You Don’t Have to Profit to Pay: the Supreme Court Speaks on Dishonest Assistance

In its recent decision, Stevens v Hotel Portfolio II UK Ltd (In Liquidation) [2025] UKSC 28, the Supreme Court ordered dishonest assistant, Anthony Stevens, to pay equitable compensation of £102 million for dissipating profits held on constructive trust. This is the first time that the Supreme Court has conducted an in-depth examination of the ‘no set off principle’ - the principle that a trustee may not set off gains and losses incurred in the course of multiple breaches of trust, with a possible exception if the breaches occur in the same or connected transactions.

Key Takeaways

• A person who dishonestly assists a trustee in dissipating funds is jointly liable with the trustee for the entire loss caused (not only the profit they made).
• Even where a principal suffers no loss, unauthorised profits held on constructive trust remain recoverable if dissipated.
• Liquidators and litigators pursuing breaches of directors' and trustees' duties now have firmer footing to claim losses through constructive trusts.

Background

Andrew Ruhan was a director of Hotel Portfolio II UK Ltd (HPII). In March 2005, HPII sold three hotels around Hyde Park to Madeiran company, Cambulo Comercio e Servicos Sociedade Unipessol LDA (Cambulo) for around £125 million. Cambulo was ostensibly owned by Mr Stevens, but in reality, Cambulo and Mr Stevens were nominees for Mr Ruhan. Mr Ruhan concealed from HPII that he was the true buyer of the hotels. HPII received market value for the hotels and therefore suffered no immediate loss.

Between 2006 and 2008, Cambulo resold the hotels (now with the benefit of planning permission for residential development), which made significant profits. HPII acknowledged that it would not itself have exploited the development opportunity which triggered the profit and so, in that sense, it did not lose out.

Mr Ruhan dissipated over £100 million of those profits for his own purposes, which were not traceable. There was no dispute that in buying the hotel and making those unauthorised profits by self-dealing and allowing his fiduciary duty and self-interest to conflict, Mr Ruhan was breaching his fiduciary duty to HPII.

In April 2008, HPII went into creditors' voluntary liquidation. When HPII discovered Mr Ruhan's role in these transactions, HPII sued both Mr Ruhan and Mr Stevens, alleging that Mr Ruhan had breached his fiduciary duties and Mr Stevens had dishonestly assisted him in doing so.

At first instance, the High Court found for HPII. It was found that Mr Ruhan had breached his fiduciary duties by failing to disclose his interest in Cambulo and by dissipating the profits which, as unauthorised profits made by a fiduciary, were held on constructive trust for HPII. Mr Stevens was held to have dishonestly assisted in Mr Ruhan's breaches of fiduciary duties and was ordered to pay HPII equitable compensation in respect of the dissipated profits in the sum of £2 million.

The Court of Appeal reversed that decision on the basis that HPII suffered no compensable loss overall and that Mr Stevens should only account for his own personal gain of around £1.5 million. HPII then appealed to the Supreme Court.

The Supreme Court's decision

In making its decision, the Supreme Court dealt with three key issues:

1. Whether loss caused by a breach of constructive trust is compensable in principle;
2. Whether HPII in fact suffered a loss as a result of the dissipation; and
3. If so, whether the profits from the on-sale of the hotels could be treated as a gain made for HPII's benefit, and set off against the subsequent dissipation loss to reduce Mr Stevens' liability.

The Supreme Court allowed HPII's appeal by a 4-1 majority (Lords Briggs, Reed, Hamblen and Richards). In doing so, the Court held:

• On issue 1, that unauthorised profits obtained by Mr Ruhan were held on constructive trust for HPII from the moment received, meaning the profits were HPII's property. Therefore, it would be contrary to basic equity principles, if dissipating trust funds (preventing HPII from claiming its property) did not result in a remedy of equitable compensation.
• Further, Mr Stevens' liability as an assistant was founded on the dissipating profits, which was separate from generating the profits. Therefore, there was no conflict with the general principle that a dishonest assister will only be liable for profits they themselves have made (and not those made by the fiduciary, i.e. Mr Ruhan).
• On issue 2, equitable compensation is the amount needed to put the beneficiary (i.e. HPII) in the position it would have been in had the fiduciary (i.e. Mr Ruhan) acted in accordance with their duties. Accordingly, the fact that HPII would not itself have made the profits is irrelevant as the breach (being the dissipation of trust held profits) deprived HPII of property to which it had proprietary rights.
• On issue 3, the general rule that a trustee may not set off gains against losses made or incurred by successive breaches of trust is subject to a potential exception where breaches occur within the same transaction, but this only applies where disallowing a set off would be inequitable. In this case, allowing a set-off would undermine the integrity and effect of the constructive trust by enabling the dishonest assistant (i.e. Mr Stevens) to escape accountability altogether.

Lord Burrows, on the other hand, would have dismissed the appeal, finding that Mr Stevens was not liable for dishonest assistance, that HPII suffered no loss as a result of the scheme as a whole, and that in any event, awarding equitable compensation for dishonest assistance would lead to potential double recovery by HPII.

Our Comment

This decision serves as a stark warning to those working with fiduciaries: where trust property is dissipated, fiduciaries and dishonest assistants may be held jointly liable - just because you do not personally profit, does not mean that you will not be made to pay!

The judgment, which tackles technical aspects of trusts law and equity, also highlights the complexity of this area of law and the need for practitioners to carefully consider the facts of a case, potential defendants and causes of action.

If you would like to discuss how this decision may apply to you or your fiduciary duties, please get in touch with Avary Patutama or Pauline Lépissier.