Berryland Books Ltd v BK Books Ltd & Ors

A director’s duty of loyalty prevents competition with his company, exploitation of its corporate assets or maturing business opportunities, and solicitation of its staff. Employees may prepare to compete and may use their own skills and knowledge after termination, but must not undertake substantive competitive activity while employed or divert their employer’s opportunities. The distinction between legitimate preparation and unlawful competition is fact-sensitive. Employees remain subject to their duties during contractual notice periods, even if they are not required to work full-time. A database attracts protection only where the statutory requirements for investment or originality are satisfied. The court found breaches of fiduciary duty and fidelity, unlawful conspiracy, and liability of the competing company as the director’s alter ego.

Berryland, a children’s-book publisher, claimed that its director, two employees and others had established and operated BK Books to compete with it. The alleged wrongdoing included preparatory competition before resignation, diversion of maturing business opportunities, misuse of confidential material, breach of fiduciary and employment duties, conspiracy, copyright infringement and database-right infringement.

The defendants denied wrongdoing and contended that BK Books had initially been established for legitimate commercial purposes. The court tried liability and entitlement to remedies, leaving quantification of financial remedies for a later inquiry. The central issues were whether the defendants had crossed the line between legitimate preparation and unlawful competition, and whether the copyright and database claims were made out.

1. Director’s duties. Indiren owed Berryland fiduciary duties until his resignation. Those duties required loyalty and prohibited him from competing with Berryland, using its corporate assets, information or maturing business opportunities for his own benefit, soliciting its staff, or concealing his own wrongdoing and that of others.
2. Employees’ duties. Helen and Sophie owed duties of fidelity until the expiry of their contractual notice periods. They were free to compete after employment ended and to use their accumulated skills, knowledge and expertise, but could not work for a competitor, divert business opportunities, misuse company property, or establish a competing business ready to operate before termination.
3. The court held that the defendants had undertaken unlawful preparatory activities, promoted Berryland products as BK Books products, diverted maturing opportunities, and coordinated their resignations so that BK Books could compete immediately. Helen and Sophie remained bound during their notice periods notwithstanding their accrued holiday entitlement.
4. The court held Indiren, Helen and Sophie liable for breaches of duty and unlawful conspiracy. Ramasan’s passive role in incorporating BK Books was sufficient, albeit with hesitation, to make him liable for the conspiracy. BK Books was treated as Indiren’s alter ego, with his knowledge attributed to it.
5. The claims of comprehensive sabotage and wider misuse of confidential information were not proved. The copyright and database claims also failed. Copyright could in principle subsist in the Sudoku books, but Berryland had not established ownership. No protected database was proved, and the email accounts did not demonstrate the substantial investment required by regulation 13 of the Copyright and Rights in Databases Regulations 1997.
6. An inquiry as to damages was ordered, with submissions invited on its terms and on costs.