HOTEL PORTFOLIO II UK LIMITED v ANDREW JOSEPH RUHAN

[2022] EWHC 383 (Comm)

Case details

Case citations
[2022] EWHC 383 (Comm) · [2022] WLR(D) 105
Court
High Court (Commercial Court)
Judgment date
23 February 2022
Judgment text

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Subjects
Equity and trusts Company Dishonest assistance
Keywords
nominee arrangement breach of fiduciary duty secret profit dishonest assistance constructive trust account of profits equitable compensation unlawful-means conspiracy limitation laches
Outcome
claim succeeded in part: breach of fiduciary duty and dishonest assistance claims succeeded; unlawful-means conspiracy claims dismissed
Judicial consideration

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Summary

A fiduciary who secretly acquires company property through a nominee breaches the duties to avoid conflicts and unauthorised profit, even where the sale price was at market value and the company cannot prove a lost opportunity. The court may order an account of profits after a dishonest and sustained breach; uncertainty about the counterfactual is not a reason to withhold relief. A dishonest assistant may be liable for profits received for the assistance and for equitable compensation for loss caused by distinct later breaches, including misuse or non-account of trust property. An unlawful-means conspiracy still requires intention to injure and causative loss.

Factual background

The claimant company, in liquidation, and its liquidator pursued claims against Andrew Ruhan and Anthony Stevens concerning the sale and redevelopment of three London hotels. The claimant alleged that Stevens acquired the hotels through Cambulo Madeira as Ruhan’s nominee, enabling Ruhan to conceal a fiduciary interest, profit from subsequent disposals and divert the proceeds.

The court determined the nominee issue, breach of fiduciary and statutory duties, dishonest assistance, unlawful-means conspiracy, limitation and laches. It also considered whether the claimant could recover an account of profits or equitable compensation despite proving no undervalue or lost sale opportunity.

Held

The claims in dishonest assistance and breach of fiduciary duty succeeded. The unlawful-means conspiracy claims failed. Quantification and consequential proprietary orders were left for further submissions.

  1. The court found that Stevens acted throughout as Ruhan’s nominee in acquiring the hotels, arranging their subsequent sale and applying the profits. The evidence showed that Ruhan exercised the relevant control and acted as the effective decision-maker. The nominee arrangement concealed Ruhan’s interest from the claimant and its stakeholders.
  2. Ruhan’s undisclosed interest placed him in conflict with his duties and involved unauthorised profit. The court ordered that the claimant was entitled, at its election, to an account of profits or equitable compensation. The absence of proof that the hotels were sold below market value did not defeat the account. The uncertainty of what would have happened had Ruhan disclosed his interest was not a basis for refusing relief.
  3. Ruhan breached sections 317 and 320 of the Companies Act 1985. Section 322(3)(a) required an account of gains made directly or indirectly by the transaction, including profits realised on a later sale. Section 322(3)(b) did not provide an alternative indemnity because the transaction itself had not caused the claimed loss.
  4. Stevens dishonestly assisted the fiduciary breaches. His role was more than minimal and was essential to concealing Ruhan’s interest. Dishonest assistance could extend to breaches of duties arising under a constructive trust. Stevens was liable to account for at least £500,000 paid for providing security and £1 million advanced and later repaid from the hotel proceeds.
  5. The conspiracy claims failed because the claimant had not established the necessary loss or pleaded a causation case consistent with the single conspiracy alleged. The claimant could not assume that the transaction occurred while claiming damages on the basis that the profits would otherwise have been accounted to it.
  6. The claims were not time-barred. The fiduciary claims fell within sections 21(1)(a) and 21(1)(b) of the Limitation Act 1980. Section 32 was also engaged by deliberate concealment. Laches did not apply because the defendants’ concealment could not generate legitimate detrimental reliance on the claimant’s inactivity. No relief under section 727 of the Companies Act 1985 or equitable allowance was appropriate.

The court’s approach to earlier authorities

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Appellate history

not stated in the judgment.

Key cases cited

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Cases citing this case

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