Boardman v Phipps [1967] 2 AC 46 (HL)

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.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal