Supreme Court clarifies remedies available against dishonest assistant for breach of a constructive trust

The Supreme Court has restored an order requiring a third party who dishonestly assisted a company director in making and then dissipating an unauthorised profit to pay equitable compensation equal to the amount of that unauthorised profit: Stevens v Hotel Portfolio II UK Ltd [2025] UKSC 28.

The Supreme Court confirmed that, in cases involving multiple breaches of duty, such as the making of unauthorised profits and the subsequent dissipation of those profits, the two breaches must be viewed as separate and distinct. The result is that a dishonest assistant can be liable, jointly with the defaulting fiduciary, for losses caused by the dissipation. The Supreme Court held that this does not contradict the established principle that a dishonest assistant can only be liable to account for profits they have themselves made (and not those made by the defaulting fiduciary). It is irrelevant that the compensation awarded against the dishonest assistant may be equal to the profit gained by the defaulting fiduciary.

The Supreme Court rejected the argument, which the Court of Appeal had accepted, that a gain to the beneficiary represented by the unauthorised profits could be set off against the loss caused by their dissipation in order to reduce, or extinguish, a dishonest assistant's liability where the two breaches were inextricably connected as elements of a single scheme. The decision leaves open the potential for equitable set-off, but not merely because the breaches are closely connected. Instead, the court may allow a set-off when there would otherwise be a "clearly inequitable result".  

For more information, see this post on our Civil Fraud and Asset Tracing Notes blog.