On the 25th & 26th February 2025, James Pickering KC & Samuel Hodge appeared before the UK Supreme Court in Stevens v Hotel Portfolio II UK Limited (in Liquidation).
In this case, a fiduciary (Mr Ruhan) made unauthorised profits for which he was accountable to his principal (HPII). Mr Ruhan was dishonestly assisted to do so by a third party (Mr Stevens). It was common ground that (a) HPII would not have made the profits for itself, and (b) the profits were held on constructive trust by Mr Ruhan for HPII from the moment he received them.
Rather than pay the profits to HPII once they were received, Mr Ruhan, in secret, then entirely dissipated them, by spending them on his own ventures. He was again dishonestly assisted by Mr Stevens to do so.
The question for the Supreme Court is whether Mr Stevens, the dishonest assistant, is liable to pay HPII equitable compensation corresponding to the amount of the profits which were dissipated.
At first instance, in February 2022, Foxton J held Mr Stevens liable to pay equitable compensation.
The Court of Appeal, in October 2023, allowed Mr Stevens’ appeal, holding that HPII had suffered no loss as a result of the overall scheme. HPII therefore only had account of profits remedies open to it.
Before the Supreme Court, Counsel argued on behalf of HPII that Mr Stevens is liable to compensate HPII, because he dishonestly assisted a breach of constructive trust which existed over the profits – i.e. a misappropriation of HPII’s property. Had that breach of trust not occurred, HPII would have had the profits – some £102.26m. Because it did occur, and HPII does not have the profits, HPII has suffered a real loss for which it should be compensated.
Mr Stevens argued that the Court of Appeal was right, and that he is not liable to pay compensation, because, if one considers the wrongful scheme as a whole and assumes that Mr Ruhan had not breached any of the duties which he owed to HPII, HPII suffered no loss, seeing as it would never have made the profits for itself.
The case goes to the heart of equitable remedies. There has, somewhat remarkably, been no previous case which is entirely on point.
The Court’s judgment, either way, will have a big impact on how we understand, in the law, the concepts of compensation, ownership, property, constructive trusts, assistance, election, loss, and gain – all of which were debated over 2 days at their most fundamental levels, with one eye always on the facts of the case.
James and Sam were instructed by James Russell, Callum Knight and Isabelle Johnstone of Spring Law.
