Friend Media Technology Systems Limited & Anor v Jonathan Norman Friend & Anor

A director’s duty to promote a company’s success is assessed subjectively. The question is whether the director honestly believed that the relevant conduct was in the company’s best interests. An honestly held unreasonable or mistaken belief may therefore avoid breach of that duty.

The duty of reasonable care, skill and diligence imposes a high threshold. The conflict duty is strict and objective, applying where there is a real and sensible possibility of conflict. A dormant competing company is not automatically free from conflict, but preparatory competition may be permissible. The assessment is fact-sensitive.

The claim concerned alleged breaches by the founder and former employee and director of companies providing anti-piracy technology. The claimants alleged breaches of contractual restraints, fiduciary duties and statutory directors’ duties arising from the defendant’s communications with customers, prospective customers, competitors and industry bodies, and from the incorporation of a dormant company.

An interim injunction had been granted by consent and the liability issues were tried on an expedited basis. The post-termination restraints in the Service Agreement had expired, and no continuing injunctive relief was sought. The central issues were whether the pleaded conduct amounted to breach and whether any pleaded breach caused loss.

1. The claims failed in their entirety. No continuing injunction was sought, and the alleged breaches said to give rise to loss were not established. The claimed lost opportunities were also inadequately pleaded and speculative.
2. The Duty to Promote under section 172 of the Companies Act 2006 was subjective. The defendant honestly believed that his conduct promoted the interests of the Friend Group. That belief could be mistaken or objectively unreasonable without itself establishing breach. His communications with customers, the Premier League, BeIN, Sky, the MPA and others were not shown to be competitive or contrary to the companies’ interests.
3. The Reasonable Care Duty under section 174 required a high threshold. The question was whether no reasonably competent director could have made the judgment in question. That threshold was not met.
4. The Conflict Duty under section 175 was strict and objective. It applied where a reasonable person would see a real and sensible possibility of conflict. The defendant’s conduct concerning OpSec, IP House, the MPA, Sky and the alleged Serie A/DAZN opportunity did not establish such a conflict. There was no proven commercial opportunity that the defendant had withheld or appropriated.
5. The mere incorporation of Friend TP Ltd, which remained dormant, did not breach the anti-competition provisions or the contractual restrictions. The court declined to determine whether its name might create confusion because that issue was irrelevant to relief or damages.
6. The court made an important observation concerning the defendant’s continuing role as a non-executive director. Ordinarily, that role involves support and guidance to the board, not unilateral intervention in the day-to-day operations of the company or its subsidiary. The existence of the section 172 duty did not obviously authorise such executive conduct without board approval. This observation was not necessary to the result because the subjective test resolved the relevant claims.
7. The surveillance of the defendant’s wife and children was invasive, unproductive and, after the first week, at least wholly reckless as to its impact. The claims nonetheless failed in their entirety.