Simtel Communications Ltd v Rebak & Ors

A director may be liable for breach of fiduciary and contractual duties where he takes an unacceptable commercial risk, misapplies company assets, diverts a maturing corporate opportunity, or acts against the company’s interests. A director’s duties may continue after resignation where the opportunity was sufficiently mature during the directorship. A company employee’s contractual duty of skill and care may require an objective level of competence where the contract assigns specialist responsibilities. For unlawful means conspiracy, the court must establish agreement, two or more persons, an intention to injure, and unlawful means. Deliberate breaches of contract and fiduciary duty may constitute unlawful means.

Simtel, an international mobile-phone wholesaler in administrative receivership, sued its former managing director, Peter Rebak, former employee Larry Chan, and Telec, a company established by Rebak and Chan. The claims concerned pre-receivership mismanagement, unauthorised use of company assets, diversion of business opportunities, destruction and transfer of company data, and the release of stock without payment.

The claimant alleged breaches of fiduciary and contractual duties and an unlawful conspiracy. The defendants denied liability and advanced counterclaims, including claims for salary, expenses and bonuses. The central issues were whether the pleaded conduct amounted to breaches of duty and whether the defendants acted pursuant to a common design intended to injure Simtel.

1. Liability for breaches of duty. The claim succeeded in substantial part. Rebak breached his fiduciary and contractual duties in entering the Falcon transaction without secured onward sales and while exposing Simtel to an unacceptable risk. Four relatively small bad deals, without more, did not establish breach where there was no clear compulsory company policy and the managing director had discretion.
2. Rebak was liable for unauthorised use of petty cash only to the extent that sums were neither repaid nor properly vouched or accounted for. He was also liable for using company funds to pay for repairs to his private car and for purporting to sell a company van without authority.
3. The duties of a director do not necessarily end on resignation. Where a director exploits a maturing business opportunity known to him during the directorship, the opportunity may be treated as company property. Rebak therefore breached his duties by diverting the Motorola opportunity to Telec. Chan and Telec were jointly liable for knowingly participating in that breach.
4. Rebak and Chan breached their duties by diverting the Planet Telecom transaction, deleting or removing Simtel’s data, transferring data to Telec, and releasing Nigerian stock without payment. Rebak could not reasonably have believed that the releases were in Simtel’s interests.
5. Conspiracy. The necessary elements were agreement or concert by two or more persons, an intention to injure, and lawful or unlawful means. Telec could conspire with its directors, and its knowledge was attributable through those controlling its transactions. The defendants acted pursuant to a common design to establish a competing business, divert Simtel’s business, and destroy or transfer data. The intention to injure was established even if covering tracks, injuring MFH or preventing competition were additional motives. Deliberate breaches of contract and fiduciary duties constituted unlawful means.
6. Rebak’s counterclaim for unpaid expenses failed for want of evidence. Chan’s bonus counterclaim was dismissed because no binding bonus agreement existed. There was judgment for Simtel, with further submissions on relief and the form of order.

First-instance judgment. No prior appellate decision is stated in the judgment.