Supreme Court reaffirms strict fiduciary standards

In a landmark ruling on 19 March 2025 (Rukhadze & Others v Recovery Partners GP Ltd [2025] UKSC 10), the UK Supreme Court delivered a decisive judgment that reinforces fundamental fiduciary principles. The unanimous dismissal of the appeal sends a clear message: Fiduciaries cannot escape accountability through hypothetical arguments.

Why this case matters

The dispute centred on whether Fiduciaries who profited from an undisclosed business opportunity could retain those gains. They argued that proving they might have earned them lawfully (a ‘but-for’ test) was sufficient. The Court resoundingly rejected this argument, affirming that:

1. The “no profit” rule is absolute – Fiduciaries must account for all unauthorised gains, regardless of hypothetical alternative outcomes.
2. Loyalty is non-negotiable – Lord Briggs stressed that any dilution of this principle would undermine trust in fiduciary relationships.
3. Equitable allowances remain the sole safety valve – Fiduciaries may seek compensation for their skill/effort, but only after disgorging profits.

Practical implications

For Fiduciaries (directors, trustees, agents):

• Scrutinise all potential conflicts – even indirect opportunities may require disclosure.
• Document consent meticulously – assumptions of ‘implied approval’ carry risk.
• Proactive compliance is cheaper than litigation – the Court’s stance leaves no room for creative defences.

For principals (businesses, beneficiaries):

• Review governance frameworks – weak controls invite exploitation.
• Monitor Fiduciaries actively – the ruling empowers you to reclaim unauthorised gains.
• Update agreements – ensure that profit-sharing terms are explicit.

How we help navigate this landscape

While the judgment provides clarity, its application demands nuanced legal expertise. We can assist clients by:

• Pre-emptive audits – Identifying vulnerabilities in fiduciary structures before disputes arise.
• Tailored training – Providing boards and trustees with practical compliance strategies.
• Dispute resolution – Assisting in recovering misappropriated gains or defending Fiduciaries against excessive claims.
• Documentation overhauls – Drafting precise agreements that protect fiduciary interests while maintaining flexibility.

The Court’s message is unambiguous: Fiduciary duties are not a theoretical ideal, but an enforceable standard. Businesses that overlook this ruling risk serious legal consequences.