Halcyon House Ltd v Baines & Ors

An employee or director may take genuine preparatory steps towards future competition, provided there is no actual competition or misuse of confidential information while the existing relationship continues. The court must identify the particular fiduciary or contractual duties owed; employment alone does not impose the full range of fiduciary obligations. A clerical employee does not ordinarily owe a fiduciary or contractual duty to disclose an employer’s possible competitor or the employee’s own future plans. Harassment requires conduct of sufficient gravity to be oppressive and unacceptable, assessed objectively. A course of conduct requires at least two occasions. An express non-disparagement term in a settlement agreement may support damages for breach, even where the statements are true.

Two related actions arose from a family dispute concerning Halcyon House Ltd, a residential letting business. Halcyon claimed against Caroline Baines, Susan Mogridge and Mint Lettings and Management Ltd for breaches of employment and fiduciary duties, misuse of confidential information and breach of a compromise agreement. Mrs Baines and Mrs Mogridge separately claimed that Nicola Low had harassed them. The central issues were whether preparatory steps to establish Mint breached duties owed to Halcyon, whether Mrs Baines breached the compromise agreement, and whether the alleged conduct amounted to harassment.

1. Halcyon Action dismissed. Mrs Baines and Mrs Mogridge owed duties of fidelity not to compete with Halcyon or solicit its staff or clients during their employment. The evidence did not establish that either had done so. The Forecast and the steps taken to establish Mint supported only a contingent plan, activated when Mrs Baines was presented with the non-negotiable Compromise Agreement.
2. A director may take preparatory steps towards future competition. On the facts, Mrs Baines had not irrevocably formed an intention to compete before the Compromise Agreement. The court therefore found no breach under either the approach in Balston Ltd v Headline Filters Ltd [1990] FSR 385 or British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523.
3. Fiduciary duties depend on the particular undertaking and circumstances. Mrs Mogridge was a clerical administrator, not a senior employee, and owed no fiduciary duties or contractual disclosure obligations of the breadth alleged. The court applied the analysis in Bristol and West Building Society v Mothew [1998] Ch 1 and University of Nottingham v Fishel [2000] ICR 1462.
4. Clause 9.7 of the Compromise Agreement was subjective. Mrs Baines was not in breach unless she actually knew both the relevant facts and that disclosure might affect Halcyon’s decision to enter the agreement. The claims based on the clause therefore failed.
5. Harassment claims dismissed. Under the Protection from Harassment Act 1997, conduct must cross the threshold from irritation or unreasonableness to oppressive and unacceptable behaviour. The alleged acts concerning Mrs Baines did not meet that threshold. Mrs Mogridge proved one malicious complaint to the police, but not the second occasion necessary to establish a course of conduct.
6. The court held obiter that a complaint to the police can in principle form part of a harassment claim, notwithstanding the general rule of immunity, because the cause of action may depend on the act of making the complaint rather than the truth of the statement. Statements made in proceedings before a tribunal remained protected by absolute immunity.
7. Had it been necessary to decide the set-off, breaches of the mutual non-disparagement clause were established and damages were in principle recoverable. The court would have allowed Mrs Baines £2,000, applying Watts v Morrow [1991] 1 WLR 1421 and Farley v Skinner [2002] 2 AC 732.