KL Capital Limited v Kenneth Townsley & Ors

Christopher Hancock KC:

1. I handed down judgment in this matter on 15 August 2025. In that judgment, I allowed the Claimant’s application for permission to amend, and I dismissed the application made by the Third Defendant to strike out the Claimant’s claim or alternatively to give summary judgment against the Claimant.

2. The Third Defendant now applies for permission to appeal against my decision.

3. In this connection, the Third Defendant puts forward two grounds of appeal, as follows: 3.1. The holding that the Claimant’s claim was not barred by the rule against reflective loss was wrong. 3.2. The holding that, as a matter of construction, the definition of “Proposed Claims” was at the very least arguably sufficiently broad to encompass what were referred to as the Stage II claims in the Particulars of Claim, was wrong.

4. The Third Defendant seeks permission to appeal on the grounds that each of these grounds stands a real prospect of success; or that there is some other compelling reason for trial. Those are, as I accept, the tests laid down in CPR 52.6, and I will therefore apply these tests in relation to each proposed ground, starting with the first ground.

5. Under this head, the Third Defendant argues that there is a real prospect that the Court of Appeal will find that my finding that the Claimant’s loss was suffered, not as a shareholder, but as an investor, since the claim is premised on the assertion that the Claimant would not have become a shareholder had it not been for the deceit practised upon it by the Defendants, will be overturned by the Court of Appeal. I have reconsidered the parties’ arguments on this point, and I remain firmly of the view that the rule against reflective loss does not bar this claim. Accordingly, I have concluded that I should not give permission to appeal on this ground for this first reason.

6. I turn therefore to the second ground relied on, namely that there is some other compelling reason for the Court of Appeal to hear this case. This is that the doctrine of reflective loss is a developing area of law, and this is the first case in which it has been raised in the context of a claim that a party has suffered loss as a result subscribing for shares in a company in order to put that company in funds to make an investment. Again, I do not consider that I should give permission to appeal on this basis. The Supreme Court has only recently considered the doctrine of reflective loss, and I regard my decision as simply an application of the Supreme Court’s guidance to the facts of this case. Whether or not that fact pattern is a recurring one, I do not think it is necessary for the Court of Appeal to rule on the point, particularly in the context of a striking out/summary judgment case.

7. This takes me to the second ground put forward, namely that there is a real prospect that the Court of Appeal will reverse my conclusion that, as a matter of construction, it is at the least arguable that the definition of Proposed Claims is arguably to be interpreted as including the Stage II claims put forward in the Particulars of Claim. In my judgment, this was simply the result of the application of well-known rules of contractual construction to the terms of this agreement and the facts of this case. In my judgment, there is no real prospect that the Court of Appeal will differ from my conclusion.

8. For the above reasons, I reject the application for permission to appeal.