Trustees Cannot Profit from Their Own Wrongdoing. UK Supreme Court Reinforces Beneficiaries’ Rights and Fiduciary Accountability.

The recent decision of the UK Supreme Court in Stevens v Hotel Portfolio II UK Ltd (In Liquidation) [2025] UKSC 28 is one of the most significant trust and fiduciary law judgments of recent years. The Court confirmed a powerful principle that lies at the heart of equity: a fiduciary who makes unauthorized profits from his position cannot treat those profits as his own, and any person who dishonestly assists in the dissipation of those profits may be liable for their full value.

Whilst the case arose in England, the principles applied by the Supreme Court are rooted in long-established equitable doctrines that are also recognised and applied by the Cyprus courts. The judgment therefore carries important implications for Cyprus International Trusts, trustees, protectors, company directors, nominees and beneficiaries.

The Facts

The case concerned a director, Mr Andrew Ruhan, who owed fiduciary duties to Hotel Portfolio II UK Ltd (“HPII”).

Mr Ruhan secretly acquired three hotels through nominee arrangements without disclosing his involvement to HPII. Although the hotels were purchased at market value and HPII suffered no direct loss at the time of sale, Mr Ruhan subsequently realised profits exceeding £100 million through the onward sale of the properties following successful planning developments.

Under long-established equitable principles, those profits were not treated as belonging to Mr Ruhan. Because they were obtained through a breach of fiduciary duty, they were held on constructive trust for HPII.

Mr Ruhan later dissipated those profits. Mr Anthony Stevens, who acted as nominee and assisted in the arrangements, was found to have dishonestly assisted both the original breach of fiduciary duty and the subsequent dissipation of the trust assets.

The question before the Supreme Court was whether Mr Stevens could be liable for the full value of the dissipated profits even though HPII itself would never have earned those profits and had suffered no direct financial loss from the original transaction.

The Supreme Court answered that question with a decisive “yes”.

The Supreme Court’s Key Finding

The Court reaffirmed that unauthorised profits obtained by a fiduciary are held on an institutional constructive trust from the moment they are received.

This distinction is critical.  The constructive trust is not merely a remedy imposed later by a court. Rather, the beneficiary acquires a proprietary interest in the profits immediately upon receipt by the fiduciary. In effect, equity treats those profits as belonging beneficially to the beneficiary from the outset.

Accordingly, when those profits were dissipated, HPII lost property that equity regarded as its own.

The Court therefore held that a person who dishonestly assists in the dissipation of those trust assets may be jointly liable to compensate the beneficiary for the entire loss, even where:

• the beneficiary did not originally suffer a direct financial loss;
• the beneficiary would never have generated those profits itself; and
• the dishonest assistant did not personally receive all of the profits.

 Why this matters for Trusts

The decision reinforces one of the most important protections available to beneficiaries.

Trustees occupy a position of trust and confidence. They are required to act solely in the interests of beneficiaries and must not place themselves in a position where their personal interests conflict with their fiduciary obligations.

Where a trustee improperly exploits trust assets, trust opportunities, confidential information, investments or business opportunities for personal gain, equity does not permit the trustee to retain those benefits.

The profits belong to the trust.  The trustee cannot argue: “I took the risk” or “I created the opportunity” or “The beneficiaries would never have earned this profit” or “The trust has not suffered any actual loss“.

The Supreme Court has reaffirmed that these arguments are irrelevant once a fiduciary has improperly profited from his position. The focus is not on whether the beneficiary suffered a traditional financial loss. The focus is on the fact that the fiduciary obtained property that equity regards as belonging to the beneficiary.

Implications for Cyprus Trusts

Cyprus trust law has historically developed alongside English equitable principles and continues to rely heavily upon English trust jurisprudence.

Although UK Supreme Court judgments are not binding upon Cyprus courts, they remain highly persuasive, particularly in areas such as:

• fiduciary duties;
• constructive trusts;
• tracing claims;
• dishonest assistance;
• knowing receipt;
• proprietary remedies, and
• equitable compensation.

The reasoning adopted by the Supreme Court is therefore likely to be carefully considered by Cyprus courts when dealing with disputes involving Cyprus International Trusts and other fiduciary relationships.

The judgment may prove particularly important where trustees, protectors, directors or nominees attempt to benefit personally from trust-related opportunities or seek to divert trust assets through opaque structures or third parties.

What does this mean for Beneficiaries?

Beneficiaries should not assume that a trustee’s misconduct becomes acceptable simply because the trust itself did not suffer an obvious financial loss.

Many beneficiaries wrongly believe that they can only bring a claim if trust assets have physically disappeared or if the trust portfolio has declined in value.

This decision demonstrates that the position is often much broader.

Potential warning signs include:

• trustees acquiring assets that should belong to the trust;
• trustees diverting investment opportunities;
• trustees using trust information for personal gain;
• undisclosed commissions or secret profits;
• nominee arrangements designed to conceal ownership;
• transfers to related parties; and
• unusual payments made from trust structures.

In many cases, beneficiaries may be entitled not only to seek recovery from the trustee but also from third parties who knowingly or dishonestly assist in the wrongdoing.

A strong message from the Courts

The Supreme Court’s judgment sends a clear message.  Equity will not permit fiduciaries to profit from their own wrongdoing. Nor will it permit those who assist them to escape liability merely because the beneficiary cannot demonstrate a conventional financial loss.

Where trust property, trust opportunities or unauthorized profits are diverted, beneficiaries may possess powerful proprietary and personal remedies capable of reaching both the wrongdoer and those who assist in the wrongdoing.

For trustees and fiduciaries, the judgment serves as a reminder that transparency, disclosure and strict compliance with fiduciary duties remain essential.

For beneficiaries, it is a reassurance that the courts remain prepared to intervene robustly where trust assets, trust opportunities or fiduciary profits are improperly appropriated.

As the Supreme Court has now reaffirmed, a fiduciary’s wrongful gain may in law belong not to the fiduciary at all, but to the beneficiary from the very moment it is received.

How AGPLAW can Assist

Trust disputes are often far more complex than they initially appear.  In many cases, beneficiaries are unaware of their rights, do not have access to the relevant information, or mistakenly believe that no claim exists because trust assets have not obviously disappeared. As the recent UK Supreme Court decision demonstrates, beneficiaries may have powerful remedies even where the wrongdoing involves diverted opportunities, unauthorized profits or assets concealed through nominee arrangements and third parties.

At AGPLAW, we regularly advise trustees, protectors, beneficiaries, family offices and high-net-worth individuals on trust administration, fiduciary duties and contentious trust matters, both in Cyprus and internationally.

Our services include:

Beneficiary Protection and Trust Disputes

• Advising beneficiaries on their rights under Cyprus International Trusts and other trust structures.
• Reviewing trustee conduct and trust administration.
• Assessing potential breaches of trust and fiduciary duties.
• Advising on beneficiary rights to information, disclosure and trust documentation.
• Representing beneficiaries in negotiations, mediations and court proceedings.

 Trustee and Fiduciary Litigation

• Claims against trustees for breach of trust.
• Claims arising from conflicts of interest and self-dealing transactions.
• Recovery of unauthorized profits and secret commissions.
• Claims against protectors, fiduciaries, directors and nominees.
• Removal and replacement of trustees where appropriate.

 Asset Tracing and Recovery

• Tracing trust assets across multiple jurisdictions.
• Investigating nominee structures and concealed ownership arrangements.
• Identifying diverted assets and unauthorized transfers.
• Coordinating with foreign lawyers, investigators and forensic specialists.
• Recovery proceedings against third parties who knowingly or dishonestly assisted in wrongdoing.

 Interim Relief and Asset Preservation

Where there is a risk that trust assets may be dissipated, immediate action is often critical. Our litigation team regularly advises on and obtains:

• Freezing Injunctions (Mareva Orders).
• Disclosure Orders.
• Norwich Pharmacal Orders.
• Bankers Trust Orders.
• Receivership applications.
• Other interim measures designed to preserve assets and secure evidence.

 Cross-Border Trust and Fiduciary Disputes

Modern trust structures frequently involve multiple jurisdictions, including Cyprus, the United Kingdom, the UAE, Switzerland, the British Virgin Islands and other international financial centres.  AGPLAW has extensive experience coordinating complex cross-border matters involving:

• Cyprus International Trusts.
• International holding structures.
• Family wealth and succession planning arrangements.
• Corporate fiduciary disputes.
• International asset recovery proceedings.

The decision in Stevens v Hotel Portfolio II UK Ltd serves as a powerful reminder that trust law is not concerned merely with compensating loss. It is equally concerned with preserving loyalty, integrity and accountability within fiduciary relationships.  The courts have once again confirmed that fiduciaries cannot retain benefits obtained through breaches of duty and that those who assist in such wrongdoing may face substantial liability, even where the beneficiary cannot point to a conventional financial loss.

The full judgment of the UK Supreme Court can be viewed here

The information provided by AGPLAW | A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. While every effort has been made to ensure the accuracy and reliability of the information contained herein, no representation or warranty is given. In no event will the author or any related parties be liable for any loss arising from reliance on this article.