Taming reflective loss – Miao Weiguo v Tendcare Medical Group Holdings Pte Ltd [2022] 1 SLR 884

• Main Author: LEE, Pey Woan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2023
• Subjects: Dispute Resolution and Arbitration; Law
• Online Access: https://ink.library.smu.edu.sg/sljlexicon/28; https://ink.library.smu.edu.sg/context/sljlexicon/article/1027/viewcontent/taming.pdf
• Institution: Singapore Management University

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."