Trust Law

Constructive Trust CasesDuties and Powers of Trustees Cases

Boardman v Phipps [1967] 2 AC 46

Key Points

• 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

Facts

• 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