CPS V Aquila Advisory – Revisiting Attribution Of Dishonest Intentions Of Directors

05 Nov 2021


On 3 November 2021, the Supreme Court handed down their decision in CPS v Aquila Advisory Ltd [2021] UKSC 49. This was the most recent opportunity for the Supreme Court to consider the principle in Bilta (UK) Ltd v Nazir [2015] UKSC 23, which concerned whether the intentions of dishonest directors could be attributed to their company.

The facts

The case concerned the directors of Vantis Tax Ltd (VTL), Mr Faichney and Mr Perrin (the Directors). VTL at all relevant times owned the IP rights to a piece of software technology. The Directors devised a scheme to defraud the revenue by purporting to sell those IP rights from the Richardson Trust (which did not exist) to various companies to artificially inflate the share values of those companies. This enabled the taxpayers who had earlier subscribed to those shares to donate them to charity at their inflated value, claiming tax relief in excess of the subscription value of the shares. In the meantime, the Directors siphoned off funds paid into those companies amounting to £4.55m.

Confiscation orders under the Proceeds of Crime Act 2002 (POCA) were made against the Directors for the £4.55m, while VTL (via their assignee, Aquila) claimed a proprietary interest under a constructive trust to the £4.55m as secret profits earned in breach of the Directors’ fiduciary duties (relying on FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45). The case was appealed to the Supreme Court, with the CPS contending that the dishonest intentions of its Directors should be attributed to VTL. This would prevent VTL from asserting their constructive trust claim against the Directors under the illegality rule.

The decision

The Supreme Court began with a restatement of the general principle in Bilta: that in civil proceedings brought by a company against its directors for breach of fiduciary duty, the dishonesty of those directors is not attributed to the company. This would, on its face, include claims for sums acquired as a result of the breach which are subject to a constructive trust.

The Supreme Court rejected the CPS’s submissions that the Bilta principle does not apply to the present case, or that there should be an exception to the principle. The court confirmed that the principle extended beyond culpability for loss-based claims, as was the case in Bilta, to claims to strip profits, as in the present case.
Some notable points in the judgment include:

It did not matter that VTL had profited from the scheme (the taxpayers were obliged to pay fees to VTL equal to 12% of the amount sheltered). A director cannot assert that they are entitled to retain a secret profit just because the company had derived a profit as well.

There is no requirement for VTL’s culpability for the illegality to be the “very matter” of the company’s complaint against the Directors. The Bilta principle would apply where the Directors were seeking to rely on their own wrongdoing defeat the claim by attributing their dishonesty to VTL. 

The Bilta principle remains good law even after the recasting of the illegality defence in Patel v Mirza [2016] UKSC 42.

The question of attribution is one to be answered prior to the question of illegality, which is considered only when the unlawful or dishonest conduct of a director is attributed to the company.

VTL was not approbating the Directors’ illegality by seeking to establish a constructive trust, since that principle applies only to claims by third parties against a principal for the acts of its agent, and not for a claim by a principal against its agent.


This decision appears harsh at first glance as it leaves the defrauded party out of pocket. Nevertheless, the conclusion follows from applying the general rules of attribution. It would be absurd for a company to be unable to seek a remedy from a dishonest director by having the director’s intentions attributed to the company. If the Directors could not do so, accordingly, neither could the CPS, who stood in no better position than the Directors. Since no intent could be attributed to VTL, the illegality issue would not arise at all.

The question of attribution was resolved as a matter of principle, and the public policy concerns of the surrounding circumstances, in relation to POCA or VTL profiting off their Directors’ criminal conduct, accordingly fell away. In this regard, the Supreme Court considered that the CPS may have been able to recover the proceeds from VTL had the appropriate POCA rights been invoked, but the CPS had expressly chosen not to do so. This undoubtedly influenced the court’s conclusion, as there would be no need to distort ordinary equitable principles where there were other ways to protect the CPS’s rights.

This decision provides welcome clarity on the breadth of the Bilta principle and the relevant factors which may be considered, with the court emphasising the importance of certainty in the rules concerning breaches of fiduciary duties.



Jian Jun (JJ) Liew