Case Summary – Equitable Compensation, Fiduciary Duty and Unpaid Vendor's Lien

Factual and Procedural Background

The case concerns a dispute between the liquidators of a company incorporated in the British Virgin Islands in 1990 ("Company A", referred to in the opinion as "the Company") and its former sole director and shareholder ("the Defendant"). It also involves another group company ("Company C"), which is in liquidation.

In 2008, the Defendant planned a restructuring of his corporate group, including an intended initial public offering ("IPO") of shares in a newly incorporated company ("Company B"). In January 2009, Company B issued shares to four holders: (i) 129,100 shares to Company A; (ii) about 8 million shares to the Defendant; (iii) 567,556 shares to Company C; and (iv) 324,205 shares to another group entity ("Company G"). In March 2009 ("the March 2009 Transfers"), Company C and Company G transferred their respective 567,556 and 324,205 shares (together, 891,761 shares – "the 891K shares") to Company A under two materially identical share purchase agreements. The consideration, totalling approximately €89.2 million, was never paid. The purpose of these transfers was to enable Company A to participate in the proposed IPO, realise value from selling the shares, and then use the proceeds to pay Company C and Company G. The IPO never occurred, and no payment mechanism was ever agreed.

On 10 October 2011, Company A was wound up by the Eastern Caribbean Supreme Court on a creditor’s application, at a time when it owned 1,020,861 shares in Company B (including the 891K shares). Under section 175(1) of the British Virgin Islands Insolvency Act 2003, on the commencement of the winding up the liquidator obtained custody and control of the company’s assets and the directors ceased to have powers, functions, or duties except as permitted by that legislation. The Defendant’s powers as a director of Company A therefore came to an end. The Defendant unsuccessfully applied in 2013–2015 to terminate the winding up.

Despite the cessation of his powers, in or around 29 February 2016 the Defendant secretly signed undated share transfer forms purporting to transfer the 567,556 and 324,205 shares (the 891K shares) from Company A to Company C. He signed these forms "for and on behalf of" Company A as "Director" without the knowledge of the then liquidator. On 29 February 2016, acting as sole director of Company B, he also signed a written resolution recording Company C as the shareholder of the 891K shares and asserting that the transfer instruments had been signed in 2010, so that beneficial ownership was said to have passed before the liquidation. Company C was registered as holder of the 891K shares in Company B’s register on 8 March 2016. At trial, the judge found that the Defendant had in fact signed the transfer forms in 2016, that he acted dishonestly and in bad faith, and that he did not act in Company A’s best interests. Those findings were not appealed. These transactions are referred to as "the 2016 Share Transfers".

In May 2017, the then liquidator of Company A sought recognition in the United Kingdom of the BVI liquidation as a foreign main proceeding under the Cross-Border Insolvency Regulations 2006. Recognition was granted on 9 June 2017. Shortly thereafter, on 23 June 2017, Company C transferred the 891K shares to another group company ("Company E").

In July 2017, all of Company B’s assets and liabilities were transferred to a different group company ("Company D"), which was owned by yet another group entity ("Company H"). This "2017 Asset and Liability Transfer" followed a letter dated 30 June 2017 from Company E (signed by the Defendant) demanding repayment within 21 days of a €600 million intra-group debt owed by Company B. Minutes of meetings in July 2017 recorded Company B’s inability to pay this debt and resolved that Company D would acquire all of Company B, taking over all its assets and liabilities. According to Company B’s 2016 accounts, its assets then exceeded its liabilities by nearly €682 million. It was common ground, and recorded in the Supreme Court as agreed, that the 2017 Asset and Liability Transfer rendered the shares in Company B, including the 891K shares, worthless.

In May 2019, the then liquidator of Company A commenced proceedings in England under section 212 of the Insolvency Act 1986 against the Defendant and Company C. The claims included: (i) that the 2016 Share Transfers were void; (ii) that the Defendant had committed a breach of post-liquidation fiduciary duty or breach of trust in procuring those transfers; and (iii) that Company C was a knowing recipient of Company A’s property (the 891K shares).

The current joint liquidators later replaced the original liquidator as claimants. A trial before Judge Smith in the High Court (Chancery Division) began in February 2021, was repeatedly adjourned, and concluded in October 2022. In a detailed judgment in 2023, the judge held that: (i) the 2016 Share Transfers were void; (ii) the Defendant owed Company A a fiduciary "stewardship" duty during winding up and breached it by effecting the 2016 Share Transfers; and (iii) Company C was a knowing recipient of the 891K shares.

On remedy, Judge Smith awarded substitutive equitable compensation. She treated Company A’s loss as the value of the 891K shares wrongfully removed from its ownership. Using Company B’s audited accounts for the year ended 31 December 2016 (showing net assets of approximately €681.9 million) and attributing a pro rata share of that value to the 891K shares, she assessed loss at €67,123,403.36. She held the Defendant and Company C jointly and severally liable for that sum as equitable compensation. She considered it unnecessary to determine whether the liquidator would in fact have sold the shares before the 2017 Asset and Liability Transfer; but stated that, had she been properly informed, the liquidator would have taken steps to take control of and realise the shares for creditors’ benefit.

The Defendant and Company C appealed. The Defendant challenged: (i) the finding that he was in breach of fiduciary duty (Issue 1); and (ii) the award of equitable compensation, arguing both that the 2017 Asset and Liability Transfer had stripped the 891K shares of value and that any residual value was eliminated by unpaid vendor’s liens under the March 2009 share purchase agreements (Issues 2 and 3). Company C appealed on the same two remedial grounds.

The Court of Appeal (Judges Newey, Arnold and Snowden) delivered judgment in April 2024. It upheld the High Court’s findings that the 2016 Share Transfers were void and that the Defendant was liable for breach of a post-liquidation fiduciary duty through intermeddling, and it rejected the unpaid vendor’s lien defence. However, it allowed the appeals on quantification, holding that by the date of trial the 891K shares were worthless due to the 2017 Asset and Liability Transfer. On its analysis of equitable compensation, the relevant assessment date was the trial date; it inferred that, had the 2016 Share Transfers not occurred, the liquidators would not have sold the shares before the 2017 Asset and Liability Transfer. Consequently, Company A would not in fact have been better off absent the breach, and no loss was established. The Court of Appeal therefore reduced the award of equitable compensation to zero.

Both the liquidators and the Defendant appealed to the Supreme Court. Company C, acting through its own liquidators, did not advance substantive arguments but accepted that the Defendant’s knowledge as its director was attributable to it and that, if the Defendant was liable in equitable compensation, it would be liable in knowing receipt for the same sum in its liquidation.

Legal Issues Presented

1. Whether the Defendant, in effecting the 2016 Share Transfers after Company A had entered liquidation and after his statutory powers as a director had ceased, owed and breached a fiduciary duty to Company A in relation to those transfers (Issue 1).
2. Whether Company A suffered no financial loss from the misappropriation of the 891K shares because those shares were allegedly subject to unpaid vendor’s liens in favour of the transferors under the March 2009 share purchase agreements (Issue 2).
3. Assuming unpaid vendor’s liens did not negate loss, how the loss in value of the 891K shares should be assessed for purposes of equitable compensation, in circumstances where the shares became worthless following the 2017 Asset and Liability Transfer (Issue 3), including:
   1. what is the correct date and method for valuing loss under the substitutive equitable compensation framework; and
   2. whether the Defendant could rely on the 2017 Asset and Liability Transfer as a supervening event to show that Company A would have suffered the same loss even absent his breach.

Arguments of the Parties

Liquidators' Arguments

• The Defendant, by purporting to act as director of Company A after liquidation, had assumed and exercised a fiduciary power over Company A’s property. By intermeddling in that way he became a de facto fiduciary (analogous to a trustee or director de son tort) and owed fiduciary duties to Company A notwithstanding the statutory removal of his formal powers.
• His dishonest execution of transfer forms and orchestration of the registration of Company C as shareholder were part of a single transaction designed to put the 891K shares beyond the reach of Company A’s creditors, in breach of his fiduciary obligations to Company A and, in light of insolvency, to its creditors.
• Company A suffered an immediate loss when the 891K shares were wrongfully removed from its ownership. The correct approach to equitable compensation was substitutive: to restore to the company the value of the misappropriated asset, valued with the benefit of hindsight but at a date and in a manner which fairly allocated risk as between company and fiduciary.
• The 2017 Asset and Liability Transfer should not be treated as eliminating Company A’s loss. It occurred after the misappropriation, when the 891K shares were no longer owned by Company A, and was part of a group restructuring in which the Defendant was closely involved and from which he (via other group entities) was the principal beneficiary. A wrongdoer should not be allowed to rely on such a later transaction, in which he had a hand and about which he gave no satisfactory explanation, to reduce or extinguish his liability.
• The Defendant’s unpaid vendor’s lien defence failed as a matter of law and fact. The March 2009 share purchase agreements, read in their commercial and factual context (particularly the intended IPO), demonstrated that the parties’ joint intention was that Company A should be able to sell the 891K shares freely in the IPO and use the cash proceeds to pay the vendors. The existence of unpaid vendor’s liens over the shares would have prevented such a sale and defeated the very purpose of the transactions. Equitable principles therefore precluded recognition of any unpaid vendor’s lien in favour of Company C or Company G.

Defendant's Arguments

• Once Company A entered liquidation, section 175 of the BVI Insolvency Act 2003 removed the Defendant’s powers as director. Without existing fiduciary powers, he could not be subject to fiduciary duties in relation to Company A’s assets. Liability as an "intermeddler" or de facto fiduciary should arise only where a person voluntarily assumes an office or set of functions which are legally capable of being discharged; here, there were no such powers to assume.
• A single act cannot both create a fiduciary duty and breach it. The court must first identify a pre-existing fiduciary relationship before considering whether any act constitutes a breach. Treating the act of signing the 2016 transfer forms as both the source of fiduciary obligations and the breach improperly conflates accountability and liability.
• The Defendant argued that he did not "cause" the 2016 Share Transfers in a way that could attract fiduciary liability to Company A: (i) his signing of the transfer forms on behalf of Company A was legally ineffective because he lacked authority and the transfers were void; and (ii) under Company B’s articles and governing company law, a transfer was only effected by registration in Company B’s share register, which occurred through actions taken by Company B (via its agents) following the Defendant’s resolution as director of Company B, not as director of Company A.
• On loss, the Defendant contended that equitable compensation should be assessed on a substitutive basis as at the time of trial, and that by then the 891K shares had become worthless as a result of the 2017 Asset and Liability Transfer. Since the liquidators would not have sold the shares before that transfer, Company A was in no worse position than it would have been absent the breach, and thus had suffered no compensable loss.
• Independently, he argued that Company A sustained no net loss because, under equitable principles, the 891K shares were subject to unpaid vendor’s liens in favour of Company C and Company G for the unpaid purchase price under the March 2009 share purchase agreements. The total amount secured by these liens exceeded the value attributed to the shares by the trial judge. Thus, on his case, even if misappropriation occurred, the equity of redemption held by Company A had no positive value.
• In relation to unpaid vendor’s liens, he maintained that the wording of the March 2009 share purchase agreements did not expressly exclude such liens and that there was no sufficient basis, confined to the documents themselves, to infer a joint intention to exclude the default equitable lien.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
BTI 2014 LLC v Sequana SA [2022] UKSC 25; [2024] AC 211 (sub nom BAT Industries plc v Sequana SA)	Company directors’ fiduciary duties extend to having regard to creditors’ interests when the company is insolvent or nearing insolvency.	Used to confirm that the Defendant’s fiduciary duties, when intermeddling with Company A’s property during liquidation, extended to protecting the interests of Company A’s creditors.
Fraser v Whalley (1864) 2 H & M 10	Directors are fiduciaries, analogous to trustees.	Cited as part of the general line of authority treating company directors as fiduciaries to support analogies applied to the Defendant’s position.
Aberdeen Railway Co v Blaikie Bros (1854) 1 Macq 461	Directors owe fiduciary duties and must avoid conflicts of interest.	Relied on as classic authority confirming the fiduciary nature of a director’s role.
In re Lands Allotment Co [1894] 1 Ch 616	Company directors are treated as trustees of the company’s funds under their control.	Used to illustrate that directors need not own legal title to be subject to trustee-like fiduciary duties; relevant to the Defendant’s lack-of-title argument.
Bristol and West Building Society v Mothew [1998] Ch 1	Definition of "fiduciary"; core obligation of loyalty and its facets.	Quoted at length and endorsed as describing the nature and content of fiduciary obligations applied to the Defendant’s conduct.
Recovery Partners GP Ltd v Rukhadze [2025] UKSC 10; [2025] 2 WLR 529	Supreme Court approval of Mothew; recognition that the duty to account for profits is itself a fiduciary duty.	Cited to reinforce the Mothew definition and to support the wider analysis of fiduciary obligations and accountability in this case.
Hopcraft v Close Brothers Ltd [2025] UKSC 33; [2025] 3 WLR 423	Fiduciary duties arise where, objectively, one party undertakes to act loyally for another; fiduciary status follows from duties, not vice versa.	Relied on to emphasise that fiduciary duties may arise ad hoc from conduct and objective circumstances, supporting the imposition of duties on the Defendant when he purported to act as director.
Attorney General v Blake [1998] Ch 439	A relationship of trust and confidence arises whenever one party undertakes to act in the interests of another.	Used to support the proposition that fiduciary relationships arise from undertakings to act on another’s behalf, applied by analogy to the Defendant’s conduct.
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41	Fiduciary duty arises where a person agrees to act for or on behalf of another in exercising a power or discretion affecting the other’s interests.	Cited as international authority supporting the concept of ad hoc fiduciary obligations based on an undertaking to act on another’s behalf.
Galambos v Perez [2009] 3 SCR 247	Ad hoc fiduciary duties require an (express or implied) undertaking to act in accordance with a duty of loyalty and the existence of discretionary power over the other’s interests.	Relied on in argument by the Defendant but distinguished: that case involved no assumption of a fiduciary power; here the Defendant arrogated a fiduciary-type power to himself.
Norberg v Wynrib [1992] 2 SCR 226	Fiduciary relationships depend on the fiduciary’s undertaking to act in the beneficiary’s interests.	Cited via Galambos as part of the Canadian formulation of ad hoc fiduciary obligations; used in the discussion of undertakings.
Guerin v The Queen [1984] 2 SCR 335	Fiduciary duties may arise where, by statute, agreement, or unilateral undertaking, one party has an obligation to act for the benefit of another.	Quoted to reinforce that fiduciary duties can arise from various forms of undertaking, relevant to the analysis of the Defendant’s assumed role.
Soar v Ashwell [1893] 2 QB 390	A person who assumes, with or without consent, to act as trustee or in a fiduciary relation and exercises command or control over property is treated as an express trustee.	Central authority for imposing fiduciary obligations on an intermeddler (trustee de son tort); applied directly to treat the Defendant as a fiduciary despite lack of formal authority.
Life Association of Scotland v Siddal (1861) 3 De G F & J 58	Extension of trustee doctrines to those who assume to act as trustees.	Cited (via Soar v Ashwell and later texts) to support the proposition that those who assume a trustee-like role are treated as trustees.
Gawton and the Lord Dacres Case (1589) 1 Leo 219; 74 ER 201	A self-appointed bailiff (agent) is accountable as if properly appointed.	Used as early authority underpinning modern concepts of executor and trustee de son tort.
Vickers v Bell (1864) 4 De G, J & S 274	Executor de son tort: intermeddler with estate assets incurs executor liabilities.	Relied on as part of the historical development of liability for unauthorised intermeddling with estate or trust property.
Gibson v Barton (1875) LR 10 QB 329	Person acting as director de facto cannot avoid statutory liabilities by denying valid appointment.	Quoted to support the notion that a person acting as director "in his own wrong" incurs directorial obligations, analogous to the Defendant’s position.
Mara v Browne [1896] 1 Ch 199	Trustee de son tort: one who intermeddles with trust property as trustee assumes trustee liabilities.	Used as part of the doctrinal foundation for treating intermeddlers as trustees subject to fiduciary duties.
Lyell v Kennedy (1889) 14 App Cas 437	Self-constituted agent who collects rents can be treated as trustee for those rents.	Cited as an example of an agent de son tort being treated as trustee-like for property handled.
Phipps v Boardman [1965] Ch 992; [1967] AC 46	Self-appointed agents may incur fiduciary obligations and an obligation to account for profits.	Lord Denning MR’s approach (treating defendants as self-appointed agents) was noted without criticism by the House of Lords and used by analogy for de facto fiduciary situations.
Taylor v Davies [1920] AC 636	Persons taking custody and administration of property on behalf of others are actual trustees subject to full fiduciary obligations.	Cited to show that de facto trustees are treated as express trustees once they assume such roles.
Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366	Recognition of de facto trusteeship and vicarious liability in equity.	Lord Millett’s description of de facto trustees was used to characterise those who assume trustee functions without appointment.
Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189	Trustee de son tort closely resembles an express trustee; the principle that one who assumes an office should not be better off than if properly appointed.	Relied on (via Lewin on Trusts) to support imposing express-trust-like liabilities on intermeddlers such as the Defendant.
New York Breweries Co Ltd v Attorney General [1899] AC 62	Executor de son tort liability can arise from intermeddling in shares without title.	Used to demonstrate that title or possession is not required for executor de son tort liability; supports the view that control over property suffices.
Inland Revenue Commissioners v Stype Investments (Jersey) Ltd [1982] Ch 456	Transfer of sale proceeds to the wrong personal representatives amounts to intermeddling, creating executor de son tort liability.	Cited to reinforce that actual possession of property is not a precondition for such liability.
English v Dedham Vale Properties Ltd [1978] 1 WLR 93	A proposed purchaser who acts as a self-appointed agent (e.g., by applying for planning permission in the vendor’s name) assumes fiduciary duties, including a duty of disclosure.	Relied on to show that fiduciary duties can arise from unilateral conduct before legal title is acquired; supports imposing duties on the Defendant for his self-assumed role.
Belmont Finance Corp v Williams Furniture Ltd (No 2) [1980] 1 All ER 393	Directors are treated as trustees of company property under their control.	Used with other authorities to support the analogy of directors to trustees, rejecting the Defendant’s reliance on absence of title.
Byers v Saudi National Bank [2023] UKSC 51; [2024] AC 1191	Directors are treated as trustees of company property and owe fiduciary duties in that capacity.	Cited to confirm that directors, even without title, are treated as trustees of the company’s property, undermining the Defendant’s argument that title is necessary.
Nolan v Nolan [2004] VSCA 109	A person is not an executor or trustee de son tort without acts asserting a right to act in that capacity.	Distinguished: in that case, the alleged intermeddler acted in his own right; here, the Defendant explicitly purported to act as director of Company A and so assumed fiduciary responsibilities.
Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415	Leading modern authority on unpaid vendor’s liens: a lien arises by operation of law unless its retention is inconsistent with the contract or the true nature of the transaction; exclusion can be inferred from the parties’ objectively ascertained intention.	Provided the framework for analysing whether unpaid vendor’s liens arose over the 891K shares. The Supreme Court applied its principles, emphasising that the "true nature of the transaction" and equitable considerations can show an intention to exclude the lien.
Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742	Stringent test for implying terms into contracts.	Contrasted with the more flexible equitable principles governing unpaid vendor’s liens; used to show that exclusion of a lien does not depend on satisfying the strict test for implied terms.
Winter v Lord Anson (1827) 3 Russ 488	Intention to exclude an unpaid vendor’s lien is to be inferred objectively from executed documents.	Discussed in Barclays and referenced to explain that, while documents are important, equitable analysis may also consider surrounding circumstances.
Tyne and Wear Passenger Transport Executive v National Union of Rail, Maritime and Transport Workers [2024] UKSC 37; [2025] AC 1222	Rectification doctrine shows equity’s willingness to consider extrinsic evidence beyond contract documents.	Cited to support the view that, in determining whether an unpaid vendor’s lien is excluded, equity may look beyond the written documents to surrounding circumstances.
Kettlewell v Watson (1884) 26 Ch D 501	Vendors who knowingly allow purchasers to resell free of encumbrance may find their unpaid vendor’s lien postponed to sub-purchasers’ interests.	Discussed to show that equitable liens are subject to broader equitable principles and that parties’ conduct and the transaction’s nature can affect the operation of liens.
In re Brentwood Brick and Coal Co (1876) 4 Ch D 562	No unpaid vendor’s lien arises where the parties intend payment only from specific capital-raising sources and where a lien would impede those arrangements.	Used by analogy: the March 2009 Transfers were structured so that payment would come from IPO proceeds, and a lien would have obstructed that plan, supporting the inference that no lien was intended.
George Wimpey Manchester Ltd v Valley and Vale Properties Ltd [2012] EWCA Civ 233; [2012] 2 EGLR 113	Example of unpaid vendor’s lien being excluded by the terms and nature of the contract.	Cited by the Defendant; distinguished as a case where exclusion was found primarily from contract interpretation, whereas here the court relied on equitable assessment of the whole transaction and surrounding evidence.
Re Albert Life Assurance Co (1870–71) LR 11 Eq 164	An unpaid vendor’s lien is excluded where it would frustrate the arrangement’s object; equitable doctrine is influenced by particular circumstances.	Supported the approach of inferring exclusion of a lien where its existence would defeat the parties’ intended transaction (here, enabling an IPO).
In re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211	Equitable compensation is assessed with hindsight; the court may take into account changes in value up to trial, unconstrained by common-law rules on remoteness or mitigation.	Provided the foundation for assessing equitable compensation by looking back from trial with full knowledge, while still requiring a principled choice of valuation date.
Libertarian Investments Ltd v Hall [2013] HKFCA 93; (2013) 17 ITELR 1	In misappropriation cases, equitable compensation restores the value of the misapplied asset; burden lies on the defaulting fiduciary to disprove the apparent causal connection between breach and loss.	Applied to place onus on the Defendant to prove that the 2017 Asset and Liability Transfer should reduce or eliminate the loss attributable to his 2016 misappropriation.
Target Holdings Ltd v Redferns [1996] AC 421	Equitable compensation is limited to loss actually caused by the breach; assessment may take into account what happened after the breach.	Used to illustrate that courts apply a "but for" causation analysis and may look beyond the date of breach, but did not establish an inflexible trial-date valuation rule.
AIB Group (UK) plc v Mark Redler & Co Solicitors [2014] UKSC 58; [2015] AC 1503	Similar to Target: loss under equitable compensation must be caused by the breach; assessment can reflect later events, but the guiding principle remains causation.	Cited to emphasise that not every subsequent event is relevant for diminishing liability and that a fiduciary cannot rely on hypothetical further wrongdoing to reduce compensation.
Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (2010) 13 HKCFAR 479	In a knowing receipt context, diminution in share value due to business decline is not charged to a recipient fiduciary where such decline is independent of the breach.	Used as an example where a supervening event (business decline) not caused by the fiduciary is properly allocated to the claimant’s risk when assessing loss.
Golden Strait Corp v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353	Common law may depart from the breach-date rule for assessing damages where justice requires, particularly in contract.	Cited to show that both common law and equity treat assessment date flexibly, undermining any rigid rule that equitable compensation must always be valued at trial.
County Personnel (Employment Agency) Ltd v Alan R Pulver & Co [1987] 1 WLR 916	Common law damages in tort are not invariably assessed at the date of breach.	Used similarly to Golden Strait to highlight flexibility in assessment dates.
Satyam Enterprises Ltd v Burton [2021] EWCA Civ 287; [2021] BCC 640	Equitable compensation does not have a fixed trial-date assessment rule.	Cited as modern authority confirming that in equity the appropriate valuation date is chosen to achieve a just and equitable result.
Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] NSWSC 851	Flexibility in determining valuation date for equitable compensation.	Reinforced the absence of any inflexible rule requiring trial-date valuation.
In re Ahmed [2018] EWCA Civ 519; [2018] BPIR 535	Example of assessing whether a misapplied asset would have been sold earlier, affecting the measure of loss.	Mentioned as a case where evidence about likely timing of sale impacted the assessment of loss in an insolvency context.
In re Brogden; Billing v Brogden (1888) 38 Ch D 546	Where a trustee has committed a breach and trust funds are missing, the trustee bears the burden of showing that no loss resulted or that the same loss would have occurred even absent the breach.	Applied to place onus on the Defendant to establish that Company A would have lost the value of the 891K shares even without the 2016 misappropriation.
Carruthers v Carruthers [1896] AC 659	Co-trustees guilty of gross negligence bear the burden of proving that the loss would have been the same even if they had properly performed their duties.	Used to confirm that trustees (and by analogy, fiduciaries) must disprove causation where their breach is established and a loss appears to flow from it.
Barnett v Creggy [2016] EWCA Civ 1004; [2017] Ch 273	Following Target, the basic rule is that a trustee in breach must restore misapplied assets or compensate for loss, but can defeat the claim by showing no loss was caused.	Cited to summarise the modern approach: equitable compensation is restorative, subject to proof (by the trustee) that no loss results from the breach.

Court's Reasoning and Analysis

Issue 1 – Breach of Fiduciary Duty by the Defendant

The Supreme Court rejected the Defendant’s contention that he owed no fiduciary duty to Company A at the time of the 2016 Share Transfers. The Court began by reaffirming that fiduciary duties are not confined to classic relationships (trustee–beneficiary, director–company, agent–principal, solicitor–client) and can arise ad hoc where a person undertakes to act loyally for another or assumes a fiduciary function. Authorities such as Mothew, Hopcraft and Blake were cited to support the proposition that fiduciary status flows from the nature of the obligations undertaken, assessed objectively, rather than from formal appointment.

Building on Soar v Ashwell and the rich line of cases on executors, trustees and directors de son tort, the Court held that a person who assumes, with or without consent, to act in a fiduciary role and exercises control over another’s property comes under fiduciary obligations and is treated as if properly appointed. The principle, encapsulated in the maxim that "a person who assumes an office ought not to be in any better position than if he were what he pretends," applies equally to a self-appointed director.

The Court stressed that fiduciary liability does not require the fiduciary to hold title to, or physical possession of, the relevant property. It is sufficient that the person exercises "command or control" over the property (as in Soar v Ashwell and English v Dedham Vale Properties). Directors themselves typically do not hold title to company property yet are treated as trustees of funds under their control (In re Lands Allotment, Belmont Finance, Byers v Saudi National Bank).

On the facts, the Defendant, after his powers as director of Company A had been removed by statute, nevertheless signed share transfer forms on behalf of Company A purporting to transfer the 891K shares to Company C and then, as director of Company B, signed a resolution facilitating registration of Company C as shareholder. These steps were part of a single dishonest transaction aimed at removing the shares from Company A’s estate and the reach of its creditors. By purporting to exercise Company A’s power to transfer its shares, the Defendant arrogated to himself a fiduciary power in relation to Company A’s property and thereby assumed a fiduciary obligation to exercise that power loyally and in good faith.

The argument that the Defendant could not be a fiduciary because his statutory powers had ceased was rejected. The Court held that he could not both (i) pretend to have director’s powers in order to effect the transfers and (ii) rely on the statutory removal of those powers to deny fiduciary responsibility. Applying the "not in a better position than if he were what he pretends" principle, he was to be treated as if he were still a director with undiminished powers for the purpose of his accountability. His breach lay precisely in the dishonest exercise of that pretended fiduciary power.

The Court further held that there is no conceptual bar to the same act both creating fiduciary accountability and constituting the breach of duty. The Defendant’s signature of the transfer forms both manifested his assumption of a fiduciary role and, given its dishonest purpose, breached the core duties of loyalty and good faith owed to Company A and its creditors.

The Court also dismissed the attempt to separate the Defendant’s roles as director of Company A and of Company B. The signing of the transfer forms (purporting to act for Company A) and the Company B board resolution were "part and parcel of the same dishonest transaction" designed to divert Company A’s property. He therefore caused the 2016 Share Transfers and was in breach of fiduciary duty to Company A in doing so.

The Supreme Court accordingly upheld the Court of Appeal’s conclusion that the Defendant was liable in breach of fiduciary duty in respect of the 2016 Share Transfers (Issue 1).

Issue 2 – Alleged Unpaid Vendor's Liens over the 891K Shares

The Defendant argued that unpaid vendor’s liens arose in equity over the 891K shares in favour of Company C and Company G under the March 2009 share purchase agreements, securing the unpaid purchase price and thereby negating any loss to Company A. The trial judge rejected this defence on two grounds: (i) on the wording of the agreements; and (ii) based on the broader transactional purpose, which she held inconsistent with any equitable lien. The Court of Appeal disagreed with the first but agreed with the second, and there was no further appeal on the construction point.

The Supreme Court focused on the second, purposive ground. It adopted the framework in Barclays Bank v Estates & Commercial, under which an unpaid vendor’s lien arises by operation of law unless its existence is inconsistent with the provisions of the contract or with the true nature of the transaction as disclosed by documents and circumstances. The test is an objective one: whether there is a clear and manifest inference that the parties intended to exclude the lien. This inquiry is equitable and more flexible than the strict test for implying contractual terms; it is not confined to the four corners of the written instruments.

The Court endorsed the trial judge’s factual findings, supported by the Defendant’s own evidence and pleadings, that the March 2009 transactions were designed to allow Company A to hold the 891K shares temporarily, to sell them in the IPO, and to use the sale proceeds to pay the vendors. The judge specifically found that the existence of an unpaid vendor’s lien over those shares would have prevented a sale of the shares in the IPO and thus thwarted the very purpose and rationale of the March 2009 Transfers. That finding was not challenged on appeal and was accepted by the Supreme Court.

Drawing on Brentwood Brick and Re Albert Life Assurance, the Court reasoned that where the parties intend the purchase price to be paid only out of a specific funding mechanism (here, IPO proceeds raised by Company A) and a lien would frustrate that mechanism or seriously impede necessary financing or onward transfers, equity will infer an intention that no lien should arise. In this case:

• the agreements were part of an internal group restructuring aimed at an IPO;
• the Defendant effectively stood on both sides of the deals and gave clear evidence that the vendors expected to be paid from IPO proceeds after Company A had on-sold the 891K shares; and
• the drafting of the price clause ("to be paid on demand ... in such way that is mutually agreed") suggested that Company A, as purchaser, was intended to retain control over the timing and method of payment, consistent with waiting for the IPO.

In light of this closely connected evidence, the Supreme Court held that the only reasonable inference was that the parties did not intend an unpaid vendor’s lien to attach to the 891K shares. To recognise such a lien would have made the IPO impossible and defeated the agreed commercial scheme. The equitable lien was therefore excluded by the true nature of the transaction and the parties’ objectively ascertained joint intention.

Accordingly, the Defendant’s unpaid vendor’s lien defence failed, and the Supreme Court dismissed his appeal on Issue 2.

Issue 3 – Quantification of Loss and the Effect of the 2017 Asset and Liability Transfer

The key dispute on Issue 3 concerned the appropriate measure and date of assessment for equitable compensation. The High Court had valued the 891K shares by reference to Company B’s 2016 accounts shortly after the misappropriation, awarding approximately €67.1 million. The Court of Appeal, treating the value of the shares as at trial, concluded that the 2017 Asset and Liability Transfer had rendered the shares worthless and that, since the liquidators would not have sold them earlier, Company A had suffered no loss.

The Supreme Court first clarified the governing principles of equitable compensation in misappropriation cases. Where a fiduciary misappropriates property, the court’s objective is to restore to the trust estate or company the value of the property that should have remained available, using hindsight and all information available at trial. However, the choice of valuation date is not governed by any inflexible rule. While equity often assesses value as at trial, this is not mandatory; the appropriate date is that which is just and equitable between principal and fiduciary.

The Court reaffirmed, with reference to In re Brogden, Carruthers v Carruthers and Libertarian Investments v Hall, that once a beneficiary (or company) shows a breach of duty and an apparent loss (here, the misappropriation of valuable shares), the defaulting fiduciary bears the burden of proving that a supervening event has broken the chain of causation or that the same loss would have been suffered even without the breach. This burden applies in the context of the "but for" counterfactual analysis endorsed in modern equitable compensation cases such as Target and AIB.

The Court drew an important distinction between:

• supervening events which are independent of the fiduciary and would have affected the property in the same way even had it remained in the trust or company (e.g. general market declines or independent business deterioration, as in Target, AIB and Akai Holdings), which may properly be taken into account to reduce or extinguish loss; and
• supervening events in which the fiduciary is involved, or from which he benefits, or whose circumstances he fails adequately to explain, which cannot ordinarily be invoked by the wrongdoer to diminish liability.

The Court offered an analogy: if a trustee misappropriates a valuable painting but leaves it hanging in a public gallery which later burns down, the loss may properly be attributed to the fire, not the misappropriation, if the beneficiary would have left it there. However, if the trustee takes the painting home and it is then destroyed in a fire at his house, he cannot rely on that event to reduce his liability; his action in removing the painting exposed it to that risk.

Applying these principles, the Court noted that the Defendant’s misappropriation in 2016 immediately deprived Company A of the value of the 891K shares. The trial judge, relying on Company B’s 2016 accounts, reasonably valued that loss at approximately €67.1 million. To rely on the 2017 Asset and Liability Transfer as extinguishing loss, the Defendant had to prove both that the 2017 transaction did, in fact, render the shares worthless (which was not disputed) and that it was a legitimate, extraneous event whose risk should be borne by Company A, not by him.

The Court scrutinised the limited evidence available about the 2017 Asset and Liability Transfer. It observed that:

• the transaction formed part of an intra-group "restructuring" within entities beneficially owned or controlled by the Defendant;
• it followed closely on the recognition in the United Kingdom of Company A’s BVI liquidation, potentially increasing the threat to group assets from the liquidators;
• the Defendant himself, on behalf of Company E, had sent the letter demanding repayment of a €600 million debt owed by Company B, which triggered the restructuring;
• the Defendant attended key meetings at which the transfer of all assets and liabilities of Company B to Company D was approved; and
• Company B’s 2016 accounts showed substantial net assets, yet all assets were transferred away without any apparent matching benefit to Company B, leaving its shares worthless while shifting value within the group.

Additionally, the Defendant had not been candid with the liquidators or the court about the nature of the 2017 transaction. Up to the early days of trial, he had suggested that all of Company B’s shares (not its assets) had been transferred to Company D, and only during the trial did he accept that what had been transferred were assets and liabilities, leaving Company A’s 129,100 shares technically in issue. The liquidators had pursued but ultimately failed to prove a dishonest conspiracy claim in relation to the 2017 Asset and Liability Transfer; however, that failure did not alleviate the Defendant’s burden to justify relying on that transaction to reduce his liability.

On this record, the Court found that there was "amply sufficient evidence" to raise a case to answer that the Defendant was more than a bystander and was in fact the principal beneficiary of the 2017 Asset and Liability Transfer, in a "zero-sum game" in which every euro lost by Company A was effectively gained within the Defendant’s group. He had neither provided a satisfactory explanation of the transaction nor attempted to prove that he played no significant part in bringing it about or that he derived no significant benefit from it at Company A’s expense.

The Supreme Court therefore held that the Defendant could not rely on the 2017 Asset and Liability Transfer as an extraneous, risk-allocating event to reduce or extinguish the loss caused by his 2016 misappropriation. The Court rejected the Court of Appeal’s reasoning that no counterfactual issue arose because the shares had "in fact" become worthless. The relevant question was the loss to Company A, not the abstract value of the shares. In reality, Company A lost the entire value of the 891K shares in 2016 when they were misappropriated; by July 2017, the 891K shares were owned by Company E, and the 2017 Asset and Liability Transfer destroyed their value to that company, not to Company A. By contrast, Company A’s remaining 129,100 shares in Company B, which had not been misappropriated, did have their value to Company A extinguished by that 2017 transaction.

Consequently, the Court concluded that the appropriate assessment of equitable compensation was the value of the 891K shares attributable to Company A at the time shortly after the 2016 Share Transfers, measured by reference to Company B’s 2016 accounts. The Defendant had failed to discharge the burden of showing that any later event should reduce that loss. The Supreme Court therefore restored the trial judge’s quantification of Company A’s loss at €67,123,403.36.

Holding and Implications

The Supreme Court made the following determinations:

• On Issue 1, the Court held that the Defendant’s conduct in signing the 2016 share transfer forms on behalf of Company A and procuring the registration of Company C as shareholder of the 891K shares, after his statutory powers as director had ceased, amounted to an assumption and dishonest exercise of a fiduciary power over Company A’s property. He thereby owed and breached fiduciary duties to Company A (including duties to its creditors in insolvency).
• On Issue 2, the Court held that no unpaid vendor’s liens arose over the 891K shares under the March 2009 share purchase agreements. Considering the structure and commercial purpose of those transactions (to facilitate an IPO and payment out of IPO proceeds), and applying equitable principles governing unpaid vendor’s liens, the Court inferred a clear intention to exclude such liens.
• On Issue 3, the Court held that Company A suffered a real and compensable loss equal to the value of the 891K shares at the time of their misappropriation, assessed with the benefit of hindsight by reference to Company B’s 2016 accounts. The Defendant, as defaulting fiduciary, bore (and failed to discharge) the burden of proving that the 2017 Asset and Liability Transfer should diminish or extinguish that loss. He could not rely on a later intra-group transaction, in which he had a significant role and from which he benefited, to escape liability.

Accordingly, the Supreme Court:

DISMISSED the Defendant’s appeal on Issues 1 and 2, and ALLOWED the liquidators’ appeal on Issue 3, with the result that the order of the trial judge awarding equitable compensation in the sum of €67,123,403.36 is reinstated. The Defendant is thus liable to pay that amount to Company A. Company C had accepted that, if the Defendant were liable to pay equitable compensation, it would be liable in knowing receipt for the same sum in its liquidation.

The decision has the following implications:

• It confirms that individuals who, without authority, purport to exercise fiduciary powers over a company’s property (for example, by acting as director de son tort after formal powers have ceased) will be treated as fiduciaries and held to the same standards and liabilities as properly appointed directors or trustees.
• It clarifies that unpaid vendor’s liens, while arising by operation of law, may be excluded where the transaction’s structure and purpose, viewed through equitable principles, show a joint intention inconsistent with the lien’s existence—particularly where a lien would frustrate or seriously impede the agreed commercial scheme.
• It emphasises that, in equitable compensation for misappropriation, there is no rigid requirement to value loss at the trial date. The appropriate valuation date and counterfactual depend on allocating risk fairly between principal and fiduciary. Wrongdoers bear the burden of proving that later events reduce loss and cannot rely on supervening events in which they are implicated, or from which they benefit, to limit their liability without full and convincing explanation.
• The judgment operates primarily as an application and reinforcement of existing equitable principles rather than as a departure from them; its immediate effect is to restore Company A’s claim against the Defendant (and, by acceptance, against Company C’s estate) for the value of the misappropriated shares. No broader new rule was expressly formulated, but the case provides authoritative guidance on intermeddling fiduciaries, unpaid vendor’s liens, and the causation and quantification of equitable compensation.