Critical Evaluation Of McPhail V Doulton And Boardman V Phipps Speeches

You are to critically evaluate the speeches from both of the following cases:

McPhail v Doulton [1971] A.C. 424 (speech of Lord Wilberforce only)

and

Boardman v Phipps [1967] 2 A.C. 46 (Speeches of Lord Cohen and Lord Upjohn only) 

To what extent have these speeches clarified the relevant law?

Overview of McPhail v Doulton Case

Parties to the court-

McPhail v Doulton (1971) AC 424

Facts of the case-

In the case McPhail v Doulton (1971) AC 424, the dispute was related to the construction deed. The deed was about transfer of the trustee shares in the organisation. McPhail transferred the trustee shares in Matthew Hall & Co Ltd. The intention of this transfer was to establish the fund for staff benefit, benefits of relatives and benefits of dependants. When McPhail died, the executers of the trust claimed that deed was not valid. As per the clause 9(a) of the trust deed, trustees are required to relate the net income of the fund to the making in their complete discretion or for employee’s benefit, officer’s benefit or benefit of ex-employee or benefit of ex-officers or the benefit of relatives or dependents. The case was sent to the Chancery Division for the reconsideration on the question of the powers as per the clause.

Speech of Lord Wilberforce-

The judgement given by the Lord Wilberforce is the formative of the matter. The Wilberforce said that the purpose of the deed is clear. The language of the clause 9(a) is compulsory. The Clause 9(a) makes a trust for the purpose of the income distribution together with the selection power. The strictness of the clause 9(a) is the practised by clause 9(b). The clause 9(b) permits to detain the income of any one year with the bank or the financial institutions for the particular period of time or permit to invest if it seems appropriate. It was said by the Lord Wilberforce that the clause 9(a) created a trust. It does not create the powers.The case would be referred to the Chancery Division for the reconsideration. The case was remitted to know the validity of the clause 9(a). But the problem is that in respect of validity, the question arises that all possible beneficiaries are covered by the complete test list. This follows from the decision made in case Inland Revenue Commissioners v Broadway Cottage Trust [1955] Ch. 20. The court of Chancery will be bound if it is not decided by the house.

The second issue arises that the clause 9(a) creates the trust not the powers. Whether this validity test is correct as per the law. If existing validity test is not correct then what the test should be applied. Lord Wilberforce said that trust would be valid if the question arises whether he was or was not within the class of matters specified outlined by the words of settler. Before the decision given, the test of is or is not was considered as right test for the validity of the powers to make an appointment but not for the discretionary trusts for which complete test was test for the certain matters. In the related case of Gulbenkian’s settlement [1970] A. C. 508 the judges were of the view that when the valid gift over the defaulted appointment, the power to make an appointment among the classes is valid if the individual is not a member of a class and power did not flop to determine the member of class. As per the opinion of Lord Wilberforce ordinary power is different from a trust.

Analysis of Lord Wilberforce's Judgement in McPhail v Doulton Case

Lord Wilberforce said that it has been concluded that the major difference between the tests to validate the powers and the trust power is unsuccessful and not correct. The rule fastened upon the court by Inland Revenue Commissioners v Broadway Cottage Trust should be discarded. The test to validate the powers should be same to acknowledge by this house in In re Gulbenkian’s settlements [1970] A.C. 508 for the powers such as the trust is not void if the individual is a member of the class.

Review of the judgement of Lord Wilberforce-

It has been reviewed that the judgement was eventually not helpful. The differences between compulsory trust and the powers is a distinction which is of little useful assistance. It has been overviewed that the trustees are required to perform fiduciary duty. The procedure to determine members of class should be one which is confined to the limitations of the common sense. It is important to notice that when the case was referred to the high court, the continued unanimity that trust deed was valid but the certainty of matters argue continued to rage.

Parties to the court-

Boardman v Phipps [1967] 2 A.C. 46

Facts of the case-

In the case Boardman v Phipps [1967] 2 A.C. 46, Boardman was a solicitor of the plaintiff who was the trustee of the will of Phipps. The plaintiff had the shares in the L & H Company. Boardman and Tom Phipps gained vision into the financials of L& H and determined to acquire the remaining shares after attending the general meeting of the company. The preliminary offer of purchase was not fully successful. Later, the offer made by Boardman along with Tom Phipps to purchase the share’s division but this offer was also not accepted. Further for the remaining shares Boardman and Tom Phipps had offered to purchase these shares with the consent of the plaintiff. When the offer accepted, Boardman and Phipps liquidated the company after attaining the controlling interest. They got capital dividends. It means they got benefits. The plaintiff filed the case against Boardman. The plaintiff claimed that Boardman as constructive trustees gained profit on return of the capital of shares in L & H company. Boardman had acted that the data and information used due to agency relationship with the trust.

Speech of Lord Cohen-

Lord Cohen said that there were chances of the conflict of interest because the beneficiary and the solicitor may come to the Boardman for the suggestion in respect of the purchase of the shares. Boardman and beneficiary owed the fiduciary duty because the negotiation was made over the shares of the trust. Lord Cohen disagreed about the nature and significance of the data and information used by the Boardman and Tom Phipps. It has been said by Lord Cohen that the data and information are not considered as property because when an agent in the fiduciary capacity attained the details and chance, agent will be responsible. The responsibilities will be depend upon the actions and facts. As per the opinion of Lord Cohen Boardman was liable because the information and data are attained in the fiduciary capacity. The other judges Lord Hodson and Lord Guest also agreed with the opinion of the Lord Cohen.

Reviewing Lord Wilberforce's Judgement in McPhail v Doulton Case

Speech of Lord Upjohn-

Lord Upjohn disagreed with the opinion of the Lord Cohen, Lord Hodson and Lord Guest. Lord Upjohn said that a practical man would not think about the actual reasonable possibility of conflict of the interest so Boardman and Tom Phipps should not held liable on the basis of fiduciary relationship. Lord Upjohn said that there is no chance that trustee would take advice from the Boardman to acquire the shares. Lord Upjohn said that the saying “possibly may conflict” requires consideration. The practical man who considers the circumstances and the significant facts of the related case would think that there were reasonable chances of the disagreement.

In this case, Lord Upjohn defined the basic rule of equity that a sensible man is not required to make profit from the trust in the fiduciary capacity. The practical man is also not required to hold the position where there are chances of conflict of interest and duties.

Lord Upjohn agreed with Lord Cohen that data and information are not considered property at all, though equity will contain its transmission if it has purchased by break the assurance. It has been said by him that in respect of the duties knowledge learnt by the trustee is not considered as property of the trust. The knowledge and information can be used in for the personal benefit. But this knowledge and information cannot be used in the circumstances, despite of the position of the trustee, which break the confidence to communicate the information and data to someone. The information and knowledge also cannot share if it is obtained in the fiduciary capacity.

Review of the judgement of Lord Cohen and Lord Upjohn-

In respect of the fiduciary relationship, the main concern of law is the appropriate exercise of the judgement or the discretion. In the given case, the issue was about the liability of the solicitor in respect of his personal benefit. The solicitor used the information for own benefit. It breached the fiduciary obligation. The all trustees did not give their consent to make profits. There was no dissenting opinion. Lord Hodson and Lord Guest were agreed with the opinion of the Lord Cohen in respect of the liability of Boardman in the fiduciary capacity. Further Lord Upjohn gave his opinion. Lord Upjohn disagreed with the Lord Cohen by saying that the sensible man does not think about the conflict of the interest. But Lord Upjohn was agreed with the Lord Cohen that information is not considered as the property.

Word Count: 1500 words

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Moffat, G, ‘McPhail v Doulton (1971) AC 424’ (2017) <https://www.lawteacher.net/free-law-essays/equity-law/mcphail-v-doulton-1971.php> accessed on 8 June 2018