Phipps v Boardman

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeViscount Dilhorne,Lord Cohen,Lord Hodson,Lord Guest,Lord Upjohn
Judgment Date03 November 1966
Judgment citation (vLex)[1966] UKHL J1103-1
Date03 November 1966

[1966] UKHL J1103-1

House of Lords

Viscount Dilhorne

Lord Cohen

Lord Hodson

Lord Guest

Lord Upjohn

Boardman and Another

Upon Report from the Appellate Committee, to whom was referred the Cause Boardman and another against Phipps, that the Committee had heard Counsel, as well on Wednesday the 2d, Thursday the 3d and Monday the 7th, days of March last, as on Monday the 25th and Tuesday the 26th days of April last, as on Tuesday the 7th, Wednesday the 8th, Thursday the 9th and Monday the 13th, days of June last, upon the Petition and Appeal of Thomas Gray Boardman, of The Manor House, Welford, in the County of Northampton and Thomas Edward Phipps, of Farndish Manor, Farndish, near Wellingborough, in the County of Northampton, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 26th of January 1965, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Order might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of John Anthony Phipps lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 26th day of January 1965, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondent the Costs incurred by him in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Viscount Dilhorne

My Lords,


On the 1st March, 1962, the Respondent John Anthony Phipps commenced an action against his younger brother, Thomas Edward Phipps and Mr. T. G. Boardman, a solicitor and partner in the firm of Messrs. Phipps & Troup. In that action he claimed a declaration that they held shares in a private company called Lester & Harris, Ltd. as constructive trustees for him, an account of the profits made by them and transfer to him of the shares held by them as constructive trustees for him and 5/18ths of the profits made by them.


The action was tried by Wilberforce, J., as he then was. He gave judgment for the Plaintiff. The Defendants appealed to the Court of Appeal (Lord Denning, M.R., Pearson and Russell, L.JJs). The appeal was dismissed and they now appeal to this House.


The estate of Mr. C. W. Phipps, the father of the Appellant Phipps and the Respondent, included 8,000 shares in Lester & Harris, Ltd. which was engaged in the textile business. Its issued capital was 30,000 £1 Ordinary shares. Mr. Phipps' estate also included a substantial holding in a family company, Phipps & Son, Ltd., also engaged in the textile business. The Appellant Phipps was Chairman of this company and Mr. Boardman was one of its directors.


By his Will dated the 23rd December, 1943, Mr. C. W. Phipps left an annuity to his widow and subject thereto 5/18ths of his estate to each of his sons and 3 /18ths to his daughter, Mrs. Noble. In the event of a son not surviving him, that son's 5/18ths was to go to the son's family. His eldest son did not survive him and so one 5/18ths went to his family.


At all relevant times until her death in November, 1958, Mr. C. W. Phipps' widow, Mrs. Ethel Phipps, was a trustee of his Will. She was, when the events which gave rise to this case occurred, over 80 years of age and suffering from senility. Consequently she did not take an active part in the affairs of the trust. The other trustees were Mrs. Noble and a Mr. Fox, an accountant.


In December, 1955, Mr. Boardman, who acted as solicitor to the trust and for several members of the Phipps family, received a letter asking whether the trustees were prepared to sell their holding in Lester & Harris, Ltd. He consulted Mr. Fox on this and as there had been some trade connection between Lester & Harris, Ltd. and Phipps & Son, Ltd., Mr. T. E. Phipps, the Appellant, was also consulted for it was thought that what was done with these shares might affect the Phipps' interests in Phipps & Son, Ltd.


Mr. Fox and Mr. Boardman looked at the accounts of Lester & Harris, Ltd. According to Mr. Boardman they showed that that company was going through a lean time and it was apparently decided to consider the Lester & Harris holding again when the accounts for the current year were published with a view to seeing whether anything could be done to improve the value of the trust's holding.


In his reply to the enquiry he had received, Mr. Boardman wrote on the 13th January, 1956, that he did not imagine that his clients would be prepared to sell except at a price approaching the asset value of the shares which he estimated at £10 a share on the basis of the 1954 Balance Sheet and that his clients were far from satisfied with the return that the shares had yielded during recent years.


On the 17th December, 1956, Mr. Boardman wrote to Mrs. Noble telling her that Mr. Fox had just received the accounts of Lester & Harris, Ltd., that they were very unsatisfactory and that "we all feel that something should be done to improve the position". He said that the Appellant Phipps had suggested that he and Boardman should attend the annual general meeting of Lester & Harris, Ltd., on the 28th December and he enclosed proxy forms to be signed by Mrs. Noble and her mother.


The Appellants attended the annual general meeting on the 28th December, 1956, representing the trust holding. Mr. Boardman expressed their dissatisfaction with the position of the company and sought without success to get Mr. Phipps elected a director. He also asked a number of questions. In his evidence at the trial he said that they got no information which was not in the published accounts. The Appellants thought that the attitude of the board of Lester & Harris, Ltd. was hostile.


On their return to Northampton they reported what had happened to Mr. Fox. In the course of their discussion Mr. Boardman suggested that the only way in which the matter could be resolved would be by the purchase of a controlling interest in Lester & Harris, Ltd. Mr. Boardman in his evidence said that Mr. Fox's reaction was to say that "he did not consider that a take-over bid for shares in a private company was something that he as a trustee or the trust should take any part in". Mr. Fox when giving evidence was asked:�

"Was there ever any question, so far as you were concerned, of the Trustees buying all the outstanding shares?"


His answer was: �

"I would not consider the Trustees buying those shares under any circumstances."


He was then asked: "Did you consider the matter and reject it?" to which his reply was: "I considered the matter and rejected it."


When Mr. Fox made it clear that he was against the trustees buying the shares, Mr. Boardman suggested that the Appellant Phipps should try to buy them. Phipps refused to do so unless Boardman agreed to come in with him and Boardman agreed to do so. In cross-examination Mr. Fox was asked:

"When Mr. Boardman and Mr. Phipps decided to make an offer for the shares themselves, did they ask your consent on behalf of the Trust or anything like that?"


His answer was:

"I do not know that they asked my consent. I was only too glad. Here was I holding 8,000 shares a minority interest in a company where the directors were unfriendly, and, having had experience in other cases of the weakness of the Companies Act with regard to minority shareholders, as soon as I could see the prospect of getting friendly directors and friendly shareholders I was only too glad."


Later, as will be seen, Mr. Boardman entered into an agreement under which the Appellants purchased 14,567 shares in Lester & Harris, Ltd., and Mr. Fox was asked the following question:

"What would your reaction have been if Mr. Boardman and Mr. Phipps, having concluded an agreement, had come to you and said "We have agreed to buy the whole of the issued capital of these shares, and of course we were doing that as agents for the Trustees with whom you must now complete the agreement"".


His answer was:

"They were not doing it for the trustees; that was the whole point."


After the meeting at the end of 1956 Mr. Boardman wrote, on the 11th January, 1957, to Mr. Fox telling him that the Appellants' efforts to buy the shares privately had failed and that they proposed to make an offer to buy the shares personally by circular. He pointed out that this would not involve the trustees who would share in any advantage gained and he asked Mr. Fox to confirm that the circular was in order and that it was in order "with regard to Mr. Phipps and my position vis-a-vis the trust".


Mr. Fox raised no objection to this, but suggested that Mr. Boardman should write to Mrs. Noble and tell her what was proposed. Mr. Boardman did so on the 17th January, 1957, and in his letter, said:

"We" (i.e. the Appellants) "both feel that the only real hope of getting the true value of the shares is by acquiring a controlling holding so that a large part of the assets can be liquidated and only those parts of the business retained that are profitable. By so doing we should be able to put up the value of the shares and get some cash out. This involves making an offer for all the remaining shares and hoping that we will get sufficient acceptances to get control. The making of an offer in this form is not a matter which Trustees should properly do and Tom and I have, therefore, agreed to make an offer personally....

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