In the recent case of Stevens v Hotel Portfolio II UK Ltd (in liquidation) and another [2025] UKSC 28, a majority of the Supreme Court has butted heads with Lord Burrows over the imposition of liability of £105m on a Mr Stevens for dishonestly assisting a company director, Mr Ruhan.

In Stevens, the claimant, Hotel Portfolio II (“HPII”), did not suffer any loss from a sale at market value to companies owned by Mr Ruhan, who concealed his ownership of those companies through Mr Stevens. The only loss to HPII was the secret profit that Mr Ruhan obtained following a further sale of the hotels. That profit was found to be held on constructive trust for HPII and then dissipated.

Nevertheless, HPII was entitled to recover the full amount of the undisclosed profit of £102.26m from both Mr Ruhan and Mr Stevens by way of equitable compensation. Mr Stevens’ liability to HPII for the full amount of Mr Ruhan’s secret profit raises an eyebrow because Mr Stevens only received £1.5m for his participation in the scheme.

Background

In 2003, HPII sold a chain of its hotels. Unknown to the company, the purchaser was companies owned and controlled by a director, Mr Ruhan. Mr Ruhan concealed his ownership in those companies by employing Mr Stevens to act as his nominee.

In 2008, Mr Ruhan’s companies sold the same hotels and obtained a profit of £105m because he had obtained planning permission.

During the liquidation of HPII in 2018, it was discovered that Mr Ruhan was the purchaser of the hotels and had received the profits in 2008. The liquidators brought claims against Mr Ruhan and Mr Stevens for recovery of the undisclosed profit.

Findings

HPII did not advance a case that: (i) it was paid less than market value for the sale in 2003, (ii) there was another buyer willing to pay more than Mr Ruhan or (iii) it would have exploited planning permission itself.

HPII therefore did not establish that Mr Ruhan’s breaches had caused any loss.

However, the Court held that Mr Ruhan was in breach of his fiduciary duties to HPII, namely by self-dealing and making the secret profit. He was found to have received the secret profit on a constructive trust for HPII in 2008, although this money was dissipated shortly thereafter by bad investments in Qatar.

Mr Stevens was held to have dishonestly assisted Mr Ruhan throughout, including in relation to the failed investments in Qatar.

Accordingly, both were liable to HPII for causing HPII’s property, i.e. the secret profit, to be dissipated. As a result of the dissipation, HPII was awarded equitable compensation against Mr Ruhan and Mr Stevens for their breaches of trust.

In the High Court, Foxton J said that he had “…not found the answer entirely satisfactory or wholly intuitive”.  He went on further to say that “the result might be thought particularly strict, because of the consequences which follow from applying [the test applicable] to claims for dishonest assistance in the breach of [ duties relating to a failure to safeguard trust property]”.

Clearly, the trial judge felt that Mr Stevens had faced an unjust outcome for his involvement in Mr Ruhan’s scheme. Nevertheless, he was bound to follow established principles to impose this liability.

Appellate Courts

Mr Stevens successfully appealed against his liability to the Court of Appeal.

The Court of Appeal felt that Mr Ruhan’s scheme was a single and uninterrupted course of conduct which, taken as a whole, caused HPII no loss. Accordingly, Mr Stevens should only be liable for the profits that he had personally made in the scheme, rather than the profits made by Mr Ruhan which were dissipated. His liability should therefore have been limited to £1.5m.

However, a majority of the Supreme Court overturned the Court of Appeal’s decision. In their view, the Court of Appeal was wrong because the secret profit constituted HPII’s property and Mr Stevens had notice and custody of this and was responsible for the dissipation. It was irrelevant that HPII had become entitled to this property only through Mr Ruhan’s wrongdoing so the fact that HPII had suffered no loss was entirely irrelevant.

In dissent, Lord Burrows indicated that the majority of the Supreme Court was wrong to separate Mr Stevens’ liability into two parts. In Lord Burrows’ view, he agreed with the Court of Appeal that there was only one dishonest scheme so Mr Stevens’ liability should have been limited to the profits that he received.

Commentary

The Supreme Court has upheld the established law in relation to equitable compensation in breach of trust claims, despite the strict way this operated against Mr Stevens.

When preparing pleadings for a secret profit claim, litigators will be guided by this case to ensure that a separate claim for a constructive trust of the secret profit is included. This might ensure that anyone with notice of the trust becomes liable for the full amount of the secret profit, like Mr Stevens did, even if they only had a small part to play.

For more information, contact Laurence Crees or Nick Goldstone.

The information contained in this article is general guidance only. The application and impact of laws can vary widely depending on the specific facts involved. The information in this article is provided with the understanding that the authors and presenters are not giving legal, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional legal, tax or other competent advisers. Before making any decision or taking any action, you should consult a Child & Child professional.