Glenea Contracts Limited v Philip Joseph Friel

An employee may owe fiduciary duties where the circumstances of employment place him in practical control of his employer’s financial affairs and create a legitimate expectation of loyalty. The question is objective; the employee’s own view of his status is immaterial.

A fiduciary who misapplies property belonging to the principal may become a constructive trustee of that property. The limitation rules applicable to trustees therefore depend on the nature of the constructive trust. A defendant who received unauthorised payments must justify them by proving entitlement or informed consent.

For breach of confidence, the information must possess the necessary quality of confidence, be imparted in circumstances importing confidence, and be unauthorisedly used or disclosed.

Glenea Contracts Limited claimed recovery from its former Commercial Manager, Philip Joseph Friel, of money paid from the company’s bank account between 2014 and 2022. It also claimed remedies for the disclosure of confidential business and personal information to Friel’s new employer.

The central issues were whether Friel owed fiduciary duties despite being an employee rather than a director, whether limitation defeated any part of the monetary claims, whether the payments were authorised or contractually due, and whether the disclosed information was confidential.

1. Fiduciary duties. The existence of fiduciary obligations was determined objectively. Employment alone does not create a fiduciary relationship, but it may provide the context in which fiduciary duties arise. Friel’s unrestricted access to the company’s bank account, responsibility for payments, administration of financial affairs and position of trust created a relationship of trust and confidence and an obligation of loyalty. He therefore owed fiduciary duties in relation to the bank account and the company’s financial affairs.
2. Constructive trust and limitation. Friel’s intention to repay the money was no defence. By taking company property over which he had control for his own use, he became a constructive trustee of the unauthorised sums. The court treated this as the first class of constructive trust identified in Paragon Finance v D B Thakerar & Co, rather than a knowing-receipt or dishonest-assistance case. Section 21(1)(b) of the Limitation Act 1980 therefore applied to recovery of trust property or its proceeds.
3. Burden of justification. Friel had to justify payments either by proving entitlement or by proving Glenea’s informed consent. He failed to do so, apart from his net salary, authorised discretionary bonuses and specified payments for tyres and DVLA charges.
4. Contract and limitation. Friel had no contractual entitlement to overtime. The contractual claim was subject to a six-year limitation period. Section 32(1) delayed limitation only until the next bank statement after each concealed payment, because reasonable diligence would have revealed the payments.
5. Confidential information. The three principal documents disclosed to the new employer were confidential, had been received in circumstances importing an obligation of confidence, and were disclosed without authorisation. The tort was established in principle, although the precise documents and damage had not been pleaded in sufficient detail for final relief to be determined at trial.
6. Disposition. Friel was found to have wrongfully paid himself £552,993.86. The sums were held on constructive trust and were subject to an account, with an inquiry to identify the payments satisfying authorised bonus entitlements. The breach-of-confidence remedy was reserved for consequential determination.