]2006] EWHC 836 (Ch). He held that when former directors and employee set up a competing business, diverting business opportunities and misusing confidential information, they had acted in breach not only of their fiduciary obligations but their implied obligation of fidelity the moment that they procured the services of attorneys in the Cayman Islands to set up the rival business. On the facts of that case, he held that a former employee was also in breach of obligations as a fiduciary, whether or not he was to be regarded as a director, and that he was in breach of his duty of fidelity. The case affords an example, on its facts, of work of preparation which constituted breaches of both the implied duty of fidelity and fiduciary duties.
32. I agree that it is insufficient merely to cloak activities with legitimacy by describing them as preparatory. The first task, as Mr Stafford QC contended, is to identify the nature of the employee's obligations. Once they have been identified, the court is then in a proper position to discern whether the activities of an employee undertaken in pursuance of a plan to be fulfilled on his departure is in breach of his duty to his employee or not. It was the judge's failure, so Mr Stafford submitted, properly to analyse the nature of Mr Tunnard's express contractual obligations, as identified in the job specification, which led the judge into error. His conclusion, between paragraphs 61 and 65, that because Mr Tunnard had only undertaken acts of preparation, he had not acted in breach, either of his duty of fidelity or of any fiduciary duty, was wrong because it depended upon the conclusion that Mr Tunnard's activities were only acts of preparation. Proper analysis of his obligations would, so it was argued on behalf of HISL, have revealed that such activities amounted to a breach not only of the obligation of fidelity but also of an obligation which he owed as a fiduciary.
92. In my view Messrs Rider and Stimson overstepped the line and their activities that they did as summarised above (after their cross examination) crossed over the line between legitimate steps for the future and breach of their duties of fidelity and (in the case of Mr Rider) his fiduciary duty. I accept that all of the activities as alleged by the Claimant in its closing were done by the Defendants and I reject their attempts to downplay what they did.93. For example I have rejected their evidence that the May Power Point presentation was not accurate. They have agreed that they did far more than they stated initially at the start of the litigation and helping themselves to the Claimant’s documents as set out above were all illegitimate actions.94. This is reinforced in my view by the lies that Mr Rider told about his future intentions when he gave notice and the lies that they told when they verified the denials and the exercise of filleting the emails as set out above. Those are all actions designed to understate what they were actually doing. I conclude that they did that because they knew what they were doing was in breach of their duties and wished to conceal the true extent of their wrongdoing.
- MR JUSTICE PETER SMITH
- INTRODUCTION
- EVIDENCE
- THE CLAIM
- MR RIDER
- MR STIMSON
- THE COMPANY HANDBOOK
- ALLEGATIONS AGAINST DEFENDANTS
- [email protected]
- DEFENDANTS’ STANCE
- CONSIDERATION OF DEFENDANT GENERATED DOCUMENTS
- THE DEFENDANTS’ EXPLANATIONS
- “emphatic no orders were placed, deliveries taken or premises contracted for prior to 8th June. Any activities carried out in the notice period which related to Concept were no more that merely preparatory”
- EPI Environmental Technologies Inc & Anr v Symphony Plastic [2004] EWHC 2945 (Ch)
- IDC v Cooley [1972] 1 WLR 443.
- DEFENDANTS’ DUTIES
- “he came to rely on me to remember and know the operational details of the business”
- “Supplier Bible”
- Tesco Stores Ltd v Pook [2004] IRLR 618.
- Hanco ATM Systems Ltd v Cashbox [2007] EWHC 1599 (Ch).
- University of Nottingham v Fishel [2000] IRLR 471
- Helmut Intgrated Systems Ltd v Tunnard [2007] IRLR 126
- Helmut
- Nottingham University
- what the Defendants did.
- ACTS DONE BY THE DEFENDANTS
- “The Legitimacy of Preparatory Activity”
- ). In
- Balston Ltd & Anr v Headline Filters Ltd & Anr
- [1990] FSR 385 a former director who set up a rival factory and had taken a lease on future business premises and formed a company for his activity was held by Falconer J (at 412 ) neither to have breached his duty of good faith nor his fiduciary duty; he had merely taken preliminary steps to investigate the viability of his plan and to advance his intention.
- [2003] 2 BCLC decided that a director who has irrevocably formed an intention to engage in a competing business and has taken preparatory steps cannot rely upon the public interest in favouring competitive business as an answer to allegations of breach of fiduciary duty. He can only put an end to his fiduciary obligation by resigning his directorship. Until he has done so, preparatory steps taken in pursuance of an irrevocable intention to compete would generally amount to a breach of his fiduciary obligations as director (see para 89).
- Shepherd Investments Limited and Anr v Walters & Anr
- ]2006] EWHC 836 (Ch). He held that when former directors and employee set up a competing business, diverting business opportunities and misusing confidential information, they had acted in breach not only of their fiduciary obligations but their implied obligation of fidelity the moment that they procured the services of attorneys in the Cayman Islands to set up the rival business. On the facts of that case, he held that a former employee was also in breach of obligations as a fiduciary, whether or not he was to be regarded as a director, and that he was in breach of his duty of fidelity. The case affords an example, on its facts, of work of preparation which constituted breaches of both the implied duty of fidelity and fiduciary duties.
- USE OF INFORMATION
- Market Maker Beijing Co Ltd & Ors v CMC Group PLC & Ors [2004] EWHC 2208
- provided
- Seager v Copydex (No1) [1967] RPC 349.
- This is the collision between the first part of the Saltman judgment referred to above and the second part.
- It is well illustrated by the decision cited by Mr Prescott QC of O. Mustad & Son-v- Dosen (note) [1964] 1 WLR 109 (H.L.). Junior counsel for Symphony usefully also obtained the Court of Appeal decision from the Lincoln’s Inn Law Library.
- “The learned Judge discussed with the Jury what constitutes a trade secret, but of course it is no good discussing what constitutes a trade secret if the person who is the owner of the particular thing which is claimed to be a trade secret has never made a secret of it. For instance, it is no use suggesting that Thoring’s machine was a trade secret if as a matter of fact Thorings had allowed people to inspect the machine during construction or had exhibited it at a trade exhibition or something of that kind. It is no use saying it is very valuable; it is no use saying it might have been a trade secret if I had locked it up and allowed nobody to have access to it, and allowed nobody except a particular man to know how it was constructed, and so forth. No evidence seems to have been given about it – well, I will not say no evidence seems to have been given about it but it seems to have been treated at the trial as though the machine was a trade secret of Thoring’s, and a question was put to the Jury, and the only question put to the Jury was on the footing apparently that it was a trade secret, and that in spite of the fact that the only man who knew anything really about it (Dosen) did say, and said more than once in his evidence, that it never was a secret, and that Thorings never treated it as a secret, and that it was quite open to everybody in the works to know exactly what it was and how it had been made, and the progress it was making and all the rest of it. It does seem to me, when one is considering what ought to be done in this case, one cannot overlook the fact that there was before the learned Judge, and there was before Counsel, evidence that this machine really – if the point had been properly investigated – turned out not to be a trade secret at all. However, that point apparently has never been decided.”
- Faccenda
- Thomas Marshall (Exports) Ltd V Guinle [1979] 1 Ch 227
- LEGITIMATE USE
- Robb v Green [1895] 2 QB 1
- peculiarly valuable. He would be saved the expense and delay of searches, such as would be necessary to enable him to compile such a list for himself. Practically, to bring all those names together, even though singly each may appear in some directory or other, would be almost impossible; and it would obviously be much more difficult to ascertain whether they would be likely customers for pheasants' eggs. By making a copy of the order-book defendant was able to canvass at once each of his master's customers without trouble or expense; and the conversation with Mr. Barclay shows that he looked upon the list in that light. The collection together of these names and addresses in his order-book was the property of the plaintiff. It is the compilation which made the book and the list so valuable to the defendant, and facilitated his endeavours to entice his master's customers to the detriment of the latter.”
- copying or extracting such names and addresses.
- Roger Bullivant Ltd v Ellis [1987] ICR 464 C.A.
- Robb
- [1895] 2 Q.B. 315, affirming the very elaborate and illuminating judgment of Hawkins J. [1895] 2 Q.B. 1, as Greer L.J. described it in
- [1935] 2 K.B. 80, 85. Mr. Fitzgerald sought to avoid the application of the rule to the present case by relying on the evidence already quoted from paragraph 16 of the first defendant's second affidavit, which is to the effect that he only used the card index for the purpose of looking up the addresses, freely available elsewhere, of people who were already known to him personally. I will only say that that evidence falls short of convincing me that that would be found at trial to have been the first defendant's only use of material which, on his own evidence, was prepared at his request nearly five years after he joined the plaintiffs and only some two months before he gave in his notice. Be that as it may, and even allowing for some differences of fact between the two cases, I think that Mr. Fitzgerald's submission is effectively disposed of by a passage in the judgment of Hawkins J. in
- The value of the card index to the defendants was that it contained a ready and finite compilation of the names and addresses of those who had brought or might bring business to the plaintiffs and who might bring business to them. Most of the cards carried the name or names of particular individuals to be contacted. While I recognise that it would have been possible for the first defendant to contact some, perhaps many, of the people concerned without using the card index, I am far from convinced that he would have been able to contact anywhere near all of those whom he did contact between February and April 1985. Having made deliberate and unlawful use of the plaintiffs' property, he cannot complain if he finds that the eye of the law is unable to distinguish between those whom, had he so chosen, he could have contacted lawfully and those whom he could not. In my judgment it is of the highest importance that the principle of
- Bullivant
- “fully armed as it were”
- INTELLECTUAL PROPERTY CLAIMS
- Employee Competition"
- the Copyright and Rights in Database Regulations 1997
- Acts infringing Database right
- whether of financial, human or technical resources.
- Bullivant
- “Confidentiality”
- Crown Dilmun v Sutton [2004] EWHC 52 (Ch).
- World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2006] EWHC 184 (Ch).