Supreme Court decision: Dishonest assistance in breaches of constructive trusts

On 23 July 2025, the Supreme Court handed down its decision in Stevens (Respondent) v Hotel Portfolio II UK Ltd (In Liquidation) and another (Appellants). The decision provides important clarification on liability for dishonest assistance where there is a breach of fiduciary duty.

Background

In 2005, while serving as a director for Hotel Portfolio II UK Limited (HPII), Mr Andrew Ruhan oversaw the sale of three hotels owned by HPII to a company known as Cambulo Madeira (Cambulo). The hotels were sold at market value for £125m. Between 2006 and 2008, Cambulo sold on the hotels to a third party – with the benefit of planning permission for a residential development – for a substantial profit.

However, it later emerged that Mr Ruhan had dishonestly concealed from HPII that he was the true purchaser of the hotels by using Mr Stevens as his nominee in relation to the sale. Mr Ruhan received approximately £102m from the subsequent sale and, after providing Mr Stevens with £1.5m as compensation for his role, he dissipated the rest of the profits on his own developments in Qatar.

HPII later went into liquidation and its creditors sued Mr Ruhan for breach of fiduciary duty and Mr Stevens for dishonest assistance. Both sides agreed that HPII itself could not have taken advantage of the residential development opportunity which had enabled the profitable sale by Cambulo.

The decisions

High Court

Foxton J held that Mr Ruhan’s failure to disclose his interest in Cambulo constituted a breach of his fiduciary duties. Furthermore, the profits raised in the later sale of the hotels by Cambulo were held on constructive trust for HPII, meaning that the dissipation of the profits by Mr Ruhan constituted a breach of his duty as a constructive trustee. On this basis, Mr Ruhan was ordered to account for the profit of £102m. Foxton J held that Mr Stevens had provided dishonest assistance and ordered him to pay equitable compensation of £102m along with nearly £60m in compound interest.

Only Mr Stevens appealed the decision, accepting that he acted dishonestly but challenging the legal basis for both the equitable compensation and compound interest.

Court of Appeal

Newey LJ allowed the appeal, setting aside both the order for equitable compensation and the order for compound interest. Although Mr Stevens was jointly liable for the loss caused by Mr Ruhan’s breach of duty, he was not liable for any profits received by Mr Ruhan. It was held that HPII had not suffered any loss as a result of the dissipation of the profits, as market value had been obtained upon the sale and HPII could not itself have realised the profits made on the later sale. Therefore, Mr Stevens could not be liable to compensate HPII for the dissipated profits and was instead ordered to pay compensation of £1.5m to reflect the payment he had received.

HPII appealed the decision to the Supreme Court on the basis that the Court of Appeal had failed to sufficiently consider the property rights obtained by HPII over the unauthorised profits or the fiduciary duties owed by Mr Ruhan in relation to the trust.

Supreme Court

The Supreme Court allowed the appeal with a four to one majority, finding that the unauthorised profits made by Mr Ruhan were held on constructive trust for HPII. Therefore, HPII had suffered loss and as Mr Stevens had assisted in the dissipation of the profits, he was liable to compensate HPII for the dissipated profits.

Key points

• Breaches of constructive trusts are compensable – Where a constructive trust arises due to a breach of fiduciary duty, it not only serves as a remedy for that breach but also creates an immediate proprietary interest once the funds are received by the trustee. If these funds are dissipated, the trustee is also liable for breach of the constructive trust and must compensate the beneficiary for the loss of its proprietary interest.
• Dishonest assistants are liable for any profits they help dissipate – As established in Novoship v Mikhaylyuk, a dishonest assistant is not liable for unauthorised profits made by the trustee. However, making and dissipating profits are two separate breaches. Therefore, dishonest assistants will not be liable for profits they help make, but they will be liable for the profits they help dissipate.
• Breaches of fiduciary duty will not be aggregated with breaches of trust – When using the but-for test to assess whether loss has been incurred, it’s irrelevant that the dissipated profits were unauthorised profits which could not have otherwise been made without the initial breach of fiduciary duty. Therefore, the correct counter factual is one in which the unauthorised profits were not dissipated. If the Court were to use the counter factual that the unauthorised profits had not been made in the first place, this would incorrectly disregard the creation of the constructive trust.
• Equitable set off is not available unless the result is plainly inequitable – It is not sufficient to argue that, where profits have been both made and dissipated in breaches of duty, set off should be available due to the connection between the gain and loss. Allowing this argument would defeat the purpose of the constructive trust.