Invideous Ltd & Ors v Thorogood & Ors

The court held that the First Defendant, Mr Thorogood, breached multiple duties owed to Invideous Ltd as employee, director and shareholder. The judge found that Mr Thorogood set up and ran NOVP (NOVP Doo-Skopje / NOVP LLC) in secret, diverted the Technicolor 'Showcase' opportunity and other client enquiries to NOVP, and induced or caused technical staff of the Macedonian subsidiary to transfer to NOVP. The Shareholders' Agreement restrictive covenant (clause 18) was held to be enforceable and to cover NOVP's business as it stood on the relevant dates. The judge concluded that some payments made from the subsidiary to NOVP were improper and that Mr Thorogood must account for them.

In addition, the court found, beyond reasonable doubt, that Mr Thorogood gave deliberately untruthful information in his affidavit of 15 March 2013 in purported compliance with the interlocutory order; that constituted contempt as pleaded. Other allegations of contempt (continuing provision of OVP services to Technicolor and others after 28 March 2013) were not proved to the criminal standard. The court continued the interim injunction and reserved final relief and any penalty for contempt for further submissions.

This is a first-instance Chancery Division trial of claims by Invideous Ltd, its Macedonian subsidiary Invidius Dooel-Skopje and an investor (Mr Andurand) against the former director and employee Mr Jack Thorogood and companies/persons associated with him (NOVP Doo-Skopje, NOVP LLC, NOVP Ltd and Mr Igor Micov). The claim alleged breaches of fiduciary and contractual duties, breaches of a shareholders' restrictive covenant, wrongful diversion of business opportunities (principally the Technicolor 'Showcase' portal), misappropriation of staff and company funds, and contraventions of interim court orders.

Background and parties:

• Invideous Ltd was a start-up providing video monetisation technology; Invidius Dooel-Skopje was its wholly owned Macedonian development subsidiary. Mr Thorogood was a founder, director and chief executive; he later resigned in February 2013.
• NOVP Doo-Skopje and NOVP LLC were companies established by Mr Thorogood and Mr Micov to pursue video-platform related products; NOVP obtained work on the Technicolor Showcase portal.

Nature of the application: The claimants sought declarations of breaches of duty, injunctions, damages and an account of profits; the trial also addressed a committal application for alleged contempts of earlier interlocutory orders.

Issues framed by the court:

• What obligations bound Mr Thorogood as director, shareholder and employee (including under the written service agreement and the Shareholders' Agreement)?
• Whether the setting up and operation of NOVP breached those obligations (including diversion of the Technicolor opportunity); whether the Shareholders' Agreement restraint (clause 18) was enforceable and covered NOVP’s activities;
• Whether Mr Thorogood improperly poached staff or diverted funds; and whether he disobeyed the interim injunctions and failed to comply with disclosure and preservation obligations, including by false affidavit evidence.

Court's reasoning and findings:

• The court found that Mr Thorogood was bound by a written service agreement (sent by him on 22 November 2011) which contained an express time-and-attention clause restricting competing activities without board consent.
• The Shareholders' Agreement covenant (clause 18) was held to be a legitimate and enforceable restraint designed to protect Invideous' legitimate interests (client connections, goodwill, confidential information and the pool of technical staff), and was not void as an unreasonable restraint of trade in the factual context.
• Applying the no-conflict / no-secret-profit principles (including the authorities cited in the judgment), the court found that the Technicolor Showcase opportunity came to Mr Thorogood in the course of his employment and directorship and that he should have disclosed it to Invideous. He instead diverted it to NOVP. That conduct, together with the October 2012 dismissals and rehiring of Invidius Dooel-Skopje staff by NOVP, constituted breaches of his fiduciary and contractual duties and of clause 18.
• Certain payments from the Macedonian subsidiary to NOVP were found to have been authorised by Mr Thorogood for the benefit of NOVP without Invideous' consent; he must account for them.
• On the contempt application, the court found beyond reasonable doubt that paragraph 10 of Mr Thorogood’s affidavit of 15 March 2013 (denying NOVP’s relationship with Technicolor and denying connections) was deliberately untruthful and that the affidavit omitted material employee-related matters; that constituted contempt. Other alleged contempts (continuing provision of OVP services after 28 March 2013 and the NOVP website content) were not proved to the criminal standard; the court accepted the case that Technicolor expedited transferring hosting/ownership and that post-order activity was limited to hiring-out development staff.

The court did not determine final remedies at trial; it continued the interim injunctions and directed further submissions as to the final injunction, damages, account and the appropriate penalty for contempt.

Claim succeeded in part. The court found at first instance that Mr Thorogood breached his written employment contract, his fiduciary duties as a director and the Shareholders' Agreement restrictive covenant by setting up and operating NOVP, diverting the Technicolor Showcase opportunity and certain other client opportunities, and by arranging for key Macedonian technical staff to move to NOVP. The court held clause 18 of the Shareholders' Agreement enforceable and ordered that Mr Thorogood must account for certain payments made to NOVP. The court also found, beyond reasonable doubt, that Mr Thorogood gave deliberately untruthful evidence in his 15 March 2013 affidavit (contempt), but did not make final orders for relief or sentence for contempt pending further submissions; interim injunctive relief was continued.