Rukhadze and others v Recovery Partners GP Ltd and another

Three individuals who had been appointed by their principal to pursue a lucrative business opportunity decided instead to pursue it for their own benefit. They were found at trial to have breached fiduciary duties owed to their principal. On the taking of an account of profits, they were found to have earned around $170m from the pursuit of the business opportunity, and were ordered to account to the principal for the entire sum less a 25% equitable allowance to reflect the work they had done in generating it.

On appeal to the Supreme Court, the three fiduciaries argued that the law concerning a fiduciary’s obligation to account for profits earned from his fiduciary position was too harsh. They submitted that they should only be required to account for the difference between (i) profits that they actually earned, and (ii) profits that they would hypothetically have earned if they had not breached their fiduciary duties. In doing so they accepted that they were asking the Court to depart from two previous decisions of the House of Lords which established that a ‘but for’ approach to causation is inappropriate in this context.

The Supreme Court unanimously dismissed the appeal, but delivered four judgments giving different reasons for reaching that conclusion. The majority (Lord Briggs, Lord Reed, Lord Hodge, and Lord Richards) held that the obligation to account for profits earned was an essential feature of a fiduciary obligation, that it was well-established that it did not depend on any counterfactual analysis, and that there was no compelling justification for changing the law.

The judgment and press summary can be found here.

Tom Weisselberg KC and Tom Cleaver acted for the respondents to the appeal (and the claimants in the proceedings).

Shaheed Fatima KC, Will Bordell and Marlena Valles also acted for the claimants.