Hotel Portfolio II UK Limited (In Liquidation) & Anor v Andrew Joseph Ruhan & Anor

For dishonest assistance, the assistant may be ordered to account for profits personally made, but is not liable to disgorge profits made by the fiduciary. Liability for loss may be joint and several. Where two breaches form one uninterrupted scheme, and the claimant suffers no loss when the scheme is viewed as a whole, equitable compensation cannot be calculated by isolating one breach and ignoring the connected gain. The court should assess whether the gain and loss arise from the same transaction, including whether they are so closely connected that it would be manifestly unjust to disregard the gain. In such a case, an account of profits may be appropriate instead of compensation.

Hotel Portfolio II UK Limited and its liquidator sued Andrew Ruhan and Anthony Stevens concerning the acquisition and subsequent profitable redevelopment sale of hotels owned by HPII. Foxton J held that Ruhan had breached fiduciary duties and that Stevens had dishonestly assisted those breaches. The High Court ordered Stevens to pay more than £102 million by way of equitable compensation, together with compound interest, in judgments reported at [2022] EWHC 383 (Comm) and [2022] EWHC 1695 (Comm).

Stevens appealed the compensation and interest orders. He did not challenge the findings that he acted as Ruhan’s nominee or dishonestly assisted breaches of fiduciary duty. The central issue was whether HPII could recover the profits as compensation for a later breach while Ruhan was liable to account for profits arising from the overall scheme.

1. Appeal allowed. Newey LJ, with whom Males and Birss LJJ agreed, set aside the order requiring Stevens to pay equitable compensation and the related interest order. An account of profits was substituted, with interest issues deferred for reconsideration after the account.
2. Dishonest assistance. The necessary elements are a breach of trust or fiduciary duty, assistance, dishonesty and a causal link with relevant loss or gain. Authorities including Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC, Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch) and Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908 establish that an assistant may account for profits personally made from the assistance. That liability does not extend to profits made by the fiduciary. Liability for loss caused by the assisted breach may be joint and several.
3. Connected breaches. HPII’s compensation claim could not isolate the later application of the profits from the original acquisition of the hotels. The acquisition and subsequent sales formed one uninterrupted scheme in which Stevens was involved from the outset. The scheme, viewed as a whole, caused HPII no loss because it received an objectively reasonable market price and could not itself have realised the development profits. Applying the reasoning in Bartlett v Barclays Bank Trust Co Ltd (Nos. 1 and 2) [1980] Ch 515, Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667 and The Nanfri [1978] 2 QB 927, it would be manifestly unjust to disregard the connected gain. Equitable compensation therefore failed, while an account of profits remained available.
4. Self-dealing. The self-dealing rule ordinarily makes a transaction voidable rather than void. The analysis in JJ Harrison (Properties) Ltd v Harrison [2001] EWCA Civ 1467 did not mean that every transfer to a fiduciary automatically created a trust; the result could differ where the conduct also constituted an unauthorised misapplication. This clarification was not necessary to the disposition.

1. Court of Appeal (Civil Division) — Appeal allowed. The equitable compensation and interest orders against Stevens were set aside, an account of profits was substituted, and interest was left for reconsideration.
2. High Court of Justice, Commercial Court — Foxton J held that Stevens had dishonestly assisted breaches of fiduciary duty and ordered him to pay equitable compensation exceeding £102 million, with compound interest, in [2022] EWHC 383 (Comm) and [2022] EWHC 1695 (Comm).