Fiduciary Conduct - A Tailored Application Lord Upjohn's Dissent in Boardman v Phipps [1967] 2 AC 46
| Author | Tara Dugdale |
| Pages | 155-178 |
9 Fiduciary Conduct – A Tailored Application
Lord Upjohn’s Dissent in Boardman v Phipps [1967] 2 AC 46
10 The Banker’s Perspective
Lord Millett’s Dissent in Twinsectra Ltd v Yardley
[2002] UKHL 12, [2002] 2 AC 164
11 Discounting Fiscal Privilege – A More Charitable Solution to the
Public Benefit Question
Lord MacDermott’s Dissent in Oppenheim v Tobacco Securities
Trust Co Ltd [1951] AC 297
12 Taking a Witch’s Brew and Making a Consommé
Lord Neuberger’s Dissent in Stack v Dowden [2007] UKHL 17,
[2007] 2 AC 432
Lord Upjohn’s Dissent in
Boardman v Phipps [1967] 2 AC 46Tara Dugdale9.1 Background 157
9.2 Uncontested facts 159
9.3 Decision of the majority 160
9.4 Lord Upjohn’s dissent 164
9.5 Applying the rule post-Boardman 169
9.6 Approach of foreign jurisdictions 173
9.7 Conclusion 176
A trustee is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of an honour, the most sensitive, is then the standard of behaviour ... the level of conduct for fiduciaries has been kept at a level higher than that trodden by the crowd.
9.1 BACKGROUND
The authority from which the extract is taken concerned two New York businessmen who were involved in a joint venture the subject-matter of which was a 20-year lease of a hotel in Manhattan. When the lease was coming up for renewal a third party approached one of the businessmen about entering into a new lease. He took up this opportunity without disclosing it to his business
158 Part III – Equity and Property Law
partner and was thus in breach of his fiduciary duty to disclose corporate opportunities.
Throughout the common law, persons acting in a fiduciary capacity
a fiduciary must not make a profit from his position [without express authority] and ‘a fiduciary must not put himself in a position where his interest conflicts with his duty’.
This chapter makes reference to the ‘rules’; however, there are conflicting arguments as to whether and to what extent the no conflict and the no profit rules are distinct, or whether the no profit rule is a natural corollary of the no conflict rule.
acted honestly and in his principal’s best interests, even though his principal benefited as well as he from his conduct, even though his principal could not otherwise have obtained the benefit, and even though the benefit was obtained through the use of the fiduciary’s own assets and in consequence of his personal skill and judgement.
Whilst the rules themselves are justified, the application and enforcement of the rules in English courts can in some cases be too strict. Pursuant to the traditional application of the rules, the courts are ‘not concerned with investigating the circumstances surrounding the breach because the [fiduciaries’] liability does
Society v Mothew [1998] Ch 1 at 18, per Lord Millet.
Review 474.
not depend upon the equity of the case but arises ab initio’.
submitted that it is the spirit of the rules which must be adhered to; the rules should be used as guidance for those acting in a fiduciary capacity, but a mechanical application should not triumph over a common sense application.
The case of Boardman v Phipps
9.2 UNCONTESTED FACTS
Mr Boardman was a solicitor for a family trust. He has been described as a ‘trustee de son tort’
World’, (1994) 110 Law Quarterly Review 238, at p 245; citing Manchester Trust v Furness [1895] 2 QB 539 at 545, CA.
160 Part III – Equity and Property Law
wife. The latter was senile. The beneficiaries of the trust were the testator’s daughter, wife and two sons: Tom Phipps and John Phipps. The main asset of the trust was a 26.6% shareholding in a company which was in financial difficulty. On behalf of the trust, Mr Boardman and Tom Phipps attended the company’s annual general meeting and during this meeting they spotted an opportunity to take over the company. During the trial at first instance, Mr Fox gave evidence that there was no power in the trust instrument to allow for the purchase of more shares in the company, and in any event no court would have sanctioned the buying of more shares due to the economic state of the company. Furthermore, there was no money in the trust to purchase more shares and, lastly, there was no willingness among the trustees to do so.
9.3 DECISION OF THE MAJORITY
Lord Guest, while reaching the same conclusion as Lord Cohen and Lord Hodson in imposing liability upon Mr Boardman and Tom Phipps, did so by a different avenue. His Lordship placed much significance upon the mere fact that a profit was made, stating that:
the law has a strict regard for principle in ensuring that a person in a fiduciary capacity is not allowed to benefit from any transactions into which they have entered with trust property.
His Lordship did not conduct an analysis of the facts to ascertain whether or not a conflict of interest arose, rather he held that ‘the only defence available to a person in such a fiduciary position is that he made the profits with the knowledge and assent of the trustees’.
liability upon them, ‘a profit was made and they are accountable accordingly’.
Lord Guest, therefore, was of the view that liability is strictly imposed simply for making a profit. The correctness of this position...
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