The Supreme Court’s judgment in Stevens v Hotel Portfolio II UK Ltd (In Liquidation) and another [2025] UKSC 28 reviews the liability faced by an individual who assists in a breach of trust or of fiduciary duty. 

The judgment examines the principle that gains and losses incurred in the course of multiple breaches of trust cannot usually be set off against one another. It also considers how the ‘but for’ test of causation applies to such breaches.

Background

Hotel Portfolio II UK Limited (HPII) wished to sell some hotels. Cambulo Madeira, a company ostensibly beneficially owned by Mr Stevens, purchased the hotels from HPII. Cambulo Madeira then developed the hotels and sold them on for a substantial profit. 

However, one of HPII’s own directors, Mr Ruhan, was behind Cambulo Madeira. Mr Stevens had been acting as his nominee to conceal this from HPII. Mr Ruhan made a profit of around £103.76 million from Cambulo Madeira’s sale of the hotels, of which £1.5m was paid to Mr Stevens for his services. The remainder of the money was lost on unsuccessful investments in Qatar pursued by Mr Ruhan, again with assistance from Mr Stevens.

As would become significant when the matter came to court, the purchase from HPII was nevertheless at full market value, and HPII would not have exploited the development opportunity itself.

When HPII was liquidated, the liquidators sued Mr Ruhan and Mr Stevens. By the time the case reached the Supreme Court, a number of points were settled.

• Mr Ruhan, as a director of HPII, owed fiduciary duties to the company. His making of the £103.76m profit was a breach of the rule that a fiduciary may not make a profit out of their position without the fully informed consent of their principal (for more information on this rule, read our article). That rule is notoriously strict, so notwithstanding that the profit was one HPII would not have made for itself, Mr Ruhan was liable to account for it to HPII.
• A secret profit made in breach of fiduciary duty is held on constructive trust for the fiduciary’s principal. In this case, that meant that Mr Ruhan held the £103.76m on constructive trust for HPII as beneficiary.
• It was therefore a further breach of trust/fiduciary duty for Mr Ruhan to spend the £103.76m on investments in Qatar. 
• Mr Stevens had dishonestly assisted Mr Ruhan throughout. He was a dishonest assistant in relation to both the making of the secret profit and the subsequent spending of the money. (For more information on liability for dishonest assistance in general, read our in depth article).
• No money was successfully recovered from Mr Ruhan. In practical terms, HPII’s only prospect for recovery was therefore Mr Stevens.

The question that remained, and which reached the Supreme Court, was how much did Mr Stevens owe HPII for the dishonest assistance he provided to Mr Ruhan? Should he account for all of the money, or only the £1.5m Mr Ruhan had paid him?

What is the liability of a dishonest assistant?

A person who dishonestly assists in the making of a secret profit by a fiduciary is liable to account only for money they themselves make from it. They are not liable to account for the profit made by the fiduciary.

But a person who dishonestly assists in a breach of trust or fiduciary duty that results in a loss to the beneficiary/principal is jointly liable with the defaulting trustee/fiduciary to compensate the beneficiary for the full amount of the loss caused.

The application of these principles to the facts at hand reached the Supreme Court. HPII said Mr Stevens should be liable for the full £103.76m. Mr Stevens said he should only be liable for the £1.5m Mr Ruhan had paid him. In the High Court, HPII had succeeded, but the Court of Appeal had disagreed and limited Mr Stevens’ liability to his own personal profit. HPII appealed.

Mr Stevens’ arguments required the Supreme Court to consider three issues. The first was whether the court can order compensation for loss caused by a breach of constructive trust of unauthorised profits. Mr Stevens said not, because the constructive trust was ‘just a remedy’, so there should be no further compensatory remedy for its breach. This was a short and unsuccessful argument. The Supreme Court had recently examined the law on secret profits and concluded that a constructive trust is not ‘just a remedy’, it is real and automatic. It would be contrary to basic equitable principles if there were no remedy for breaching such a trust.

The other two issues received more detailed consideration, presenting difficult and nuanced questions:

1. Did the dissipation of the money cause HPII a loss?
2. If it did, was Mr Stevens able to set that loss off against the gain made in the form of the secret profit that equity deems was held for its benefit?

The Supreme Court’s decision

The Supreme Court decided by 4-1 majority that the dissipation did cause HPII a loss, and that Mr Stevens was not permitted to set that loss off against the earlier profit.

No loss?

The assessment of loss qualifying for equitable compensation uses a ‘but for’ counterfactual analysis: what position would the beneficiary have been in, but for the breach of trust? The beneficiary’s loss is the difference between that position and the one in which they in fact find themselves.

Applied to this case, Mr Stevens had argued that the two breaches were so connected that the counterfactual the court should consider was the position HPII would have been in had Mr Ruhan not committed either of his breaches. This should lead to the conclusion that the profit would never have been made to begin with, so HPII would be in exactly the same position as it now was.

But the Supreme Court disagreed. The breaches were not to be aggregated. The but for test in this context does not require that the earlier breach of duty consisting in making the profits did not happen – that would lead to consideration of a situation where there was no constructive trust to be breached. In fact, the but for test requires consideration of the terms of the trust that has been breached. From this, one can work out what would have happened if those terms had been complied with instead of breached. 

Applying this, ‘but for’ Mr Ruhan’s breach of trust in dissipating the profit (and Mr Stevens’ dishonest assistance in that breach), HPII would have been the beneficial owner of the money held on constructive trust for it. HPII had therefore been caused loss in the full amount of £103.76m.

Set off?

The usual equitable principle is that gains and losses from different breaches of trust cannot be set off against one another. There is a possible exception to this principle if the breaches arise in the same transaction.

Mr Stevens sought to argue that the exception applied here. While it was not possible to suggest that the breaches were literally part of the same transaction, since clearly there were many different transactions over time, he asked the Supreme Court to consider that those transactions were all connected in such a way as to mean the exception should apply.

Given the court’s conclusion on the question of loss, it is perhaps unsurprising that the judges were also unpersuaded by this argument. Indeed, writing the lead judgment Lord Briggs said there was ‘something rather fantastical’ about the idea, and that it ‘sound[ed] like using fraud to ravel rather than unravel all’. 

The court concluded that while the exception to the no set-off principle does exist, it is only available where it would be inequitable to refuse set-off. The majority did not think that was the case here. The profit made by Mr Ruhan had belonged to HPII, and if set-off were permitted then the purpose of the constructive trust imposed over that money would be entirely defeated, which could not be right. This would be like allowing a thief to escape liability because they had initially gifted the property that they subsequently stole.

The result was that the High Court’s conclusion was restored, and Mr Stevens was personally liable for the full £103.76m.

Comment

This is perhaps a case where neither conclusion feels entirely satisfactory. Requiring Mr Stevens to compensate HPII for the full amount appears to render him liable for Mr Ruhan’s secret profit by the back door, notwithstanding that he could not have been so liable if Mr Ruhan had not dissipated the money. However, as the majority judgment explained, if this were not the case then the constructive trust would not fulfil its purpose.

The upshot of the decision is that liability for dishonest assistance is affirmed and clarified. When funds are held on trust (including constructive trust), a trustee who dissipates those funds is liable to compensate the beneficiary for the loss of their proprietary interest. The loss is assessed by comparing what the value is now with what it would have been but for the breach. A person who dishonestly assists in that dissipation is jointly liable with the trustee for that loss. And none of this is diminished by the fact that the funds held on trust were the profits made through an earlier breach of duty, even one which caused the beneficiary no loss or indeed represented a gain for them.