Floreat Investment Management Limited v Benjamin Churchill & Ors
[2023] EWCA Civ 440
Hotel Portfolio II UK Limited (In Liquidation) & Anor v Andrew Joseph Ruhan & Anor
4 October 2023
[2023] EWCA Civ 1120
Court of Appeal
A company's director secretly sold its hotels, making a huge profit. His helper is also in trouble. The court said the company wasn't actually hurt by the initial sale, only by the later misuse of the profits, so the helper only has to give back what *he* personally gained, not the director's whole profit.
Key Facts
- •Hotel Portfolio II UK Limited (HPII) sold its hotel portfolio to companies controlled by Andrew Ruhan.
- •Ruhan, a director of HPII, failed to disclose his interest in the buyer, Cambulo Madeira (controlled by Anthony Stevens).
- •Cambulo Madeira resold the hotels at a substantial profit, with proceeds benefiting Ruhan.
- •HPII went into liquidation, and its liquidator sued Ruhan and Stevens for breach of fiduciary duty and dishonest assistance.
- •The High Court found Ruhan and Stevens liable, awarding equitable compensation to HPII.
- •Stevens appealed against the compensation award and the interest.
- •The Court of Appeal focused on the interplay between an account of profits and equitable compensation for dishonest assistance.
Legal Principles
Fiduciary duties (no conflict, no profit rules)
Boardman v Phipps [1967] 2 AC 46, Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, Gwembe Valley Development Co Ltd v Koshy [2004] 1 BCLC 131
Proprietary claims for breach of fiduciary duty
JJ Harrison (Properties) Ltd v Harrison [2002] BCC 729
Liability for dishonest assistance in breach of fiduciary duty
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC, Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638 (Ch), Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908
Equitable compensation for breach of trust or fiduciary duty
Foskett v McKeown [2001] AC 102, Libertarian Investments Ltd v Hall [2014] 1 HKC 368
Equitable set-off
Bartlett v Barclays Bank Trust Co Ltd [1980] Ch 515, Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667, The Nanfri [1978] 2 QB 927
Account of profits vs. equitable compensation
Tang Man Sit v Capacious Investments Ltd [1996] AC 514
Outcomes
Appeal allowed.
The Court of Appeal found that the High Court's award of equitable compensation to HPII against Stevens was incorrect because the gain and loss arose from the same transaction and HPII had suffered no overall loss. Stevens' liability was limited to his personal profit.
Order for equitable compensation against Stevens set aside.
The sale to Cambulo Madeira caused no loss to HPII. The subsequent profit was inextricably linked to the initial breach. There was no independent breach regarding the profit’s misapplication.
Order for an account of profits substituted for the compensation order.
This aligns with the principle that a dishonest assistant is liable for their own profits but not the fiduciary’s.