Rukhadze v Recovery Partners GP Ltd [2025] UKSC 10

The Supreme Court in Rukhadze v Recovery Partners GP Ltd [2025] UKSC 10 has decided that a fiduciary is liable to account for profits which were made after the fiduciary relationship has ended if the profits derived from or were made out of that fiduciary relationship, such as where the fiduciary learned about an opportunity whilst they were a fiduciary. This involves a causation test, rejecting the approach in recent decisions of the Court of Appeal, but the Appellants’ argument that a fiduciary is only liable to account for profits which would not have been made but for the breach of fiduciary duty, was rejected.

The Appellants were fiduciaries who, whilst still working for their principals in providing recovery services, made preparatory steps to enter into a contract with a third party to provide similar services to those provided by the principals. They then resigned, successfully negotiated a contract with the third party and provided recovery services. The trial judge had held that their resignation was in bad faith and had enabled them to obtain a developing business opportunity  from the principals. They were liable to account for their profits of $179 million subject to a 25% equitable allowance for their work and skill. This award was confirmed by the Supreme Court. The argument that the fiduciaries would have made the same profit had they entered into negotiations only after they had resigned was rejected, both because the counterfactual ‘what if?’ question was irrelevant and, as Lord Leggatt recognised, the profit derived from an opportunity available to them because they were fiduciaries.

In four judgments amounting to 335 paragraphs in total the Supreme Court has affirmed the vital importance of loyalty as the core principle underpinning fiduciary law and the need to deter disloyalty. But the judgments reveal significant disagreement in the Supreme Court as to the nature of fiduciary liability and the operation of accounting for profits, particularly as to what test of causation applies. The function and determination of the equitable allowance remains unclear. Whilst the Supreme Court has purported to clarify the law, significant uncertainties about its operation persist.

To read the full judgment, please click here.

Professor Graham Virgo KC (Hons) appeared with Lord Wolfson KC and Watson Pringle, instructed by Signature Litigation, for the Appellant in the Supreme Court.