Alasdair Glass and Simon Fitzpatrick discuss recent developments in fiduciary law in Thomson Reuters Practical Law

Recent Supreme Court authority has reshaped the fiduciary law landscape, with three key judgments in 2025 clarifying core doctrines. Each case addressed a different aspect of fiduciary law, including dishonest assistance, the application of causation to an account of profits and the role of honesty in equitable compensation claims. While the decisions reaffirm many established principles, they each add some important clarifications or developments that are to the benefit of potential claimants. Practitioners should keep these points firmly in mind when assessing potential fiduciary law claims.

Dishonest assistance

Stevens v Hotel Portfolio II UK Ltd (in liquidation) and another related to a breach of fiduciary duty that arose in respect of the sale of hotel developments in London ([2025] UKSC 28, www.practicallaw.com/w-047-9705). The fiduciary, Mr Ruhan, was a director of Hotel Portfolio II UK Ltd, which owned three hotels that had potential for development as premium residential property. Through his associate, Mr Stevens, who acted as nominee, Mr Ruhan arranged to sell the hotels to a company of which he was a beneficial owner. Mr Ruhan's beneficial ownership in the purchasing company was concealed from Hotel Portfolio II.

The properties were later sold for a significant profit and Mr Stevens distributed a dividend of around £95 million to Mr Ruhan, who spent the dividend on speculative projects in Dubai and lost all of it. Hotel Portfolio II went into liquidation. The liquidators brought claims against both Mr Ruhan for breach of fiduciary duty, in respect of failing to disclose his interest and dissipating the sale profits, and Mr Stevens for dishonest assistance.

The High Court held that Mr Ruhan was liable to account for the profits and Mr Stevens was liable to pay equitable compensation in respect of the dissipation of the profits, which included £95 million for the loss of the dividend (Hotel Portfolio II UK Ltd (in liquidation) and another v Ruhan and Stevens [2022] EWHC 383 (Comm); [2022] EWHC 1695 (Comm)) (see box "Election between compensation and profits"). On Mr Steven's appeal, the Court of Appeal set aside the order for him to pay equitable compensation ([2023] EWCA Civ 1120; www.practicallaw.com/w-041-5078). However, the Supreme Court allowed the appeal and restored the High Court's order.

The Court of Appeal had reasoned that Mr Ruhan's breaches comprised a single and uninterrupted course of conduct that caused Hotel Portfolio II no loss. Accordingly, Mr Steven's liability should be limited to his personal profit, which amounted to less than £1.5 million. However, the Supreme Court found that the course of conduct should not be amalgamated in this way to limit a dishonest assistant's liability. As a matter of equity, unauthorised profits arising from the breach are deemed to be held on constructive trust for the beneficiary. Once that trust came into existence, the dissipation of the trust funds constituted a loss for which Mr Stevens, who assisted with the dissipation, was liable to compensate.

While the principle established in Novoship (UK) Ltd and anothers v Nikitin and others that a dishonest assistant is not required to account for profits they did not personally make remains unchanged, that principle does not extend to a loss caused by dissipation ([2014] EWCA Civ 908; www.practicallaw.com/4-578-8266). The result is that, in certain circumstances, a dishonest assistant may be found liable to compensate for losses that equate to most, if not all, of the unauthorised profits.

Account of profits

In Rukhadze and others v Recovery Partners GP Limited and another, the Supreme Court held that three individuals and their associated companies (the appellants) were liable to account for profits arising from a bad faith resignation with a view to appropriating a maturing business opportunity in breach of their fiduciary duties ([2025] UKSC 10, www.practicallaw.com/w-046-7225). The respondents were a company incorporated in the British Virgin Islands (BVI) and an English limited liability partnership. The individual appellants worked for the respondents and held positions of responsibility, such as directorships.

The business opportunity was the provision of asset recovery services to the family of a deceased billionaire. Following a falling out between the appellants and the ultimate beneficial owner of the respondents, the appellants had taken preparatory steps to provide the recovery services. After resigning, the appellants obtained the business opportunity and made significant profits. The High Court found that the appellants had breached their fiduciary duties and the respondents elected for an account of profits ([2018] EWHC 2018 (Comm)). The appellants' liability was later reduced by 25% by way of an equitable allowance to reflect their time, skill and effort in making the profits ([2022] EWHC 690 (Comm)).

Following unsuccessful appeals by both sides to the Court of Appeal, the appellants appealed to the Supreme Court seeking to challenge the causation test as applied to accounts of profits; namely, that a "but for" test should apply so that principals should not be entitled to claim for unauthorised profits that they could or would not have earned ([2023] EWCA Civ 305; www.practicallaw.com/w-039-2330). The appeal which, if successful, would have overturned the long-established House of Lords authority in Regal (Hastings) Ltd v Gulliver and Boardman v Phipps, was heard before a seven-justice panel of the Supreme Court ([1967] 2 AC 134; [1967] 2 AC 46). The panel unanimously refused the appeal but for different reasons.

One of the key debates that arose in the individual judgments was whether an account of profits represents an independent duty or is simply a remedy for a breach of fiduciary duty. Lord Briggs' leading judgment affirmed that there is an independent duty to account for unauthorised profits that arises from the fiduciary relationship. In other words, it seems that a pre-existing breach of fiduciary duty is no longer required to order an account of profits (only that unauthorised profits have been earned) but, at the same time, an account remains a remedy for a breach of duty.

The court also expressly declined to incorporate a "but for" causation test in accounts of profits, which had been the subject of much academic discussion, although Lord Legatt delivered a powerful and cogent dissenting judgment on this point. Various questions remain as to what impact Rukhadze will have on the trial process for fiduciary law claims, including what, if any, role there is for establishing a breach for unauthorised profit cases. It also remains to be seen how the court will grapple with the inherent tension between, on the one hand, the right of a principal to elect between an account of profits and equitable compensation and, on the other, the primary duty of the defaulting fiduciary to account for those profits.

Honesty and equitable compensation

In Mitchell and another (joint liquidators of MBI International & Partners Inc (in liquidation)) v Al Jaber, the defendant, Sheikh Mohamed Al Jaber, was a director of a BVI company, MBI International & Partners Inc, which acquired valuable shares in another entity, JJW Hotels & Resorts Holding Inc ([2025] UKSC 43). Following a winding-up order made in respect of MBI, the Sheikh's powers as a director ceased. Despite this, he transferred shares in JJW to a company in Guernsey over which he maintained control (having dishonestly backdated the relevant share transfer forms) and subsequently on to a UK company. All the assets and liabilities of JJW were then transferred, rendering the shares in JJW worthless.

The liquidators of MBI sued the Sheikh for breach of fiduciary duty and sought equitable compensation. The High Court found that there had been a breach of fiduciary duty and ordered equitable compensation in an amount reflecting the value of the shares at the point they were transferred from MBI to the Guernsey company ([2023] EWHC 364 (Ch)). The Court of Appeal reversed the order for equitable compensation on the basis that it was required to assess loss at the date of trial and the subsequent transfer of the assets out of JJW had rendered the shares worthless, so MBI had suffered no actionable loss ([2024] EWCA Civ 423).

The Supreme Court allowed the liquidators' appeal. It took great care to emphasise that losses that have arisen independently from a breach, such as a decline in the market, are not generally subject to equitable compensation. However, if there has been a misappropriation arising from a breach of fiduciary duty, the onus is on the defaulting fiduciary to show that the supervening event causing the loss establishes a true break in the causal chain. In addition, in cases of misappropriation, the loss occurs at the moment of breach; in this case, on the transfer of the shares in JJW from MBI to the Guernsey company. For a defaulting fiduciary to rely on a supervening event, the relevant counterfactual would need to show that the loss was unrelated to the misappropriation giving rise to the breach of fiduciary duty. If the defaulting fiduciary had a hand in the supervening event, the defaulting fiduciary cannot then benefit from the "but for" causation test in order to escape liability.

Practical takeaways

There are a number of lessons to be drawn from these judgments. All three represent a tilting of the scales in favour of the wronged principal, whether by reaffirming existing principles or by applying the law flexibly to the benefit of those principals. This conscious bolstering of the fiduciary law framework by the Supreme Court is all the more significant given the ubiquity of fiduciary duties in modern commercial relationships. In particular, given the strict consequences that can result from a breach of fiduciary duty or dishonest assistance, commercial actors must be wary of the substantial grey zone that now exists in which the presence (or not) of a fiduciary relationship is finely balanced. The potential for such uncertainty has been demonstrated by the recent Supreme Court decision regarding the lawfulness of commissions earned by motor finance lenders in Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance), Wrench v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) and Hopcraft v Close Brothers Ltd ([2025] UKSC 33; see News brief “Motor finance cases: Supreme Court allays fears”, www.practicallaw.com/w-047-9684).

Where there is a risk of fiduciary duties being imported into parties' commercial dealings, they may wish to consider placing limits on these duties, or contractually exclude or regulate them.  Parties that are accused of earning unauthorised profits may be wise to seek an early determination of the issue by way of a declaration of non-liability to avoid the risk of spending many productive years earning profits that may need to be disgorged in the future. For parties that believe they have suffered loss at the hands of their fiduciaries or associates, they should be mindful of the improved avenues for redress that are open to them.