Jurisdiction(s):
United Kingdom

UK Supreme Court upholds fiduciary account of profits rule; rejects ‘but for’ lawful alternative test; Regal v Gulliver and Boardman v Phipps reaffirmed (Rukhadze v Recovery Partners)

Published on: 11 April 2025

Published by a LexisNexis Dispute Resolution expert

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Article summary

Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10

Background

This appeal concerns the fiduciary ‘profit rule’. Fiduciaries, including trustees and company directors, owe a duty of loyalty to their beneficiary or principal (the person for whom they hold or administer property, eg the company in the case of a director). That duty includes a requirement that, where a fiduciary derives a profit by virtue of their position, they must account for that gain to the principal, unless the principal has given fully informed consent. The respondents to this appeal are a company incorporated in the British Virgin Islands (to which the claims of another such company have been assigned) together with an English LLP. The individual appellants were engaged by the respondents and occupied roles of trust and responsibility (for example serving as directors), thereby owing fiduciary duties to them. In breach of those obligations, the appellants diverted a business opportunity from the respondents and exploited it for their own benefit. After proceedings in the High Court, the appellants were—consistently with the profit rule—ordered to pay to the...

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