Hanco ATM Systems Ltd. v Cashbox ATM Systems Ltd & Ors

Summary judgment may be given on serious allegations, including dishonesty and breach of fiduciary duty, where the defence has no realistic prospect of success and no compelling reason requires a trial. The court must avoid a mini-trial, but it need not accept bare denials or artificial factual disputes. An employee with sufficiently senior responsibilities may owe fiduciary duties, including duties of loyalty, avoidance of conflicts, disclosure of personal wrongdoing and disclosure of impending departures that threaten the employer’s business. Competing for the employer’s business while still employed is a plain breach of those duties. An interim costs payment may be assessed conservatively using the available material where the paying party has not provided a helpful alternative calculation.

The claimant obtained summary judgment before Master Bowles against Cashbox and Mr Thomas for breaches of contract, fiduciary duty, dishonest assistance and breach of confidence. The defendants sought permission to appeal and, if granted, determination of the appeal. The issues included the suitability of summary judgment, Mr Thomas’s employment and fiduciary duties, dishonesty, Cashbox’s liability for use of confidential terms and conditions, and an interim payment on account of costs.

The court reviewed the Master’s decision under the applicable appeal principles and considered whether any defence had a real prospect of success or whether another compelling reason required a trial.

1. Permission and appeal. Permission to appeal was refused on all substantive grounds because the proposed appeal had no real prospect of success. Permission was granted, and the appeal allowed, only on the issue that the finding against Cashbox for receipt and use of the claimant’s terms and conditions was not sustainable on the unamended pleadings.
2. Summary judgment. The court applied Civil Procedure Rules 1998, Part 24. A summary judgment application is not a summary trial, and a mini-trial must be avoided. Nevertheless, the court is not required to accept denials or witness evidence which have no real substance or are contradicted by contemporaneous documents. Serious allegations require close scrutiny, but they do not automatically create a compelling reason for a trial.
3. Employment and fiduciary duties. Mr Thomas’s conduct in forming a rival business, recruiting staff and, while still employed, submitting a cheaper competing bid for the contract which he was responsible for procuring for the claimant was a breach of his contractual duty of fidelity and fiduciary duties. His senior role justified the conclusion that he owed fiduciary duties. Those duties included loyalty, acting in the claimant’s interests, avoiding conflicts, disclosing his own wrongdoing and disclosing impending employee departures which could threaten the claimant’s business.
4. Dishonesty. The undisputed facts made it possible to determine dishonesty at the summary stage. The Master had applied the more demanding approach associated with Twinsectra Ltd v Yardley, but the judge considered that later authority had moved away from a two-stage test. On either approach, Mr Thomas’s conduct was plainly dishonest, and Cashbox had the same knowledge through Mr Thomas as its sole director.
5. Costs. The interim payment of £150,000 was within the Master’s discretion. The Master was entitled to use the defendants’ estimated costs as a conservative yardstick, make deductions for limited recoverability and the 60 per cent costs order, and conclude that making no order would be unjust.

1. High Court (Chancery Division): Master Bowles entered judgment for the claimant on specified liabilities and ordered an interim payment of £150,000 on account of costs. The defendants sought permission to appeal.
2. High Court (Chancery Division): The court refused permission on all substantive grounds, but granted permission and allowed the appeal on the pleaded-case issue concerning Cashbox’s alleged receipt and use of the claimant’s terms and conditions.