The UK Supreme Court has handed down a significant judgment in Mitchell & another v Sheikh Mohamed Bin Issa Al Jaber & another, reinstating a €67m award in favour of the Krys Global liquidators. The decision provides important clarity on the liability of directors who continue to act after liquidation and reinforces the strict approach courts take when assessing breaches of fiduciary duty.

For businesses, insolvency practitioners and litigation funders, the ruling underscores how high the standards of accountability are for those handling company assets – and how essential it is to have the right legal protection and funding in place when disputes of this magnitude arise. At Annecto Legal, we can assist clients by helping them secure funding and insurance for their cases.

Background to the Supreme Court Appeal

Clyde & Co, acting for the liquidator appellants since 2017, pursued claims arising from the director’s transfer of a company’s principal asset – a shareholding – after liquidation. The case went through the Court of Appeal and ultimately the Supreme Court, focusing on two core issues:

1. Whether a person purporting to act as a director after liquidation can assume fiduciary duties; and
2. How and when equitable compensation should be measured, particularly where the value of an asset changes over time

Both the Court of Appeal and the Supreme Court also considered (and rejected) the defendants’ argument that an unpaid vendor’s lien arose to defeat the liquidators’ claim.

Directors acting post-liquidation can assume fiduciary duties

Although the company was incorporated in the BVI – where a director’s powers cease upon liquidation – the courts rejected the argument that no fiduciary duty could arise.

The director in question had continued to act as if he still possessed authority, transferring away the company’s key asset. Both appellate courts agreed that:

• Fiduciary duties can arise ad hoc based on the real-world conduct and relationship between parties
• Equity recognises fiduciary obligations where trust and confidence are assumed, even informally
• A director who acts after liquidation cannot escape accountability simply because statutory authority has ended

As the Supreme Court summarised: “Fiduciary duties are not confined to well-established categories.”

This principle reaffirms that anyone handling company property – formally or informally – can be held to the to highest standards of loyalty and accountability.

Measuring equitable compensation: No fixed date and a heavy burden on the fiduciary

A central issue in the case was the correct date for valuing misappropriated assets. The Court of Appeal had reduced the €67 million award to zero on the basis that the shareholding’s value had collapsed by the time of trial, following an Asset and Liability Transfer. The Supreme Court firmly rejected that approach and reinstated the full award.

The Court emphasised that there is no fixed rule that valuation must occur at the trial date. Instead, the question is always what is “just and equitable” between the beneficiary and the fiduciary. When a fiduciary misappropriates property, the beneficiary suffers an immediate loss, and the misappropriated asset is generally valued at the point of the breach.

If a fiduciary wishes to argue that a later event reduced or eliminated that loss, the burden of proof lies squarely on them. This is a demanding standard: the fiduciary must show that the event occurred, that it truly caused the loss, and that it was entirely independent of their wrongdoing. The Court noted that supervening events will rarely break the chain of chain of causation, particularly where the fiduciary had any involvement or stood to gain.

In this case, the defendant offered no satisfactory explanation for the Asset and Liability Transfer, could not be cross-examined, and evidence suggested he played a part in the process. As he failed to discharge the heavy burden placed on him, the Supreme Court restored the original €67 million award.

Litigation funding options

At Annecto Legal, we specialise in helping businesses, law firms and insolvency practitioners access the financial support need to pursue high-value and high-complexity disputes, including:

After-the-event (ATE) legal insurance – ATE insurance is generally used to protect from adverse costs risks, Security for Costs, and Cross Undertakings in Damages. After-the-event (ATE) legal expenses insurance is perhaps best thought as a similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse costs award.

The claimant has swapped their obligation to pay the defendants in the event of a loss, with the obligation to pay the insurer in the event of a win. This ‘swap’ is generally an attractive swap as the client is likely to be in a better financial position following a win than following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.

For insolvency disputes, insurers will often defer all premium payment until financial recovery is made in the claim. Premium will be capped at a maximum of recovered funds.

Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for a claim in exchange for a share of any financial settlement or damages awarded. This option can be attractive when there are no funds to pursue a strong case. Such funding can also be used to drawdown cash immediately to be used for the purposes of restructuring the business, investigating claims, or pursuing litigation. Utilising contingent assets in this way can be an innovative and useful way to raise funds, when other options are unavailable.

Assignment of litigation – Some types of disputes can be assigned to a third party, usually for an upfront payment and a share of recoveries (after costs). This model can be useful on smaller cases when the ATE and CFA model would not deliver value. But giving up control can sometimes be costly, especially on larger claim disputes.

How can Annecto Legal assist?

When handling insolvency matters, practitioners are obligated to explore all avenues to maximise recoveries for creditors and protect the estate. This often includes pursuing complex claims for misappropriated assets, breach of fiduciary duty, or other disputes arising during or after litigation.

At Annecto Legal, we assist a wide range of clients in finding the appropriate litigation funding, assignment options and after-the-event (ATE) insurance.

If you are in the process of bringing or defending an insolvency dispute and want to explore how Annecto Legal can help you secure the right funding, contact us today.