September 1, 2025
The decision of the Supreme Court in Stevens v Hotel Portfolio II UK Limited (in liquidation) [2025] UKSC 28 provides important clarifications on liability for dishonest assistance where there is a breach of fiduciary duty. This judgment develops and amplifies a further recent judgment of the Supreme Court in Rukhadze v Recovery Partners [2025] UKSC 10.
It provides an important analysis of: (i) the nature of a constructive trust and of constructive trustees’ duties; (ii) the proper approach to the assessment of loss in equitable compensation cases and how such applies in “multiple breach” cases; and (iii) for the first time, the legal basis for the “no set off principle” (which arises where a trustee’s breaches result in both gains and losses to the trust) and its exceptions.
Given that the Royal Court has appropriate regard to English law for guidance on matters relating to dishonest assistances and constructive trusts, this judgment is likely to be persuasive should the Royal Court be asked to consider constructive trusts and equitable compensation.
Hotel Portfolio II UK Limited (HPII) owned a series of hotels in London. Each of these hotels were recognised as having, at least in principle, potential for development and conversion into premium residential accommodation. Mr Andrew Ruhan (Mr Ruhan) bought HPII for between £42m and £47m in mid-2003 at which point it was already heavily indebted to, Morgan Stanley and Thistle Hotels plc. A re-structuring took place in 2004 through which the ownership of HPII was equally divided between companies belonging to Mr Ruhan, Morgan Stanley and Thistle Hotels plc.
Mr Ruhan was a director of HPII. In 2005, Morgan Stanley and Thistle Hotels wanted to realise their investment in HPII and authorised Mr Ruhan to accept bids for some of the hotels in excess of £125m. In March of that year, a company incorporated in Maderia called, Cambulo Comercio e Servicos Sociedada Unipessol LDA (Cambulo) agreed to buy some of the hotels for £125m. This represented the market value at the time for those hotels. Cambula was ostensibly beneficially owned by Mr Stevens but it was subsequently found out that Mr Stevens and Cambulo acted in relation to the acquisition and subsequent resale of the hotels as Mr Ruhan’s nominee. This was dishonestly concealed throughout from the other directors and shareholders of HPII.
In April 2006, Cambulo sold one of the hotels realising a net profit of £7.76m. This net profit was received by Mr Ruhan and thereafter dissipated. In 2008, Cambulo sold the remaining hotels acquired from HPII realising a profit of £251m. After payments to another stakeholder, Cambulo eventually distributed £95.2m to Mr Ruhan. Mr Ruhan immediately used the £95.2m to pay down loans taken out by him in connection with developments in Qatar. He also provided a sum of £1.5m to Mr Stevens for his services.
HPII subsequently entered 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 opportunities which had enabled the profitable sales by Cambulo.
At First Instance, the High Court held that Mr Ruhan’s failure to disclose his interest in Cambulo constituted a breach of his fiduciary duties to HPII. As such, 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. The High Court held that Mr Stevens had provided dishonest assistance and ordered him to pay equitable compensation of £102m along with nearly £60m in compounded interest.
Mr Stevens appealed the decision. Whilst he accepted that he acted dishonestly, he challenged the legal basis for both the equitable compensation and the compound interest.
The Court of Appeal set aside both the order for equitable compensation and the order for compound interest. Whilst the Court of Appeal noted that Mr Stevens was jointly liable for the loss caused to HPII by Mr Ruhan’s breach of duty, he was not liable for any profits received by Mr Ruhan. The Court 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 to Cambulo and HPII could not itself have realised the profits made on the later sale. Therefore, it held, that 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 that decision to the Supreme Court.
By a 4:1 majority, the Supreme Court allowed the appeal, finding that the unauthorised profits made by Mr Ruhan were held on constructive trust for HPII. As such, HPII had suffered a loss and as Mr Stevens had assisted in the dissipation of the profits, he was liable to compensate HPII for those dissipated profits.
The key points from this judgment are that:
The decision of the Supreme Court in Stevens v Hotel Portfolio II UK Limited (in liquidation) [2025] UKSC 28 provides important clarifications on liability for dishonest assistance where there is a breach of fiduciary duty. This judgment develops and amplifies a further recent judgment of the Supreme Court in Rukhadze v Recovery Partners [2025] UKSC 10.
It provides an important analysis of: (i) the nature of a constructive trust and of constructive trustees’ duties; (ii) the proper approach to the assessment of loss in equitable compensation cases and how such applies in “multiple breach” cases; and (iii) for the first time, the legal basis for the “no set off principle” (which arises where a trustee’s breaches result in both gains and losses to the trust) and its exceptions.
Given that the Royal Court has appropriate regard to English law for guidance on matters relating to dishonest assistances and constructive trusts, this judgment is likely to be persuasive should the Royal Court be asked to consider constructive trusts and equitable compensation.
Hotel Portfolio II UK Limited (HPII) owned a series of hotels in London. Each of these hotels were recognised as having, at least in principle, potential for development and conversion into premium residential accommodation. Mr Andrew Ruhan (Mr Ruhan) bought HPII for between £42m and £47m in mid-2003 at which point it was already heavily indebted to, Morgan Stanley and Thistle Hotels plc. A re-structuring took place in 2004 through which the ownership of HPII was equally divided between companies belonging to Mr Ruhan, Morgan Stanley and Thistle Hotels plc.
Mr Ruhan was a director of HPII. In 2005, Morgan Stanley and Thistle Hotels wanted to realise their investment in HPII and authorised Mr Ruhan to accept bids for some of the hotels in excess of £125m. In March of that year, a company incorporated in Maderia called, Cambulo Comercio e Servicos Sociedada Unipessol LDA (Cambulo) agreed to buy some of the hotels for £125m. This represented the market value at the time for those hotels. Cambula was ostensibly beneficially owned by Mr Stevens but it was subsequently found out that Mr Stevens and Cambulo acted in relation to the acquisition and subsequent resale of the hotels as Mr Ruhan’s nominee. This was dishonestly concealed throughout from the other directors and shareholders of HPII.
In April 2006, Cambulo sold one of the hotels realising a net profit of £7.76m. This net profit was received by Mr Ruhan and thereafter dissipated. In 2008, Cambulo sold the remaining hotels acquired from HPII realising a profit of £251m. After payments to another stakeholder, Cambulo eventually distributed £95.2m to Mr Ruhan. Mr Ruhan immediately used the £95.2m to pay down loans taken out by him in connection with developments in Qatar. He also provided a sum of £1.5m to Mr Stevens for his services.
HPII subsequently entered 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 opportunities which had enabled the profitable sales by Cambulo.
At First Instance, the High Court held that Mr Ruhan’s failure to disclose his interest in Cambulo constituted a breach of his fiduciary duties to HPII. As such, 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. The High Court held that Mr Stevens had provided dishonest assistance and ordered him to pay equitable compensation of £102m along with nearly £60m in compounded interest.
Mr Stevens appealed the decision. Whilst he accepted that he acted dishonestly, he challenged the legal basis for both the equitable compensation and the compound interest.
The Court of Appeal set aside both the order for equitable compensation and the order for compound interest. Whilst the Court of Appeal noted that Mr Stevens was jointly liable for the loss caused to HPII by Mr Ruhan’s breach of duty, he was not liable for any profits received by Mr Ruhan. The Court 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 to Cambulo and HPII could not itself have realised the profits made on the later sale. Therefore, it held, that 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 that decision to the Supreme Court.
By a 4:1 majority, the Supreme Court allowed the appeal, finding that the unauthorised profits made by Mr Ruhan were held on constructive trust for HPII. As such, HPII had suffered a loss and as Mr Stevens had assisted in the dissipation of the profits, he was liable to compensate HPII for those dissipated profits.
The key points from this judgment are that:
The decision of the Supreme Court in Stevens v Hotel Portfolio II UK Limited (in liquidation) [2025] UKSC 28 provides important clarifications on liability for dishonest assistance where there is a breach of fiduciary duty. This judgment develops and amplifies a further recent judgment of the Supreme Court in Rukhadze v Recovery Partners [2025] UKSC 10.
It provides an important analysis of: (i) the nature of a constructive trust and of constructive trustees’ duties; (ii) the proper approach to the assessment of loss in equitable compensation cases and how such applies in “multiple breach” cases; and (iii) for the first time, the legal basis for the “no set off principle” (which arises where a trustee’s breaches result in both gains and losses to the trust) and its exceptions.
Given that the Royal Court has appropriate regard to English law for guidance on matters relating to dishonest assistances and constructive trusts, this judgment is likely to be persuasive should the Royal Court be asked to consider constructive trusts and equitable compensation.
Hotel Portfolio II UK Limited (HPII) owned a series of hotels in London. Each of these hotels were recognised as having, at least in principle, potential for development and conversion into premium residential accommodation. Mr Andrew Ruhan (Mr Ruhan) bought HPII for between £42m and £47m in mid-2003 at which point it was already heavily indebted to, Morgan Stanley and Thistle Hotels plc. A re-structuring took place in 2004 through which the ownership of HPII was equally divided between companies belonging to Mr Ruhan, Morgan Stanley and Thistle Hotels plc.
Mr Ruhan was a director of HPII. In 2005, Morgan Stanley and Thistle Hotels wanted to realise their investment in HPII and authorised Mr Ruhan to accept bids for some of the hotels in excess of £125m. In March of that year, a company incorporated in Maderia called, Cambulo Comercio e Servicos Sociedada Unipessol LDA (Cambulo) agreed to buy some of the hotels for £125m. This represented the market value at the time for those hotels. Cambula was ostensibly beneficially owned by Mr Stevens but it was subsequently found out that Mr Stevens and Cambulo acted in relation to the acquisition and subsequent resale of the hotels as Mr Ruhan’s nominee. This was dishonestly concealed throughout from the other directors and shareholders of HPII.
In April 2006, Cambulo sold one of the hotels realising a net profit of £7.76m. This net profit was received by Mr Ruhan and thereafter dissipated. In 2008, Cambulo sold the remaining hotels acquired from HPII realising a profit of £251m. After payments to another stakeholder, Cambulo eventually distributed £95.2m to Mr Ruhan. Mr Ruhan immediately used the £95.2m to pay down loans taken out by him in connection with developments in Qatar. He also provided a sum of £1.5m to Mr Stevens for his services.
HPII subsequently entered 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 opportunities which had enabled the profitable sales by Cambulo.
At First Instance, the High Court held that Mr Ruhan’s failure to disclose his interest in Cambulo constituted a breach of his fiduciary duties to HPII. As such, 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. The High Court held that Mr Stevens had provided dishonest assistance and ordered him to pay equitable compensation of £102m along with nearly £60m in compounded interest.
Mr Stevens appealed the decision. Whilst he accepted that he acted dishonestly, he challenged the legal basis for both the equitable compensation and the compound interest.
The Court of Appeal set aside both the order for equitable compensation and the order for compound interest. Whilst the Court of Appeal noted that Mr Stevens was jointly liable for the loss caused to HPII by Mr Ruhan’s breach of duty, he was not liable for any profits received by Mr Ruhan. The Court 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 to Cambulo and HPII could not itself have realised the profits made on the later sale. Therefore, it held, that 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 that decision to the Supreme Court.
By a 4:1 majority, the Supreme Court allowed the appeal, finding that the unauthorised profits made by Mr Ruhan were held on constructive trust for HPII. As such, HPII had suffered a loss and as Mr Stevens had assisted in the dissipation of the profits, he was liable to compensate HPII for those dissipated profits.
The key points from this judgment are that:
The decision of the Supreme Court in Stevens v Hotel Portfolio II UK Limited (in liquidation) [2025] UKSC 28 provides important clarifications on liability for dishonest assistance where there is a breach of fiduciary duty. This judgment develops and amplifies a further recent judgment of the Supreme Court in Rukhadze v Recovery Partners [2025] UKSC 10.
It provides an important analysis of: (i) the nature of a constructive trust and of constructive trustees’ duties; (ii) the proper approach to the assessment of loss in equitable compensation cases and how such applies in “multiple breach” cases; and (iii) for the first time, the legal basis for the “no set off principle” (which arises where a trustee’s breaches result in both gains and losses to the trust) and its exceptions.
Given that the Royal Court has appropriate regard to English law for guidance on matters relating to dishonest assistances and constructive trusts, this judgment is likely to be persuasive should the Royal Court be asked to consider constructive trusts and equitable compensation.
Hotel Portfolio II UK Limited (HPII) owned a series of hotels in London. Each of these hotels were recognised as having, at least in principle, potential for development and conversion into premium residential accommodation. Mr Andrew Ruhan (Mr Ruhan) bought HPII for between £42m and £47m in mid-2003 at which point it was already heavily indebted to, Morgan Stanley and Thistle Hotels plc. A re-structuring took place in 2004 through which the ownership of HPII was equally divided between companies belonging to Mr Ruhan, Morgan Stanley and Thistle Hotels plc.
Mr Ruhan was a director of HPII. In 2005, Morgan Stanley and Thistle Hotels wanted to realise their investment in HPII and authorised Mr Ruhan to accept bids for some of the hotels in excess of £125m. In March of that year, a company incorporated in Maderia called, Cambulo Comercio e Servicos Sociedada Unipessol LDA (Cambulo) agreed to buy some of the hotels for £125m. This represented the market value at the time for those hotels. Cambula was ostensibly beneficially owned by Mr Stevens but it was subsequently found out that Mr Stevens and Cambulo acted in relation to the acquisition and subsequent resale of the hotels as Mr Ruhan’s nominee. This was dishonestly concealed throughout from the other directors and shareholders of HPII.
In April 2006, Cambulo sold one of the hotels realising a net profit of £7.76m. This net profit was received by Mr Ruhan and thereafter dissipated. In 2008, Cambulo sold the remaining hotels acquired from HPII realising a profit of £251m. After payments to another stakeholder, Cambulo eventually distributed £95.2m to Mr Ruhan. Mr Ruhan immediately used the £95.2m to pay down loans taken out by him in connection with developments in Qatar. He also provided a sum of £1.5m to Mr Stevens for his services.
HPII subsequently entered 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 opportunities which had enabled the profitable sales by Cambulo.
At First Instance, the High Court held that Mr Ruhan’s failure to disclose his interest in Cambulo constituted a breach of his fiduciary duties to HPII. As such, 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. The High Court held that Mr Stevens had provided dishonest assistance and ordered him to pay equitable compensation of £102m along with nearly £60m in compounded interest.
Mr Stevens appealed the decision. Whilst he accepted that he acted dishonestly, he challenged the legal basis for both the equitable compensation and the compound interest.
The Court of Appeal set aside both the order for equitable compensation and the order for compound interest. Whilst the Court of Appeal noted that Mr Stevens was jointly liable for the loss caused to HPII by Mr Ruhan’s breach of duty, he was not liable for any profits received by Mr Ruhan. The Court 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 to Cambulo and HPII could not itself have realised the profits made on the later sale. Therefore, it held, that 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 that decision to the Supreme Court.
By a 4:1 majority, the Supreme Court allowed the appeal, finding that the unauthorised profits made by Mr Ruhan were held on constructive trust for HPII. As such, HPII had suffered a loss and as Mr Stevens had assisted in the dissipation of the profits, he was liable to compensate HPII for those dissipated profits.
The key points from this judgment are that: