On 24 November 2025, the UK Supreme Court handed down the decision in Mitchell v Al Jaber [2025] UKSC 43.
The judgment addresses the following three principal areas of interest for Cayman directors: (i) when ad hoc fiduciary duties will be engaged (including after insolvency); (ii) how the rights of creditors should be considered in an insolvent situation; and (iii) how courts will measure loss and award equitable compensation when company assets are misapplied.
Background
MBI International & Partners Inc. entered liquidation in the British Virgin Islands in 2011. In 2016, the company’s former director (without the knowledge or consent of the liquidator) caused the transfer of significant company assets to an associated company by signing a share transfer form as a “director” and backdating the form to prior to the liquidation. In 2017, the transferred shares were stripped of their value, rendering them worthless.
The liquidators brought a claim against the director for breach of fiduciary duty and against the associated company for knowing receipt. The liquidators succeeded at trial but lost in the Court of Appeal, which held that the director was in breach of his duties, but that the company had suffered no loss from the breach of fiduciary duty. The Liquidators appealed to the Supreme Court.
The director also appealed, arguing that he did not owe the company fiduciary duties in 2016 because: (i) he was no longer a director; and (ii) a de facto fiduciary can only owe fiduciary duties where he/she has legal title to, or possession of, property.
Decision
First, the Supreme Court rejected the director’s appeal and confirmed that fiduciary duties can arise ad hoc. A person who purports to exercise fiduciary powers in relation to company property assumes fiduciary obligations and is accountable accordingly, even if he lacked formal authority at the time. The Court emphasized that: “The relationship of trust and confidence is the consequence, and not the cause, of a fiduciary duty. The fiduciary duty exists because, looking at the matter objectively, the fiduciary has undertaken not to pursue his own interests.”
The Court treated the defendant director’s conduct, by signing transfer instruments on behalf of the company during liquidation and engineering registration changes, as an “arrogation” of his fiduciary duties. This was sufficient to trigger: (i) the director’s fiduciary duties; and (ii) his liability for breach, regardless of whether he received company property. For Cayman directors, the Court’s findings are clear: those who hold themselves out as exercising a company’s powers over its assets will be treated as fiduciaries with corresponding obligations and liabilities.
Furthermore, the Court confirmed that it is not necessary that a person who has arrogated to himself a fiduciary power to deal with property has title to or possession of the property before he can come under a fiduciary duty. As Lord Esher MR stated in Soar v Ashwell it is sufficient that he has “exercised command or control” over it. The court confirmed that directors of a company do not have title or possession to the company’s property but they are treated nonetheless as if they were trustees of the funds of the company under their control.
Third the Court reaffirmed the decision in BTI 2014 LLC v Sequana SA [2022] UKSC 25, namely that the director’s fiduciary duty to the company extended to having regard to the interests of its creditors in the context of insolvency. This obligation sits within the director’s overarching duty to act in good faith for proper purposes. In this case, the impugned transfers were undertaken in the context of liquidation, which heightened the duty to protect the value of assets for the benefit of creditors. This analysis is entirely consonant with common law principles recognised in Cayman.
Fourth, the court was asked to consider whether the shares improperly transferred out of the liquidation estate were charged with unpaid vendor liens, which, if correct, would result in the Company having suffered no loss from the improper transfers in 2016. The Supreme Court confirmed that Barclays Bank Plc v Estates and Commercial Ltd [1997] 1 WLR 415 remains the leading modern authority and that when considering the evidential burden of determining if a lien over assets can be established the Court should not just consider the documents executed by the parties, as other evidence from the surrounding circumstances of the transactions may demonstrate the joint intention of the parties. The Court stated “As a matter of general approach, equity has never confined itself just to looking at documents, or documents executed by the parties to a transaction, but will also take account of other sources of evidence as may be appropriate to determine the relevant issue in accordance with fairness and the justice of the case”.
Finally, the Supreme Court disagreed with the Court of Appeal’s assessment that equitable compensation required the court to assess the existence of loss at the time of the trial. The Court held that although courts commonly look back from the date of trial to assess loss, there is no inflexible “trial-date valuation rule.” When a fiduciary has misappropriated trust property, equity requires the Court to consider what is just and equitable in the circumstances to restore the wronged party to the position it would have been in but for the breach.
The Court also confirmed that the burden lies on the defaulting fiduciary to prove that a supervening event would have eliminated the value even if the breach had not occurred, particularly if he was involved in the supervening event and derived personal benefit from the action. Thereby confirming that a wrongdoer cannot reduce his liability by pointing to later events of wrongdoing in which he was actively involved. Courts will not allow a fiduciary to say, in substance, “if I hadn’t diverted the asset, then I would have wiped its value out later anyway”.
Consequently, the first instance decision was reinstated, and the director was ordered to pay the company €67,123,403.36.
The decision is a helpful reminder that, notwithstanding the displacement of a company’s directors’ duties upon the appointment of liquidators, former directors who purport to exercise fiduciary duties will be burdened with the corresponding obligations (including those to creditors) and cannot seek to evade responsibility or liability.
