“In our judgment the personal claim is misconceived. It is of course correct, as the judge found and Mr. Bartlett did not dispute, that he and Mr. Laughton, in advising the shareholders to support the resolution approving the agreement, owed the shareholders a duty to give such advice in good faith and not fraudulently. It is also correct that if directors convene a meeting on the basis of a fraudulent circular, a shareholder will have a right of action to recover any loss which he has been personally caused in consequence of the fraudulent circular; this might include the expense of attending the meeting. But what he cannot do is to recover damages merely because the company in which he is interested has suffered damage. He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a "loss" is merely a reflection of the loss suffered by the company. The shareholder does not suffer any personal loss. His only "loss" is through the company, in the diminution in the value of the net assets of the company, in which he has (say) a 3 per cent. shareholding. The plaintiff's shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing. The plaintiff still holds all the shares as his own absolutely unencumbered property. The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company. A simple illustration will prove the logic of this approach. Suppose that the sole asset of a company is a cash box containing£100,000 . The company has an issued share capital of 100 shares, of which 99 are held by the plaintiff. The plaintiff holds the key of the cash box. The defendant by a fraudulent misrepresentation persuades the plaintiff to part with the key. The defendant then robs the company of all its money. The effect of the fraud and the subsequent robbery, assuming that the defendant successfully flees with his plunder, is (i) to denude the company of all its assets; and (ii) to reduce the sale value of the plaintiff's shares from a figure approaching£100,000 to nil. There are two wrongs, the deceit practised on the plaintiff and the robbery of the company. But the deceit on the plaintiff causes the plaintiff no loss which is separate and distinct from the loss to the company. The deceit was merely a step in the robbery. The plaintiff obviously cannot recover personally some£100,000 damages in addition to the£100,000 damages recoverable by the company.”
“(1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss … “(2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding … “(3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other.”
“32. On behalf of Mr Sevilleja, Mr David Lewis QC submitted that what emerges from these authorities is that there is a four-fold justification for the rule against reflective loss. I agree with that analysis. The four aspects or considerations justifying the rule which emerge from the authorities, in particular Lord Millett's speech in Johnson v GoreWood & Co[2002] 2 AC 1 , are: (i) the need to avoid double recovery by the claimant and the company from the defendant: see per Lord Millett at p 62 quoted at para 18 above; (ii) causation, in the sense that if the company chooses not to claim against the wrongdoer, the loss to the claimant is caused by the company's decision not by the defendant's wrongdoing: see per Lord Millett at p 66 quoted at para 20 above and Chadwick LJ in Giles v Rhind[2003] Ch 61 8, para 78; (iii) the public policy of avoiding conflicts of interest particularly that if the claimant had a separate right to claim it would discourage the company from making settlements: see per Lord Millett at p 66 again quoted at para 20 above; and (iv) the need to preserve company autonomy and avoid prejudice to minority shareholders and other creditors. The point about company autonomy is made by Lord Millett at p 66 quoted at para 21 above and the point about protecting minority shareholders and other creditors is made by Arden LJ at para 162 in Johnson v Gore Wood & Co (No 2)[2003] EWCA Civ 172 8quoted at para 24 above.”
“These being exceptions, the exclusions will have to be interpreted strictly. The proposed Regulation does not take over the exclusion in Article 1(2)(h) of the Rome Convention, which concerns rules of evidence and procedure. It is clear from Article 11 that, subject to the exceptions mentioned, these rules are matters for the lex fori. They would be out of place in a list of noncontractual obligations excluded from the scope of this Regulation.” (b) Article 11 was what became Article 15. I set out below the relevant provisions from the Commission’s 2003 Proposal in the context of a consideration of the particular terms of that Article. (c) The Commission’s 2003 Proposal was however amended when the matter came before the European Parliament. It was at this stage that Article 1(3) was introduced. The justification for this Amendment was said to be as follows: “This amendment takes account of the universal principle of lex fori within private international law that the law applicable to procedural questions, including questions of evidence, is not the law governing the substantive legal relationship (“lex causae”) but, rather, the procedural law of the forum.” (4) On the basis of this drafting history, it was submitted that the intention of the draftsman was that Article 1(3) and Article 15 should be read together, and that the purpose of Article 15 was to make clear which aspects of the law which might otherwise be regarded as procedural were nonetheless to be governed by the applicable law, in order to resolve differences that had existed in the manner in which this question had been treated in different countries prior to Rome II. (5) Overall, it was submitted that the RL rule was one which was concerned with a condition for “admissibility of actions, rather than rules concerned with the substance or content of parties’ rights” and was thus a rule of procedure. The quotation here was taken from the decision of the Court of Appeal in Actavis v Eli Lilly [2015] Bus LR 1068, where the Court said: “130. Article 1(3)of Rome II is a rule about what is sometimes called the “vertical scope” of the Regulation. Evidence and procedure are excluded from the scope of the Regulation. Although it does not automatically follow that these issues will be subject to the lex fori, the private international law principle that such matters are for the law of the forum is well recognised. It is enough to quote Dicey at paragraph 7.002: “The principle that procedure is governed by the lex fori is universally admitted.” 131. Article 1 5of Rome II is not itself directly concerned with clarifying the distinction between substance on the one hand and evidence and procedure on the other. It simply contains a list of matters which are “in particular” to fall under the designated law. Included in the list are matters, such as limitation periods, which were traditionally the subject of some debate as to whether they were substance or procedure. Article 1 5does not answer that question, but merely declares that they will be subject to the law which governs non-contractual obligations under Rome II. I therefore do not regard Article 1 5as a safe guide to whether matters which do not fall within its scope are procedural or substantive. 132. The distinction between substance and procedure is a fundamental one. The principle underlying it is said to be that a [foreign] litigant resorting to a domestic court cannot expect to occupy a different procedural position from that of a domestic litigant. Thus, that litigant cannot expect to take advantage of some procedural rule of his own country to enjoy greater advantage than other litigants here. Equally he should not be deprived of some procedural advantage enjoyed by domestic litigants merely because such an advantage is not available to him at home. Thus, at common law, every remedy was regarded as procedure: see for example Don v Lippmann (1837) 2 Sh. & MacL. 682 at 724-5. 133. Whether a rule is to be classified as one of substance or one of procedure or evidence under Rome II is a matter of EU law: the fact that a rule is classified as one or the other under domestic law is of no relevance. There is therefore a need for an autonomous EU criterion for allocating rules into one or the other category. 134. In Wall v Mutelle de Poitiers Assurances[2014] EWCA Civ 138 ; [2014]1WLR 426 3, the claimant motorcyclist was injured in a motor accident in France. He claimed damages against the other driver's insurers in England. Liability, which was governed by French law, was admitted. The question arose as to whether the claimant should be permitted to adduce expert evidence in accordance with English practice, or whether a single joint expert should be instructed, as would be the practice in France. This court held that the issue of which expert evidence the court should order was one of “evidence and procedure” within Article 1(3)and not an issue relating to “the existence, the nature and the assessment of damage” within Article 15(c)of Rome II. It was argued that the objective of the Regulation was to ensure uniformity of outcome, and that the English court should do its best to ensure that uniformity by adopting all the rules of the foreign court which might affect outcome. The court rejected that argument (see Longmore LJ at [11] to [14] and Jackson LJ at [40] to [43]), holding that it was inevitable that the same facts tried in different countries might achieve different outcomes. The words “evidence and procedure” were thus given what Jackson LJ called their “natural meaning”. 135. In my judgment, subject to any impact on the question which Rome II may have had, the rules with which we are concerned are conditions of admissibility of actions, rather than rules concerned with the substance or content of parties' rights. They are all concerned with whether the court should hear a dispute about substance. They are not concerned directly with the substance itself. Thus: i) a rule about the need to seek an acknowledgement from the patentee will avoid the dispute coming to court if the acknowledgment is given; ii) a rule requiring the giving of particulars will ensure that the proposed act is sufficiently formulated for the court to be able to adjudicate on whether it infringes; iii) a rule requiring some form of interest, or degree of preparation, will avoid cases coming to court if the party seeking the DNI has not reached a stage where it has sufficiently formulated its plans; iv) a rule requiring that the party seeking the DNI can show that it would serve a useful purpose avoids the court adjudicating on pointless disputes. 136. Such rules would traditionally, for private international law purposes, be classified as procedural and not substantive. In my judgment, therefore, they should continue to be so treated unless Rome II requires a different outcome. 137. I do not think Mr Mitcheson's argument based on Dr Illmer's illuminating article displaces this view. As Dr Illmer himself recognises, “matters of procedure concerned with the commencement of the proceedings” will continue to be governed by the lex fori. I consider that the rules with which we are concerned fall within that description. They are not so intertwined with matters of substance as to require them to be dealt with under the lex causae. Whilst the passage from Dicey on which Mr Mitcheson relies suggests a very narrow interpretation of “evidence and procedure”, the authors nevertheless say at 7-072: “It is clear that rules on the conduct of the parties prior to the instigation of proceedings, for example on providing notice before action, or on the need for a meeting between parties before starting proceedings, are procedural.” 138. Whilst rules which require an interest, or effective preparations, are different, I can see no reason in principle why they should not be categorised in the same way. As the judge observed, they have the same broad purpose as the more formalistic rules to which Dicey expressly refers, and are quite distinct from the rules which govern the parties' substantive rights.” 139. I do not accept that Article 1 5should be given a wider effect than its language suggests, treating the listed matters as no more than examples of a class of analogous matters regarded as procedural in private international law, but now to be brought within the designated law. Mr Raphael is right that the legislative history shows that the Regulation was intended to respect the private international law principle that the ‘ lex fori ’ is applicable to procedural questions. 140. Although Article 1 5applies the lex causae to a number of matters which at least the English common law would have treated as procedural, none of them, as it seems to me, is apt to encompass the rules for admissibility of a DNI. I take these in turn. 141. Paragraph (a) is concerned with the basic conditions and extent of liability under a non-contractual obligation, and the persons who may potentially be held liable. Whilst Mr Mitcheson's attempt to fit the negative declaration into the wording of the paragraph is ingenious, it does not seem to me that, even if correct, it gets him home. That is because the conditions of admissibility of a positive claim are not caught by the section. If that is so, then I fail to see how the conditions of admissibility of a DNI can be caught either. 142. The problem with reading paragraph (c) as widely as Mr Mitcheson contends is that it covers any remedy, when the legislative history shows it was concerned with financial remedies alone. Moreover, as the judge pointed out, other language versions of paragraph (c) use words which translate as “compensation”, “indemnity” or “reparation”
“Article 11 defines the scope of the law determined under Articles 3 to 10 of the proposed Regulation. It lists the questions to be settled by that law. The approach taken in the Member States is not entirely uniform: while certain questions, such as the conditions for liability, are generally governed by the applicable law, others, such as limitation periods, the burden of proof, the measure of damages etc, may fall to be determined by the lex fori. Like Article 10 of the Rome Convention, Article 11 accordingly lists the questions to be settled by the law that is actually designated. In line with the general concern for certainty in the law, Article 11 confers a very wide function on the law designated. It broadly takes over Article 10 of the Rome Convention, with a few changes of detail.” (4) The RL rule is not an indispensable feature of the forum’s legal framework for resolving disputes which is the test suggested by the leading textbooks on the subject: (a) In Dickinson on The Rome II Regulation, at paragraphs 14.60 and 14.61, the author concludes that a decision by a Court to refuse to apply a law which comes under the provisions of Article 15 on the grounds that the rule is procedural would be exceptional and justified on the basis that the rule has a feature that renders it as an integral and indispensable element of the forum’s legal framework for the judicial determination of disputes. (b) The learned editors of Dicey, Morris and Collins on The Conflict of Laws state, at paragraph 34-36: “Article 1(3) stipulates that the Regulation shall not apply to evidence and procedure without prejudice to Art.2 1(concerned with “formal validity”) and Art.2 2(concerned with “burden of proof”). These provisions, and their relationship with the law applicable under the Regulation, are addressed in further detail below. At this stage it will suffice to draw attention to two points. First, the exclusion of evidence and procedure seems to mean, that English practice in relation to the pleading and proof of foreign law continues to have effect. Secondly, while characterisation of matters relating to evidence and procedure is at least partially a matter for national law, the role and scope of the concepts of evidence and procedure must also be defined and understood within the framework of the Regulation. In particular, and in addition to Arts 2 1and 2 2,it will be necessary to have regard to the non-exhaustive list of matters which Art.1 5requires to be determined in accordance with the law applicable to non-contractual obligations under the Regulation. This list includes issues which, at common law, were characterised as matters of procedure, to be governed by the law of the forum. Foremost among these are “the nature and assessment of damage or the remedy claimed” and “rules of prescription and limitation”
“The application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum.”