White Winston Select Asset Funds LLC & Anor v Mahon & Anor

A person who obtains and uses a company’s customer list for personal commercial advantage may be liable for breach of confidence, even where the information was originally collected by that person and the customers regard the person, rather than the company, as their personal contact. The use of the list as a convenient shortcut is a classic springboard misuse.

A director’s conflict duty under Companies Act 2006, s 175, depends on the company continuing to have interests with which the director’s interests may conflict. After the company has ceased trading and disposed of its business and assets, conduct undertaken for a new competing business will not ordinarily engage that duty. A director’s duties under ss 172 and 174 do not continue beyond cessation of office unless preserved by statute.

The claimants acquired the business and assets of a company in administration and pursued claims against its former director, a tailor. They alleged misuse of the company’s customer lists, breach of fiduciary duty and breach of statutory duties as a director.

The director obtained copies of the company’s lists shortly after administration began and used them to contact customers before and after the company ceased trading. The court had to determine liability, including whether the conduct constituted breach of confidence and whether the director remained liable under the conflict and other statutory duties.

1. Breach of confidence. The company’s customer lists were confidential information communicated in circumstances importing an obligation of confidence. Obtaining, copying, retaining and using the lists to obtain customers’ email addresses constituted breaches of confidence. It was no answer that the lists were used only as a shortcut, that many contacts had originally been built up by the director, or that the customers regarded him personally as their tailor. The conduct was a classic springboard misuse.
2. Director’s duties. The director owed fiduciary and statutory duties to the company, including the duty under Companies Act 2006, s 175, to avoid direct or indirect interests conflicting, or possibly conflicting, with the company’s interests. Securing access to the lists on 1 August 2017 and using them on 21 August 2017 breached that duty while the company continued to trade. The failure to disclose the appropriation and subsequent use of the lists also constituted a breach.
3. The conflict duty was continued after cessation of office by s 170(2)(a), but only in relation to property, information or opportunities of which the director became aware while a director. Its operation still depended on the company having interests capable of conflicting with the director’s interests. Once the company had ceased trading and sold its business and assets, there were no such extant interests. Conduct after that date therefore did not breach s 175. The duties under ss 172 and 174 were likewise rendered inapplicable in the circumstances.
4. The director was entitled to establish a competing tailoring business and had no contractual restraint of trade. The court declined to excuse the appropriation of the company’s lists under s 1157.
5. The liability findings were limited to the identified breaches and added nothing to the breach of confidence remedy. The claims against the second defendant were discontinued during the trial.