## Facts

- The case arose from a family trust created by the will of William Phipps, managed by his widow and two sons, including Tom Phipps.
- The trust held significant shares in Lester and Harris Ltd, a poorly performing textile company.
- The trustees chose not to act to improve the company's financial state.
- Boardman, the family solicitor, and Tom Phipps investigated the company, used information obtained as fiduciaries, and acquired additional shares, resulting in the company being restructured and increased profitability.
- Their actions increased the value of the trust’s shares, but they also made personal profits.
- Other trust beneficiaries argued that Boardman and Tom had breached their fiduciary duties by personally benefiting from information obtained through their fiduciary roles.

## Issues

1. Whether Boardman and Tom Phipps, as fiduciaries, were liable to account for profits made through acquiring additional shares in Lester and Harris Ltd.
2. Whether the no-profit rule applied despite the trust benefitting and absence of a direct loss.
3. Whether beneficiaries’ consent or approval could absolve fiduciaries from liability.
4. Whether good faith and benefit to the trust mitigate the strictness of the fiduciary duty.

## Decision

- The House of Lords held that Boardman and Tom Phipps breached their fiduciary duties by making profits arising from their fiduciary positions.
- It was found immaterial that the trust had benefited or that the fiduciaries acted in good faith.
- The court determined both had used confidential information and opportunities arising from their fiduciary capacities for personal profit.
- A constructive trust was imposed on the profits made, requiring Boardman and Tom Phipps to account to the trust.
- The no-profit rule was reaffirmed as absolute, regardless of principal loss or good faith.

## Legal Principles

- Fiduciaries are bound by a strict duty of loyalty and must avoid conflicts of interest or situations where duty and personal interest may conflict.
- The no-profit rule strictly prevents fiduciaries from profiting due to their role or information derived from it.
- Constructive trusts are available as an equitable remedy for profits gained in breach of fiduciary duty, ensuring any unjust enrichment is returned to the trust.
- The principle is applied even where the principal or trust benefits and the fiduciary acts in good faith; mitigation by good faith is not permitted.

## Conclusion

Boardman v Phipps [1967] 2 AC 46 (HL) is a foundational case on fiduciary obligations, firmly establishing the strictness of the no-profit rule and the requirement for fiduciaries to account for profits made by reason of their position, irrespective of good faith or benefit to the trust.