Someone recently bought our

students are currently browsing our notes.

X

Boardman v Phipps

[1967] 2 AC 46

Case summary last updated at 24/02/2020 14:46 by the Oxbridge Notes in-house law team.

Judgement for the case Boardman v Phipps

The solicitor to a family trust (S) and one Beneficiary (B)-there were several-went to the board meeting of a company in which the trust owned shares. They wanted to invest and improve the company. The Trustee (T) refused to let them invest on behalf of the trust. Therefore S and B invested themselves and the company did very well, improving the value of the shares held by themselves individually and by the trust. Another beneficiary (P) claimed conflict of interest and demanded her share of the profit, because of S’ fiduciary role. HL (majority 3-2) held that S and B would hold their acquired shares as constructive trustees for the beneficiaries. However the court exercised its “inherent jurisdiction” to make a monetary award to S for his services to improving the value of the trust. 
 
Lord Hodson and Lord Guest: Since S and B had used information made available to them by virtue of their relationship to the trust (as solicitor and beneficiary respectively), and since the information was trust property, they had made a profit out of trust property, rendering them liable. 
 
Lord Cohen (on a point with which Hodson and Cohen agreed): S had placed himself in a position of potential CoI, for example if the trustees asked his advice on the merits of buying more shares in the company. This meant he had to account for all profits arising out the CoI, no matter how remote the probability was that this CoI would actually arise. It was irrelevant that S had acted in an open and honest (and profitable!) way. 
 
Viscount Dilhorne and Lord Upjohn (DISSENTING): A COI only arises and renders a fiduciary liable to account for profits made where a reasonable man, looking at all the relevant circumstances, would conclude that there was a real, sensible possibility of conflict of interest, which was not the case here. 
 
The minority are right- it is unfair that where no CoI actually caused harm (or even potential harm) to the trust S should have to account for his profits. This ruling would deter people in S’ position from actions which could only improve the value of the trust. If S had been asked advice in the future he could simply have declined to give it, while other jurisdictions (e.g. US) have been able to adopt a more flexible approach- Oakley (ed) Parker and Mellows; The Modern Law of Trusts

Boardman v Phipps crops up in following areas of law