Home Information Cases Latin American Investments Ltd v Maroil Trading Inc & ors (2017)

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Latin American Investments Ltd v Maroil Trading Inc & ors (2017)


It was arguable that a claim for specific performance to force the defendants to pay sums due to a company in which the claimant held shares did not breach the reflective loss principles set out in Johnson v Gore Wood & Co (No.1) [2002] 2 A.C. 1. A freezing injunction obtained by the shareholder against the defendants was therefore continued.


The court was required to determine whether a freezing injunction made against the defendants should be continued.

The Part 20 claimant (Oceanic), the first defendant, and the claimant in the main action were shareholders of a joint venture company (JVC) which owned two oil tankers. Under the terms of two shareholder agreements, the tankers were to be made available to the second defendant. The second defendant entered into a contract of affreightment with a third party and assigned its rights in that contract to the JVC. A dispute arose between the JVC and the third party. The first and second defendants settled the dispute without the permission of the claimant and Oceanic. The defendants also entered into a commission agreement relating to the settlement. Oceanic believed that the dispute had been settled at an undervalue of over $50 million, and also complained that the JVC's share of the sums due under the commission agreement had not been paid. It issued proceedings for specific performance of the defendants' obligations to pay the relevant sums to the JVC and obtained the freezing injunction against them.

The defendants submitted that the freezing injunction should be discharged because Oceanic's claim breached the reflective loss principle set out in Johnson v Gore Wood & Co (No.1) [2002] 2 A.C. 1. Oceanic maintained that the reflective loss principle did not apply because the remedy sought was specific performance in favour of the JVC.


(1) The reflective loss principle - A number of propositions were set out in Johnson, including the proposition that "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 … to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company." In the instant case Oceanic had its own cause of action against the defendants under the terms of the shareholders' agreement. That was not sufficient unless its loss was separate and distinct from that suffered by the JVC. The underlying reasons which justified the reflective loss principle were described in Johnson as the principle of company autonomy; to ensure that the company's creditors were not prejudiced by the action of individual shareholders; and that a party did not recover compensation for a loss which another party had suffered, Johnson explained (see paras 11-14 of judgment).

(2) Did Oceanic's claim breach the reflective loss principle? - Since the remedy of specific performance for breach of the shareholders' agreements would result in payments being made to the JVC, rather than to Oceanic, it was arguable that the remedy of specific performance would not breach the reasons underlying the reflective loss principle, Peak Hotel and Resorts Ltd v Tarek Investments Ltd [2015] EWHC 3048 (Ch) applied. Specific performance was arguably the most appropriate method of enforcing the shareholders' agreements where there was a dispute between shareholders. However, payment of such sums as were found due for concluding the settlement agreement without authority and in conflict of interest appeared to be an order at the suit of Oceanic that the defendants pay damages to the JVC. If the remedy of specific performance was available, it was hard to see why the remedy of damages should not also be available. Neither remedy appeared to breach the reflective loss principle as they were consistent with the principle of company automony. They did not prejudice creditors of the JVC as the sums would be paid to the JVC, and they did not enable a shareholder to recover compensation for a loss suffered by the JVC because the compensation was payable to the JVC. There was no authority which stated in terms that that was wrong (paras 14, 18, 22-23).

(3) Were Oceanic's claims for a money judgment? - A freezing injunction could only be made in support of an anticipated money judgment. However, "money judgment" was not narrowly construed. The judgment which Oceanic sought was for the payment of sums by the defendants to the JVC, either by way of an order for specific performance or by way of an order for damages. Such orders for the payment of monetary sums to the JVC appeared to be money judgments for the purposes of freezing injunction relief, notwithstanding that they did not require any sum to be paid to Oceanic (paras 25-27). The freezing injunction was directed to be continued until trial (para.37).

Freezing injunction against defendants continued

Queen's Bench Division (Commercial)
Teare J
Judgment date
26 May 2017

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Louise Hutton