Invideous Ltd & Ors v Thorogood & Ors

A senior employee and director must not divert business opportunities learned of through the company, even where the opportunity falls outside the company’s narrowly defined existing activities or the company might not have pursued it. Fiduciary duties of loyalty, no conflict and no secret profit apply strictly to opportunities received in the course of the directorship.

A restraint imposed through a shareholders’ agreement is enforceable where it protects legitimate client connections, goodwill and access to skilled personnel, and goes no further than reasonably necessary. The scope of a start-up’s business is assessed commercially, by reference to its plans, intended activities and services supplied, including bundled or resold products.

The claimants alleged that the first defendant, formerly a shareholder, director and senior employee of Invideous Ltd, secretly established NOVP Doo-Skopje and diverted business opportunities, employees and funds to that business. The principal opportunity concerned the Technicolor Showcase portal. Related claims were brought against companies and individuals alleged to have conspired in the breaches.

The court also determined whether the defendant had breached interim orders restraining competition and requiring disclosure, preservation of evidence and truthful information. The central issues were the scope of his employment, contractual, shareholder and fiduciary obligations, the enforceability of the restraint in the shareholders’ agreement, and whether the alleged contempt was proved beyond reasonable doubt.

1. Employment obligations. The defendant was bound by the written service agreement sent to the company’s solicitor, despite the absence of a later signature. His seniority and central role imposed a high degree of loyalty, fidelity and diligence. He breached those obligations by setting up and working for NOVP Doo-Skopje and diverting opportunities and employees.
2. Shareholders’ agreement. The restraint was reasonably necessary to protect Invideous’s client connections, goodwill and access to technical personnel. Its duration, worldwide potential scope and non-solicitation provisions were justified by the nature of the business and the defendant’s hybrid position as investor, shareholder and senior employee. The clause was not void in restraint of trade.
3. Fiduciary duties. The defendant owed duties to promote the company’s interests, avoid conflicts and account for secret profits. A director cannot appropriate an opportunity received in the course of the directorship merely because it falls outside the company’s existing business or because the company might not have pursued it. The Technicolor opportunity came to the defendant through his work for Invideous and should have been disclosed and pursued for that company.
4. Scope of the business. Invideous’s business was not confined to paywall and hot-spot advertising. Its business plans and actual activities covered payments, platforms, players, applications and bundled services, including third-party products. Competition was assessed broadly and commercially, rather than by technical labels or a snapshot of products actually sold at one time. NOVP’s business fell within the restraint.
5. The defendant also breached his duties by pursuing opportunities with Nexeven and Sound Tribe Live, arranging the October 2012 transfer of employees to NOVP, and causing payments to be made from Invidius Dooel-Skopje to NOVP without consent. He was liable to account for those payments. The other defendants were liable for conspiracy.
6. Contempt had to be proved beyond reasonable doubt. The court was not satisfied that post-March 2013 provision of online video platforms or platform services, the revised website, disclosure failures or destruction of evidence had been proved to that standard. It was satisfied that the defendant’s affidavit deliberately and falsely omitted material information about Technicolor and employees transferred to NOVP. Liability for the substantive breaches was established, while relief and the contempt penalty were reserved.

The judgment describes earlier interim injunctions and disclosure orders made by Mitting J, Sales J and Vos J. The substantive claim and committal application were tried together before the High Court.