New Supreme Court judgment: Mitchell v Al Jaber [2025] UKSC 43

MBI International & Partners Inc is a BVI company. It entered liquidation in 2011. In 2016, the company’s director (who had by then been stripped of his powers as a director under BVI law) caused the transfer of valuable assets (“the 891k Shares”) to an associated company. The director caused the transfer of the 891k Shares by signing a share transfer form as “director” and backdating the form to a time prior to the liquidation. The following year, in 2017, because of events in respect of which the director had given no proper explanation, the 891k Shares became worthless. The liquidators brought a claim against the director for breach of fiduciary duty and against the associated company for knowing receipt. The liquidators succeeded at trial but lost in the Court of Appeal, which held that the company had suffered no loss from the breach of fiduciary duty.

On appeal to the Supreme Court, the director argued that he could not owe fiduciary duties because: (i) he had no relevant powers under BVI law at the time of the transfer of the 891k Shares; and (ii) there is a rule that a de facto fiduciary can only owe fiduciary duties where s/he has legal title to, or possession of, property. The Supreme Court unanimously rejected the director’s appeal and upheld the decision of the trial judge and the Court of Appeal that where a person unlawfully purports to assume a fiduciary role and clothes him or herself with a fiduciary power they become liable as though they were a lawfully appointed fiduciary.

The liquidators appealed against the Court of Appeal’s finding that they were not entitled to equitable compensation because, so the Court of Appeal held: (i) there is a rule that equitable compensation is measured as at the date of trial; and (ii) in this case, the shares were worthless by the date of trial and the company therefore suffered no loss.

The Supreme Court unanimously allowed the liquidators’ appeal. There is no invariable rule that loss will be calculated as at the date of trial. The date of valuation will be the date that is just and equitable in all the circumstances. Where, as here, a fiduciary misappropriates assets, the principal suffers an immediate loss. If the fiduciary wishes to argue that the misappropriated asset would have declined even if s/he had not misappropriated it, then the burden is on the fiduciary to prove that and to prove that the fiduciary was not personally involved in the subsequent act that caused the value of the asset to decline. In this case, the director proved no such thing and, in fact, the evidence that was available suggested that the director was personally involved in the events of 2017 whereby the 891k Shares became worthless.

The Supreme Court therefore restored the order of the trial judge that the director and the associated company pay c.€67m (plus interest from 2016) in equitable compensation.

Read the full judgment here.

Tom Smith KC, Joseph Curl KC and Jon Colclough acted for the successful liquidators.