Mitchell & Anor v Sheikh Mohamed Bin Issa Al Jaber (No 2) [2025] UKSC 43:
Fiduciary Liability of Post‑Liquidation “Intermeddler” Directors, Unpaid Vendor’s Liens and Equitable Compensation

1. Introduction

This Supreme Court decision sits at the intersection of company law, insolvency, equity and cross‑border group structures. It addresses three tightly connected questions:

• When, if at all, does a director whose statutory powers have been terminated by a liquidation nonetheless owe fiduciary duties in relation to company property which he dishonestly “intermeddles” with?
• Can an unpaid vendor’s lien in equity be excluded not only by the terms of the contract but by the broader commercial purpose and context of the transaction, proved by extrinsic evidence?
• In quantifying equitable compensation for misappropriation of shares, may a defaulting fiduciary rely on a later group restructuring (in which he was involved and from which he benefited) that in fact destroyed the value of those shares, so as to argue that the company has suffered “no loss”?

The case arises from the liquidation of MBI International & Partners Inc (the “Company”), incorporated in the British Virgin Islands (BVI), and a dishonest transfer of 891,761 shares in another BVI company, JJW Hotels & Resorts Holding Inc (“JJW Inc”). Those shares (the “891K shares”) were registered in the Company’s name at the time of its winding up, but later, during liquidation and without the knowledge of the liquidator, were transferred for no consideration to a Guernsey company, JJW Hotels & Resorts Ltd (“JJW Guernsey”), and subsequently on to another group entity.

The controlling mind behind these entities was Sheikh Mohamed Bin Issa Al Jaber (the “Sheikh”), a sophisticated international businessman and ultimate owner/controller of a sprawling “MBI” group of companies. The liquidators of the Company (“the Liquidators”), now Greig Mitchell and Kenneth Krys, brought claims against the Sheikh (for breach of fiduciary duty) and JJW Guernsey (for knowing receipt) seeking equitable compensation for the loss of the 891K shares.

Three issues reached the Supreme Court:

1. Issue 1: Fiduciary duty despite loss of formal powers – Did the Sheikh owe the Company a fiduciary duty in respect of the 2016 transfer of the 891K shares, even though, by virtue of BVI insolvency law, his powers as a director had ceased upon liquidation?
2. Issue 2: Unpaid vendor’s liens – Were the 891K shares subject to unpaid vendor’s liens arising under the 2009 share purchase agreements (“SPAs”), so that in economic terms the Company suffered no loss?
3. Issue 3: Quantification and later asset stripping – If there was a breach and no lien, how should the loss be quantified, given that a 2017 intra‑group transaction (the “2017 Asset and Liability Transfer”) stripped JJW Inc of its assets and rendered its shares apparently worthless?

The judgment is important not merely for its outcome, but because it clarifies and develops several aspects of equitable principle:

• It extends and restates the doctrine of the fiduciary intermeddler or “de facto/trustee de son tort” in a corporate and insolvency setting, holding that a director who dishonestly purports to exercise powers that statute has removed is nonetheless bound by fiduciary duties he pretends to have.
• It refines the law of unpaid vendor’s liens, confirming that such liens can be excluded by the objectively ascertained joint intention and commercial purpose of the parties, proved by context and evidence, not limited to the four corners of the contract.
• It re‑emphasises that equitable compensation for misappropriation is assessed with a strong bias towards full restoration, places the burden on the defaulting fiduciary to establish any “no loss” or “supervening event” defence, and sharply limits the ability of that fiduciary to rely on later events in which he participated or from which he benefited.

2. Summary of the Judgment

2.1 Factual and corporate backdrop

• The Company (MBI International & Partners Inc) was incorporated in the BVI in 1990. The Sheikh was at all material times its sole shareholder and a director.
• JJW Inc was incorporated in 2008 as part of a proposed IPO restructuring of the group’s hotel interests. In January 2009, shares in JJW Inc were allotted to:
  • the Company: 129,100 shares (“129K shares”);
  • the Sheikh personally: ~8 million shares;
  • JJW Guernsey: 567,556 shares; and
  • JJA Beteiligungsverwaltungs GmbH (“JJAB”): 324,205 shares.
• On 18 March 2009 the Company acquired the 567K and 324K shares from JJW Guernsey and JJAB respectively under SPAs (the “March 2009 Transfers”), intending to sell the shares in the planned IPO and use the proceeds to pay the vendors. The consideration was never paid; no demand was made or method of payment agreed.
• The Company was wound up by the BVI court on 10 October 2011. Under s 175(1)(b) Insolvency Act 2003 (BVI), the directors (including the Sheikh) remained in office but ceased to have any powers, which passed to the liquidator.
• Despite that, on or around 29 February 2016, the Sheikh dishonestly signed undated share transfer forms purporting to transfer the 567K and 324K shares from the Company to JJW Guernsey, signing “for and on behalf of [the Company]” as “Director”, and then passed a resolution as director of JJW Inc registering JJW Guernsey as shareholder. The trial judge found he acted dishonestly and not in the Company’s best interests; that finding stood unchallenged.
• Ms Caulfield, the then BVI liquidator, obtained recognition of the BVI liquidation in England under the Cross‑Border Insolvency Regulations 2006 in June 2017. Shortly thereafter, JJW Guernsey transferred the 891K shares to another MBI entity, MBI International Holdings Inc.
• In July 2017, all the assets and liabilities of JJW Inc were transferred to JJW Hotels & Resorts UK Holdings Ltd (“JJW UK”), an MBI group company (the “2017 Asset and Liability Transfer”). JJW Inc’s 2016 accounts had shown net assets of c. €682m; after the transfer, JJW Inc became an empty shell and its shares – including the Company’s remaining 129K – became effectively worthless.

2.2 Procedural history

• In May 2019, the then liquidator, Ms Caulfield, brought proceedings under s 212 Insolvency Act 1986 in England, seeking:
  • a declaration that the 2016 share transfers were void;
  • relief against the Sheikh for breach of fiduciary duty or breach of trust; and
  • relief against JJW Guernsey as knowing recipient.
• Joanna Smith J (Chancery Division) held:
  • the 2016 share transfers were void;
  • the Sheikh owed and breached a fiduciary duty of “stewardship” during winding up by orchestrating the transfers;
  • JJW Guernsey was a knowing recipient; and
  • the appropriate relief was substitutive equitable compensation equal to the value of the 891K shares, taken as €67,123,403.36, based on JJW Inc’s 2016 accounts and a pro rata allocation. The Sheikh and JJW Guernsey were held jointly and severally liable.
• The Court of Appeal (Newey, Arnold and Snowden LJJ) upheld liability for breach of fiduciary duty and knowing receipt, and rejected the unpaid vendor’s lien defence, but overturned the compensation award, holding that by the time of trial the 891K shares were worthless due to the 2017 Asset and Liability Transfer, and the Company had not proved that, but for the breach, the shares would have been sold earlier. Therefore, it held, no loss had been established.

2.3 Supreme Court’s orders and holdings

The Supreme Court (Lord Hodge, Lord Briggs, Lord Sales; Lord Stephens and Lord Richards agreeing) held:

• Issue 1 – Fiduciary duty: The Sheikh was in breach of a fiduciary duty owed to the Company when he caused the 2016 share transfers. Even though his formal powers as director had ceased under BVI law, by purporting to exercise those powers and intermeddling with company property, he assumed fiduciary obligations as a de facto fiduciary (an “intermeddler” or director/trustee de son tort). He could not rely on the statutory cessation of powers to immunise himself.
• Issue 2 – Unpaid vendor’s liens: There were no unpaid vendor’s liens over the 891K shares. On the evidence, the SPAs formed part of a restructuring whose purpose was to facilitate an IPO and a free sale of the shares; any lien would have obstructed that purpose. Equity therefore inferred that the parties intended to exclude such liens.
• Issue 3 – Quantification: The Court of Appeal was wrong to reduce the loss to zero by reference to the 2017 Asset and Liability Transfer. The default rule is that misappropriation causes an immediate loss of the value of the property at the time of misappropriation, subject to the fiduciary proving that some later event legitimately breaks the causal link. Here, the 2017 transfer was an intra‑group transaction instigated and influenced by the Sheikh, from which he benefited. He had not discharged the heavy burden of showing he could legitimately rely on it as a “no loss” event. The trial judge’s award of €67,123,403.36 was reinstated.

The Sheikh’s appeal on Issues 1 and 2 was dismissed; the Liquidators’ appeal on Issue 3 was allowed. As JJW Guernsey accepted that its liability in knowing receipt would mirror the Sheikh’s, the compensation order against it stands in the same amount.

3. Core Legal Principles and New Precedent

3.1 Post‑liquidation “intermeddler” directors as fiduciaries

The central doctrinal advance lies in the Court’s treatment of the Sheikh as a fiduciary intermeddler. Key holdings:

• The fact that BVI Insolvency Act 2003, s 175(1)(b) removed the Sheikh’s powers as a director on liquidation did not mean he owed no fiduciary duties when he later purported to exercise those powers.
• Where a person arrogates to himself a fiduciary power—here, the power to dispose of company property—equity treats him as a fiduciary (e.g. trustee or director de son tort) so that:
  • he is subject to the duties that attach to that power; and
  • he cannot defend himself by saying that, in law, he never had the power.
• The same act that constitutes the arrogation (signing the share transfer forms) can both:
  • bring fiduciary duties into existence; and
  • amount to a breach of those very duties.
  There is no conceptual bar to that dual character.

This significantly strengthens the protection of company assets during insolvency, ensuring that directors cannot escape fiduciary accountability by pointing to the formal cessation of their powers while at the same time pretending to exercise those powers.

3.2 Excluding unpaid vendor’s liens: intention and transaction purpose

On unpaid vendor’s liens, the key principles clarified are:

• A vendor’s equitable lien arises by operation of law where unpaid purchase price remains owing, but is excluded where:
  • it is inconsistent with the contract; or
  • inconsistent with the “true nature of the transaction”, including the parties’ objectively ascertainable joint intention and the transaction’s commercial purpose.
• That intention may be inferred from documents and surrounding circumstances – not confined to the written contract itself. Equity is not limited to “four corners” contractual analysis.
• Where it is clear that the very purpose of the transaction (here, enabling a free transfer of shares into an IPO) would be defeated by a lien, equity will treat the lien as excluded.

The Court thereby extends and systematises the reasoning in Barclays Bank plc v Estates & Commercial Ltd and Re Brentwood Brick and Coal Co, confirming that the “true nature of the transaction” and the parties’ joint intentions can be proved by a broad evidential enquiry, not just the express wording of the instrument.

3.3 Equitable compensation, supervening events and burden of proof

On quantum, the Court crystallises several important points:

• Equitable compensation for misappropriation is substitutive and restorative: the court seeks to restore to the beneficiary or company the value of what was wrongfully taken.
• There is no rigid “trial date” rule. The appropriate valuation date (breach, trial, or intermediate) is a matter of justice and equity, informed by hindsight but sensitive to causation and fairness.
• Where misappropriated property had value when wrongly taken, there is an immediate prima facie loss. The burden lies on the fiduciary to prove that some supervening event—actual or counterfactual—would have destroyed that value anyway, such that no net loss was suffered.
• Not every subsequent event can be used to reduce liability:
  • The fiduciary cannot rely on his own further wrongdoing or other wrongdoing as a supervening cause.
  • Where the fiduciary was involved in, or benefited from, the later event (as with the 2017 Asset and Liability Transfer), he faces a heavy evidential burden to show that it is nonetheless legitimate to factor that event into the causation analysis.
  • Absent full and candid explanation and evidence, the court will not allow the fiduciary to treat such an event as breaking the chain of causation or erasing loss.

Thus, although everyone accepted that the 2017 transfer in fact left JJW Inc and its shares worthless, the Sheikh could not use that fact to escape liability for his earlier misappropriation when:

• he had orchestrated and benefited from the 2017 restructuring; and
• he had not discharged the burden of showing that, in a proper counterfactual where no breach occurred, the same destruction of value would fairly be placed at the Company’s risk rather than his own.

4. Detailed Analysis

4.1 Precedents cited and how they shaped the decision

4.1.1 Mothew, Rukhadze and Hopcraft: defining fiduciary status

The Court begins its analysis of fiduciary status with Millett LJ’s classic statement in Bristol and West Building Society v Mothew [1998] Ch 1, emphasising that:

• a fiduciary is someone who has undertaken to act for or on behalf of another in circumstances of trust and confidence;
• the core obligation is single‑minded loyalty; and
• fiduciary obligations arise because the person is subject to them, not because he bears some label of “fiduciary”.

This passage has been repeatedly endorsed by the Supreme Court, including in:

• Recovery Partners GP Ltd v Rukhadze [2025] UKSC 10, where the Court characterised the obligation to account for profits as a substantive duty, not merely a remedial choice; and
• Hopcraft v Close Brothers Ltd [2025] UKSC 33, which elaborated on the objective test for whether a relationship is fiduciary by examining undertakings and the allocation of loyalty.

In Mitchell v Al Jaber, these authorities underpin the Court’s conclusion that:

• fiduciary obligations are not limited to de jure office‑holders;
• they can arise ad hoc where a person in fact assumes or arrogates a power that carries fiduciary obligations; and
• the inquiry is objective: did the person in question, in substance, take on responsibility to act in another’s interests in exercising a power that affects that other’s rights?

4.1.2 Soar v Ashwell and the “trustee de son tort” line of cases

The Court draws heavily on the rich line of authority on trustees and executors de son tort (trustees “in their own wrong”), including:

• Soar v Ashwell [1893] 2 QB 390 – where Lord Esher MR held that someone who assumes, even without consent, to act as a trustee or in a fiduciary relation and exercises “command or control” of the property is treated as an express trustee, fully liable as such.
• Gawton and the Lord Dacres Case (1589), Vickers v Bell (1864), Gibson v Barton (1875), Mara v Browne [1896] 1 Ch 199, and Lyell v Kennedy (1889) – all illustrating that one who usurps the office of executor, trustee or agent becomes subject to the attendant responsibilities to third parties and beneficiaries.
• In re Canadian Land Reclaiming and Colonizing Co (1880) 14 Ch D 660 – recognising that self‑appointed directors can be treated as bearing the full obligations of properly appointed directors.
• Williams v Central Bank of Nigeria [2014] AC 1189 – where Lord Neuberger approved Lewin’s statement that “a person who assumes an office ought not to be in any better position than if he were what he pretends”.

This line of authority is transposed into the corporate context: for directors who purport to exercise powers over company property, even if:

• they were never validly appointed; or
• their powers have subsequently been removed (e.g. on insolvency),

equity nevertheless imposes fiduciary duties when they act as if they still had those powers.

4.1.3 New York Breweries and Stype Investments: intermeddling without possession

To counter the Sheikh’s argument that he had no fiduciary responsibility because he never personally received title to the shares, the Court relies on:

• New York Breweries Co Ltd v Attorney General [1899] AC 62 – the House of Lords treated a company as an executor de son tort for intermeddling with shares by registering them in the names of foreign executors, although it never itself owned the property.
• IRC v Stype Investments (Jersey) Ltd [1982] Ch 456 – a nominee’s transfer of proceeds to the wrong personal representatives constituted intermeddling, making the nominee liable as an executor de son tort.

Together with English v Dedham Vale Properties Ltd [1978] 1 WLR 93 (where a proposed purchaser created a fiduciary relationship by lodging a planning application in the vendor’s name without consent), these cases show that:

• title or possession is not a necessary condition for fiduciary liability; what matters is the exercise of “command or control” over another’s property in a representative guise; and
• fiduciary obligations may arise before the intermeddler acquires, or even without ever acquiring, the property in question.

4.1.4 Hospital Products and Galambos: comparative perspectives

From other common law jurisdictions the Court draws on:

• The Australian High Court in Hospital Products Ltd v US Surgical Corp (1984) 156 CLR 41: Mason J emphasised that a fiduciary relationship exists where one party undertakes to act for or in the interests of another in the exercise of power or discretion affecting the latter’s interests, especially where the other is vulnerable to abuse.
• The Canadian Supreme Court in Galambos v Perez [2009] 3 SCR 247: Cromwell J explained that ad hoc fiduciary duties require an (express or implied) undertaking to act with loyalty and that the fiduciary hold and exercise a discretionary power that can affect the other’s interests.

The Sheikh attempted to rely on Galambos to argue that he held no discretionary power in 2016, and so could not be a fiduciary. The Supreme Court distinguished it:

• Galambos concerned a partner who never purported to exercise a discretionary power over the claimant’s property; here, the Sheikh did exactly that.
• The whole line of “de son tort” cases is premised on the idea that one can be a fiduciary even when one does not in law possess the relevant power, provided one purports to do so.

4.1.5 Barclays Bank v Estates & Commercial, Brentwood Brick and Kettlewell: unpaid vendor’s lien

On unpaid vendor’s liens, the anchor authority is Millett LJ’s judgment in Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415. Key points:

• An unpaid vendor’s lien arises automatically in equity where the purchase price is unpaid, unless excluded:
  • by the contract’s provisions;
  • by the “true nature” or “character” of the transaction; or
  • because the vendor has obtained all he bargained for.
• The inquiry is equitable, not rigidly contractual; the question is whether it would be just and consistent with the transaction to recognise the lien.

Brentwood Brick (1876) 4 Ch D 562 and Kettlewell v Watson (1884) 26 Ch D 501, analysed at length in the judgment, show:

• Where the parties positively intend that payment will come only from some particular source (e.g. future capital raising) and that the buyer’s title must remain unencumbered so it can borrow or raise capital, an unpaid lien is inconsistent and excluded.
• The relevant intention may be gathered widely, not only from a single conveyance but from the broader commercial scheme and conduct.

Re Albert Life Assurance Co (1870–71) LR 11 Eq 164 is cited for the broader proposition that:

• The unpaid vendor’s lien doctrine is governed by equitable principles, “influenced by the particular circumstances of each case”; and
• the key question is whether the transfer was intended to be conditional on payment (supporting a lien) or unconditional, with the vendor relying solely on the purchaser’s covenant (excluding a lien).

4.1.6 Target, AIB, Akai Holdings, Dawson and Libertarian: equitable compensation and causation

The Court’s causation and valuation analysis is rooted in modern authority:

• In re Dawson [1966] 2 NSWR 211 – Street J held that equitable compensation for breach of trust is assessed using “the full benefit of hindsight” at trial; the trustee must restore the value the fund would now have but for the breach, unconstrained by common law rules of foreseeability or mitigation.
• Libertarian Investments Ltd v Hall (2013) 17 ITELR 1 – the Hong Kong Court of Final Appeal, following Dawson, confirmed that:
  • equitable compensation focuses on restoring the trust fund; and
  • once the beneficiary shows loss apparently flowing from breach, the fiduciary bears the burden of disproving the causal link.
• Target Holdings Ltd v Redferns [1996] AC 421 and AIB Group (UK) plc v Mark Redler & Co [2015] AC 1503 – the Supreme Court’s earlier modern statements on equitable compensation, emphasising:
  • compensation is “referable to loss actually suffered by the trust estate”;
  • a “but for” analysis is conceptually appropriate; but
  • the assessment must still operate within the restorative objective of equity, not the strictures of common law remoteness.
• Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (2010) 13 HKCFAR 479 (“Akai Holdings”) – a bank held misappropriated shares; later, the company’s business collapsed. The Hong Kong court treated the collapse (unconnected to the bank’s wrongdoing) as the true cause of the loss in value, not the misappropriation, and limited the bank’s liability accordingly.

The Supreme Court accepts that “but for” counterfactual analysis is legitimate in equity, but strongly re‑asserts, through In re Brogden (1888) 38 Ch D 546, Carruthers v Carruthers [1896] AC 659, and Libertarian, that:

• once a breach and an immediate loss of value are shown, the fiduciary carries the burden of establishing that later events, in a legitimate counterfactual, would have removed that loss anyway; and
• not every later event can be relied on, particularly where the fiduciary is implicated in or benefited from it.

4.1.7 Sequana and the creditors’ interests

The Court briefly references BTI 2014 LLC v Sequana SA [2022] UKSC 25; [2024] AC 211, reaffirming that when a company is insolvent or on the verge of insolvency, directors’ duties to the company “extend to having regard to the interests of its creditors”. This is relevant because:

• by February 2016 the Company was in winding up;
• the Sheikh’s action in diverting the 891K shares away from the liquidator was plainly contrary to creditors’ interests; and
• this contextualises the finding that his intermeddling breached fiduciary duties owed to the Company in an insolvency context.

4.2 The Court’s legal reasoning on each issue

4.2.1 Issue 1 – Fiduciary duty of an intermeddling director post‑liquidation

(a) The Sheikh’s core arguments

The Sheikh advanced three main contentions:

1. No office, no duty: Once s 175(1)(b) IA 2003 removed his powers as director, he said he could not owe fiduciary duties as a director. Without powers, there could be no trust‑like responsibility.
2. No receipt, no intermeddler’s liability: He argued that liability as a trustee or director de son tort required him to have received and held the property; causing transfers to others was insufficient.
3. Single act cannot both create and breach a duty: The act of signing the share transfer forms could not simultaneously give rise to fiduciary duties and count as a breach of them.

(b) Why the Court rejected these arguments

The Court rejected each argument, relying heavily on the historical and comparative jurisprudence:

• Undertaking not essential where there is arrogation of fiduciary power:
  • While many fiduciary relationships rest on a voluntary undertaking (as in Galambos and Hospital Products), equity also recognises fiduciary duties where someone unilaterally arrogates a fiduciary power.
  • The defining feature is the assumption of a representative role over another’s property, not the validity of that role in law.
• No need for legal power or title:
  • Trustees and directors de son tort, and executors de son tort, are by definition people who do not lawfully hold the office or power they purport to exercise.
  • Cases like New York Breweries, Stype Investments and English v Dedham Vale demonstrate that fiduciary obligations may bite merely because a person exercises “command or control” over another’s property in a representative guise, even without title or possession.
  • Accordingly, the Sheikh’s inability lawfully to sign for the Company was not a defence; it was part of what made him an intermeddler.
• Receipt of property not required for fiduciary accountability:
  • Directors are fiduciaries with respect to company property they control even though they do not own it; they can be liable when they cause company assets to be misapplied to others.
  • The principle in Soar v Ashwell and Gibson v Barton is that the intermeddler’s liability flows from usurpation of responsibility, not from personal enrichment.
  • Here, the fact that the 891K shares went to JJW Guernsey (a company under the Sheikh’s control) rather than to him personally did not neutralise his fiduciary liability.
• Same act can create and breach the duty:
  • Equity recognises that the moment someone assumes or asserts fiduciary control over another’s property, the duty of loyalty arises.
  • If that assumption is itself dishonest or conflicted, the same act is simultaneously the moment of assumption and the act of breach.
  • The Court saw no conceptual problem in treating the Sheikh’s signing of the transfer forms as both: (i) arrogating fiduciary power; and (ii) breaching fiduciary duty by misappropriating assets.
• Cannot hide behind the statutory removal of powers:
  • The Sheikh’s argument that s 175(1)(b) IA 2003 meant he had “no powers” and thus owed “no duties” would, if accepted, undermine the very protection the statute intends for creditors and the insolvent estate.
  • Equity therefore applies the core “de son tort” principle: a person who assumes an office ought not to be in a better position than if he were what he pretends.
  • Thus, for the purposes of liability, he is treated as if he had retained the director’s powers and owed the full panoply of fiduciary obligations, including the duty in an insolvency context to take account of creditors’ interests (Sequana).

(c) A unitary dishonest transaction

The Court rejected the idea that the Sheikh’s roles should be compartmentalised into separate capacities as:

• purported director of the Company (signing the transfer forms); and
• director of JJW Inc (signing the resolution to register the transfers).

It treated these steps as “part and parcel of the same dishonest transaction”: a concerted scheme to strip assets from a company in liquidation without the liquidator’s knowledge. As such, the Sheikh’s actions as director of JJW Inc were part of his breach of fiduciary duty owed to the Company and its creditors.

4.2.2 Issue 2 – Unpaid vendor’s liens and the March 2009 SPAs

(a) The SPA structure

Under the March 2009 SPAs:

• the Company acquired the 567K shares from JJW Guernsey for €56,755,600 and the 324K shares from JJAB for €32,420,500; and
• the price was “to be paid on demand … in such way that is mutually agreed” between the parties.

The Sheikh argued that because the purchase price remained unpaid, JJW Guernsey and JJAB had unpaid vendor’s liens over the 891K shares for the stated consideration, such that:

• the economic value of the shares to the Company at all times was negative or negligible; and
• even if the shares had some gross market value in 2016–2017, any proceeds would have been swallowed by the unpaid purchase money, leaving the Company with no net loss.

(b) Why equity inferred the exclusion of a lien

The trial judge rejected the lien argument for two reasons:

1. on construction of the term “Encumbrance” and cl 2.1; and
2. more broadly, because a lien would have been inconsistent with the commercial rationale of the transaction (enabling an unencumbered IPO sale).

The Court of Appeal disagreed on the first point (narrow interpretation of “Encumbrance”), but agreed wholeheartedly with the second. The Supreme Court endorsed this broader equitable reasoning.

The key elements of the Court’s analysis were:

• Purpose of the transaction:
  • Unchallenged evidence, supported by the Sheikh’s pleadings and witness statements, was that:
    • the March 2009 transfers were designed to enable the Company to hold a consolidated block of JJW Inc shares;
    • those shares would then be sold in an IPO; and
    • the IPO proceeds would be used to pay the vendors the contractual price.
  • The judge found specifically that the existence of an unpaid vendor’s lien over the 891K shares would have prevented the Company from effecting such an IPO sale and thus “thwarted” the purpose of the transaction.
• Equitable lens, not strict contract interpretation:
  • Following Barclays, the question whether a lien arises or is excluded is governed by equitable principles.
  • While contracts are an important source of evidence, they are not exclusive; equity can, and often must, consider “the circumstances of the case”.
  • The Court expressly disapproved a narrow, document‑only approach to intention, and read Millett LJ’s references to “documents” in Barclays in the light of wider equitable practice.
• Joint intention inferred from context and evidence:
  • Because the Sheikh effectively controlled both sides of each SPA (the Company, JJW Guernsey, JJAB) and explicitly explained their purpose in evidence, the judge was entitled to treat that as strong evidence of a joint intention that the shares be freely saleable in an IPO.
  • Recognising an unpaid vendor’s lien that would block or severely complicate that IPO would be inconsistent with that joint intention.
• Parallel with Brentwood Brick:
  • As in Brentwood Brick, the structure indicated that the vendor was looking to a specific source of payment (future IPO proceeds, not the asset itself) and that encumbering the asset would frustrate raising that source.
  • On that reasoning, equity infers that no unpaid vendor’s lien was intended to arise.

Thus, the Court held that no unpaid vendor’s lien attached to the 891K shares. This removed a substantial plank from the Sheikh’s “no loss” argument.

4.2.3 Issue 3 – Quantification of loss and the 2017 Asset and Liability Transfer

(a) The trial judge’s approach

Joanna Smith J:

• adopted a substitutive approach to equitable compensation, consistent with Dawson and Libertarian;
• used hindsight to value the misappropriated shares at a date close in time to the breach, via JJW Inc’s 2016 accounts showing net assets of ~€681.9m; and
• allocated a pro rata portion of that net asset value to the 891K shares (€67,123,403.36), without a minority discount, as the loss to the Company.

She regarded later events (including the 2017 Asset and Liability Transfer) as irrelevant to this calculation, particularly since the wrongdoer bore the risk of subsequent value changes unless he could show that the shares would have been sold earlier or would have lost value for reasons unrelated to his misconduct.

(b) The Court of Appeal’s “no loss” analysis

The Court of Appeal took a very different approach:

• It treated the “substitutive” analysis as requiring assessment of loss at the date of trial.
• By trial, it accepted (on both sides’ cases) that the shares were worthless due to the 2017 Asset and Liability Transfer.
• It found that the Liquidators had not proved that, absent the misappropriation, they would have sold the shares before July 2017.
• It therefore concluded that the Company would have ended up in the same financial position even without the 2016 transfers, and hence had suffered no loss from the Sheikh’s breach.

(c) The Supreme Court’s correction: burden and legitimacy of supervening events

The Supreme Court considered this approach fundamentally misplaced, for several reasons:

1. Immediate loss on misappropriation:
   • Once it is shown that company property with a positive value was dishonestly misappropriated, the company suffers immediate loss of that value.
   • The presumptive measure of equitable compensation is the value of the asset when misappropriated (or its value if retained to trial), unless the fiduciary shows that subsequent legitimate events would have destroyed that value anyway.
2. Burden on the fiduciary:
   • In line with In re Brogden, Carruthers and Libertarian, the burden to show that “no loss” was caused, or that a later event broke the causal chain, lies on the defaulting fiduciary.
   • Once the beneficiary shows breach and missing property, the fiduciary must prove that even if he had acted properly, the trust or company would have ended up no better off.
3. Not all supervening events are usable by the fiduciary:
   • A fiduciary cannot rely on speculative wrongdoing by others (e.g. “someone else would have stolen it”).
   • Nor can he usually rely on events in which he participated or from which he benefited without a clear innocent explanation, full disclosure, and proof that those events would fairly be treated as the company’s risk.
4. The 2017 Asset and Liability Transfer was tainted and unexplained:
   • It was the Sheikh’s letter, on behalf of MBI International Holdings, that triggered the process by demanding repayment of a €600m debt from JJW Inc.
   • He attended the key July 2017 board meeting of JJW Inc which approved the transfer of all assets and liabilities to JJW UK.
   • He stood, as ultimate owner of the MBI group, to benefit from shifting JJW Inc’s net asset surplus into another group entity free of the Company’s minority stake.
   • He never clearly explained the commercial justification for stripping a company with net assets of c. €682m of all assets in return for assuming significantly smaller liabilities.
   • Newey LJ himself noted “unanswered questions” as to the propriety of the transfer and possible claims JJW Inc or its shareholders might bring in respect of it.
5. Actual vs counterfactual use of the 2017 transfer:
   • Factually, the 2017 transfer did make all shares in JJW Inc, including the Company’s unrecovered 129K shares, worthless.
   • But in the real world, by July 2017 the 891K shares belonged to another MBI company, not the Company, precisely because of the Sheikh’s earlier breach.
   • Thus, the 2017 transfer actually destroyed the value of MBI International Holdings’ 891K shares, not the Company’s. The Company’s loss had already crystallised in 2016 when its shares were taken away.
   • The Sheikh wanted the Court to pretend in the counterfactual world that the Company still held those shares in 2017 and then bring the 2017 transfer into the analysis to demonstrate zero value.
   • That is precisely a counterfactual deployment of the 2017 transaction to reduce his liability; and to do that, he needed to show that it was a legitimate event to rely on. He had not done so.
6. Analogy of the painting and the fire:
   • If a trustee misappropriates a painting but leaves it in the same public gallery and the gallery later burns down, then, absent sale, the misappropriation may not have caused loss: the painting would have been destroyed anyway.
   • But if the trustee removes the painting to his own house and there it burns down, he cannot say, “The fire would have destroyed it anyway.” He has altered the risk profile and location of the asset; the loss lies with him.
   • Here, the Sheikh’s misappropriation “removed” the value of the shares from the Company. The later “fire” (the 2017 transfer) occurred in a world where the assets were held within his group, and he had a hand in orchestrating the circumstances of their destruction.

(d) Proper valuation date and reinstatement of the trial judge’s award

Having rejected the Sheikh’s attempted reliance on the 2017 Asset and Liability Transfer, the Court:

• accepted the judge’s use of JJW Inc’s 2016 accounts as the best available evidence of the value of the 891K shares around the time of misappropriation; and
• held that no later event legitimately diminished the loss from that value.

Accordingly, the €67,123,403.36 award was reinstated. The Court’s approach confirms that, although equity looks with hindsight at trial, it is not compelled to use the trial date as the valuation date, particularly where that would let a defaulting fiduciary take the benefit of his own later actions or unexplained intra‑group structuring.

5. Clarifying Complex Concepts

5.1 Fiduciary duties, intermeddlers and “de son tort” actors

Fiduciary duty is a duty of loyalty owed by one person (the fiduciary) to another (the principal or beneficiary), requiring the fiduciary to act in good faith, avoid conflicts, and not profit from the position without informed consent.

Intermeddler / trustee or director de son tort describes someone who, without proper appointment:

• assumes control over another’s property or affairs; and
• acts as though he holds an office (executor, trustee, director).

Equity treats such a person as having the obligations of that office (e.g. to account, to act loyally), even if he lacks its rights or legal authority. The rationale is that one who usurps fiduciary powers “ought not to be in any better position than if he were what he pretends”.

5.2 Equitable compensation: substitutive vs reparative and valuation

Equitable compensation is the monetary remedy courts of equity use to respond to breaches of trust and fiduciary duty. It differs from common law damages in several ways:

• It is primarily substitutive: aimed at restoring the trust fund or company estate to the position it would have been in but for the breach, rather than compensating for all knock‑on losses following common law rules of remoteness.
• Equity uses the full benefit of hindsight at the date of trial to see what the fund would now contain, absent the breach.
• There is no rigid rule that the valuation must be at the date of breach or at trial; the court selects the date that best reflects justice and the restorative objective.
• Once breach and loss of property are shown, the fiduciary bears the burden of disproving causal connection, including by pointing to legitimate supervening events that would have caused the same loss.

5.3 Unpaid vendor’s lien

An unpaid vendor’s lien is an equitable security interest that arises automatically where:

• a vendor transfers property to a purchaser; and
• the purchase price is unpaid, in whole or in part.

Unless excluded, the vendor retains:

• a lien over the property for the unpaid balance; but
• only as security – it does not undo the transfer.

The lien is excluded where:

• the contract (expressly or by necessary implication) displaces it; or
• recognising a lien would be inconsistent with the parties’ joint intention and the nature of the transaction (e.g. where the property is meant to be freely marketable or used as security for further finance).

5.4 Knowing receipt

Knowing receipt is a form of equitable wrongdoing occurring where a person:

• receives trust property or property subject to another’s equitable interest;
• with knowledge (actual or deemed) that it is being misapplied in breach of trust or fiduciary duty; and
• is thereby required to account for the value of that property.

JJW Guernsey, controlled by the Sheikh, was held liable as a knowing recipient of the 891K shares, because:

• its director (the Sheikh) knew the Company was in liquidation and he had no authority to effect the transfer; and
• his knowledge was attributable to JJW Guernsey.

5.5 Liquidation and directors’ powers

Under BVI Insolvency Act 2003, s 175(1):

• on commencement of liquidation:
  • the liquidator obtains custody and control of the company’s assets; and
  • directors remain in office but cease to have any powers, except as permitted under the insolvency regime.

This is designed to protect creditors by preventing directors from continuing to deal with company property once insolvency has intervened. The Supreme Court’s development is to say:

• if a director disregards this and nevertheless pretends to exercise powers over those assets, he will still be treated as owing fiduciary duties in relation to that intermeddling.

6. Practical Implications and Future Impact

6.1 For directors, controllers and corporate groups

• Post‑liquidation exposure: Directors of insolvent entities cannot shelter behind statutory cessation of powers while informally influencing or orchestrating transactions. If they purport to act for the company, they will be treated as de facto fiduciaries and exposed to full equitable liability.
• Controllers and group restructurings: Ultimate beneficial owners who:
  • control multiple group entities; and
  • direct intragroup transfers of assets, particularly where one entity is in distress or liquidation,
  face heightened risk of personal liability if their involvement amounts to intermeddling with assets of a company in liquidation.
• No safe harbour in lack of formal power: The decision sends a clear signal that equity is concerned with what people do in substance, not technical deficiencies in their appointment or the formal removal of their authority.

6.2 For insolvency practitioners and litigators

• New avenue against insiders: Liquidators can rely on this precedent to pursue de facto fiduciary claims against directors and controllers who continue to deal with company assets post‑insolvency, particularly within groups.
• Burden shift on “no loss” defences: When pursuing misappropriation claims, practitioners should:
  • show that the asset had value when taken; and
  • argue that the burden is then on insiders to prove any later “no loss” event, especially where they were involved in subsequent restructurings.
• Pleading supervening events: Defendants seeking to rely on later events must:
  • plead those events explicitly;
  • provide full disclosure explaining their genesis and their own role; and
  • be prepared to demonstrate why those events are fairly allocated to the company’s risk, not their own.
• Cross‑border contexts: The case sits within a cross‑border framework (BVI company, Guernsey entity, English proceedings, CBIR recognition). It underscores that English courts will robustly apply equitable principles to group structures even where underlying companies are offshore.

6.3 For transactional lawyers and vendors

• Drafting around unpaid vendor’s liens: While liens arise by operation of law, they can be deliberately excluded. Parties who want a lien should:
  • expressly preserve it in the instrument; or
  • at least ensure the transaction structure is not inconsistent with its existence (e.g. no absolute need for the asset to be freely marketable).
• Designing IPO‑linked share transfers: Where a vendor’s consideration is tied to IPO proceeds or future capital raising, lawyers should consider whether and how security is to be provided – via lien, charge, or other structures – and document that clearly to avoid unintended exclusion of equitable liens.

6.4 Development of equitable jurisprudence

• Fiduciary law modernisation: The case cements the modern, functional approach to fiduciary status: what matters is assumption or arrogation of responsibility, not formal labels.
• Coherence in compensation doctrine: It helps reconcile:
  • the “restorative” language of Dawson and Libertarian;
  • the “loss actually suffered” and “but for” analysis in Target and AIB; and
  • the need to prevent wrongdoers from exploiting subsequent events that they orchestrate.
• Equity’s evidential flexibility: On unpaid vendor’s liens, the case endorses an approach that is sensitive to commercial realities and evidence, not shackled to narrow contractual implication tests.

7. Conclusion

Mitchell & Anor v Sheikh Mohamed Bin Issa Al Jaber (No 2) is a significant and carefully reasoned contribution to modern equity. It does three main things.

1. It confirms that a director who dishonestly intermeddles with company property after his formal powers have ceased is nonetheless a fiduciary. Equity will treat him as if he retained the powers he pretends to have, with corresponding obligations of loyalty and stewardship, particularly in an insolvency context where creditors’ interests are in play.
2. It clarifies that unpaid vendor’s liens can be excluded by the objectively ascertainable joint intention and commercial purpose of the parties, drawing not only on the contract documents but on wider contextual evidence. Where a lien would frustrate the intended free marketability of the property (as in a proposed IPO), equity will infer its exclusion.
3. It re‑asserts that equitable compensation for misappropriation aims at restoration and places a heavy burden on the defaulting fiduciary to prove “no loss”. A fiduciary cannot ordinarily rely on later events that he has helped bring about or from which he benefits, to erase an earlier loss. The 2017 Asset and Liability Transfer could not be invoked to nullify the Sheikh’s liability; the Company’s loss crystallised when its shares were wrongly taken from it, and the €67.1m award was properly restored.

In the broader legal landscape, the judgment deepens the law’s ability to respond to complex corporate and cross‑border asset‑stripping schemes, while maintaining doctrinal coherence with long‑standing equitable principles. It offers a robust toolset to protect companies in liquidation and their creditors against insiders who misuse group structures and purportedly “lost” powers to divert valuable assets beyond reach.