar to such an action being brought by a party to a contract which would be held to violate the competition rules.”
“29. However, in the absence of Community rules governing the matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive directly from Community law, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render practically impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness)…. 30. In that regard, the Court has held that Community law does not prevent national courts from taking steps to ensure that the protection of the rights guaranteed by Community law does not entail the unjust enrichment of those who enjoy them… 31 Similarly, provided that the principles of equivalence and effectiveness are respected… Community law does not preclude national law from denying a party who is found to bear significant responsibility for the distortion of competition the right to obtain damages from the other contracting party. Under a principle which is recognised in most of the legal systems of the Member States and which the Court has applied in the past… a litigant should not profit from his own unlawful conduct, where this is proven. 32. In that regard, the matters to be taken into account by the competent national court include the economic and legal context in which the parties find themselves and, as the United Kingdom Government rightly points out, the respective bargaining power and conduct of the two parties to the contract. 33. In particular, it is for the national court to ascertain whether the party who claims to have suffered loss through concluding a contract that is liable to restrict or distort competition found himself in a markedly weaker position than the other party, such as seriously to compromise or even eliminate his freedom to negotiate the terms of the contract and his capacity to avoid the loss or reduce its extent, in particular by availing himself in good time of all the legal remedies available to him.”