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endobj In 1996 Mr Clarke settled 150,000 on trust to benefit various family members including his grandchildren, Brooke and Billy. Unit 11. Boardman v Phipps (1967) was an example of the application of strict liability. &Thb;ynxP\ -|tLo9sRx[8-a5& 'vd `f@). The House of Lords maintained the strict rule that historically equity has imposed on a fiduciary. 25% off till end of Feb! Boardman had concerns about the state of Lexter & Harris' accounts and thought that, in order to protect the trust, a majority shareholding was required. 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. Part II describes the rationales for adopting each of the approaches to awarding allowances to dishonest fiduciaries. Applicant VEAL of 2002 v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 437. The Cambridge Law Journal publishes articles on all aspects of law. Some societies use Oxford Academic personal accounts to provide access to their members. stream 3 0 obj S;70[`J)LQ,ecX_LK,*q3>~ B=eA* He and a beneficiary, Tom Phipps, went to a shareholders' general meeting of the company. Show all summaries ( 46 ) Whether or not the trust or the beneficiaries in their stead could have taken advantage of the information is immaterial: p. 111A, The question whether or not there was a fiduciary relationship at the relevant time must be a question of law and the question of conflict of interest directly emerges from the facts pleaded, otherwise no question of entitlement to a profit would fall to be considered. 2 0 obj He said unequivocally that knowledge learnt by a trustee in the course of his duties is not property of the trust and may be used for his own benefit unless it is confidential information which is given to him (i) in circumstances which, regardless of his position as a trustee, would make it a breach of confidence to communicate it to anyone or (ii) in a fiduciary capacity. In April 1997, Mrs Newman and her husband granted a lease of 1 Vicarage . Did Boardman and Tom Phipps breach their duty to avoid a conflict of interest, despite the fact that the company made a profit and they had obtained (some) consent from the beneficiaries? 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. They bought a majority stake. This authentication occurs automatically, and it is not possible to sign out of an IP authenticated account. The other two members of the majority, Lord Hodson and Lord Guest, opined that information can constitute property in appropriate circumstances and in the current case, the confidential information acquired can be properly regarded as property of the trust. If you are a member of an institution with an active account, you may be able to access content in one of the following ways: Typically, access is provided across an institutional network to a range of IP addresses. Lord Upjohn dissented, and held that Phipps and Boardman should not be liable because a reasonable man would not have thought there was any real sensible possibility of a conflict of interest. 39^40. 3 0 obj Priority of trustees indemnity inter se: pari passu or first in time priority? For faster navigation, this Iframe is preloading the Wikiwand page for Boardman v Phipps . See below. If you see Sign in through society site in the sign in pane within a journal: If you do not have a society account or have forgotten your username or password, please contact your society. endobj Ought Boardman and Tom Phipps to be allowed remuneration for their work and skill in these negotiations? Such persons will, however, be entitled to payment on a liberal scale for their work and skill. Citation and Court [1967] 2 AC 46. Lord Upjohn also agreed with Lord Cohen that information is not property at all, although equity will restrain its transmission if it has been acquired by a breach of confidence. <> This is a Premium document. 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. His Lordship distinguished Regal (Hastings) v Gulliver by restricting Regal Hastings to circumstances concerned with property of which the principals were contemplating a purchase. Boardman v Phipps is a leading authority on the no-conflict rule. 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. His Lordship distinguished Regal (Hastings) v Gulliver by restricting Regal Hastings to circumstances concerned with property of which the principals were contemplating a purchase. privacy policy. Do not use an Oxford Academic personal account. Boardman v Phipps [1967] Where an individual is in the position of agent for trustees, any knowledge acquired in such a position is trust property. Lord Upjohn was in dissent in Boardman v. Phipps, but his dissent was "on the facts but not on the law": Queensland Mines Ltd. v. Hudson (1978) 52 A.L.J.R. This is because there is no possibility the trustee would seek Boardman's advice to purchase the shares and at any rate Boardman could have declined to act if given such request. Flower; Graeme Henderson). Boardman and Phipps did not obtain the fully informed consent of all the beneficiaries. WI[y*UBNJ5U,`5B1F :IK6dtdj::yj A breach of a fiduciary duty is of strict liability, regardless of their intention Boardman v Phipps 1967 1. % Constructive trusts, unjust enrichment, tracing 2010 Cases, Written by Oxford & Cambridge prize-winning graduates, Includes copious academic commentary in summary form, Concise structure relating cases and statutes into an easy-to-remember whole. enough, and that am attempt to take control of the company should be initiated. Penn v Lord Baltimore (1750) Paul Mitchell . Abstract. Boardman appealed against a finding that he was a constructive trustee for, or agent did not necessarily render him accountable for profit from its use, yet in, the present case, as both the information which satisfied B and P, purchase of the shares would be a good investment and the opportunity to bid, came as a result of B acting on behalf of the trustees B and P, trustees of five eighteenths of the shares in the company for the respondent and, were liable to account to him for the profit thereon accordingly, Human Rights Law Directions (Howard Davis), Tort Law Directions (Vera Bermingham; Carol Brennan), Marketing Metrics (Phillip E. Pfeifer; David J. Reibstein; Paul W. Farris; Neil T. Bendle), Public law (Mark Elliot and Robert Thomas), Commercial Law (Eric Baskind; Greg Osborne; Lee Roach), Introductory Econometrics for Finance (Chris Brooks), Criminal Law (Robert Wilson; Peter Wolstenholme Young), Principles of Anatomy and Physiology (Gerard J. Tortora; Bryan H. Derrickson), Electric Machinery Fundamentals (Chapman Stephen J. His statement has . Is it a conflict? Boardman and Phipps would have to account for their profits, despite the fact they had best intentions and made the Lexter & Harris a profit. Boardman V Phipps - Judgment - House of Lords House of Lords The majority of the House of Lords (Lords Cohen, Guest and Hodson) held that there was a possibility of a conflict of interest, because the solicitor and beneficiary might have come to Boardman for advice as to the purchases of the shares. The majority agreed unanimously that liability to account for the profits made by virtue of a fiduciary relationship is strict and does not depend on fraud or absence of bona fides, and so Phipps and Boardman would have to account for their profits. You do not currently have access to this article. The majority agreed unanimously that liability to account for the profits made by virtue of a fiduciary relationship is strict and does not depend on fraud or absence of bona fides, and so Phipps and Boardman would have to account for their profits. S;70[`J)LQ,ecX_LK,*q3>~ B=eA* Boardman and Tom Phipps, one of the beneficiaries under the trust, were unhappy with the state of the . law since Boardman v Phipps. in. 2010-2023 Oxbridge Notes. Select your institution from the list provided, which will take you to your institution's website to sign in. It publishes over 2,500 books a year for distribution in more than 200 countries. 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. His lordship, with respect . . By capitalizing some of the assets, the company made a distribution of capital without reducing the values of the shares. He said unequivocally that knowledge learnt by a trustee in the course of his duties is not property of the trust and may be used for his own benefit unless it is confidential information which is given to him (i) in circumstances which, regardless of his position as a trustee, would make it a breach of confidence to communicate it to anyone or (ii) in a fiduciary capacity. The trust property included a substantial shareholding in a private company. He also obtained detailed trading accounts of the English and Australian arms of the business. The Trustee (T) refused to let them invest on behalf of the trust. 'Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case. Choose this option to get remote access when outside your institution. Copyright 2023 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01, co-appellant was another son of the testator, described as constructive trustees by virtue of a fiduciary relationship to the, B decided along with one of the trustees that the company was not doing well. The case for tracing forward not backward through an overdraft. His liability to account depends on the facts. However, to do this he needed a majority shareholding in the company. The trust benefited by this distribution 47,000, while Boardman and Phipps made 75,000. The majority disagreed about the nature and relevance of information used by Boardman and Phipps. fiduciary he was accountable to the beneficiaries for any profit he had made. Shibboleth / Open Athens technology is used to provide single sign-on between your institutions website and Oxford Academic. It depends on the circumstances. John Phipps and another beneficiary, sued for their profits, alleging a conflict of interest by Boardman and Phipps. (eg- acting for multiple people) a. The trust benefited by this distribution 47,000, while Boardman and Phipps made 75,000. Oxbridge Notes in-house law team. The claim for repayment cannot, however, be allowed to extend further than the justice of the case demands. The beneficiary principle in the 21st century, Subscription prices and ordering for this journal, Purchasing options for books and journals across Oxford Academic, Receive exclusive offers and updates from Oxford Academic. Part II describes the rationales for adopting each of the approaches to awarding allowances to dishonest fiduciaries. Therefore, Boardman was speculating with trust property and should be liable. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide, This PDF is available to Subscribers Only. [1] The trust assets include a 27% holding in a company (a textile company with factories in Coventry, Nuneaton and in Australia through a subsidiary). National Provincial Bank Ltd v Ainsworth (1965) Alison Dunn; 20. law since Boardman v Phipps. Enter your library card number to sign in. Paragon Finance plc v DB Thakerar & Co (a . Society member access to a journal is achieved in one of the following ways: Many societies offer single sign-on between the society website and Oxford Academic. Published by Oxford University Press. O(Grx+Q_[%Dm%|(Dy m%Cn(Dy(o%~(Jg(Q[tJD|(R(GIAK(xRph1%Z'-Y!bO-FDY b<9hHJO-F?!b<98HO-F!b-f b. Boardman v Phipps is a leading authority on the no-conflict rule. our website you agree to our privacy policy and terms. 399, 400 (PC). Oxbridge Notes is operated by Kinsella Digital Services UG. If the agent has been guilty of any dishonesty or bad faith, or surreptitious dealing, he might not be allowed any remuneration or reward. But then John Phipps, another beneficiary, sued for their profits, alleging a conflict of interest. If you believe you should have access to that content, please contact your librarian. P0Y|',Em#tvx(7&B%@m*k Coke v Fountaine (1676) Mike Macnair; 3. This article explores how the dissenting judgment of Lord Upjohn in Boardman v Phipps has been preferred by the lower courts and why the courts have adopted such a position. However, they would be able to retain a generous remuneration for the services he performed. xksgD2u$N+xH)%"dU &c~m_WMnny|t80^olIv"+E] mv}f"gv UY Fe_go_eu6[xGLBdUS-?b\4?s=}GO0upAQ![*`E"~ my lords. (Keech v Sandford 1726) - landlord would not grant new lease to beneficiary so trustee took in his own name. The only defence available to a person in such a fiduciary position is that he made the profits with the knowledge and assent of the trustees. This article is also available for rental through DeepDyve. strict liability of fiduciaries has been the subject of criticism on the grounds that it is unfair to penalise honest trustees in the same way as guilty trustees and that the strict rule may discourage people from accepting the post. Boardman v Phipps [1966] UKHL 2 is a landmark English trusts law case concerning the duty of loyalty and the duty to avoid conflicts of interest. For librarians and administrators, your personal account also provides access to institutional account management. Boardman was a solicitor to trustees of a will trust. Mr Tom Boardman was the solicitor of a family trust. They suggested to a trustee (Mr Fox) that it would be desirable to acquire a majority shareholding, but Fox said it was completely out of the question for the trustees to do so. If the defendant has done valuable work in making the profit, then the court in its discretion may allow him a recompense. <>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/Annots[ 17 0 R 22 0 R 23 0 R 25 0 R 35 0 R 36 0 R 40 0 R 42 0 R] /MediaBox[ 0 0 594.96 842.04] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> endobj xksgD2u$N+xH)%"dU &c~m_WMnny|t80^olIv"+E] mv}f"gv UY Fe_go_eu6[xGLBdUS-?b\4?s=}GO0upAQ![*`E"~ in Aberdeen Railway v. Blaikie, 136 where he said: "And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect. <>/ExtGState<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/Annots[ 17 0 R 22 0 R 23 0 R 25 0 R 35 0 R 36 0 R 40 0 R 42 0 R] /MediaBox[ 0 0 594.96 842.04] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> 2.I or your money backCheck out our premium contract notes! The majority of the House of Lords (Lords Cohen, Guest and Hodson) held that there was a possibility of a conflict of interest, because the solicitor and beneficiary might have come to Boardman for advice as to the purchases of the shares. The proposition of law involved in this case is that no person standing in a fiduciary position, when a demand is made upon him by the person to whom he stands in the fiduciary relationship to account for profits acquired by him by reason of his fiduciary position and by reason of the opportunity and the knowledge, or either, resulting from it, is entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person.: The appellants obtained knowledge by reason of their fiduciary position and they cannot escape liability by saying that they were acting for themselves and not as agents of the trustees. Land law - Introduction to land law with description of its history, Introduction to Sports Massage and Soft Tissue Practices, Legal and Professional Aspects of Optometry (BIOL30231), Access to Health Professionals (4000773X), Business Data Analysis (BSS002-6/Ltn/SEM1), Introductory Chemistry (0FHH0023-0901-2018), Introduction toLegal Theory andJurisprudence, Introduction to English Language (EN1023), Cell Membranes - Lecture notes, lectures 1 - 24. View the institutional accounts that are providing access. <> The proceedings. Grey v Grey (1677) Jamie Glister; 4. endobj Lord Upjohn dissented, and held that Phipps and Boardman should not be liable because a reasonable man would not have thought there was any real sensible possibility of a conflict of interest. For more information, visit http://journals.cambridge.org. The majority unanimously agreed that liability to account for the profits due to a fiduciary relationship is strict; it does not depend on fraud or an absence of bona fides. The majority of the House of Lords (Lords Cohen, Guest and Hodson) held that there was a possibility of a conflict of interest, because the solicitor and beneficiary might have come to Boardman for advice as to the purchases of the shares. His Lordship regarded Boardman to be liable because he acquired the information in the course of the fiduciary relationship and because of the fiduciary relationship. WI[y*UBNJ5U,`5B1F :IK6dtdj::yj Annetts v McCann (1990) 170 CLR 596. <> Click the account icon in the top right to: Oxford Academic is home to a wide variety of products. Mr Boardman (the trust's solicitor) investigated the affairs of the company, initially on behalf of the trust, and gained useful information. endobj able to bring it back to profit, and the trust fund benefited. Boardman had concerns about the state of Lexter & Harris accounts and thought that, in order to protect the trust, a majority shareholding was required. It concludes that the conduct-based approach in Boardman v Phipps should be rejected, and that the unjust enrichment-based approach provided by Warman International Ltd v Dwyer should be Following successful sign in, you will be returned to Oxford Academic. They owed fiduciary duties (to avoid any possibility of a conflict of interest) because they were negotiating over use of the trust's shares. ), Rang & Dale's Pharmacology (Humphrey P. Rang; James M. Ritter; Rod J. The House of Lords maintained the strict rule that historically equity has imposed on a fiduciary. Nicholas Collins, The no-conflict rule: the acceptance of traditional equitable values?, Trusts & Trustees, Volume 14, Issue 4, May 2008, Pages 213224, https://doi.org/10.1093/tandt/ttn009. T he respondent, JP, was a son of the testator and a beneficiary under the . No positive wrongdoing is proved or alleged against the appellants but they cannot escape from the consequences of their acts involving liability to the respondent unless they can prove consent.: p. 112A, I have no hesitation in coming to the conclusion that the appellants hold the Lester & Harris shares as constructive trustees and are bound to account to the respondentIn the present case the knowledge and information obtained by Boardman was obtained in the course of the fiduciary position in which he had placed himself. It is not contended that the trustees had such knowledge or gave such consent. p. 117D G, The relevant rule for the decision of this case is the fundamental rule of equity that a person in a fiduciary capacity must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict.: p. 123C, Whether there is a possibility of conflict depends on whether the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict: p. 124B, Note that in this case, not only did the principals, which are the trust beneficiaries, no lose anything, but they actually profited from the increase in value of shares held under the trust as a result of the actions of defendants thus it can be surmised that regardless of whether any wrongdoing or harm was caused to the principal, the fiduciary is liable for all profits acquired as a result of his position. John Phipps and another beneficiary, sued for their profits, alleging a conflict of interest by Boardman and Phipps. BOARDMAN v PHIPPS. Current issues of the journal are available at http://www.journals.cambridge.org/clj. His daughter, Mrs Newman, was one of the trustees. 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. 7 Boardman v. Phipps [1967] 2 A.C. 46, 124 per Lord Upjohn. A personal account can be used to get email alerts, save searches, purchase content, and activate subscriptions. This article explores how the dissenting judgment of Lord Upjohn in Boardman v Phipps has been preferred by the lower courts and why the courts have adopted such a position. "It is perhaps stated most highly against trustees or directors in the celebrated speech of Lord Cranworth L.C. <>>> %PDF-1.5 This has fuelled a more general debate as to whether the no-conflict rule should be harsh or more flexible. Maguire v Makaronis 1997 infers that anyone under a fiduciary obligation must foreshow righteousness of their transactions. They owed fiduciary duties (to avoid any possibility of a conflict of interest) because they were negotiating over use of the trusts shares. Material Facts Boardman was the solicitor for a family trust. When on the society site, please use the credentials provided by that society. will. "And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect. F5aE}*?fxl1oA+;{ S>"~qOf~AcW|g[ VFaxb'o Tns34}#rPDB Another beneficiary (P) claimed conflict of interest and demanded her share of the profit, because of S fiduciary role. But when, as in this case, the agents acted openly and above board, but mistakenly, then it would be only just that they should be allowed remuneration. BOARDMAN and Another v. PHIPPS Viscount Dilhorne Lord Cohen Lord Hodson Lord Guest Lord Upjohn. His A fiduciary shall not profit from his position, Appeal dismissed; the defendants were liable to account for the shares and profits to the trust beneficiaries, but the liberal allowance was maintained, A fiduciary agent has to account to for any profits acquired by reason of the his fiduciary position and the opportunity or knowledge resulting from it, even if the principals could not have made the profits themselves with such opportunity or knowledge, unless the principal has given his informed consent, The profits will be held on constructive trust for the principal by the fiduciary agent, but the board may make allowance to the fiduciary agent for expenditure and work expended to acquire the profit, The defendants, Boardman and another, were acting as solicitors to the trustees of a will trust, and therefore were fiduciaries but not trustees, The trustees were minority shareholders in a private company which was being inefficiently managed, Boardman and one of the beneficiaries under the trust, in good faith, personally financed the purchase of a controlling interest in the company, in order to reorganise it to the benefit of the trust holding, Both the personal and trust holdings increased in value as a result of the reorganisation; one of the other beneficiaries therefore sought an account of the personal profits made by the defendants, Wilberforce J, in the High Court, held that the defendants were liable to account for the profit less the money spent on realising that profit; but at the same time made a liberal allowance for the work put in to realise that profit, The defendants appealed to the Court of Appeal, who dismissed their appeal; they subsequently appealed to the House of Lords.