Boardman v Phipps [1967] 2 AC 46

A family trust held a substantial minority shareholding in a company. Boardman, solicitor to the trustees, and Tom Phipps, a beneficiary acting with him, investigated the company's affairs and considered that its performance could be improved. They acquired additional shares personally, using an opportunity and information obtained through their involvement with the trust. Their work increased the value of both their own shares and the trust's holding. They acted honestly, but had not obtained the necessary fully informed consent. Another beneficiary, John Phipps, claimed an account of the profits attributable to his interest in the trust.

Were fiduciaries accountable for profits from an opportunity connected with their position despite their honesty, the trust's benefit and its inability to pursue the purchase itself?

A majority of the House of Lords upheld liability to account. Boardman and Tom Phipps had acted in a fiduciary capacity in the relevant dealings and obtained their opportunity through that position. Their honesty and the benefit conferred on the trust did not remove the need for properly informed consent. Nor was it decisive that the trustees would not themselves have made the investment. The shares and profits were subject to equitable obligations, but the defendants could receive an allowance for their work and skill in producing the gain. The dissenting speeches questioned whether the necessary conflict existed. The majority did not find fraud; it applied the strict rules governing unauthorised fiduciary profit.

A fiduciary may have to account for an unauthorised profit obtained through their position even when acting honestly and benefiting the principal. Fully informed consent can authorise conduct otherwise prohibited. An equitable allowance for skill and effort is distinct from denying liability.

Boardman shows why fiduciary liability differs from compensation for loss: the claimant need not prove that the venture impoverished the trust. The court polices loyalty and unauthorised gain, while an allowance can recognise valuable work. Read it with Keech v Sandford and FHR European Ventures. The difference between the majority and dissent also helps identify the contested question: whether the relationship and opportunity engaged the strict fiduciary rule, rather than whether the defendants had behaved dishonestly.