INTRODUCTION
Generally, fiduciary duties have been found to arise in the usual categories of relationships namely trustee-beneficiary, agent–principal, director-company, partnership as between themselves, solicitor-client and guardian-ward. Beyond this list, there are other situations where those holding certain positions such as liquidators, administrators and senior employees can be found to owe fiduciary duties. In determining whether fiduciary duties can be imputed, the following passage in Bristol and West Building Society v Mothew [1998] Ch 1, 18 is often used as a starting point:
“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary.”
In the recent decision of Mitchell v Al Jaber [2025] UKSC 43; [2026] 2 All ER 809 (“Mitchell”), the UK Supreme Court opened the door to finding the existence of fiduciary duties even in a situation where a person who did not have authority, held himself out as having such authority from a fiduciary position. The Supreme Court also clarified how equitable compensation is measured and who must prove that a later event extinguished the principal’s loss.
THE FACTS IN MITCHELL
The first defendant (“the Sheikh”) was a director and sole shareholder of MBI International & Partners Inc (“MBI”), a company incorporated in the British Virgin Islands which was wound up in 2011. Under BVI insolvency law, the liquidator took custody and control of MBI’s assets, and the directors, although remaining in office, ceased to have any powers.
In February 2016, without the liquidator’s knowledge, the Sheikh signed share transfer forms transferring 891,761 shares held by MBI in JJW Inc to a Guernsey company of which he was a director, for no consideration. He procured registration of the transfer by asserting, dishonestly, that the forms had been signed in 2010, before the winding up.
In July 2017, all of JJW Inc’s assets and liabilities were transferred to a UK company in the same group (“the 2017 Transfer”), which it was common ground rendered the shares worthless.
The trial judge awarded equitable compensation of €67,123,403.36. The Court of Appeal reduced that to nil. The Supreme Court restored the award in full.
FIDUCIARY DUTIES ARE NOT CONFINED TO ESTABLISHED CATEGORIES
The Sheikh’s defence was simple. The winding up had stripped him of his powers as a director, and without fiduciary powers there can be no fiduciary duties.
The Supreme Court rejected the Sheikh’s defence. A person who assumes an office ought not to end up in a better position than if he were what he pretends. It held that fiduciary duties are not confined to established categories. They may arise on an ad hoc basis from an objective analysis of the relationship between the parties to ascertain whether it involves a relationship of trust and confidence. The fiduciary duty exists because, objectively, the fiduciary has undertaken not to pursue his own interests. However, no conscious undertaking is required. Equity may recognise a duty even where the person gave no thought to the other party’s interests and in fact acted against them. That is so where a person arrogates to himself a power which, if exercised by a trustee, agent or director, would carry fiduciary obligations.
The Sheikh pretended to be a director with authority to transfer the shares. He could not then shelter behind the very statutory provision that had removed his powers and which he had set out to circumvent. The Supreme Court also held that a single act may both create and breach a fiduciary duty, and that it made no difference that the shares went to a company he controlled rather than to him personally.
EQUITABLE COMPENSATION AND THE BURDEN OF PROOF
Where a fiduciary misappropriates property under his control, equitable compensation restores to the principal, at the expense of the defaulting fiduciary, the value of the property misappropriated. The court looks back from the date of trial, with the full benefit of hindsight, and asks what the property would have been worth to the company had it not been taken. There is no fixed valuation date, neither the breach date favoured at common law nor the trial date often adopted in equity. The date is chosen by reference to what is just and equitable between the parties.
The decisive point was the evidence. Once the principal proves that the property had value when it was taken, an immediate loss is established. If the fiduciary says that a supervening event severed the causal link, the burden of proof lies squarely on him to prove on a ‘but for’ basis that supervening event and its impact on the causative link between the breach of duty and the loss suffered by the principal.
Nor may every supervening event be relied upon. A fiduciary who participated in the supervening event, or who increased the property’s exposure to the risk, will generally not be allowed to shelter behind it. The Supreme Court’s illustration was a painting held on trust and hung in a public gallery. If the trustee claims it as his own but leaves it hanging and the gallery burns down, the beneficiary has lost nothing, but if he takes it home and his own house burns down, the risk is his.
On the facts, the Sheikh signed the letter of demand that set the 2017 Transfer in motion, attended the key board meeting, and stood to benefit as ultimate beneficial owner of the group. He offered no satisfactory explanation and made no proper disclosure. Using the painting analogy, he would have lit the fire himself. In any event, the relevant measure is the value of the shares to MBI, and that value fell to zero in 2016 when they were taken. A stolen car keeps its value as a car, but not to its owner.
CONCLUSION & KEY LESSONS
As discussed in , in Recovery Partners GP Ltd and another v Rukhadze and others [2025] UKSC 10; [2026] 1 All ER 189, the fiduciary could not keep his profits by arguing that he would have made them in any event. In Mitchell, the fiduciary could not escape the duty by denying that he ever validly held the office, nor escape compensation by pointing to a later event of his own making.
From the UK Supreme Court’s decision in Mitchell, two key lessons are worth noting:
- 1. Directors who have resigned, been removed, or whose powers have ceased on the appointment of a liquidator may still incur fiduciary liability if they continue to deal with company property or hold themselves out as having authority to do so.
- 2. An apparently worthless asset at the time of judgment may still find a substantial claim. The questions are what the asset was worth to the company when it was taken, and whether the defendant is entitled to rely on what happened afterwards.
Although Mitchell is an English decision, it applies principles drawn from the same body of equity that the Malaysian courts administer, and it will be highly persuasive in Malaysia and other parts of the Commonwealth.
Halim Hong & Quek (HHQ) Fraud, Asset Recovery and Investigations Practice Group acts for companies, liquidators, trustees and shareholders in claims arising from breaches of fiduciary duty and the misapplication of company assets. If you require any assistance with asset tracing and recovery, please contact Siva Kumar Kanagasabai at kumar@hhq.com.my; Erica Wong at erica.wong@hhq.com.my and Henry Teh at henry.teh@hhq.com.my.
Disclaimer: This article is for general information only and does not constitute legal advice or legal opinion. It should not be relied upon as a substitute for specific legal advice. No person should act (or refrain from acting) based on this article without obtaining advice on the specific facts and circumstances. Halim Hong & Quek does not accept responsibility or liability for any loss or damage arising from reliance on this article. Halim Hong & Quek reserves the right to update, amend or withdraw this article at any time. All rights reserved.
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About the authors
Siva Kumar Kanagasabai
Senior Partner
Head of Dispute Resolution Practice Group
Halim Hong & Quek
kumar@hhq.com.my
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Erica Wong Jia Chie
Associate
Dispute Resolution
Halim Hong & Quek
erica.wong@hhq.com.my
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Henry Teh Hen Li
Pupil-in-Chambers
Dispute Resolution
Halim Hong & Quek
henry.teh@hhq.com.my
