Stevens v Hotel Portfolio II UK Ltd (In Liquidation) and another [2025] UKSC 28 is of significant relevance for students of equity and trusts law. In a judgment given by Lord Briggs (with Lord Burrows dissenting), the Supreme Court filled in some of the gaps in our understanding of the operation of constructive trusts.
The case concerned a breach of trust by a constructive trustee and the attendant liability of a dishonest assistant in that breach. R was a director of the claimant hotel owners (“HPII”). In that function, he owed HPII the core fiduciary duty of loyalty (Mothew per Millett LJ) meaning he could not make unauthorised profit, nor could he place his interest in conflict with that of HPII. HPII sold three hotels to another company. That company was ostensibly owned by the defendant, Stevens, but was really a nominee for R. No-one disclosed to HPII that Stevens was the true buyer. The hotels were sold at market value and, subsequently, were sold on again with planning permission. The subsequent sales made a very large profit for R (over £100m went to him). HPII would not, itself, have made such profits as it had no plans to apply for planning permission.
R dissipated the profits he received.
HPII, upon discovering R’s dual role in the hotel disposals, sued R and Stevens. HPII alleged R had breached his fiduciary duties, with Stevens dishonestly assisting him in the breach. In the appeal to the Supreme Court, their Lordships had to consider a question of set off to calculate HPII’s recovery. This aspect will not be discussed in this blogpost.
In analysing Lord Briggs’s judgment, the starting point is that R breached his fiduciary duties towards HPII by making an unauthorised profit from the subsequent sale of the hotels. This meant he held the profits on a constructive trust in HPII’s favour. Stevens assisted this breach through his role as an undisclosed nominee of R in the sale of the hotels by HPII. Since R had dissipated his profits, HPII had to pursue Stevens in order to recover; Lord Briggs noted that HPII had recovered “nothing” from R ([5]).
Lord Briggs emphasises that the constructive trust in HPII’s favour was not a remedial one. Rather, as per Lord Browne-Wilkinson in Westdeutsche (1994), it was an institutional constructive trust. Now, it is surprising that Lord Briggs had to emphasise this point given that the official English law position is one of not recognising such remedial constructive trusts. Nevertheless, Lord Briggs seems to have sought to underline the property-laden nature of HPII’s interest in the profits. He is clear that the right to the profits not a mere contractual right or remedy for a contractual wrong. Rather, HPII enjoyed property rights over the profits in R’s hands, rendering it unimportant whether the relevant assets were held in a constructive trust rather than any other type of trust. Lord Briggs, then, made short shrift of Stevens’s argument that HPII’s interest disappeared when the monies were dissipated or that there was “no loss” for HPII because they would not have sought planning permission and so could not have fully exploited the hotel sites to make the same profit as R. Simply put, once HPII gained a proprietary interest in the money in R’s hands due to his concealment of his involvement in the original sale, that interest remained.
A further “no loss” point arose in relation to the dishonest assistant’s duty to make good losses. Any equitable compensation owed was to be limited to the loss experienced by HPII. This was to be calculated by according to the hypothetical that R had not breached his duty. However, Stevens argued that what mattered was R’s conduct at the point of sale not at the point of dissipation of the assets. In that world, had R not breached his duty at the point of sale of the hotels, R would not have made a gain. Fast forward to R’s dissipation of those assets, then, R merely dissipated assets which HPII would not have had any rights to had R maintained his duty of loyalty to start with. Lord Briggs was, unsurprisingly, unconvinced by this argument because the relevant counterfactual related to HPII’s loss at the point when R dissipated the assets under the constructive trust, not at the earlier stage. It would be contrary to principle and common sense for HPII to have a beneficial interest in property as a result of R’s breach only to lose that interest due to R’s dissipation in a subsequent breach of duty owed under the constructive trust meant to protect HPII’s interest.
I haven’t touched on Lord Burrows’s dissent due to space constraints in this blogpost. From the foregoing analysis, it is clear that Stevens offers important insights into the role of the constructive trustee who, even though they owe a slightly reduced package of obligations towards the beneficiary of the constructive trust than an express trustee would, remains liable for the consequence of their breach of this separate trust. The application of that principle across to the liability of the dishonest assister is an important reminder of the significant liability imposed on such actors; even where R had dissipated the assets received in breach of his fiduciary to HPII, Stevens remained liable to that full extent.
This writer, Harry, is a graduate of Oxford and Yale. He will commence pupillage in consumer law in October and is available to tutor widely across undergraduate, postgraduate, and vocational law courses.
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