Read on for our summary of the Supreme Court's judgment and the key takeaways for directors and insolvency practitioners.

Published: 5 May 2026

The Supreme Court’s decision in Mitchell & another v Sheikh Mohamed Bin Issa Al Jaber No 2, handed down towards the end of last year, provides important clarification around the circumstances in which commercial actors may owe – and breach – fiduciary duties, and how the remedy of equitable compensation may respond.  In this article we consider the decision and the key takeaways for those involved in complex commercial and insolvency disputes, including how liquidators should approach the assessment of claims against directors and connected third parties.

Background

Sheikh Mohamed Al Jaber (the Sheikh) was a director of a BVI-incorporated company, MBI International & Partners Inc (MBI).  In March 2009 MBI acquired c890,000 shares in another company associated with the Sheikh, JJW Inc.  No payment was ever demanded or made for those shares.  MBI was wound up in October 2011, at which point the Sheikh’s powers as a director of MBI came to an end.

In February 2016, however, and without the knowledge of MBI’s liquidator at the time, the Sheikh signed – purportedly for and on behalf of MBI as its director – undated share transfer forms for the transfer of the JJW Inc shares from MBI to another associated company, JJW Guernsey.

In July 2017, all JJW Inc’s assets and liabilities were then transferred to a further associated company, JJW UK.  As a result, all the shares in JJW Inc, which JJW Guernsey had acquired from MBI in 2016, became worthless.

The proceedings

In 2019, MBI’s liquidator commenced proceedings pursuant to s.212 of the Insolvency Act 1986, including claims (i) that the 2016 share transfers were void, (ii) that in bringing about the 2016 share transfers, the Sheikh acted in breach of fiduciary duty or in breach of trust, and (iii) that JJW Guernsey was the knowing recipient of the shares.

At first instance the trial judge found in favour of MBI’s (new) liquidators on all three claims.  As to the appropriate remedy, the judge held the liquidators were entitled to equitable compensation on a ‘substitutive’ basis.  This was calculated as around EUR 67m, based on a pro rata proportion of JJW Inc’s total approximate value, attributable to the relevant shares, at the time of the 2016 share transfer.

The Sheikh and JJW Guernsey appealed to the Court of Appeal, which upheld the judge’s decision in relation to breach of fiduciary duty, but found that the liquidators had failed to establish any loss, on the basis that by the time of the trial the shares were worthless as a result of the 2017 transfer.

Both parties further appealed to the Supreme Court.

The Supreme Court’s decision

There were three key issues for the Supreme Court to determine:

1. Whether the Sheikh was in breach of fiduciary duty in effecting the 2016 share transfers
2. If so, whether MBI did not in any event suffer any financial loss, on the basis it acquired the shares in March 2009 subject to unpaid vendor’s liens
3. How any loss as may have been suffered should be calculated.

The Supreme Court (Lords Hodge, Briggs and Sales, with whom Lords Stephens and Richards agreed) dismissed the Sheikh’s appeals on the first two points and allowed the liquidators’ appeal on the third, effectively upholding the first instance decision.

In particular, the Supreme Court considered that:

1.  Fiduciary duties can arise on an ‘ad hoc’ basis and are not confined to well established categories of relationship (such as a company and its director(s)).  The necessary relationship of trust and confidence arises whenever one party undertakes, expressly or impliedly, to act in the interests of another.  Equity will recognise such an undertaking even in circumstances where the alleged fiduciary has not made any conscious undertaking, or considered the interests of the person to whom they owe a duty, or indeed has acted contrary to that person’s interests.

In the present case, the fact that:

• the Sheikh had no actual power – as he purported - to transact on behalf of MBI at the time of the share transfers
• the shares were transferred to a company under his control rather than the Sheikh himself

did not prevent a finding that, in the circumstances, he owed and breached a fiduciary duty to MBI.  There was also no reason why the single indivisible act of the Sheikh signing the share transfer forms could not both create, and constitute a breach of, a fiduciary duty.

2. As to whether there was an unpaid vendor’s lien in relation to the March 2009 transfers, the key question was whether there was a clear and manifest inference that the parties intended to exclude one.  The relevant evidence must be closely related to the transaction but is not limited to the documents agreed by the parties.

Here, the evidence was very strong and compelling.  The intention of the March 2009 transfers, which the Sheikh stood on both sides of, was to enable an initial public offering of the shares in JJW Inc.  The existence of an unpaid vendor’s lien would have prevented the sale of the shares in the IPO, undermining the transfers’ commercial purpose and rationale.

3. While there is a general tendency in equity to assess quantum at the date of trial, and in common law at the date of breach, it was not necessary for the purposes of this appeal to examine the reasons for that divergence.  It was common ground that, on the authorities concerned with equitable compensation, there was no fixed/inflexible rule as to the appropriate date to use.  The question therefore was what was just and equitable as between the principal and the fiduciary, or the beneficiary and trustee.  Where a fiduciary or trustee has:

• misappropriated relevant property
• the principal or beneficiary can prove that the property had value when it was misappropriated

they suffer an immediate loss of value.

If the fiduciary/trustee then wishes to rely on other events as having broken the chain of causation, the burden of proof lies squarely with the fiduciary/trustee.  Any such events would be unlikely to qualify if the fiduciary was involved, unless there was a clear and convincing innocent explanation.

Here, the Sheikh could not rely on the 2017 transfer as breaking the chain of causation since he made no attempt to prove that – contrary to the evidence otherwise available – that he played no significant part in it.  That being the case, the relevant assessment was the loss of the value of the shares to MBI, as principal, when they were misappropriated in 2016.  It did not matter that the shares themselves retained their value following the misappropriation, until the 2017 transfer rendered them worthless (to anyone).

Key takeaways

This judgment in particular serves as an important caution to anyone involved with the affairs of a company that they may, purely by their conduct, assume a fiduciary duty to the company, and potentially face legal action in relation to any breach.  This is regardless of whether or when they may have held any official post or otherwise expressly undertaken responsibility for certain functions.

Equally, those considering or pursuing claims against commercial actors will welcome the Supreme Court’s confirmation that the question of whether a fiduciary duty exists is not constrained by form or formalities. This is good news for officeholders (but something for directors to be aware of) as it is a helpful reminder that the Court will adopt a “common sense” approach to reviewing potential respondents to claims. It helps defeat technical arguments around formal job titles/ statutory roles that can be raised as a defence against alleged malfeasant acts.

The clarification that a fiduciary will generally not (absent an innocent explanation) be able to rely on supervening events as breaking the chain of causation if he/she “had a hand in them” is also good news as it widens the potential avenues of recovery; as does the flexible approach to assessing equitable compensation.

This is one of four significant judgments concerned with fiduciary duties handed down by the Supreme Court in 2025 (the others being Rukhadze in March, Stevens in July and Hopcraft in August). While each has naturally been concerned with different specific points of law, the relatively high number of them reaching the Supreme Court in quick succession is undoubtedly notable.  Whilst these judgments between them reaffirm various long-established principles (with many authorities cited dating to the 1800s), they also contain certain developments, demonstrating the flexibility of English common law to adopt to more modern-day commercial scenarios and disputes.