Supreme Court clarifies liability for equitable compensation for breach of fiduciary duty

The Supreme Court has allowed an appeal by the joint liquidators (the "Liquidators") of MBI International & Partners Inc (the "Company"), reinstating a substantial compensation award and clarifying the approach courts should take when assessing loss and causation in cases of misappropriation, especially where subsequent events affect the value of the property in question: Mitchell [2025] UKSC 43.

The judgment clarifies that anyone who assumes fiduciary powers can be held liable for breach of those duties, even without having formal authority. This liability extends to those who intermeddle with company assets, regardless of whether the wrongdoer personally receives the misappropriated property or channels it to another entity under their control.

The decision also confirms that equitable compensation aims to restore the value of misappropriated property, and that the date for valuing loss is not fixed by rigid rules. Instead, the courts will consider what is just and equitable in the circumstances, with regard to the substance and purpose of transactions. The Supreme Court further clarified that if a defaulting fiduciary is involved in, orchestrates, or benefits from subsequent events that destroy the value of the misappropriated property, they cannot rely on those events to avoid or reduce their liability for the original breach unless they can provide an innocent explanation. These principles reinforce the protections that equity affords to beneficiaries, principals and creditors.

For further detail, see this post on our Civil Fraud and Asset Tracing Notes blog.