Boardman v Phipps [1967] 2 AC 46

Tom Boardman was a solicitor for a family trust.
The trust assets include a 27% holding in a textile company called Lexter & Harris.
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 and Tom Phipps, a beneficiary of the trust, attended a general meeting of the company.
They suggested to Mr Fox, a trustee, that it would be desirable to acquire a majority shareholding, but Fox disagreed.
With the full knowledge of the trustees, Boardman and Phipps purchased a majority stake of the shares themselves.
Boardman and Phipps did not obtain the fully informed consent of all the beneficiaries.
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.
John Phipps and another beneficiary, sued for their profits, alleging a conflict of interest by Boardman and Phipps.

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?

Boardman and Tom Phipps had breached their duties to avoid a conflict of interest.
Lords Cohen, Guest and Hodson held that there was a possibility of a conflict of interest because the beneficiaries might have come to Boardman for advice as to the purchases of the shares. They owed fiduciary duties (to avoid any possibility of a conflict of interest) because they were negotiating over use of the trust’s shares.
Boardman was speculating with trust property and should be liable.
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.
Boardman and Phipps would have to account for their profits, despite the fact they had best intentions and made the Lexter & Harris a profit.

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