UK: Trustees And Conflicts Of Interest – Sidestepping The Rule Against Self-Dealing

It is a basic principle of trust law that trustees may not put themselves into a position where their personal interests conflict with their duties as trustee.   If a trustee has a personal interest in a transaction relating to the trust then he or she may be committing a breach of trust.  This is called the rule against self-dealing.   Such transactions may be undone by the Court (and the trustee pay the costs of any proceedings). But does the rule apply where the conflict of interest arises after the person became a trustee?  The case of Newman v Clarke provides clarification.

What is the rule against self-dealing?

A long line of court decisions have held that a trustee, as with other types of fiduciary, must not place him or her self in a position where their personal interests conflict, or may potentially conflict, with their duties as trustee.   It is also clear that a trustee must not derive any personal advantage from the administration of the trust unless expressly authorised to do so.

The rule was applied strictly in the leading case of Boardman v Phipps where a trustee used knowledge he had acquired as trustee to make a commercial gain for himself without informing the beneficiaries.   The trustee was made to repay to the beneficiaries much of the value of the gain he made.

In Newman v Clarke, the trustee, Mr Clarke, sought to purchase the freehold of a property owned by the trust.   One of his co-trustees, Mrs Newman, who also happened to be his daughter, took action against him.   However, the circumstances were quite different to those in Boardman v Phipps.

The proceedings

In 1996 Mr Clarke settled £150,000 on trust to benefit various family members including his grandchildren, Brooke and Billy.   His daughter, Mrs Newman, was one of the trustees.

In April 1997, Mrs Newman and her husband granted a lease of 1 Vicarage Drive, Beckenham, Kent to Mr Clarke.   Subject to certain conditions in the Leasehold Reform Act 1967 being met, that lease entitled Mr Clarke to purchase the freehold interest in the property.

In June 1997, Mr and Mrs Newman sold their interest in the freehold of 1 Vicarage Drive to the trustees of Mr Clarke's 1996 settlement.  Less than a week later Mr Clarke was appointed as a trustee of the 1996 settlement.

In March 2015, Mr Clarke served a notice under the Leasehold Reform Act 1967 purporting to exercise his right to acquire the freehold interest in 1 Vicarage Drive from the trustees (of which he was one).

Mrs Newman, as trustee, together with Brooke and Billy as beneficiaries, brought proceedings in the High Court against Mr Clarke on the basis that Mr Clarke was breaching his duties as trustee.

What did Mrs Newman and the beneficiaries want?

The claimants relied on the principle that trustees, as fiduciaries, must avoid conflicts of interest.  They relied in particular on the rule against self-dealing.  They argued that Mr Clarke fell foul of the rule against self-dealing because he sought to acquire the freehold interest in the property in his personal capacity as tenant from himself in his capacity as a trustee.  Essentially, Mr Clarke's personal interest was in conflict with his duties as trustee.


The Court reviewed the basis for the self-dealing rule and the nature of a trustee's conflict of interest. It noted that Mr Clarke became a tenant under the lease before he became a trustee.  His right under the Leasehold Reform Act 1967 to acquire the freehold came from the lease and so the Court held that this falls within an exception to the rule against self-dealing.  In another case decided many years previously, which Mr Clarke's counsel drew to the Court's attention, the effect of the self-dealing rule had not been applied because 'there could be no rational ground for applying the self-dealing rule to the unilateral exercise of a right granted before the trusteeship came into force.'

The Court concluded that because Mr Clarke became a tenant of 1 Vicarage Drive before he became a trustee and because the right he is asserting came out of the lease, it must fall within this permitted exception to the self-dealing rule, and he could therefore purchase the freehold from the settlement in this case.

One surprise is that Mrs Newman was alleging conflict of interest against her father, Mr Clarke, despite having been in a similar position herself previously.  In 1997 she and her husband sold the freehold in 1 Vicarage Drive to the trustees of the 1996 settlement of which she was a trustee!

Failed attempt to amend the claim

Mr Clarke had already issued an application in the first-tier tribunal for it to determine the price of the freehold interest he wanted to purchase.  Those proceedings were stayed in light of the High Court proceedings.

The claimants asked the High Court to give permission to amend their claim to focus instead on concerns they said they had about Mr Clarke's future conduct in the First-tier Tribunal proceedings.  Specifically, they said that they were concerned that Mr Clarke, as trustee, would only allow inappropriately low valuation evidence to be put forward by the trustees so as to enable him to purchase the freehold at a low price.  On the legal basis for amending their claim at this advanced stage of the proceedings, the claimants sought to rely on the case of Kim v Park (a libel case) in which the Court had said that it was wrong in principle to strike out a claim 'without giving [the claimants] an opportunity of rectifying the defect'.

However, the Court held that the concerns expressed about Mr Clarke's future conduct in the First-tier Tribunal proceedings did not amount to the formulation of even 'the legal bones of a claim'. It also seemed to the Court that any reformulated claim along the lines that were being suggested would amount to 'a wholly new claim.'

Accordingly, the Court held that the claimants could not amend their claim to raise the concern they had about the valuation evidence that may be produced in the other proceedings.  The claimants' claim was dismissed summarily without a final trial.

Is the dispute over?

The Court's comments about these concerns being a completely new claim leave open the possibility of the claimants issuing fresh proceedings focussed on those concerns.  They may, however, have had enough of legal costs by now...

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Richard Walker
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.