One man’s loss is another man’s gain: Hotel Portfolio II UK v Ruhan  EWCA Civ 1120
In Hotel Portfolio II UK (HPII) v Ruhan, the English Court of Appeal set aside an award of equitable compensation against Mr Stevens who dishonestly assisted Mr Ruhan in breaching fiduciary duties Ruhan owed as company director of HPII.
The CoA held at both stages of Ruhan and Stevens’ wrongdoing HPII suffered no loss. At stage one, HPII suffered no loss because it sold hotels to a company - in which Ruhan had a concealed interest behind his nominee Stevens – for fair market value. At stage two, HPII suffered no loss because HPII could never have exploited the hotels’ potential of which Ruhan took advantage.
HPII argued stage two should be considered separately from stage one and, when so analysed, it had suffered loss. HPII argued its loss at stage two arose from the fact that Ruhan had taken profits subject to a fiduciary relationship and dissipated them, with Stevens’ dishonest assistance, such that Stevens should compensate HPII in respect of the profits Ruhan had made and dissipated.
The CoA rejected that argument, applying the equitable set-off test. The CoA found both stages of wrongdoing were part of one uninterrupted course of dealing, it would be unjust to consider them separately and HPII had suffered no loss such that equitable compensation was unavailable. Furthermore, if HPII’s argument was correct Stevens would be liable to “compensate” HPII for profits made not by him but by Ruhan, showing that HPII’s argument elided the fundamentally different loss- based remedy of equitable compensation with the gain-based remedy of an account of profits.
However, although Stevens was not liable for equitable compensation (because HPII suffered no loss) Stevens would have to account for profits he personally made in his dishonest assistance. The case accordingly illustrates the differences between an account of profits and equitable compensation.