Keeping them “Honest”: Breach of Fiduciary Duty and Liability for Dishonest Assistance

In Watson v Fletcher and others¹ Lord Richardson reaffirmed that the existing English law regarding dishonest assistance and the mental element of accessory liability applied in Scots law.² Although the case provided an opportunity to clarify important issues of the standard of dishonesty, the judge refrained from resolving them, leaving unanswered questions about the breadth and uncertainty of the mental element necessary for a finding of dishonest assistance. This case note considers the decision and analyses its implications for the future of dishonest assistance.

James Watson, the pursuer, sought damages from six defenders, five individuals and a company, alleging a breach of fiduciary duty by the first defender and dishonest assistance by the others. Watson, a director of Croftshore Limited,³ sued as the company's assignee. Croftshore was in administration and the heritable proprietor of an area of land, Portpatrick, acquired for the purpose of residential development.⁴ Portpatrick Holidays LLP (“Holidays”),whose members were the first defender and another Croftshore director, obtained two plots of land near Croftshore’s land, in Portpatrick, in 2006 (“the Holidays’ site”).⁵ After Holidays entered administration in 2013, there were discussions about Croftshore purchasing the Holidays’ site. Croftshore’s directors sought to obtain funding for the purchase, and two directors – the pursuer and a third individual – sought to resolve a drainage issue affecting the Holidays’ site, which would have involved entering into a servitude with a third party owning adjacent land.⁶ The discussions ultimately failed and the Holidays’ site was sold to the sixth defender, SBAY-C SA(1) Limited, of which the second defender was the sole director and shareholder.⁷

The third, fourth, and fifth defenders were accused of providing assistance to the sixth defender in purchasing the Holidays’ site.⁸ The pursuer argued that the defenders had orchestrated a scheme, enabling the sixth defender to exclusively own the Holidays’ site, thereby excluding Croftshore from acquiring the site and profiting from its development, and sharing the profits among themselves. Moreover, Watson argued that the first and second defenders assisted the sixth defender in the negotiations for the servitude regarding the drainage in competition with Croftshore.⁹ Following the intimation of a draft summons by Croftshore against the first, third, fourth, and fifth defenders, the first defender threatened to cease working for Croftshore in his capacity as a contractor and eventually resigned his post on 6 July 2015. He thereafter failed to both return to the site at Portpatrick and co-operate with Croftshore’s alternative contractor and site supervisor.¹⁰

The damages sought were based on the profits that Croftshore would have earned if it had developed the Holidays’ site.¹¹ The legal basis against the first defender proceeded as a breach of his fiduciary duty as a director of Croftshore, whilst the other defenders were accused of dishonest assistance.¹² The first defender argued that the pursuer's claim related to the first defender's actions as a contractor, which improperly conflated his roles as a director and contractor, asserting that fiduciary duties did not extend to actions taken in the latter capacity without a breach of the underlying contract, upon which no claim had been made.¹³ The pursuer replied by stating that the first defender's argument was flawed in assuming that his duties as a director and contractor could not apply simultaneously, emphasising that fiduciary duties continue even in non-directorial roles.¹⁴

The second defender argued that the pursuer had failed to adequately...