boardman v phipps criticism boardman v phipps criticism

Tom Boardman was a solicitor for a family trust. The trustees were informed of these intentions. 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. Annetts v McCann (1990) 170 CLR 596. Boardman was concerned about the accounts of the company, and thought that to protect the trust a majority shareholding is required. He also obtained detailed trading accounts of the English and Australian arms of the business. However, to do this he needed a majority shareholding in the company. 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. If you cannot sign in, please contact your librarian. The articles and case notes are designed to have the widest appeal to those interested in the law - whether as practitioners, students, teachers, judges or administrators - and to provide an opportunity for them to keep abreast of new ideas and the progress of legal reform. The trust property included a substantial shareholding in a private company. 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. 2 0 obj The trust assets include a 27% holding in a textile company called Lexter & Harris. The trust benefited by this distribution 47,000, while Boardman and Phipps made 75,000. % A personal account can be used to get email alerts, save searches, purchase content, and activate subscriptions. principal shareholder group, Boardman obtained information about the factories of Lester & Harris in Coventry and Nuneaton and its property in Australia. This decision was followed and applied in Boardman v Phipps. He and a beneficiary, Tom Phipps, went to a shareholders' general meeting of the company. His lordship, with respect . House of Lords. 1 0 obj 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. However, the circumstances were quite different to those in Boardman v Phipps. 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. Coke v Fountaine (1676) Mike Macnair; 3. Therefore the agent must account to the trust for any profit made out of the position. They owed fiduciary duties (to avoid any possibility of a conflict of interest) because they were negotiating over use of the trust's shares. 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. 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. Throughout this phase Proprietary relief in Boardman v Phipps 6 [1967] 2 AC 46 (HL) 73. Oxbridge Notes is operated by Kinsella Digital Services UG. 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. All rights reserved. Sealy, Commercial Law and Commercial Reality (London 1984), pp. If the defendant has done valuable work in making the profit, then the court in its discretion may allow him a recompense. 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. John Phipps and another beneficiary, sued for their profits, alleging a conflict of interest by Boardman and Phipps. The trust benefited by this distribution 47,000, while Boardman and Phipps made 75,000. For more information, visit http://journals.cambridge.org. Become Premium to read the whole document. 31334. This article is also available for rental through DeepDyve. xksgD2u$N+xH)%"dU &c~m_WMnny|t80^olIv"+E] mv}f"gv UY Fe_go_eu6[xGLBdUS-?b\4?s=}GO0upAQ![*`E"~ If the agent has been guilty of any dishonesty or bad faith, or surreptitious dealing, he might not be allowed any remuneration or reward. Following successful sign in, you will be returned to Oxford Academic. CASE BRIEF TEMPLATE. 1 0 obj Choose this option to get remote access when outside your institution. T he respondent, JP, was a son of the testator and a beneficiary under the . 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. 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. <> 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. 4 0 obj The gist of it is that the defendant has unjustly enriched himself, and it is against conscience that he should be allowed to keep the money. my lords. Is it a conflict? 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. The case for tracing forward not backward through an overdraft. His liability to account depends on the facts. . The Cambridge Law Journal 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. If your institution is not listed or you cannot sign in to your institutions website, please contact your librarian or administrator. Oxbridge Notes in-house law team. Don't already have a personal account? The Appellant Phipps was Chairman of this company and Mr. Boardman was one of its directors. 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. 39^40. 2010-2023 Oxbridge Notes. It publishes over 2,500 books a year for distribution in more than 200 countries. 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. The trust benefited by this distribution 47,000, while Boardman and Phipps made 75,000. Boardman v Phipps answers this question: in the affirmative. 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. 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. 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. endobj WI[y*UBNJ5U,`5B1F :IK6dtdj::yj P0Y|',Em#tvx(7&B%@m*k 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. ", The phrase "possibly may conflict" requires consideration. Do not use an Oxford Academic personal account. Such persons will, however, be entitled to payment on a liberal scale for their work and skill. 3 0 obj For terms and use, please refer to our Terms and Conditions This is a famous case in which John Phipps successfully claimed that, flowing fro. law since Boardman v Phipps. Boardman and Tom Phipps had breached their duties to avoid a conflict of interest. Lord Cohen said the information is not truly property and it does not necessarily follow that, because an agent acquired information and opportunity while acting in a fiduciary capacity, he is accountable. Many of these journals are the leading academic publications in their fields and together they form one of the most valuable and comprehensive bodies of research available today. The direct tyranny will come on by and by, after it shall have gratified the multitude with the spoil and ruin of the old institutions of the land.Samuel Taylor Coleridge (17721834), From scenes like these old Scotias grandeur springs,That makes her loved at home, revered abroad;Princes and lords are but the breath of kings,An honest mans the noblest work of God!Robert Burns (17591796), "It is perhaps stated most highly against trustees or directors in the celebrated speech of Lord Cranworth L.C.