Helmet Integrated Systems Ltd v Tunnard and others: CA 15 Dec 2006

Whilst employed by the claimants as a salesman, the defendant came to want to develop his idea for a modular helmet suitable for fire-fighters and others. He took certain steps including showing the proposal confidentially to a competitor, and then left the company. The claimant brought proceedings alleging breach of a duty of confidentiality toward them, and now appealed against refusal of relief.
Held: The claimant’s appeal was dismissed. It was proper for the claimant to refer to the provisions of the contract and the job specification, requiring him to advise the company on the activity of competitors. When examining his action before leaving, those contractual obligation could create additional duties. In this case the defendant should have disclosed information about the competitor’s intentions, and to deploy such information exclusively for the benefit of the claimant. He was not however under a duty to disclose his own activities preparatory to leaving. He was therefore not in breach of any fiduciary duty to the claimant.
Moses L.J. said: ‘This freedom to compete, once an employee has left, unrestrained by any enforceable covenant, carries with it a freedom to prepare for future activities, which the employee plans to undertake, once he has left. In Robb v. Green (q.v. supra) Hawkins J. concluded that a manager who had copied a list of customers was liable in damages for breach of an implied term not to use such information to the detriment of his employer. But he observed, in words echoed frequently thereafter, that each case would depend upon its own circumstances and there will be cases where an employee may legitimately canvas, issue circulars, have a place of business ready and hire employees . . The Court of Appeal made no observation suggesting disagreement when it affirmed Hawkins J.’s conclusion.
The legitimacy of preparatory activity
The battle between employer and former employee, who has entered into competition with his former employer, is often concerned with where the line is to be drawn between legitimate preparation for future competition and competitive activity undertaken before the employee has left. This case has proved no exception. But in deciding on which side of the line Mr. Tunnard’s activities fall, it is important not to be beguiled into thinking that the mere fact that activities are preparatory to future competition will conclude the issues in a former employee’s favour. The authorities establish that no such clear line can be drawn between that which is legitimate and that which breaches an employee’s obligations.’

May, Lloyd, Moses LJJ
[2006] EWCA Civ 1735, [2007] FSR 16, [2007] IRLR 126
England and Wales
CitedBell v Lever Brothers Ltd HL 15-Dec-1931
Bell was director and chairman of Niger, a subsidiary of Lever Brothers Ltd who dismissed him, offering and paying andpound;30,000 compensation. Lever then discovered that Mr Bell had made secret profits at the expense of Niger for which he could . .
CitedBalston Ltd v Headline Filters Ltd and Another ChD 1990
The claimant, a manufacturer of filter tubes, employed the defendant as a director. He gave notice to leave, but during his notice period, he was contacted by a customer who informed him of a meeting between that customer and the company at which . .
CitedRobb v Green 1895
An employee intending to enter business for himself may prepare for that step, provided he does not breach terms of his contract of employment or breach the confidence reposed in him by his employers. The duty may be breached by an employee . .
CitedRobb v Green CA 2-Jan-1895
The lower court had relief granted an order for delivery up to the plaintiff employer of all copies or extracts from the plaintiff’s papers in the defendant’s possession or under his control.
Held: The former employee’s appeal failed.
CitedBalston Ltd v Headline Filters Ltd and Another 1987
The second defendant, whilst still during his notice period to leave employment by the plaintiff, began to make arrangements to start his own competing business, and solicited future business from a customer of the plaintiff. The plaintiff sought an . .
CitedFaccenda Chicken Ltd v Fowler CA 1986
Nature of Confidentiality in Information
The appellant plaintiff company had employed the defendant as sales manager. The contract of employment made no provision restricting use of confidential information. He left to set up in competition. The company now sought to prevent him using . .
CitedIndustrial Development Consultants Ltd v Cooley 1972
Mr Cooley was the managing director of the claimant. His duties included procuring business in the field of developing gas depots. The company had unsuccessful negotiations with the Eastern Gas Board for the development of four depots. However, the . .
CitedNottingham University v Fishel QBD 19-Jan-2000
When a university embryologist, the respondent, worked abroad he did not act in any breach of fiduciary duty. He remained under a specific duty to direct his fellow embryologists to work in the interests of the university and not in his own . .
CitedBritish Midland Tool Limited v Midland International Tooling ChD 2003
Four former employees had set out to create a business in competition with the claimant. They had agreed to use unlawful means to do so.
Held: A director who decided to set up a competing business and took preparatory steps could rely upon the . .
CitedShepherds Investments Ltd and Another v Walters and others ChD 12-Apr-2006
The claimant company accused former directors and employee of setting up a competing business, of diverting business opportunities and of misusing confidential information. They said that they had acted in breach not only of their fiduciary . .
CitedFassihim, Liddiardrams, International Ltd, Isograph Ltd v Item Software (UK) Ltd CA 30-Sep-2004
The first defendant (F) had been employed by a company involved in a distribution agreement. He had sought to set up a competing arrangement whilst a director of the claimant, and diverted a contract to his new company.
Held: A company . .

Cited by:
CitedCustomer Systems Plc v Ranson CA 29-Mar-2012
Leave to appeal granted. . .
CitedImam-Sadeque v Bluebay Asset Management (Services) Ltd QBD 10-Dec-2012
Popplewell J said: ‘In general terms, it can be said that the duty of fidelity requires an employee not to engage in competitive activity. Nevertheless, it is legitimate for him to undertake competitive activity as soon as he ceases the employment . .
CitedWhitmar Publications Ltd v Gamage and Others ChD 4-Jul-2013
Whitmar claimed damages for breach of contract; an account of profits; damages for breach of fiduciary duty and/or for infringement of its Database Rights under the Copyright and Rights in Database Regulations 1997; and for a permanent injunction . .

Lists of cited by and citing cases may be incomplete.

Intellectual Property, Company, Employment

Updated: 11 November 2021; Ref: scu.247402