Boardman v Phipps [1966]

Boardman v Phipps [1966] UKHL 2 stands as a landmark decision in English trusts law, specifically addressing the duty of loyalty and the obligation to avoid conflicts of interest within a trustee-beneficiary relationship.

Mr Tom Boardman, serving as the solicitor for a family trust, found himself at the centre of a dispute regarding the trust's assets, which included a significant holding in a company. Boardman, concerned about the company's accounts, believed that acquiring a majority shareholding was necessary to protect the trust's interests. Collaborating with a beneficiary, Tom Phipps, they attended a shareholders' meeting where they realised the potential to turn the company around. Despite a trustee expressing that acquiring a majority shareholding was out of the question, Boardman and Phipps, with the knowledge of the trustees, decided to purchase the shares themselves. Subsequently, the company made a distribution of capital, benefiting the trust and yielding substantial profits for Boardman and Phipps.

In the High Court, Wilberforce J held Boardman liable for breaching the duty of loyalty by not accounting for the money obtained. However, Boardman was allowed remuneration for his services. The Court of Appeal upheld this decision, asserting that Boardman and Phipps had breached their duty of loyalty by placing themselves in a conflict of interest but could retain generous remuneration for their services.

In the House of Lords, the majority, comprising Lords Cohen, Guest, and Hodson, found a potential conflict of interest due to Boardman's dual roles as a solicitor and beneficiary. They held that Boardman and Phipps owed fiduciary duties in negotiating the trust's shares, and thus, were liable to account for the profits. While emphasising the strict nature of liability for profits in fiduciary relationships, they acknowledged the right to generous remuneration for services rendered.

However, Lord Upjohn dissented, contending that a reasonable person would not have perceived a real sensible possibility of a conflict of interest. He distinguished Regal (Hastings) v Gulliver [1942] and argued that knowledge acquired by a trustee in the course of duties is not the property of the trust unless it is confidential information.

In conclusion, this case remains a pivotal case, shaping the understanding of fiduciary duties, conflicts of interest, and the strict liability associated with profiting from fiduciary relationships in English trusts law.
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