Publication Type
Case note/Digest
Publication
Singapore Law Journal (Lexicon) (Reissue)
Publication Date
6-2023
Abstract
At common law, the “no reflective loss” (“NRL”) principle bars a shareholder from bringing a personal action to recover any diminution in share value resulting from a wrong inflicted by a thirdparty wrongdoer on the company. Such reduction in value is not treated as the shareholder’s personal loss as it is a “mere reflection” of the company’s loss. And this is so even if the company does not seek to recover from the wrongdoer or settles with the wrongdoer for a sum well below its actual loss. Though endorsed by the highest courts, the NRL principle remains controversial by reason of its uncertain rationale and breadth. By prioritising the company’s claim over that of shareholders, the principle simplistically assumes a direct correlation between the value of the company’s assets and that of its shares. It also accords insufficient weight to the independent and personal character of the shareholders’ causes of action. In practice, these criticisms are borne out by the principle’s “will o’ wisp” character as courts struggle to distinguish between reflective and personal losses. Of further concern is the potentially expansive reach of the rule as some cases suggest that the principle prevents even creditors from enforcing personal claims against wrongdoers, threatening to “distort large areas of the ordinary law of obligations."
Disciplines
Dispute Resolution and Arbitration | Law
Subject(s)
Applied or Integration/Application Scholarship
ISSN/ISBN
2737-5048
Publisher
SMU Lexicon, SMU School of Law
Version
publishedVersion
Copyright Holder
Singapore Management University
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Format
application/PDF
Citation
LEE, Pey Woan.
Taming reflective loss – Miao Weiguo v Tendcare Medical Group Holdings Pte Ltd [2022] 1 SLR 884. (2023). Singapore Law Journal (Lexicon) (Reissue). 3, 130-155.
Available at: https://ink.library.smu.edu.sg/sljlexicon/28
Volume
3
Page
130-155
Research Area
Corporate, Finance and Securities Law