Boardman v Phipps
A solicitor to a trust who made a profit by using information obtained while acting for the trust was liable to account for the profit, even though he acted honestly and the trust also benefited.
Facts
A trust held a minority shareholding in a private company. Mr Boardman, the trust's solicitor, and Tom Phipps, one of the beneficiaries, attended the company's general meeting on behalf of the trustees and obtained information about its affairs. They concluded that the company could be made more profitable, and bought most of the remaining shares with their own money, after telling some of the trustees. They reorganised the company, and both they and the trust made large profits. Another beneficiary, John Phipps, sued them to account for their profits.
Legal principle
The House of Lords held, by a majority of three to two, that Mr Boardman and Tom Phipps were liable to account to the trust for their profits. Lord Cohen said that they had obtained the information and the opportunity to buy the shares while acting as agents for the trust, and that there was a possibility of conflict between their interest and their duty. They had acted honestly, and the trust had benefited, but they had not obtained the informed consent of all the trustees. They were, however, allowed generous remuneration for their work and skill. Lord Upjohn, dissenting, said that there must be a real sensible possibility of conflict, which did not exist here.
Related cases on fiduciary duties
- Attorney General for Hong Kong v Reid [1994] 1 AC 324
- Bray v Ford [1896] AC 44
- Bristol and West Building Society v Mothew [1998] Ch 1
- Re Duke of Norfolk's Settlement Trusts [1982] Ch 61
- FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45, [2015] AC 250
- Guinness plc v Saunders [1990] 2 AC 663
- Holder v Holder [1968] Ch 353
- Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443
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