With the full knowledge of the trustees boardman and

- With the full knowledge of the trustees, Boardman
and Phipps purchased a majority stake of the shares
themselves. Boardman and Phipps did not obtain the
fully informed consent of all the beneficiaries.
- The company made a distribution of capital without
reducing the values of the shares. The trust benefited
by this distribution £47,000, while Boardman and
Phipps made £75,000.
- John Phipps and another beneficiary, sued for their
profits, alleging a conflict of interest by Boardman and
Phipps.
- The issue was whether Boardman and Tom Phipps
breached their duty to avoid a conflict of interest, even
though the company had made a profit and they had
obtained (some) consent from the beneficiaries?

- It was held that Boardman and Tom Phipps had
breached their duties to avoid a conflict of interest.
Lords Cohen, Guest and Hodson held that there was a
possibility of a conflict of interest because the
beneficiaries might have come to Boardman for advice
as to the purchases of the shares. They owed fiduciary
duties (to avoid any possibility of a conflict of interest)
because they were negotiating over use of the trust’s
shares. Boardman was speculating with trust property
and should be liable.
- The majority unanimously agreed that liability to
account for the profits due to a fiduciary relationship is
strict; it does not depend on fraud or an absence of
bona fides.
- Boardman and Phipps would have to account for
their profits, despite the fact they had best intentions
and made the Lexter & Harris a profit.
Chan v Zacharia
- The words of Deane J connote a wider application;
‘stated comprehensively in terms of liability to
account, the principle of equity is that a person who is
under a fiduciary obligation must account to the person
to whom the obligation is owed for any benefit or gain;
(i) which has been obtained or received in
circumstances where a conflict or significant
possibility of conflict existed between his fiduciary
duty and his personal interest in the pursuit of possible
receipt of such a benefit or gain, or (ii) which was
obtained or received by use or by reason of his
fiduciary position or of opportunity or knowledge
resulting from it.
Soulos v Korkontzilas
- McLachlin J stated the constructive trust imposed for
breach of fiduciary relationship thus serves not only to
do the justice between the parties that good conscience
requires, but to hold fiduciaries and people in the
positions of trust to the high standards of trust and
probity that commercial and other social institutions
require if they are to function effectively.
=) Bribes
- Decision of Privy Council in AG of Hong Kong v
Reid is an authority for the following proposition: a
constructive trust may be imposed on a trustee who has
received bribes. In Lister & Co v Stubbs the English
Court of Appeal had adopted the position that a
fiduciary who had received a bribe was bound to pay it
over to his principal, but he was not subject to a
constructive trust.