In Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10, the Supreme Court had the task of deciding whether a change was needed to the law on equitable obligations and liabilities of fiduciaries.
The duty under the microscope was the so-called “profit rule”, i.e. that a fiduciary must account to his principal for any profit derived from or made out of the fiduciary relationship, save where the principal has provided his informed consent to the fiduciary retaining that profit. Such profit has long been treated in equity as held on constructive trust for the principal from the moment it is made.
In Rukhadze, the Court re-examined whether it needed to apply a common law “but for” causation test before granting an account of profits in such circumstances. Was the Court required to ask whether the fiduciary would have made the profit but for its breach, for example because the principal would have consented to it or because the fiduciary could have terminated the relationship before he gained the opportunity and would have made the same profit anyway?
