ZENITH LOGISTICS SERVICES (UK) LIMITED & ORS. v PETER JAMES KEATES & ORS.

A company director who diverts business opportunities, staff time or company assets to a personal venture breaches statutory and fiduciary duties, even if the company might not have exploited the opportunity itself. A real sensible possibility of conflict is sufficient; actual loss, bad faith or fraud is not required for the no-conflict rule. Employees may owe contractual duties of fidelity and good faith, but fiduciary status depends on the nature of the entrusted role. Unlawful means conspiracy requires a combination, unlawful means directed towards the claimant, an intention that loss should result, and resulting pecuniary loss. Dishonest assistance requires assistance in a breach of fiduciary duty coupled with objective dishonesty. Knowing receipt requires beneficial receipt of trust property or traceable proceeds with knowledge making retention unconscionable.

Three claims were tried together: Zenith’s claim against Biosol for unpaid transport invoices; its claim against Christopher Read for the cost of company cars supplied in addition to a contractual car allowance; and the Main Claim against Peter Keates and others for diversion of biomass opportunities, misuse of assets, conspiracy, dishonest assistance, knowing receipt and related losses.

The court determined the terms and continuation of the oral transport agreement, the restitutionary and equitable liability arising from the cars, the directors’ and employees’ duties, and the liability of the various defendants for payments, benefits and business activities connected with the Spring Companies.

1. Biosol Claim. The oral transport agreement required Zenith to provide a dedicated fleet and drivers for an initial five-year term, on an open-book cost-plus basis. Biosol was liable for the recoverable costs of the dedicated vehicles and drivers, subject to credit for revenue from other use. The agreement was not terminated in October 2017. Judgment was therefore given for Zenith, subject to deduction of charges for the low-loader trailer.
2. Read Claim. Applying the reasoning in Relfo Limited v Varsani, Mr Read had been enriched by company cars supplied through a breach of Mr Keates’s fiduciary duty. Knowledge was unnecessary for unjust enrichment, although Mr Read in fact knew that the arrangement was improper. His liability was £34,912.42, excluding the early-termination charge, which was Zenith’s loss but not Mr Read’s enrichment.
3. Duties and biomass opportunities. Mr Keates, as director and managing director, owed duties under sections 170, 172, 175 and 176 of the Companies Act 2006, together with contractual duties of fidelity and good faith. His personal involvement in the Farm, Tenby, Ammanford and Resolven opportunities, and his failure to disclose his own and colleagues’ wrongdoing, breached those duties. Mr Read breached his contractual duties by assisting the venture and failing to disclose what he knew.
4. Conspiracy and assistance. The defendants’ conduct established an unlawful means conspiracy concerning diversion of employees’ time and efforts. Breaches of contract and fiduciary duty were capable of being unlawful means, and the participants knew that loss to Zenith was likely. Mr Read and Mr Bundock had also dishonestly assisted Mr Keates. However, the claimants failed to prove recoverable pecuniary loss caused by the conspiracy. Separate misappropriations by Mr Keates were not agreed unlawful means and were not dishonestly assisted by those defendants.
5. Asset misuse and receipt. Mr Keates was liable for dishonest payments and benefits, including the Agco finance payments, diesel, website costs, false payments to Alfred Properties, personal expenses, hospitality and other benefits. His liabilities arising from actual dishonesty survived discharge under section 281(3) of the Insolvency Act 1986. Mr Claridge was liable in knowing receipt or, where appropriate, for unjust enrichment in respect of payments and benefits received. Spring Renewables was liable for knowing receipt of the diesel and IT services.
6. Loss and orders. The claims for lost profits and wasted management time failed because they were unpleaded, causally unsupported or incapable of rational quantification. No substantial damages were awarded for conspiracy or dishonest assistance. Further submissions were reserved on the precise order, equitable accounting, VAT and consequential matters.