The vanishing exception?

In Giles v Rhind [2003] 1 BCLC 1, [2003] All ER (D) 340 (Oct) the Court of Appeal held that there was an exception to the no reflective loss principle where the defendant had by his own wrongdoing so destroyed or disabled the company that it was unable to pursue its claim against him.

The facts in Giles v Rhind

In breach of his service agreement with the company SHF, D set up a competing company, to which he induced SHF’s major customer to transfer its business. SHF issued proceedings against D, but went into administrative receivership, and was forced to discontinue because it had no funds to provide the security for costs which it was ordered to pay on D’s application.

The claimant, a shareholder in SHF, then brought proceedings against D claiming damages for breach of a shareholders’ agreement to which they were both party. Th e claims included