Stevens v Hotel Portfolio II: Supreme Court rules on liability for dishonest assistance in breaches of constructive trusts
Overturning the decision of the Court of Appeal, the Supreme Court has confirmed in Stevens v Hotel Portfolio II [2025] UKSC 28 that a person can be liable to pay equitable compensation where they dishonestly assist a director in dissipating unauthorised profit.
In 2005, Hotel Portfolio II UK Ltd sold three hotels at market value to Cambulo, a Madeiran company ostensibly owned by Anthony Stevens. In reality, Mr Stevens was the nominee of Andrew Ruhan, a director of Hotel Portfolio II, who concealed that he was the true purchaser. Between 2006 and 2008, Cambulo sold the hotels, with Mr Ruhan receiving profits of £103.76 million, which he then dissipated.
Upon discovery of Mr Ruhan’s true role in these transactions, Hotel Portfolio II brought a claim against both Mr Ruhan and Mr Stevens. Hotel Portfolio II alleged that Mr Ruhan had breached his fiduciary duties to Hotel Portfolio II and that Mr Stevens had dishonestly assisted him in doing so. Hotel Portfolio II succeeded at first instance, with the High Court finding:
(i) Mr Ruhan breached his fiduciary duties, firstly by failing to disclose his interest in Cambulo and, secondly, dissipating the profits, which he held as a constructive trustee for Hotel Portfolio II.
(ii) Mr Stevens was held to have dishonestly assisted in Mr Ruhan’s two breaches, and ordered to pay equitable compensation for Mr Ruhan’s second breach: the dissipation of the profits.
Who is a dishonest assistant?
A cause of action for dishonest assistance involves a non-trustee (i.e., Mr Stevens) being personally liable for breaches of trust committed by a trustee (i.e., Mr Ruhan). A claim for dishonest assistance requires:
(i) a breach of trust or fiduciary duty by the primary wrongdoer;
(ii) the non-trustee must have induced and/or assisted the primary wrongdoer in the breach; and
(iii) the non-trustee must have acted dishonestly, (i.e. an objective test that imposes liability if the accessory has not acted as a honest person would).
Mr Stevens successfully appealed to the Court of Appeal, who held that since Hotel Portfolio II would not have realised the profits itself, there was no loss to compensate (see below issue (ii) before the Supreme Court concerning whether the breach of fiduciary duty should be aggregated with the subsequent breach of the constructive trust).
In July 2025, the Supreme Court allowed the appeal in favour of Hotel Portfolio II by a majority of 4:1. As the unauthorised profits made by Mr Ruhan were held on constructive trust for Hotel Portfolio II, and Mr Stevens had dishonestly assisted in their dissipation, Mr Stevens was personally liable to compensate Hotel Portfolio II for the full £103.76 million of dissipated profits.
The issues before the Supreme Court
(i) Whether loss caused by a breach of constructive trust is compensatable in principle.
(ii) Whether Hotel Portfolio II suffered a loss as a result of the dissipation.
(iii) If so, whether the profits from the onwards sale could be treated as a gain made for the benefit of Hotel Portfolio II, and set off against the subsequent dissipation loss to reduce Mr Stevens’ liability.
(i) Whether loss caused by a breach of constructive trust is compensatable in principle.
The constructive trust was equity’s response to the breach that generated the unauthorised profits, giving Hotel Portfolio II an immediate proprietary interest in the fund representing those profits. The Supreme Court's view was that it would be "extraordinary and contrary to basic equitable principle for the dissipation of a fund held on an institutional constructive trust to give rise to no remedy by way of equitable compensation for any consequential loss".
(ii) Whether Hotel Portfolio II suffered a loss as a result of the dissipation.
The assessment of equitable compensation for breaches of trust is to be conducted through a “but-for” counterfactual: what would have been the beneficiary’s position but for the breach of trust?
Mr Stevens argued that Hotel Portfolio II had suffered no real loss because the dissipation breach was aggregated with the earlier breach that generated the profits and, therefore, Hotel Portfolio II was in the equivalent position to that in which neither breach had occurred. The Supreme Court disagreed. It found that this argument did not follow the case law, was inconsistent with the purpose of the constructive trust, and would enable "the dishonest assistant to escape scot-free". Instead of a counterfactual where the constructive trust never came into being, the correct counterfactual was one where the trust fund had not been dissipated. Therefore, Hotel Portfolio II had suffered loss in the full amount of £103.76 million.
(iii) If so, whether the profits from the onwards sale could be treated as a gain made for the benefit of Hotel Portfolio II and set off against the subsequent dissipation loss to reduce Mr Stevens’ liability.
The general rule is that a trustee is not permitted to set off gains made in one breach of trust against losses made in another. There is, however, a permitted exception where breaches arise in the same transaction and a strict application of the rule would lead to a plainly inequitable result. Mr Stevens argued that the transactions were all connected in such a way that the exception should apply. The Supreme Court were unpersuaded, describing his argument as "fantastical".
"There is, at the outset, something rather fantastical (rather than equitable) about the notion that a liability which would ordinarily be incurred from participation in a series of events can be expunged by alleging they were all part of the same fraudulent scheme. It sounds like using fraud to ravel rather than unravel all."
