Boardman v Phipps - Case Brief PDF

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CASE BRIEF TEMPLATE Name of Case

Boardman v Phipps

Citation and Court

[1967] 2 AC 46 House of Lords

Material Facts

Boardman was the solicitor for a family trust. He attended the annual general meeting of Lester & Harris Ltd, a company in which the trust had a substantial shareholding.  Boardman and Tom Phipps, one of the beneficiaries under the trust, were unhappy with the state of the company.  Together they planned to acquire shares in the company to take it over.  Boardman was able to assess the viability of the takeover because of information about the company he gained while acting as solicitor for the trust.  Boardman advised the beneficiaries of the trust of these plans and no objection was made by any of them; however the trial judge determined that he had not provided the full picture of his interests in the transaction  He also had the consent of two of the three trustees; the third, being senile, was not advised of these plans.  The takeover was successful. The trust, Boardman, and Tom Phipps all made substantial profits in relation to the shares that they had personally acquired. John Phipps, one of the beneficiaries under the trust, sought an account of the profits made by Boardman and Tom Phipps on the grounds of breach of fiduciary duties. The issue was whether Boardman and Tom Phipps should have to account for the profits made when the trust also profited greatly.

Legal Issue

 

Relevant Law Application of Law to the Facts Conclusion

Decision: (bare majority) Information held by Boardman was trust property and he had breached fid duty by investing own money in scheme. Fact that trust profited irrelevant. B & T.Phipps had not received fully informed consent of all trustees, nor did they have consent of beneficiaries. Boardman liable even though acting in good faith and benefitted all parties. Lord Guest: nothing dishonest or underhanded in what Boardman did. Strict application of principle that a person in a fid capacity is not allowed to benefit from any transactions into which he has entered with trust property (the information was trust property as it was obtained in negotiations wherein he was acting for the trust). Pg270 Liability to account for profit ‘in no way depends on fraud, or absence of bona fides…the liability arise from the mere fact of a profit having…been made. The profiteer, however honest and well intentioned, cannot escape the risk of being called upon to account’ Regal (Hastings) Ltd v Gulliver (1967) AC 134, 144-145, Lord Russell of Killowen. 270 Boardman and Tom Phipps ‘hold the (shares) as constructive trustees and are bound to account to the respondent. It is irrelevant that the trustees themselves could not have profited by the transaction.’ 271 ‘the knowledge and information obtained by Boardman was obtained in the course of a fiduciary position in which he had placed himself. The only defence available to a person in such a fiduciary position is that he made the profits with the knowledge and assent of the trustees...