Recovery Partners GP Ltd & Anor v Rukhadze & Ors

A fiduciary’s post-resignation exploitation of a business opportunity is actionable where the liability arises from a pre-resignation breach. The opportunity need only have matured to the point where contact with a third party has produced some outline of future contractual relations; no draft contract, imminent agreement or probable completed deal is required. Active pursuit ends only on a clear dissociation from the opportunity. A resignation with an intention to compete is not automatically wrongful, but preparatory steps and disloyal conduct may constitute a bad-faith resignation. The exclusion of a fiduciary may exceptionally reduce duties to vanishing point. Members of an LLP may also owe statutory and equitable duties, depending on their actual role and agency.

The claimants alleged that three individuals diverted to themselves an opportunity to provide asset-recovery and family-office services to the family of a deceased businessman. The opportunity had initially been developed within SCPI and was later pursued through Recovery Partners and Revoker. The individuals resigned from, or were suspended by, those entities and continued providing services to the family through a new structure. The corporate defendants were alleged to have received the resulting benefits.

The central issues were whether the opportunity remained one which the claimants were pursuing, whether the defendants owed fiduciary, contractual or LLP duties, whether their preparatory conduct and resignation constituted a breach, and whether the subsidiary claims in confidence, conspiracy and knowing receipt were established.

1. Liability. The claimants succeeded on liability. Mr Rukhadze breached fiduciary duties owed to SCPI, Recovery Partners and Revoker; Mr Alexeev breached duties owed to SCPI and Revoker; and Mr Marson breached duties owed to Revoker. Mr Rukhadze and Mr Alexeev also breached their LLP duties. The corporate defendants were liable in knowing receipt, subject to proof that they received monies resulting from the breaches.
2. Fiduciary status and duties. Applying Bristol & West Building Society v Mothew [1998] Ch 1, fiduciary status depended objectively on an undertaking to act for another in circumstances of trust and confidence. The duties included single-minded loyalty, the no-conflict rule and the no-profit rule. Mr Rukhadze’s consultancy agreement remained effective because it had not been terminated or varied in accordance with its terms. The court applied Rock Advertising Ltd v MWB Business Exchange Centres Ltd [2018] UKSC 24 and LLP Regulations 2001 to the contractual and statutory duties.
3. Business opportunity. The opportunity originated with SCPI and remained its opportunity. Recovery Partners and Revoker also acquired interests in it through the roles assigned to them. The term “Salford Principals”, the proposed structures and the Steps Papers did not establish any agreement surrendering or reallocating the opportunity. Applying Canadian Aero Service Ltd v O’Mailley (1973) 40 DLR (3d) 371 and Hunter Kane Ltd v Watkins [2003] EWHC 186 (Ch), the opportunity was maturing because presentations, a signed term sheet and continuing negotiations had produced outlines of future contractual relations. The negotiations remained a continuum. The absence of a concluded contract did not prevent the opportunity from being maturing.
4. Active pursuit and resignation. Active pursuit had not ended. A clear dissociation was required, and the claimants had not abandoned the opportunity. Post-resignation liability arose from pre-resignation breaches, not from fiduciary duties continuing after resignation. Resignation alone was not necessarily a breach, but the defendants had taken preparatory steps to continue the services in a post-SCPI world and had aligned themselves with the family while still owing duties. Their conduct therefore amounted to a bad-faith resignation. The exceptional reasoning in In Plus Group Ltd v Pyke [2002] EWCA Civ 370 did not apply: the suspension was short, the defendants continued doing the substantive work, and they were not effectively excluded from the business.
5. Subsidiary claims. The defendants misused confidential information, including the negotiating structure, draft terms and surrounding commercial knowledge. The claim was sufficiently particularised for the court to decide it, applying Scully (UK) Ltd v Lee [1998] IRLR 259. The individual defendants combined to obtain the Recovery Services and intended the resulting loss to SCPI if necessary; the requirements of unlawful means conspiracy were satisfied. The assignment of SCPI’s claims to Recovery Partners was valid because it formed part of a transaction in which the assignee had a genuine commercial interest.
6. Relief. Questions concerning an account of profits, equitable compensation, allowances and the hypothetical conclusion of a later contract were left for consequential submissions.

not stated in the judgment.