Lux Films v Andrew Fowler & Anor

A director and full-time employee remains subject to fiduciary, statutory and contractual duties despite deteriorating relations or unresolved exit negotiations. Without informed consent, he may not divert corporate opportunities, compete using the company’s confidential information, or exploit its resources, staff, goodwill and client relationships. Preparatory competition is permissible only if it does not involve active competition, misuse of confidential information or a conflict of interest. A company and its controlling director may be capable of civil unlawful means conspiracy where they act in distinct capacities through concerted conduct causing loss. The criminal law rule concerning conspiracy between a sole controller and his company does not govern the civil tort.

Lux Films Ltd brought a liability-only claim against its former director and employee, Andrew Fowler, and his wholly owned company, Andrew Fowler Media Ltd. It alleged diversion of clients and corporate opportunities, misuse of confidential information and company resources, breaches of fiduciary, statutory and employment duties, knowing receipt, unlawful means conspiracy and resignation without reasonable notice.

The defendants entered insolvency arrangements shortly before trial and did not appear. The court declined to stay the proceedings and determined liability on Lux’s evidence and the contemporaneous documents. The central issues were the continuing scope of Fowler’s duties, whether the diverted work and information belonged to Lux, and whether the corporate defendant was liable for receiving and implementing the benefits of the breaches.

1. Liability established. The claim succeeded against both defendants, subject to further submissions on the appropriate relief and a later hearing on quantum.
2. Fowler was a director and full-time employee of Lux. The deterioration of relations, exclusion alleged by him, and unresolved exit discussions did not release him from his continuing duties. The court distinguished In Plus Group Ltd v Pyke [2002] EWCA Civ 370, where the circumstances were materially different.
3. The court rejected the proposed rigid contractual term requiring exactly 40 hours per week. The relevant obligation was to devote the substance of his working time and energies to Lux. Fowler breached that obligation and his duty of fidelity by working for AFML while remaining employed and paid by Lux.
4. Information has the necessary quality of confidence where it is commercially sensitive, acquired in circumstances importing confidence, and used without authority to the confider’s detriment. Collated client information, pricing, proposals, contractual materials, production methodologies, supplier information and footage may be confidential even where individual elements are not secret in isolation.
5. Fowler breached his fiduciary duties and Companies Act 2006, sections 172, 173 and 175, by diverting the doTERRA opportunity and other business, failing to act in Lux’s interests, and placing himself in an undisclosed conflict. His conduct was active competition, not merely preparation for future competition.
6. AFML was liable in knowing receipt because it received contracts, revenues, profits and other benefits derived from Fowler’s breaches, with knowledge attributable through Fowler as its sole director and controlling mind. It was also liable for unlawful means conspiracy.
7. The elements of unlawful means conspiracy require combination, concerted action, unlawful means, loss and the requisite intention to injure. In civil law, the combination may exist between a company and its controlling director where they act in separate legal capacities through sequential and interlocking conduct. The criminal principle in R v McDonnell [1996] 1QB 233 did not govern the civil claim.