TCP Europe Ltd v Perry & Ors

Employees may owe contractual duties of good faith, fidelity and mutual trust and confidence, and may also owe a fiduciary duty not to divert sales opportunities properly belonging to their employer during employment. The fiduciary duty adds a proprietary remedy, including an account of profits, but does not enlarge the underlying contractual obligations. No such fiduciary duty ordinarily continues after employment ends; post-termination restrictions depend on their proper construction. Liability for dishonest assistance requires dishonesty assessed objectively in light of the assistant’s actual knowledge. Liability for inducing breach of contract requires actual knowledge of the relevant contractual term and its breach; negligence or constructive knowledge is insufficient. Conspiracy cannot avoid those requirements. Claims for damages require proof of loss, while an account examines the wrongdoer’s net profit.

The claimant, a company selling customised commemorative objects, sued former employees and associated individuals and companies. It alleged breaches of employment contracts and fiduciary obligations, dishonest assistance, inducing breach of contract and conspiracy arising from the diversion of business to a competing enterprise.

The court struck out or gave summary judgment on claims against several defendants for want of pleaded and evidential grounds. It then considered the admitted diversions by three former or current employees, the scope of their contractual and fiduciary duties, the effect of post-termination restrictions, and the claimant’s claims for damages and an account of profits.

1. Claims against peripheral defendants. The allegations against Mrs Perry, Mrs Eveleigh, Jamy Ltd, NickNames Ltd and the Burt defendants did not identify knowledge of any particular fiduciary obligation or contractual term. The claims were therefore struck out under Civil Procedure Rules Part 3.4(2)(a). The proposed amendments would have been liable to summary judgment under Civil Procedure Rules Part 24.2(a)(i).
2. Accessory liability. Following Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, dishonest assistance required dishonesty by the alleged assistant, assessed in light of what that person actually knew. Following OBG Ltd v Allan [2008] 1 AC 1, inducing breach of contract required actual knowledge of the relevant contractual term and awareness that the conduct would breach it. Negligence, including failure to make a reasonable inquiry, was insufficient. A conspiracy to use unlawful means could not circumvent those requirements.
3. Employment and fiduciary duties. Applying University of Nottingham v Fishel [2000] ICR 1462, the mere employment relationship did not impose a general fiduciary code. In the circumstances, however, each of the three employees owed a duty during employment not to divert sales opportunities which should have been pursued for TCP. The fiduciary duty added an account-of-profits remedy, but did not enlarge the contractual obligations. No fiduciary duty governed post-termination conduct.
4. Liability and remedies. The admitted diversions amounted to breaches of contract and fiduciary duty and formed part of a conspiracy. TCP nevertheless failed to prove loss, so its substantial damages claims failed. Mr Perry, Mr Beckett and Mr Fagliarone each received nominal damages orders of £2 against them. An account was directed for specified profits made by ART: jointly against Mr Beckett and Mr Fagliarone for the first five transactions, and against Mr Beckett alone for the remaining six. Damages against Mrs Eveleigh were assessed at nil.