Boardman v Phipps

Boardman v Phipps
Court	House of Lords
Decided	3 November 1966
Citation(s)	[1966] UKHL 2, [1967] 2 AC 46, [1966] 3 WLR 1009, [1966] 3 All ER 721
Transcript(s)	Full text of judgment
Case history
Prior action(s)	[1965] Ch 992, [1965] 2 WLR 839 and [1964] 1 WLR 993
Court membership
Judge(s) sitting	Viscount Dilhorne, Lord Cohen, Lord Hodson, Lord Guest and Lord Upjohn
Keywords
conflict of interest, trusts, fiduciary duties, quantum meruit

Boardman v Phipps [1966] UKHL 2 is a landmark English trusts law case concerning the duty of loyalty and the duty to avoid conflicts of interest.

Mr Tom Boardman was the solicitor of a family trust. The trust assets include a 27% holding in a company (a textile company with factories in Coventry, Nuneaton and in Australia through a subsidiary). Boardman was concerned about the accounts of the company, and thought that to protect the trust a majority shareholding is required. He and a beneficiary, Tom Phipps, went to a shareholders' general meeting of the company. They realised together that they could turn the company around. They suggested to a trustee (Mr Fox) that it would be desirable to acquire a majority shareholding, but Fox said it was completely out of the question for the trustees to do so. With the knowledge of the trustees, Boardman and Phipps decided to purchase the shares themselves. They bought a majority stake. But they did not obtain the fully informed consent of all the beneficiaries. By capitalizing some of the assets, the company made a distribution of capital without reducing the values of the shares. The trust benefited by this distribution £47,000, while Boardman and Phipps made £75,000. But then John Phipps, another beneficiary, sued for their profits, alleging a conflict of interest.

Wilberforce J held that Boardman was liable to pay for his breach of the duty of loyalty by not accounting to the company for that amount of money, but that he could be paid for his services.

Lord Denning MR, Russell LJ and Pearson LJ upheld Wilberforce J's decision and held that Boardman and Phipps had breached his duty of loyalty, which arose as they had become self-appointed agents representing the trust, by putting themselves in a conflict of interest. They were therefore liable for the profits earned. However, they would be able to retain a generous remuneration for the services he performed. On this, Lord Denning MR said (at 1021)

"it would be inequitable now for the beneficiaries to step in and take the profit without paying for the skill and labour which has produced it."

I think there should be a generous remuneration allowed to the agents.

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