Foster Bryant Surveying Ltd v Bryant & Anor

A director’s fiduciary duties require loyalty, good faith and avoidance of conflicts, but their application to a retiring director is intensely fact-sensitive. A director who resigns may prepare for lawful post-termination competition and use general skill, knowledge and personal connections, provided that he does not exploit company property or a maturing corporate opportunity acquired through a disloyal plan.

Acceptance during a notice period of a customer-initiated proposal for work after departure does not itself establish a breach. The result may differ where the director solicits business, diverts a corporate opportunity, actively competes while in office, or resigns in order to appropriate such an opportunity.

The claimant company appealed from HHJ Richard Seymour QC, sitting as a High Court judge in the Commercial Court. The first respondent had resigned as a director after a breakdown with the other director and majority shareholder, but remained formally in office during his contractual notice period.

The company’s principal client, concerned to preserve continuity after the respondent’s departure, proposed that he should provide services through a new company after his resignation took effect. The trial judge found that this was a customer-led initiative, that the respondent had neither solicited nor diverted the client’s business, and that the company had suffered no loss. The judge dismissed the fiduciary-duty claim and refused an account of profits.

The appeal concerned whether the respondent’s acceptance of the proposed future engagement while still a director was necessarily a breach of fiduciary duty and, if so, whether an account was required.

1. Appeal dismissed. Rix LJ, with whom Moses and Buxton LJJ agreed, held that the trial judge was entitled to find no breach of fiduciary duty.

2. A director must act with loyalty, good faith and without conflict. The principles remain exacting, but their application where a director is retiring is fact-sensitive. A director may resign and, after the fiduciary relationship ends, may generally compete using general skill, knowledge and personal connections. Liability may arise where the director uses or diverts company property, including a maturing business opportunity, or plans resignation in order to exploit it.

3. The respondent’s resignation was not prompted by a wish to obtain the client’s work. He neither solicited the client nor sought a particular project. The client initiated and pressed the proposal, and its retainer was neutral as to any particular project. His agreement to work for the client only after his resignation became effective was, at most, preparation for future competition. It did not amount to disloyalty, diversion, or exploitation of a maturing business opportunity.

4. The trial judge’s finding that the respondent had in practice been excluded from the company’s management was open to him. It did not mean that fiduciary duties automatically ended before the formal retirement date, but formed part of the factual setting.

5. The court confirmed that a fiduciary who profits from a breach may be required to account even where the beneficiary proves no loss. That issue did not arise: there was no finding that an existing company project or any resulting profit had been transferred to the respondent or his new company, or that any profit was connected with an assumed breach.

• Court of Appeal (Civil Division): Appeal dismissed: [2007] EWCA Civ 200.
• High Court (Commercial Court): HHJ Richard Seymour QC dismissed the claim for breach of fiduciary duty and for an account. The lower-court citation was not stated in the judgment.