Aston Risk Management Ltd v Lee Jones & Ors

Equitable compensation for breach of fiduciary duty is assessed at trial, with hindsight and on a common-sense view of causation. Common-law rules of remoteness and foreseeability do not apply, but the breach must have caused the loss claimed.

The court must identify the precise breach and the counterfactual position without it. A claim cannot be enlarged at the quantum stage beyond the pleaded breach or reopened findings on liability. Where a fiduciary diverted a business opportunity and undertaking, compensation may reflect the value transferred, assessed by an appropriate valuation method and with realistic adjustments. Loss-of-chance principles do not necessarily govern equitable compensation.

The claimant, Aston Risk Management Ltd, pursued assigned claims arising from breaches of fiduciary duty by Mr Lee Jones in connection with the transfer of the business and undertaking of ASS to AMR, and claims against Neutrino Network Ltd as knowing recipient and constructive trustee.

Liability had been determined in the earlier judgment, [2023] EWHC 603 (Ch). The present judgment concerned quantum. The court considered compensation for payments made to Neutrino and Cumulo, the value of the transferred business and undertaking, outstanding work in progress and debtors, and administration and liquidation costs.

1. Quantum application. The claimant obtained judgment for equitable compensation against Mr Jones of £130,418.95 for payments to Neutrino, £33,900 for payments to Cumulo and £1,235,285 for the transfer of ASS’s business and undertaking to AMR. Neutrino was liable as constructive trustee for knowing receipt of £130,418.95.
2. Equitable compensation differs from common-law damages because remoteness and foreseeability do not apply. Nevertheless, the wrongful act must cause the loss, and the claimant must be restored to the position it would have occupied without the breach. Assessment is made at trial, with hindsight and using common sense. These principles were derived from Target Holdings Ltd v Redferns and AIB Group (UK) Ltd v Mark Redler & Co.
3. The relevant breach was Mr Jones’s fiduciary breach in transferring the substance and benefit of ASS’s business and undertaking to AMR. The counterfactual was therefore the position absent that transfer. The court concluded that ASS would probably have renegotiated its relationship with the Quindell group on terms similar to those obtained by AMR.
4. The income approach was appropriate for valuing the transferred undertaking. Applying hindsight, a one-year multiplier and a 20% risk discount were appropriate. The court increased the allowance for properly chargeable development and reporting expenses, producing compensation of £1,235,285.
5. The court declined to reopen findings made in the liability judgment concerning Neutrino invoices. The additional work-in-progress claim was outside the pleaded case and, in any event, was not shown to have been caused by the established breach. Administration and liquidation costs also failed because no breach in causing ASS to enter administration had been pleaded or found, and the established breach was not sufficiently causative of those costs.
6. The court rejected a further loss-of-chance discount. Common-law quantification principles did not govern equitable compensation, and the immateriality of the company’s ability to take advantage of an opportunity under section 175(2) of the Companies Act 2006 informed the approach.

The judgment determined quantum following the liability judgment in [2023] EWHC 603 (Ch). Permission to appeal the liability decision had been refused by the Court of Appeal on 6 February 2024.