Supreme Court Confirms ‘No-Profit’ Rule For Fiduciaries
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Katie de Swarte
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Trustees: Supreme Court confirms ‘no change’ to ‘no-profit’ rule for fiduciaries
The contested probate and trusts team at Osbornes Law represent clients in all forms of probate and trusts disputes.
An important decision from the Supreme Court in a case revolving around a very high value estate, upholds an important equitable principle for trustees: the so-called ‘no-profit’ rule applies strictly to trustees and other fiduciaries who profit from their position.
What is a fiduciary?
Fiduciaries are those with a legal duty to act in good faith and in the best interests of the beneficiaries when dealing with trust money and other assets. It is based on the obligation of absolute loyalty. Individual and professional trustees owe these duties as fiduciaries, including executors and estate administrators who hold assets on trust for the beneficiaries.
The ‘no-profit’ rule prevents trustees from making a profit from their use of trust assets (unless they have authority). They must account to the trust for any profits made. It is an equitable rule recognising that the profit belongs to the beneficiaries under a constructive trust.
In this important case, the Supreme Court considered whether it was now time to make a key change to rules that have existed since the 1960s.
What’s the background?
In Rukhadze v Recovery Partners [2025] UKSC 10, a dispute arose concerning the estate of Georgian billionaire Badri Patarkatsishvili.
The claimants – a BVI incorporated company and an English LLP – brought a claim against three individuals for breach of fiduciary duties to recover millions in profits. The three defendants had been contracted by the deceased’s family to provide services related to the recovery of Badri’s worldwide assets; they were subject to legal duties as fiduciaries.
The alleged breach was the diversion of a business opportunity away from the claimants, exploiting it for their own benefit and making a total profit of around $180m. The defendants disputed any liability to account for and repay those profits, but the claimants succeeded in the High Court and, again, in the Appeal Court.
The Supreme Court considered whether the rules on profit should be changed, to include a new requirement: Could the same profit have been made but for the breach of fiduciary duty? The defendants argued that this was necessary to reflect the evolving nature of the business world.
The justices reviewed the seminal authorities on the no-profit rule (Regal (Hastings) Ltd v Gulliver (1967) and Boardman v Phipps (1967); and all seven unanimously resisted any change.
Lord Briggs stated:
“A former fiduciary cannot avoid liability by saying that he would have made the profit even if he had not committed a breach of fiduciary duty… The essential purpose of the profit rule is to deter fiduciaries from giving in to the human temptation to depart from their obligation of single-minded loyalty to their principal (for their own benefit.”
Further, the obligation for a fiduciary to account for profits is an equitable duty and an inherent aspect of being a fiduciary. Repayment of profits is therefore not merely discretionary – introducing a ‘but for’ test would undermine the essence of the duty.
The defendants were ordered to account to the claimants for $134m in profits plus interest.
One of the justices provided a different but helpful perspective, taking the view that the term ‘profile rule’ is misleading. He stated: “The true rule is that a fiduciary must not use any property, information or opportunity belonging to the principal for the fiduciary’s own benefit (or for any unauthorised purpose).”
What does this mean?
The decision is an important reminder that trustees, personal representative – and anyone else in a fiduciary position – are obligated to account for any profits and other benefits derived from dealing with trust assets. At Osbornes Law, we understand the complexities of fiduciary relationships and are committed to helping clients navigate disputes with clarity, confidence, and expert legal insight
Contact us
If in doubt, speak with the expert contested probate and trusts solicitors at Osbornes Law. For specialist advice, contact our team by:
- Filling in our online enquiry form; or
- Calling us on 020 7485 8811
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