The appeal arose from a judgment of the Court of Appeal reaffirming the trial judge’s decision that the Company had a proprietary right to the proceeds illegally obtained by its directors acting in breach of their fiduciary duties and as such the proceeds were being held on constructive trust for the Company.

On appeal to the Supreme Court, CPS argued that the rule of attribution was not intended to secure a benefit from the dishonest conduct of its directors. Instead, the rule operated solely to protect a company from losses as a result of the dishonest conduct. The effect of the CPS’ argument was that: (i) the illegality of the directors should be attributed to the Company so as to prevent the Company from relying on the doctrine of constructive trust; and (ii) the secret profits should be used to satisfied the confiscation orders.

The Supreme Court dismissed the appeal and concluded inter alia  that the Company was entitled to the proceeds from the unlawful use of the Company’s property by its directors in breach of their fiduciary duties even in circumstances where the Company suffered no loss and stood to profit from the crime. Lord Stephens also reaffirmed the principle that in civil proceedings brought by a company against its directors for breach of fiduciary duty, the dishonesty of the directors is not attributed to the company.

This decision is the latest and perhaps most significant decision to address the rules of attribution and the principle that wrongful acts of directors in breach of their fiduciary duties cannot be attributed to the company.