TCP Europe Ltd v Perry & Ors

Underlying the claims made in this action are what are called, variously, Lucites or tombstones. As I understand it, a Lucite, or tombstone in the sense in which that term is meant as an alternative description of a Lucite, is a sort of commemorative item intended to mark the conclusion of some sort of high-value financial transaction, such as the takeover of one large company by another. The word “Lucite” seems actually to be a proprietary name for a solid transparent plastic that is a methyl methacrylate resin, but, by extension, it seems to have come to mean the type of object which I have described, which in many, if not most, instances comprises a block of methyl methacrylate resin in which has been embedded words or items commemorating the relevant transaction. In purely functional terms a Lucite, in the sense relevant to the issues in this action, is completely useless, save, perhaps, as a paperweight. However, it seems to have become the fashion, prior to the onset of the more straightened economic times in which we now live, for Lucites to be produced as a sort of trophy following the successful conclusion of a financial transaction of significant value, and for them to have been circulated amongst the participants, typically representatives of investment banks, lawyers, accountants, and so forth.

It seems to be relevant to the circumstances giving rise to the present action that, following the demise of Lehman Brothers Holdings Inc. and Bear Stearns Companies Inc., the Lucite was an object the time of which had passed, at any rate in the areas of activity which it had traditionally been produced to commemorate. There were, from about 2008, fewer high-value financial transactions which anyone wished to commemorate, and even fewer which the participants in the transaction considered should properly be marked ostentatiously by the production of expensive pieces of no utility.

The claimant in this action, TCP Europe Ltd. (“TCP”), is a company incorporated in England and Wales under company number 3646299 and is a subsidiary of a corporation incorporated in the State of New York in the United States of America called The Corporate Presence Inc. The principal business of TCP as described in the Report of the Directors and Financial Statements for the year ended 30 September 2009 (“the 2009 Accounts”) was “the sale of customised commemoratives”, that is, Lucites. Although TCP sold Lucites, it did not, itself, manufacture them. Depending upon the particular requirements necessary to be met by an individual commission, the relevant Lucites were actually physically produced by one of a number of suppliers. One of these was the ninth defendant, Jamy Ltd. (“Jamy”). The eleventh, twelfth and thirteenth defendants, respectively Mr. Peter Burt, Mr. Nicholas Burt and Mr. Keith Allen, were, at all times material to this action directors both of Jamy and of the tenth defendant, NickNames Ltd. (“NickNames”). It appears that, so far as possible, TCP preferred to have Lucites manufactured by an associated company incorporated in the Province of Quebec in the Dominion of Canada, Acrylique Le-Bo Inc. (“ALB”).

The auditors of TCP at the time of the preparation of the 2009 Accounts were BDO LLP. In their report included in the 2009 Accounts, beneath the rubric, “Emphasis of matter – going concern”, they wrote:-

“In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 17 to the financial statements concerning the company’s ability to continue as a going concern. The Company’s ability to continue as a going concern depends on its ability to generate positive cash flow from operations or to obtain funds from its immediate parent company, The Corporate Presence Inc, if required. The Company has received a commitment from The Corporate Presence Inc, its immediate parent company, to provide financial support for a period of not less than 12 months from the date of approval of these financial statements. The Corporate Presence Inc is itself dependent on the group’s ability to continue to operate within its available funding.

The group has available committed funding which it believes is sufficient for its funding requirements. However the trading and cash flow forecasts prepared by management and used in making this assessment incorporate revenue growth assumptions that may not be achieved. In the event that the forecast revenue growth is not achieved by the group, then the existing group borrowing facility may not be sufficient to meet operating cash requirements and group management would be obliged to seek additional sources of finance.

Based on group management’s expectation that the group will be able to continue to operate within the existing group borrowing facility, the directors are satisfied that it is appropriate for the financial statements of TCP Europe Limited to be prepared on a going concern basis, however inherently there can be no certainty over the group’s future trading performance and accordingly its ability to continue to operate within existing borrowing facilities.

These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern. The financial statements do not include the adjustments that may be necessary if the company was unable to continue as a going concern.”

The auditors’ report included in the 2009 Accounts was signed on 8 December 2010. It is clear from the passage cited that the ability of TCP to continue to trade at that date was dependent upon the support of its parent, and that the ability of The Corporate Presence Inc. to provide that support was itself dependent upon the then available funding of the group being sufficient to permit that support.

According to the 2009 Accounts, TCP had made a loss in the year ended 30 September 2009 of £2,117,303. Note 4 to the 2009 Accounts explained that:-

“Administrative expenses include exceptional items of £1,210,550 in the year (2008 – Nil), relating to the waiver of amounts owed by fellow group companies and the write-back of amounts owed to other fellow group companies which waived amounts owed by the company.”

That note suggested that the position of the group as a whole was not sound.

The balance sheet of TCP as at 30 September 2009 noted shareholders’ funds of £98,657, a reduction from the level of £2,215,960 as at 30 September 2008. The reduction seems largely to have been attributable to a reduction in stocks between the two year ends from £172,564 in 2008 to £25,000 in 2009, and more particularly in the reduction in debtors from £2,514,535 in 2008 to £383,131 in 2009. The impression of a substantial reduction in the level of business in the year ended 30 September 2009 was reflected in the reduction in turnover from £4,385,163 in the year ended 30 September 2008 to £1,997,681.

The first defendant in this action, Mr. Tony Perry, was, until he resigned with effect from 23 December 2008, employed by TCP as Head of Sales. Rather confusingly, on various contemporaneous documents Mr. Perry was described as a “director” of TCP, but it was common ground that he was never a statutory director of the company.

Mr. Robert Fagliarone, the third defendant, was a statutory director of TCP from October 2004 until he resigned as such with effect from 20 May 2008. After his resignation as a statutory director Mr. Fagliarone continued as an employee of TCP in the role of Senior Account Manager until, by letter dated 30 March 2009, he resigned his employment with effect from 30 June 2009.

The second defendant, Mr. Andrew Beckett, was employed by TCP from 29 November 1999 as an Account Executive, or salesman. Mr. Beckett was promoted to the role of Account Manager in 2006. He gave notice of resignation of his employment with effect from 31 December 2009 on 29 October 2009, but he was in fact dismissed by TCP before his resignation took effect. He was first suspended on 4 December 2009.

The fourth defendant, Mrs. Lisa Beckett, is the wife of Mr. Beckett. By an order dated 21 May 2012 I gave summary judgment in favour of Mrs. Beckett in this action and she took no part in the trial.

The fifth defendant, Mrs. Janet Perry, is the wife of Mr. Perry. She made a witness statement in which she denied any knowledge of the matters alleged against her in this action, but she did not appear at the trial.

Mrs. Lisa Eveleigh, the sixth defendant, is the sister of Mr. Perry. She lives in France. Judgment was entered against her in favour of TCP in default of Defence. She also did not appear at the trial.

The seventh defendant, Midton Acrylics Ltd. (“Midton”), like Jamy, is a manufacturer of Lucites. The eighth defendant, Mr. Brian Johnston, is a director of Midton. Midton and Mr. Johnston came to terms with TCP before the trial and they did not appear, and were not represented, at it.

While, it seems, TCP had suspicions about matters in advance of receiving it, for practical purposes what this action was about was what was said in a letter dated 11 December 2009 written by Mr. Richard Miskella of Lewis Silkin LLP, solicitors, to Mr. Howard Lewis-Nunn of the solicitors acting on behalf of TCP, Rochman Landau LLP. The letter is important for a number of reasons, and it is appropriate to quote substantially the whole of it:-

“ART Design Group Limited (“ART”), Andrew Beckett (“AB”), Robert Fagliarone (“RF”), Tony Perry (“TP”, AB, RF and TP together the “Owners”) and The Corporate Presence Limited (“TCP”)

Further to our call and emails earlier this week, I set out below, as previously volunteered, the fullest account possible in the time available of ART’s trading history, including its inception. I have also set out other activities of the Owners, which are relevant to TCP.

Executive summary

The Owners have suspended ART’s trading. Enclosed with my letter at Exhibit 1 are the corporate documents of ART, including a blank share certificate and stock transfer form. The Owners hereby gift legal and beneficial ownership of ART to TCP, and invite TCP to fill out the stock transfer form as it sees fit.

The Owners unreservedly apologise for any difficulties caused to TCP by their actions and will make themselves available to answer any further questions which TCP might have, once it has considered my letter.

Background to my letter

As previously explained to you by telephone, last week AB took advice from me regarding his position at TCP and his suspension. He gave me a full explanation of his activities (see further below). He was dismayed to discover the potential legal analysis which could be placed upon his actions and those of the Owners generally. He immediately determined to give voluntary disclosure of his activities to TCP, and arranged an urgent meeting with RF and TP to explain the situation.

RF and TP were equally concerned by the situation, and met with me and AB this week. Following my meeting with them they also immediately determined to join with AB in giving voluntary disclosure of their activities. The Owners also determined to suspend trading of ART and to gift ART to TCP.

The Owners’ actions were inspired by naivety rather than any malicious intent.

Genesis of ART

In March 2008 the Owners became extremely concerned about the prospects of losing their jobs. As a result, they began discussing what they could do next, if the worst case scenario happened. In April 2008, they decided to work together and form a new company. They chose the name ART Design Group in May 2008.

Activities prior to the establishment of ART

RF took a copy of TCP’s artwork and logos in or around August/September 2008. This is on the drive which has been returned under cover of my letter. There is one more copy of these artwork and logos. This was provided by RF to a graphic design company called Cuttin-Edge Solutions Limited. This company operates from France. This copy of TCP’s artwork and logos is being couriered to me at this firm’s offices, and I will deliver it up to you as soon as it is received. No copies have been retained of any of this data by any of the Owners, directly or indirectly, and no copies of the retrieved copy will be made.

RF also took samples of TCP’s acrylic blocks from late 2008 until June 2009. These are also in the box which accompanies my letter. No copies have been retained of any of these samples by any of the Owners, directly or indirectly.

Around September 2008 the Owners began working with a UK producer of acrylic blocks called Jamy Limited (“Jamy”). A small number of jobs were carried out and invoiced by a company called NickNames Limited, which is an associated company of Jamy. The orders placed with Jamy are set out in Schedule 1. This lists the date of the transaction, which Owner placed the order, who the client was, the invoiced amount and the gross profit realised (by way of commission, where identified). Exhibit 2 contains supporting documentation, showing the invoices raised and spreadsheets of transactions provided by Jamy to ART.

The commission payments were made into TP’s personal bank account. Exhibit 9 is an extract from TP’s personal bank statements from January 2008 onwards, showing all payments made into it, commencing January 2009. You will see that payments numbered [a] to [d] in Exhibit 9 represent the payments made by NickNames Limited related to the activities listed in Schedule 1.

In November 2008 the Owners met with a web designer to discuss ART’s website and the designer began to create ART’s website around December 2008.

In December 2008 Jeff Sehgal, CEO of TCP’s parent company The Corporate Presence Inc., discovered the existence of one of the jobs that had been produced by Jamy and raised this with AB. Also in December 2008, TP’s employment with TCP terminated pursuant to a compromise agreement.

Formation of ART

ART was formed on 18 February 2009. TP registered ART with Companies House (see Exhibit 1). TP appointed his sister as both director and company secretary. She lives in France and took no part in this process. ART’s postal address was registered as a PO Box number in Bristol. ART’s company bank account was opened at Barclays in March 2009. I enclose a copy of the latest bank statement at Exhibit 3 to my letter, and also enclose RF’s bank card. TP and AB were issued with bank cards but have destroyed them. RF believes the account may be registered for online banking. He is checking this and if correct he will provide the access details on Monday.

AB registered the website addresses: www.art-design-group.com;www.art-design-group.co.uk; www.artdesigngroup.co.uk, www.artdesigngroup.eu; www.artdesignlimited.com and www.art-design-group.org in his name. The .com website was active from around March 2009 until Monday 7 December 2009. The others were never active. The invoices for the domain name registration are at Exhibit 4.

ART’s trading activities

ART operated informally. As a result it does not have any management or other accounts. No book-keeping of any kind was carried out. ART has contracted with 3 manufacturers, Jamy, Midton Acrylics Limited (“Midton”) and Neelpure Developing Company Limited (“Neelpure”). The only records which the Owners have of transactions are the manufacturers’ invoices and payment records in bank accounts. Those which the Owners have are provided in the supporting documentation to my letter.

TP started cold-calling potential clients and directing them to ART’s website in late February 2009. These included contacts of TCP known to each of the Owners. The current contact lists of TP, RF and AB are at Exhibit 5.

ART engaged Midton to manufacture acrylic blocks for ART in March 2009. They instructed Midton to invoice clients on ART’s behalf and to maintain a client account for ART. This is apparently quite a common arrangement for Midton. Schedule 2 sets out all orders placed by the Owners and/or ART with Midton, in the same format as Schedule 1. Exhibit 6 contains the same categories of supporting documentation as Exhibit 2, together with commission lists and statements.

RF served notice of resignation as an employee of TCP in March 2009. He worked his notice, which expired in June 2009.

In July 2009 TP sent hundreds of spam emails to contacts. These emails have been deleted due to storage restrictions on the ART website (see further ART IT systems below).

On 3 July 2009 Midton made a payment of £6,543.37 by cheque into TP’s wife’s personal account. Transaction [h] in Exhibit 9 represents this payment. This money remained in TP’s wife’s account and was used for expenses and forward orders for crystal.

In September 2009 the Owners took their only profit from ART. Midton transferred £13,710.33 to TP’s personal account, and TP distributed £3,500 to RF and AB by personal cheques. AB’s cheque was paid at his sole discretion to his wife’s personal account, see Exhibit 12 for her bank details. Transactions [e]. [f] and [g] in Exhibit 1 represent respectively the payment in from Midton and the payments out to RF and AB. Transaction [e], the payment from Midton, was made into a Halifax account which is TP’s wife’s personal account at Exhibit 9.

In July 2009 ART engaged a Chinese glass manufacturer, Neelpure, to make some glass artefacts for clients. Schedule 3 sets out the transactions entered into in the same format as schedules 1 and 2. Exhibit 7 contains the relevant supporting documentation.

AB resigned from his employment with TCP on 29 October 2009. He is currently working his notice period which expires on 31 December 2009.

ART’s bank account was only used for expenses, crystals and acrylics. All commission was paid into TP’s account or his wife’s account.

ART IT systems

ART’s email system is hosted externally by One Smart Host. Each of the Owners operated one or more email addresses. The live ART addresses and passwords are at Exhibit 4.

As TCP is now the new owner of ART, the Owners acknowledge that TCP is entitled to access their email addresses to search for relevant information, and to continue ART’s trading if TCP so decides. TCP is also entitled to change their passwords. The Owners will not access these email addresses again.

The particular ART email facility which has been leased does not permit extensive storage of old emails. For this reason the Owners have periodically deleted the contents of their various email addresses. The Owners believe that it may be possible to reconstruct their email activities by contacting One Smart Host, and acknowledge TCP may wish to do so.

ART’s website is also hosted by One Smart Host. The documentation is at Exhibit 4. AB has instructed Aaron Wardle, AB’s contact at One Smart Host, that TCP is now the new owner of the ART website, and that TCP may do as it wishes with the websites.

Other documents

My clients have conducted a thorough search to ensure that they have provided everything that they can to you. TP has a memory stick at his home in Kent. He will be delivering it to my firm’s office on Monday, and I will immediately forward it to you.

In the event that further relevant material comes to light my clients will immediately send this to you.

Undertakings

My clients volunteer the following undertakings:

1.

My letter is a true and accurate record of their activities;

2.

They have not withheld details of any relevant transactions;

3.

They have not made any income or profits other than that which is disclosed in my letter;

4.

They have not retained any property or confidential information of TCP. I have retained a copy of the file enclosed with my letter, for the purposes of this matter only and will destroy it as soon as this matter is resolved; and

5.

They will not use any confidential information of TCP.

Next steps

Some banking records and invoices have not been provided by the suppliers. However the commission statements and commission lists detail all the transactions. My clients have provided everything they possibly could in the time available. TP will provide his memory stick on Monday, as previously stated, and the copy of the TCP artwork and logos will be returned as soon as received from France.

As previously explained, the Owners are ready to respond to any questions or requests for further information. Please do not hesitate to contact me if you wish to discuss any aspect of my letter and supporting documentation.”

Mr. Miskella did not attempt, in his letter dated 11 December 2009, to analyse in legal terms the effect of what he was saying on behalf of Mr. Perry, Mr. Beckett and Mr. Fagliarone. However, I think that it is uncontroversial that there would have been terms implied into the contract of employment of each by TCP, if not expressed therein, to the effect that each would serve TCP with good faith and fidelity and that each would seek to maintain a relationship of mutual trust and confidence with TCP and not do anything which was calculated to damage that relationship. What was admitted in the letter appeared to amount to breaches of those terms on the part of each of Mr. Perry, Mr. Beckett and Mr. Fagliarone. I do not think that discussions between Mr. Perry, Mr. Beckett and Mr. Fagliarone about the prospects of TCP, and giving some consideration to their respective futures outside of TCP, amounted to breaches of the relevant terms. However, starting to work with Jamy whilst each of Mr. Perry, Mr. Beckett and Mr. Fagliarone were still employed by TCP was obviously a breach and involved diverting away from TCP work which otherwise TCP might have had a chance of obtaining. The taking by Mr. Fagliarone of artwork, logos and acrylic blocks belonging to TCP was, I think, clearly also in breach of the terms which I have mentioned. Depending upon whether there were, in any relevant contracts, covenants restricting the freedom of the appropriate individual from competing with TCP after his contract of employment had come to an end, it may be that the operations undertaken by Mr. Perry and Mr. Fagliarone after they had each ceased their employments with TCP amounted to breaches of contract. Active involvement by Mr. Beckett in the business of ART Design Group Ltd. (“ART”) at any point appears to have been a breach of the terms which I have mentioned, for his employment with TCP did not come to an end prior to the writing by Mr. Miskella of his letter dated 11 December 2009.

On the face of it, by instructing Mr. Miskella to write to Mr. Lewis-Nunn in the terms he did in the letter dated 11 December 2009 each of Mr. Perry, Mr. Beckett and Mr. Fagliarone was seeking to make a clean breast of what he had done and to face up to the consequences. Subsequently, by a letter dated 23 December 2009 written on their behalfs by Mr. Miskella to Mr. Lewis-Nunn, each offered to pay to TCP the amount which he had received as profit from what he had done which was admitted in the letter, £3,500, in addition to handing over to TCP the assets of ART, including cash at bank and sums due from debtors amounting to about £30,000. Those offers were rejected.

What TCP at length resolved to do was to commence proceedings against all of those identified in the letter dated 11 December 2009 save the Chinese company, Neelpure. In this action there were named as defendants not only Mr. Perry, Mr. Beckett and Mr. Fagliarone, but also Mrs. Perry, Mrs. Beckett, Mr. Perry’s sister, Mrs. Eveleigh, Midton, Jamy and NickNames. Moreover the directors of Midton, Jamy and NickNames were also joined as defendants.

It was difficult, in the light of the roles of each as described in the letter dated 11 December 2009, to see any justification for joining Mrs. Perry, Mrs. Beckett, Mrs. Eveleigh, Midton, Mr. Johnston, Jamy, NickNames, Mr. Peter Burt, Mr. Nicholas Burt or Mr. Keith Allen as defendants. The endorsement of “Brief details of claim” on the claim form, issued on 14 June 2010, did not even try. The endorsement read, simply:-

“The Claimant claims damages, delivery up, account of profits, and interest from the relevant Defendants for breaches of contract, and for breaches of director’s duties.”

None of the fourth to thirteenth defendants, inclusive, had ever entered into a relevant contract with TCP or been a director of that company.

Of the fourth to thirteenth defendants, only Mrs. Beckett sought, before trial, to be dismissed from the action on the grounds that the claim against her had no real prospect of success. As I have noted, I heard her application for summary judgment on 21 May 2012 and acceded to it. Prior to the trial, in fact by a consent order dated 2 March 2012, TCP came to terms with Midton and Mr. Johnston. Those terms provided for the claims against Midton and Mr. Johnston, and a counterclaim on behalf of Midton, to be stayed, and for TCP to pay Midton and Mr. Johnston costs agreed at £65,000. However, at the start of the trial, in the light of the witness statements filed on behalf of TCP, the witness statements filed on behalf of each of Mrs. Perry, Jamy, NickNames, Mr. Peter Burt, Mr. Nicholas Burt and Mr. Keith Allen, and contemporaneous documents relied upon on behalf of TCP, it was necessary to consider whether the claims against any of those parties had any real prospect of success.

The way in which the Particulars of Claim was pleaded made it somewhat difficult to understand exactly how the case for TCP was put against any defendant. So far as the defendants other than Mr. Perry, Mr. Beckett and Mr. Fagliarone were concerned the critical paragraph was paragraph 26:-

“By reason of their activities set out above, Mrs. Beckett, Mrs. Perry, Ms Eveleigh, Midton Acrylics, Mr. Johnston, Jamy, NickNames, Peter Burt, Nick Burt and Mr. Allen knowingly assisted and/or induced or procured and/or conspired with Mr. Perry, Mr. Beckett and Mr. Fagliarone to breach their contractual and equitable obligations to the Claimant and to injure the Claimant’s business.”

It thus appeared that what was being said against each of the defendants other than Mr. Perry, Mr. Beckett and Mr. Fagliarone that he, she or it had (i) knowingly assisted in a breach of a fiduciary obligation by Mr. Perry, Mr. Beckett and/or Mr. Fagliarone; (ii) procured a breach of contract on the part of Mr. Perry, Mr. Beckett and/or Mr. Fagliarone and (iii) conspired with all of the other defendants that Mr. Perry, Mr. Beckett and/or Mr. Fagliarone should breach his contractual and fiduciary obligations. So far as liability was concerned it appeared that the allegations of conspiracy added nothing to the allegations of knowing assistance in breaches of fiduciary obligations and procuring breaches of contract. However, it appeared that, if the conspiracy allegations were made out, each conspirator could be held liable in damages for all of the consequences of the conspiracy, rather than just that part in which he, she or it participated.

The allegations in paragraph 26 of the Particulars of Claim are not capable of being understood without considering what were described in that paragraph as “their activities set out above”. Before coming to the activities alleged, it is convenient to remind oneself of the relevant principles of law to be applied to the allegations.

For the reasons explained by Lord Nicholls of Birkenhead in giving the advice of the Privy Council in Royal Brunei Airlines Sdn. Bhd. v. Tan [1995] 2 AC 378, to describe the relevant wrongdoing as “knowingly assisting” in a breach of a fiduciary obligation is misleading and may tend to obscure the fact that what is necessary to be proved to make out the case is dishonesty. At page 391B – D of the report Lord Nicholls said:-

“Before leaving cases where there is real doubt, one further point should be noted. To inquire, in such cases, whether a person dishonestly assisted in what is later held to be a breach of trust is to ask a meaningful question, which is capable of being given a meaningful answer. This is not always so if the question is posed in terms of “knowingly” assisted. Framing the question in the latter form all too often leads one into tortuous convolutions about the “sort” of knowledge required, when the truth is that “knowingly” is inapt as a criterion when applied to the gradually darkening spectrum where the differences are of degree and not kind.”

Earlier in the advice, at page 385A – C Lord Nicholls had formulated the correct principle in this way:-

“These examples suggest that what matters is the state of mind of the third party sought to be made liable, not the state of mind of the trustee [that is, the person owing the fiduciary obligation]. The trustee will be liable in any event for the breach of trust, even if he acted innocently, unless excused by an exemption clause in the trust instrument or relieved by the court. But his state of mind is essentially irrelevant to the question whether the third party should be made liable to the beneficiaries for the breach of trust. If the liability of the third party is fault-based, what matters is the nature of his fault, not that of the trustee. In this regard dishonesty on the part of the third party would seem to be a sufficient basis for his liability, irrespective of the state of mind of the trustee who is in breach of trust. It is difficult to see why, if the third party dishonestly assisted in a breach, there should be a further prerequisite to his liability, namely that the trustee also must have been acting dishonestly. The alternative view would mean that a dishonest third party is liable if the trustee is dishonest, but if the trustee did not act dishonestly that of itself would excuse a dishonest third party from liability. That would make no sense.”

What amounts to dishonesty in the context of dishonestly assisting a breach of a fiduciary obligation Lord Nicholls explained at page 389B – G:-

“Before considering this issue further it will be helpful to define the terms being used by looking more closely at what dishonesty means in this context. Whatever may be the position in some criminal or other contexts (see, for instance, Reg. v. Ghosh [1982] QB 1053), in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher and lower values according to the moral standards of each individual. If a person knowingly appropriates another’s property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.

In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others’ property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless. …”

Finally, at page 392A – C Lord Nicholls stated his conclusion as to the obligations of those dealing with dishonest trustees:-

“There remains to be considered the position where third parties are acting for, or dealing with, dishonest trustees. In such cases the trustees would have no claims against the third party. The trustees would suffer no loss by reason of the third party’s failure to discover what was going on. The question is whether in this type of situation the third party owes a duty of care to the beneficiaries to, in effect, check that a trustee is not misbehaving. The third party must act honestly. The question is whether that is enough.

In agreement with the preponderant view, their Lordships consider that dishonesty is an essential ingredient here. There may be cases where, in the light of the particular facts, a third party will owe a duty of care to the beneficiaries. As a general proposition, however, beneficiaries cannot reasonably expect that all the world dealing with trustees should owe them a duty of care lest the trustees are behaving dishonestly.”

In the result, therefore, as it seems to me, in order to establish liability for dishonestly assisting, or knowingly assisting, a party acting in breach of a fiduciary obligation, it is necessary to demonstrate that the person providing the assistance was acting dishonestly, in the light of what he actually knew at the time, as distinct from what a reasonable person would have known or appreciated. In the present case it was necessary, in my judgment, to demonstrate that those alleged to have dishonestly, or knowingly, assisted Mr. Perry, Mr. Beckett and/or Mr. Fagliarone to act in breach of some fiduciary obligation were aware of the obligation in question, otherwise they could not have assisted dishonestly in the breach of it.

The elements which needed to be considered in the context of an allegation of inducing a breach of contract were considered by the House of Lords in OBG Ltd. v. Allan [2008] 1 AC 1. Lord Hoffmann set out his conclusions on this point, which were shared by the other members of the House, at pages 29D – 30D:-

“39.

To be liable for inducing breach of contract, you must know that you are inducing a breach of contract. It is not enough that you know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realize that it will have this effect. Nor does it matter that you ought reasonably to have done so. This proposition is most strikingly illustrated by the decision of this House in British Industrial Plastics Ltd. v. Ferguson [1940] 1 All ER 479, in which the plaintiff’s former employee offered the defendant information about one of the plaintiff’s secret processes which he, as an employee, had invented. The defendant knew that the employee had a contractual obligation not to reveal trade secrets but held the eccentric opinion that if the process was patentable, it would be the exclusive property of the employee. He took the information in the honest belief that the employee would not be in breach of contract. In the Court of Appeal [1938] 4 All ER 504, 513, MacKinnon LJ observed tartly that in accepting this evidence the judge had “vindicated his honesty … at the expense of his intelligence” but he and the House of Lords agreed that he could not be held liable for inducing a breach of contract.

40.

The question of what counts as knowledge for the purposes of liability for inducing a breach of contract has also been the subject of a consistent line of decisions. In Emerald Construction Co. Ltd. v. Lowthian [1966] 1 WLR 691 union officials threatened a building contractor with a strike unless he terminated a subcontract for the supply of labour. The defendants obviously knew that there was a contract – they wanted it terminated – but the court found that they did not know its terms and, in particular, how soon it could be terminated. Lord Denning MR said, at pp 700 – 701:

“Even if they did not know the actual terms of the contract, but had the means of knowledge – which they deliberately disregarded – that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not.”

41.

This statement of the law has since been followed in many cases and, so far as I am aware, has not given rise to any difficulty. It is in accordance with the general principle of law that a conscious decision not to inquire into the existence of a fact is in many cases treated as equivalent to knowledge of that fact: see Manifest Shipping Co. Ltd. v. Uni-Polaris Insurance Co. Ltd. [2003] 1 AC 469. It is not the same as negligence or even gross negligence: in British Industrial Plastics Ltd. v. Ferguson [1940] 1 All ER 479, for example, Mr. Ferguson did not deliberately abstain from inquiry into whether disclosure of the secret process would be a breach of contract. He negligently made the wrong inquiry, but that is an altogether different state of mind.”

The important principle for present purposes is that it is necessary, in order to establish liability for inducing or procuring a breach of contract, to prove that the party alleged to have induced or procured the breach actually knew of the term or terms of the contract breach of which was alleged to have been induced or procured. It is not enough that the act complained of amounted to a breach of contract as a matter of law, or on proper construction of the relevant contract. It is not enough that the party alleged to have induced or procured the breach ought reasonably to have known of the term or terms in question and that what he, she or it did amounted to inducing or procuring a breach of it. It is not enough that the party alleged to have induced or procured the breach was negligent in being unaware of the relevant term or terms.

Mr. Antony Sendall, who appeared at the trial on behalf of TCP, contended that the allegations of conspiracy were of a conspiracy to use unlawful means, the unlawful means in question being dishonestly assisting in a breach of a fiduciary obligation, and/or inducing or procuring a breach of contract, on the part of Mr. Perry, Mr. Beckett and/or Mr. Fagliarone. He reminded me that in Lonrho Plc v. Fayed [1992] 1 AC 448 the law as to what had to be proved in order to make out a case in conspiracy to cause harm by unlawful means had been clarified. The relevant principle was cogently summarised by Lord Bridge of Harwich, giving the only substantive speech, at pages 465G – 466A:-

“The reasoning in these passages is both clear and cogent. Where conspirators act with the predominant purpose of injuring the plaintiff and in fact inflict damage on him, but do nothing which would have been actionable if done by an individual acting alone, it is in the fact of their concerted action for that illegitimate purpose that the law, however anomalous it may now seem, finds a sufficient ground to condemn their actions as illegal and tortious. But when conspirators intentionally injure the plaintiff and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests; it is sufficient to make their action tortious that the means used were unlawful.”

However, there are other features of a conspiracy which need to be noted. They are to be found conveniently set out in Clerk & Lindsell on Torts, 20^th ed. At paragraph 24-92 of that work it is noted that:-

“The tort requires an agreement, combination, understanding, or concert to injure, involving two or more persons. Of the various words used to describe a conspiracy, “combination” has been preferred to “agreement” on the ground that “agreement” might be thought to require some agreement of a contractual kind, whereas all that is needed is a combination and common intention.”

Then at paragraph 24-94 the authors write:-

“The conspirators need not all join in at the same time, nor need they have exactly the same aim in mind, but the possession of a separate aim may be evidence that the party concerned has not participated in the combination at all, at any rate if he acted throughout in ignorance of the true facts. The question is how far the defendant was aware of the plan and then “joined in the execution” of it. A person may be a party to a combination to use unlawful means, even though he himself cannot commit the unlawful acts in question, for example a person who joins parties to a contract in threats that they will break that contract, thereby constituting a conspiracy to intimidate. On the other hand, persons who participated in meetings which formed part of the combination but who played no active role will not be parties to the conspiracy. The question is whether a particular defendant, having regard to his knowledge, utterances and actions, was sufficiently a party to the combination and the common design. It would appear that the question whether a person is a party to a combination constituting a conspiracy is essentially the same as whether he is liable as a joint tortfeasor in procuring a wrong, by reason of a common design.”

I think that it follows that, in order to be liable as a conspirator participating in a conspiracy to use unlawful means, a party must at least be aware of the means intended to be used, aware that the use of those means would be unlawful and agree to the use of those means. If the party in question was not aware of the means intended to be used, or not aware that the use of those means would be unlawful, it could not be said that that party was a party to a combination to use unlawful means. Thus in a case such as the present, in which the means alleged to be unlawful were dishonestly assisting in breaches of fiduciary obligations and inducing or procuring breaches of contract, it was not possible, by putting the claim in conspiracy, to avoid the need to prove the knowledge of the fiduciary obligation or particular contract term, as the case might be, necessary to pursue substantive claims for dishonestly assisting in breaches of fiduciary obligations or for inducing or procuring breaches of contract.

The “activities set out above” referred to in paragraph 26 of the Particulars of Claim in relation to Mrs. Perry, Mrs. Eveleigh, Jamy, Nicknames, Mr. Peter Burt, Mr. Nicholas Burt and Mr. Allen were set out in paragraphs 24 and 25 of the Particulars of Claim and were these:-

“24.

…

(2)

Instead of seeking to procure work for the Claimant, Mr. Perry, Mr. Beckett and Mr. Fagliarone utilised the services of Midton Acrylics, Jamy, NickNames and a Chinese company called Neelpure Developing Company Limited (“Neelpure”) (who also compete with the Claimant) in order to produce products for clients in competition with the Claimant.

…

(8)

In about June 2008, Mr. Perry and Mr. Fagliarone met with Peter Burt, Nick Burt and Keith Allen in order to discuss and agree the proposed working relationship between A.R.T. Design Group and Jamy and/or NickNames.

(9)

In about October 2008, Mr. Perry, Mr. Beckett and Mr. Fagliarone met with Peter Burt, Nick Burt and Mr. Allen of Jamy again to discuss their proposed working relationship.

…

(13)

Midton Acrylics, Mr. Johnston, Jamy, NickNames, Peter Burt, Nick Burt and Mr. Allen were at all material times aware of:

(a)

the employment relationship between Mr. Perry, Mr. Beckett and Mr. Fagliarone on the one hand and the Claimant on the other;

(b)

the fact that Mr. Perry and Mr. Fagliarone were or had been directors of the Claimant;

(c)

the work being done for A.R.T. Design Group was not work for the Claimant but was for the personal benefit of Mr. Perry, Mr. Beckett and Mr. Fagliarone;

(d)

the work being done for A.R.T. Design Group was work that was being undertaken in direct competition with the Claimant and was being done at least in part by misusing resources of the Claimant and was likely to and was intended to cause loss and damage to the Claimant.

…

25.

…

(3)

When the company A.R.T. Design Limited was registered on 18 February 2009, Mr. Perry, Mr. Beckett and Mr. Fagliarone took steps to conceal its existence and significance from the Claimant despite their obligations to disclose their activities. In particular:

(a)

Ms Eveleigh was appointed as a director and company secretary in order to conceal the true ownership and involvement in the company;

…

(7)

In order to conceal its activities, A.R.T. Design Group operated by passing the business unlawfully obtained by them or diverted away from the Claimant to Midton Acrylics, Jamy, NickNames or Neelpure and allowing those companies to invoice the clients direct and then A.R.T. Design Group would receive a commission. In doing so, Mr. Perry, Mr. Beckett and Mr. Fagliarone received knowing assistance from Mr. Johnston and/or Peter Burt and/or Nick Burt and/or Mr. Allen.

…

(8)

…

(h)

Despite the fact that A.R.T. Design Group opened a bank account in March 2009, no payments were received into it directly for work done for clients or ‘commisisons’ from Midton Acrylics, Jamy, NickNames or Neelpure. All payments or ‘commissions’ were made to the individual Defendants through personal accounts of one or more of them or by other indirect means as yet unknown to the Claimant. At least two payments of substantial sums of money were paid into the personal bank accounts of individual Defendants. In July 2009, the sum of £6,543.37 was paid by Midton Acrylics into Mrs. Perry’s personal bank account … The Claimant also believes that sums have been retained by Midton Acrylics, Jamy and/or Nicknames [sic] that were due to be paid to one or more of the individual Defendants and/or A.R.T. Design Group and that this was done with the knowing assistance of Mr. Johnston and/or Peter Burt and/or Nick Burt and/or Mr. Allen.”

It was nowhere alleged in the Particulars of Claim that any of Mrs. Perry, Mrs. Eveleigh, Mr. Peter Burt, Mr. Nicholas Burt, Mr. Allen, Jamy or NickNames was actually aware of some particular fiduciary obligation alleged to have been owed by Mr. Perry, Mr. Beckett or Mr. Fagliarone to TCP of which he could be in breach, or of some particular contractual obligation owed by Mr. Perry, Mr. Beckett or Mr. Fagliarone to TCP of which it was contended that the relevant defendant had induced or procured a breach. In those circumstances the claim form and the Particulars of Claim disclosed no reasonable grounds for bringing a claim against any of the fifth, sixth, ninth, tenth, eleventh, twelfth or thirteenth defendant and the allegations in fact made against each of them should be struck out pursuant to the provisions of Civil Procedure Rules Part 3.4(2)(a).

However, the lack of any proper grounds for any claim against the fifth, sixth, ninth, tenth, eleventh, twelfth or thirteenth defendants by TCP was not simply a matter of pleading. If it were, it might be capable of being remedied, as Mr. Sendall sought to do, by producing a proposed Amended Particulars of Claim. However, there was no evidence whatsoever in any of the witness statements exchanged in anticipation of the trial that any of Mrs. Perry, Mrs. Eveleigh, Mr. Peter Burt, Mr. Nicholas Burt, Mr. Allen, Jamy or NickNames was aware at any time prior to the commencement of this action that any of Mr. Perry, Mr. Beckett or Mr. Fagliarone owed, or was said to owe, some fiduciary obligation to TCP, or some particular contractual obligation, which meant that, by doing whatever it was alleged against the particular defendant that defendant did, he, she or it was dishonestly assisting in a breach of a fiduciary obligation or inducing or procuring a breach of contract. The allegations against Mrs. Perry and Mrs. Eveleigh in this regard were spectacularly inadequate. All Mrs. Perry was alleged to have done was to have received an amount in her bank account. All Mrs. Eveleigh was alleged to have done was to have accepted appointment as a director and company secretary of ART. There was not a scrap of evidence that either of them did anything else.

It was accepted by the Messrs. Burt and Mr. Allen, and thus by Jamy and NickNames, that they knew, when they first had dealings with Mr. Perry, Mr. Beckett and Mr. Fagliarone in the context of supplying Lucites to customers of Mr. Perry, Mr. Beckett and Mr. Fagliarone, that each was employed by TCP. Documentary evidence relied upon by Mr. Sendall on behalf of TCP showed that some designs sent to Jamy for production of Lucites for customers of Mr. Perry, Mr. Beckett and Mr. Fagliarone included the name and logo of TCP. That fact might, perhaps, have alerted Jamy to the risk of claims for breach of copyright. However, when I suggested to Mr. Sendall that in fact the material put before me in the form of witness statements and copies of contemporaneous documents did not prove any case against any of the defendants with whose cases I am concerned in this part of this judgment, he candidly accepted that, at least in relation to the claims against Mr. Peter Burt, Mr. Nicholas Burt, Mr. Allen, Jamy and NickNames, the expectation was that appropriate admissions of knowledge would be elicited in cross-examination of Mr. Peter Burt, Mr. Nicholas Burt and/or Mr. Allen. Consequently, as it seemed to me, it was accepted that the only prospect of success of TCP against Jamy, NickNames, Mr. Peter Burt, Mr. Nicholas Burt or Mr. Allen depended upon, first, Mr. Peter Burt, Mr. Nicholas Burt and/or Mr. Allen, deciding to give evidence on his own behalf and on behalf of Jamy or NickNames, as the case might be; and, second, one or more of them during cross-examination accepting that he was aware of some particular fiduciary obligation owed by Mr. Perry, Mr. Beckett and/or Mr. Fagliarone to TCP, or some particular contractual obligation owed by Mr. Perry, Mr. Beckett and/or Mr. Fagliarone, of which Mr. Perry, Mr. Beckett and/or Mr. Fagliarone would be in breach by reason of the dealings between the person under the obligation and Jamy or NickNames. Thus the whole case depended upon speculative possibilities. Actually, viewed in the context of the injunction directed to the court in Civil Procedure Rules Part 1.1(1) to deal with cases justly, things were both worse and, to a degree, sinister. None of the defendants who appeared before me was represented. Each, including Jamy and NickNames, appeared effectively in person. Consequently the risks that the defendants affected did not understand the legal issues at stake, or the importance, in the circumstances, of the tactical judgment whether or not to give evidence, were high.

In the end I reached the conclusion that the proper course was to strike out the claims against Mrs. Perry, Jamy, NickNames, Mr. Peter Burt, Mr. Nicholas Burt and Mr. Allen in the exercise of my powers under Civil Procedure Rules Part 3.4(2)(a), but taking into account that the pleading deficiencies were not capable of remedy by alleging specifically against any relevant defendant any matter of which there was evidence in any of the witness statements put before me or in any of the contemporaneous documents. On the evidence put before me I should, if a properly pleaded statement of case of TCP disclosed an arguable cause of action against any of the fifth, sixth, ninth, tenth, eleventh, twelfth or thirteenth defendant, have entered summary judgment in favour of that defendant pursuant to Civil Procedure Rules Part 24.2(a)(i). As the proposed Amended Particulars of Claim would, in my judgment, have been susceptible of being the subject of summary judgment in favour of the relevant defendants if permission were granted to amend, the appropriate course was not to grant permission.

But for the judgment entered against her in default of Defence it would have been appropriate to strike out the claims against Mrs. Eveleigh.

Although the way in which the case was put on behalf of TCP was laced with suggestions that what was admitted on behalf of Mr. Perry, Mr. Beckett and Mr. Fagliarone in Mr. Miskella’s letter dated 11 December 2009 was but the tip of the iceberg, in fact there was no real evidence that any of them had done anything other than was admitted in that letter or in their respective Defences in this action.

Mr. Perry admitted that he had sought business for ART after he had left the employment of TCP, but contended that what he admitted did not involve any breach of any obligation owed to TCP. He also accepted, I think, that he had collected the money which was raised for himself, Mr. Beckett and Mr. Fagliarone from the transactions diverted from TCP by Mr. Beckett and Mr. Fagliarone. That involvement on his part in those activities, as it seems to me, amounted to breach by him of his obligations of good faith, fidelity and mutual trust and confidence during the currency of his employment by TCP.

Mr. Beckett, in addition to the transactions which he accepted he had diverted away from TCP, did accept in cross-examination that he had acted as a conduit between a designer based in Germany, Alexander Kling, and clients of Mr. Kling who wished to obtain Lucites, on the one hand, and ART, on the other, but otherwise said that he had no day-to-day involvement in ART at all. Although, on the face of it, Mr. Beckett was in breach of his contract of employment by TCP in failing to seek to secure for TCP the work being offered by Mr. Kling’s clients, in fact TCP seems to have suffered no loss thereby. TCP was not prepared to deal with Mr. Kling or clients for whom he acted unless and until Mr. Kling paid TCP sums outstanding in respect of previous work, and paid in advance for any new work. Mr. Kling, on the other hand, was not prepared to deal with TCP on those terms, as his ability to pay TCP depended upon him being paid by his own clients, and because, amongst other things, TCP had made direct contact with one of his clients and had caused difficulties between him and that client. Mr. Beckett accepted that Mr. Perry and Mr. Fagliarone had each, after the termination of his respective employment by TCP, set about obtaining work for ART and was successful in doing so. Notwithstanding that, apart from his role in relation to Mr. Kling and his clients, Mr. Beckett played no part in the day-to-day conduct of the business of ART, as he continued throughout to be employed by TCP, in my judgment strictly he owed, by his obligations of good faith, fidelity and mutual trust and confidence, a duty to TCP to seek to obtain for TCP all of the work which Mr. Perry and Mr. Fagliarone in fact obtained for ART, notwithstanding that the obtaining of some or all of that work did not amount to any breach of contract on the part of the person obtaining it.

Mr. Fagliarone admitted diverting work from TCP whilst employed by TCP, but contended, like Mr. Perry, that what he did on behalf of ART after the cessation of his employment by TCP was not in breach of any obligation owed to TCP. However, Mr. Fagliarone continued to be an employee of TCP during a period when Mr. Perry was obtaining business for ART and, as it seems to me, in respect of that period Mr. Fagliarone strictly owed a like duty to TCP to that which I have mentioned in the case of Mr. Beckett, to seek to obtain for TCP all of the work which Mr. Perry in fact obtained for TCP. These analyses may seem somewhat unreal, especially in relation to Mr. Beckett, who told me that, essentially, he did not actually know what Mr. Perry and Mr. Fagliarone were doing in terms of seeking business for ART after each had left TCP. However, I think that my findings are the logical consequence of ART being a joint enterprise of Mr. Perry, Mr. Beckett and Mr. Fagliarone. Essentially, whilst ART was operating and Mr. Fagliarone and Mr. Beckett were still employed by TCP, they were competing with their employer through their interests in ART, even if Mr. Perry, or (in the case of Mr. Beckett) later Mr. Fagliarone, was acting independently and without his knowledge.

In his closing submissions Mr. Sendall contended that a consequence of Mr. Beckett strictly being in breach of his obligations of good faith, fidelity and mutual trust and confidence by reason of being interested in the business of ART whilst continuing to be employed by TCP was that Mr. Perry and Mr. Fagliarone were liable for inducing or procuring Mr. Beckett to breach those obligations in that way and/or conspired together and with Mr. Beckett that he should breach those obligations. I do not accept those submissions. For the reasons which I have given Mr. Perry and Mr. Fagliarone could only be liable for inducing or procuring Mr. Beckett to breach the terms of his contract of employment in relation to good faith, fidelity, and mutual trust and confidence if each of them knew of the relevant contract terms and knew that Mr. Beckett being involved with ART whilst still employed by TCP amounted to a breach of them. Mr. Fagliarone in terms in cross-examination denied being aware of the terms of Mr. Beckett’s contract. As non-lawyers one would not expect either Mr. Fagliarone or Mr. Perry to be aware that the terms as to good faith, fidelity and mutual trust and confidence were to be implied into a contract of employment, if not expressed, or that, on the rather technical grounds which I have explained, by being involved in ART whilst employed by TCP Mr. Beckett was in breach of them. There was no evidence to justify the conclusion that either Mr. Perry or Mr. Fagliarone did know that, by his involvement in ART whilst continuing to be employed by TCP, Mr. Beckett was in breach of the implied terms as to good faith, fidelity and mutual trust and confidence. Consequently it could not be held that either of them induced or procured Mr. Beckett to breach those obligations. By parity of reasoning there was no basis on which to find any conspiracy to induce or procure Mr. Beckett to breach those obligations.

The pleaded case of TCP against each of Mr. Perry, Mr. Beckett and Mr. Fagliarone as to liability was not presented as clearly as it might have been. What was alleged as the legal foundation for the claims was:-

“15.

Mr. Perry, Mr. Beckett and Mr. Fagliarone were employed by the Claimant under the terms of written contracts of employment of various dates (“the Employment Contracts”). Copies of their respective Employment Contracts are attached as Schedule A to these Particulars of Claim.

16.

The Claimant will rely at trial upon the whole of the Employment Contracts for their full terms and effect, but in particular it relies upon the following clauses:

(1)

Clause 3: Duties

(2)

Clause 10: Outside Interests

(3)

Clause 12: Confidentiality

(4)

Clause 13: Early Termination

(5)

Clause 16: Duties Upon Termination

(6)

Clause 17: Restrictions

17.

In addition to the express terms of their Employment Contracts, each of Mr. Perry, Mr. Beckett and Mr. Fagliarone’s employment relationships with the Claimant were covered by the following implied terms:

(1)

An implied term that they would serve the Claimant with good faith and fidelity; and

(2)

An implied term that the parties would maintain at all times during the employment a relationship of mutual trust and confidence and neither the [sic] party would act or omit to act in a manner calculated or likely to destroy or materially diminish that relationship.

18.

In addition to his Contract of Employment, Andrew Beckett entered into a Confidentiality and Proprietary Information Agreement dated 29 November 1999. A copy of that agreement is attached as Schedule B to these Particulars of Claim.

19.

The Claimant will rely upon the Confidentiality and Proprietary Information Agreement entered into by Mr. Beckett as a whole at trial for its full terms and effect, but in particular relies on the following terms:

(1)

Clause 1: Confidential Information and Trade Secrets.

(2)

Clause 3: Restrictions.

20.

After Mr. Perry’s employment by the Claimant terminated on 23 December 2008, he entered into a written Compromise Agreement dated 16 January 2009. A copy of the Compromise Agreement is attached as Schedule C to these Particulars of Claim.

21.

The Claimant will rely at trial upon the whole of the Compromise Agreement for its full terms and effect, but in particular, it relies upon the following clauses:

(1)

Clause 7: Secrecy

(2)

Clause 9: Post Termination Restrictions

(3)

Clause 10: Past and Future Conduct of Employee

(4)

Clause 11: Company Property

(5)

Schedule 4.

22.

In addition to their contractual obligations, each of Mr. Perry, Mr. Beckett and Mr. Fagliarone by reason of their senior positions of trust within the Claimant’s business and in the case of Mr. Perry and Mr. Fagliarone, their directorships of the Claimant, owed fiduciary obligations to the Claimant. In particular, they each owed the following obligations:

(1)

During his directorship/employment, to act at all times in the way he considered, in good faith, would be most likely to promote the success of the Claimant for the benefit of its members as a whole, and in doing so to have regard (amongst other matters) to:

(a)

The likely consequences of any decision in the long term;

(b)

The interests of the Claimant’s employees;

(c)

The need to foster the Claimant’s business relationships with suppliers, customers and others;

(2)

During his directorship/employment, to avoid any situation in which he had or could have a direct or indirect interest that conflicted or possibly could conflict with the interests of the Claimant. In particular, this duty applied to the exploitation of any property, information or opportunity of which he became aware while he was a director or senior employee, irrespective of whether or not the Claimant could take advantage of the property, information or opportunity;

(3)

After his directorship, to avoid any situation in which he had or could have a direct or indirect interest that conflicted or possibly could conflict with the interests of the Claimant as regards the exploitation of any property, information or opportunity of which he became aware while he was a director, irrespective of whether or not the Claimant could take advantage of the property, information or opportunity.

23.

Further, during and after his directorship and/or his employment each of Mr. Perry, Mr. Beckett and Mr. Fagliarone owed to the Claimant an equitable obligation of confidence to preserve the confidentiality of the Claimant’s confidential information and/or trade secrets and not to use or disclose that information for his own benefit or for the benefit of others.”

In addition to the allegations of the fiduciary and contractual obligations which I have set out, Mr. Perry, Mr. Beckett and Mr. Fagliarone were also alleged to have been conspirators in paragraph 26 of the Particulars of Claim, which I have already set out, and these allegations were also made:-

“27.

By acting as set out above, each of the Defendants also unlawfully interfered in the Claimant’s trade or business [which really added nothing to the allegation of conspiracy].

28.

Further, the Defendants are in possession of property belonging to the Claimant which they have failed to deliver up and their failure to deliver these items up amounts to wrongful interference. In particular, one or more of the Defendants is/are in possession of Original Artwork files generated by the Claimant which were wrongly removed from the Claimant by one or more of Mr. Perry, Mr. Beckett and Mr. Fagliarone and which should have been returned to the Claimant, but were instead provided to Jamy and/or Midton and/or NickNames.”

The allegations in paragraph 28 of the Particulars of Claim were not really pursued at the trial. Certainly there was no evidence put before me that, notwithstanding what was said in Mr. Miskella’s letter dated 11 December 2009, any defendant retained as at the date of the trial any item of property belonging to TCP.

Seeking to rely upon the whole of the contracts referred to at paragraph 16, the whole of the contract mentioned at paragraph 18 and the whole of the contract pleaded at paragraph 20 was neither necessary nor helpful in considering whether any particular conduct of any relevant contracting party amounted to a breach of contract or not. Identifying particular contractual provisions, the contents of which were neither quoted nor summarised, again was not of much assistance to the reader in understanding the nature of the case of TCP. Actually limited light was shed on the nature of the case by considering the identified clauses, because each contained a number of sub-clauses, some of which appeared to be wholly immaterial to any issue in this action. The alleged fiduciary obligations appeared actually to add little of value to the issues of liability in the action. What the action was in fact about, in relation to Mr. Perry, Mr. Beckett and Mr. Fagliarone, was whether what they, by Mr. Miskella’s letter dated 11 December 2009 and their respective Defences, admitted doing, exposed them to liability to TCP, and, if so, on what grounds and to what extent. No one suggested that he should have been entitled to compete with TCP whilst employed by TCP, so showing that doing so was in breach of a number of separate obligations owed to TCP did not assist TCP in any worthwhile fashion. The only live issues in relation to what any of Mr. Perry, Mr. Beckett and Mr. Fagliarone might have been permitted to do concerned what was done by Mr. Perry and by Mr. Fagliarone after the employment of each by TCP had come to an end.

The contractual position of Mr. Beckett was interesting. He contended that he had refused to sign the version of a contract of employment attached to the Particulars of Claim at Schedule A which bore his name. No signed copy was produced at the trial. I accept the evidence of Mr. Beckett on that point. He agreed that he had signed the contract described as a “Confidentiality and Proprietary Agreement” (“the Beckett Agreement”) dated 29 November 1999 of which a signed copy was adduced in evidence, but the Beckett Agreement appeared not to include any express provisions which were especially material to any issue in this action. The allegations of misuse of confidential information complained of, which perhaps fell within clause 1, really amounted to no more than the contention that Mr. Beckett, insofar as he did seek business for ART or its informal predecessors, based his attempts upon requests made by potential customers to TCP for quotations for Lucites. It is difficult to see that these invitations for quotations were confidential or, if they were, that TCP suffered any loss or damage as a result of any misuse of confidential information, as opposed to diversion of the work in question in breach of the terms as to good faith, fidelity and mutual trust and confidence to be implied into the Beckett Agreement in the absence of any express terms to similar effect. Clause 3 of the Beckett Agreement related only to limitations on Mr. Beckett’s ability to engage in certain forms of activity following the termination of his employment. There was no suggestion that anything he did which was complained of on behalf of TCP occurred after the employment of Mr. Beckett by TCP had come to an end.

Both Mr. Perry and Mr. Fagliarone admitted entering into a form of contract of employment in the terms attached to the Particulars of Claim in Schedule A. Mr. Fagliarone told me that he took the view that that contract of employment might never have come into force, because, although there was provision for his signature to be witnessed, that had never happened. He also considered that the contract ceased to have any effect which it might otherwise have had when he resigned as a director of TCP. In my view Mr. Fagliarone was in error on both of these points. No formality, beyond his own signature and a signature on behalf of TCP, was necessary for the contract to come into existence. The contract regulated the rights and liabilities of TCP and Mr. Fagliarone in relation to the employment of Mr. Fagliarone by TCP. It had, on its face, no impact on the position of Mr. Fagliarone as a director of TCP, which was not an employment, but an office. Consequently the contract was not discharged by Mr. Fagliarone’s resignation as a director of TCP.

Of the clauses specifically identified in paragraph 16 of the Particulars of Claim, these seemed to be in fact the most material to the circumstances of the present action:-

“3.1

The Executive:

(a)

will faithfully and diligently perform such duties and exercise such powers as may be assigned to or vested in the Executive from time to time by or under the authority of the Board in such manner as shall be specified by or under the authority of the Board and shall use his best endeavours to promote the interests of the Company and any Group Member as directed by the Board;

…

(d)

shall devote the whole of his time attention and abilities to the performance of his duties during the Company’s normal business hours of 9.00 am to 6:00 pm Monday to Friday inclusive and at such other times as may reasonably be necessary in the interests of the Company (unless prevented by illness or other incapacity and except as may from time to time be permitted or required by the Board);

…

(h)

shall report to the Board his own wrongdoing and any wrongdoing or proposed wrongdoing of any employee or director of the Company or any Group Member immediately on becoming aware of it.

…

10.1

During the Employment (including without limitation during any period for which clause 2.5) [sic] is operated the Executive shall not (save with the prior written consent of the Board):

(a)

directly or indirectly be engaged, concerned or interested in any capacity in any business, trade or occupation other than that of the Company except as a holder of not more than five per cent. of the issued shares or securities of any companies which are listed or dealt in on any recognised stock exchange or market. For this purpose “occupation” shall include any public, private, or charitable work which the Board considers may hinder or interfere with the performance of the Executive’s duties; or

(b)

introduce to any other person, firm or company other than any Group Member, or transact for the account of himself or any other person firm or company other than any Group Member, business of any kind with which the Company is able to deal.

…

16.1

Upon termination of the Employment for whatever reason or after notice having been served at the request of the Company the Executive shall immediately:

(a)

hand over to the Company all documents, books, materials, records, correspondence, papers and information (on whatever media and wherever located) relating to the business of the Company or any Group Member, any magnetic discs on which information relating to the business is stored and any keys, credit cards and other property of the Company or any Group Member (including in particular any car provided to the Executive) which may be in his possession, custody, care or control and shall provide a signed statement that he has complied fully with the terms of this clause;

(b)

irretrievably delete any information relating to the business of the Company or any Group Member stored on any magnetic or optical disc or memory and all matter derived therefrom which is in his possession, custody, care or control outside the premises of the Company and shall produce such evidence of compliance with this sub-clause as the Company may require;

…

17.2

The Executive shall not either personally or by an agent and either on his own account or for or in association with any other person directly or indirectly for a period of twelve months after the Termination Date:

(a)

in competition with the Company, be employed or engaged or otherwise interested in any Restricted Business;

(b)

in competition with the Company, in respect of Restricted Business, solicit business from or canvass or entice away or endeavour to solicit business from, or canvass or entice away any Counterparty or Prospective Counterparty;

(c)

in competition with the Company, in respect of Restricted Business, have any business dealings with, any Counterparty or Prospective Counterparty;

…

17.3

Nothing in this clause 17 shall prevent the Executive from being engaged in or by, or participating in, any business or entity to the extent that any of the Executive’s activities for such business or entity shall relate solely to:

(a)

geographical locations in which the business or entity does not compete or seek to compete with the Company in the Restricted Business;

(b)

matters of a type with which the Executive was not materially concerned in the 12 months immediately preceding the Termination Date;”

The various expressions used in clause 17 which commenced with capital letters were all defined for the purposes of the relevant contracts. The expression “Termination Date” was defined at clause 1.1 as meaning, “the date on which the Executive’s employment under this agreement terminates”. Other relevant expressions were defined in clause 17.1 at rather greater length:-

“For the purposes of this clause the following words have the following meanings:

(a)

“Counterparty” means any person, firm, company or other entity whatsoever:

(i)

who or which is an investor in the Company at the Termination Date or who or which invested in the Company at any time in the period of 12 months immediately preceding the Termination Date;

(ii)

who or which had regular dealings with the Company in connection with or arising out of the business of the Company at the Termination Date or at any time in the period of 12 months immediately preceding the Termination Date (and shall include without limitation any person, company or other entity with whom there was an actual arrangement for a joint venture with the Company or an arrangement for the provision of goods or services to, by, or in conjunction with the Company);

(iii)

who or which is a client or customer of the Company at the Termination Date or who or which was a client or customer of the Company at any time in the period of 12 months immediately preceding the Termination Date;

and in each case:

(iv)

with whom or with which the Executive had material dealings in the course of the Employment;

(v)

of or about whom the Executive acquired confidential information as set out in clause 11 or trade secrets or material knowledge or material information in the course of the Employment; or

(vi)

with whom or with which any employee who was under the direct or indirect supervision of the Executive had material dealings in the course of his employment,

at any time in the period of 12 months immediately preceding the Termination Date;

(b)

“Prospective Counterparty” means any supplier, client, customer, person, firm, company or other entity whatsoever with whom or with which the Company shall during the 12 months immediately preceding the Termination Date have had negotiations or discussions regarding:

(i)

possible investment in the Company;

(ii)

having regular dealings with the Company in connection with or arising out of the business of the Company;

and in each case

(iii)

with whom or which during such period the Executive shall have had material dealings in the course of the Employment;

(iv)

of whom or which during such period the Executive shall have acquired Confidential Information or trade secrets or material knowledge or material information in the course of the Employment; or

(v)

with whom or which during such period any employee who was under the direct or indirect supervision of the Executive had material dealings in the course of his employment,

during the period of 12 months immediately preceding the Termination Date;

(c)

“Restricted Business” means the business of the Group including but not limited to the design, manufacture, distribution, production or sale of commemorative mementos but limited to the activities with which the Executive was concerned or involved in the course of his employment during the twelve months period immediately prior to the Executive ceasing to be employed or for which the Executive has been responsible during such period;”

The precise provisions of clause 17 of the contracts of Mr. Perry and Mr. Fagliarone were important, because it was contended by each of Mr. Perry, Mr. Beckett and Mr. Fagliarone that what Mr. Perry and Mr. Fagliarone did after the termination of his employment by TCP did not amount to a breach, or, at any rate there were many instances in which what was done did not amount to a breach, of his obligations in clause 17. The points made were essentially, first, that the restrictions in clause 17.2 did not prevent any employee, after termination of his employment, from having dealings with an entity, whether previously a customer of TCP or not, with whom the relevant employee had not had dealings in the course of the last twelve months of his employment, or about whom he had not acquired material knowledge during the course of the last twelve months of his employment, or with whom neither he nor any employee under his supervision had had material dealings during the course of the last twelve months of his employment, because of the definition of the expressions “Counterparty” and “Prospective Counterparty”. The second point was that the exception in clause 17.3(b) had the effect that the restrictions in clause 17.2 did not prevent an employee from embarking on a type of business with which the employee had not been materially concerned during the twelve month period preceding the termination of his employment. The third point was that the exception in clause 17.3(a) had the effect that the restrictions in clause 17.2 did not prevent an employee undertaking even business of the same type as that in which he had been engaged during the twelve month period preceding the termination of his employment if that business was conducted in a geographical location in which TCPdid not carry on business.

The expression “the Group”, which was used in the definition of the expression “Restricted Business” in clause 17.1(c), was defined in clause 1.1 of the relevant contracts as meaning, “the Company [which was named as TCP at the beginning of the contract] and its Group Members”. The expression “Group Member” was defined also in clause 1.1 as meaning:-

“the Employer [not a defined expression, but fairly obviously meaning TCP], any holding company of the Employer (as defined in s.736 of the Companies Act 1985) and any subsidiary undertakings of the Employer or such holding company…”

In his Defence Mr. Perry simply denied in terms any breach on his part of any provisions of his contract of which a copy was included in Schedule A to the Particulars of Claim.

Mr. Fagliarone was a little more forthcoming in his Defence in relation to the impact of the limitations on clause 17 of his contract. His Defence included, in paragraph 11:-

“(6)

It is admitted that the Third Defendant did divert 11 projects away from the Company, namely those projects listed at paragraphs 24(1)(e), (f), (g), (ee), (gg), (hh), (jj), (mm), (yy), (eee) and (ttt) in the period September 2008 to the expiry of his notice period in June 2009. Those jobs were carried out engaging either the Ninth Defendant or the Seventh Defendant to produce Lucite orders which either the Seventh Defendant or the Tenth Defendant, Nicknames Limited, would then invoice for on behalf of ART.

…

(8)

From September 2008 to June 2009 approximately £18,000 in diverted gross sales revenue generated profits of £5,900 for ART from any and all projects with the Ninth Defendant. It is admitted that the Third Defendant diverted seven projects in this period amounting to approximately £8,500 in diverted gross sales revenue which generated profits of £2,700 for the Tenth Defendant.

(9)

It is also admitted that in or about March 2009, the Third Defendant diverted three projects from the Claimant to the Seventh Defendant, resulting in a profit of approximately £3,500 for ART.

(10)

It is admitted that in the majority of the jobs referred to at (8) and (9) above, the Claimant’s artwork was used.

(11)

However, in all cases in which the Third Defendant diverted work away from the Claimant and/or used its artwork, the end client was unaware that the project had not been undertaken by the Claimant and there was therefore no loss to the Claimant over and above any profit made by ART on the specific project.

(12)

Save as set out above, it is denied that the vast majority of the projects listed at clause 24 of the Particulars of Claim (including the two projects with a China based crystal provider, Neelpure Developing Company Limited) were diverted from the Claimant, but in fact resulted from the First and/or Third Defendants cold-calling clients in new industries after the termination of their respective employments with the Claimant. Of the remaining clients listed at paragraph 24(1) of the Particulars of Claim, only a small number (approximately 8) were clients of the Claimant.

(13)

Further, a number of the projects listed came to ART unsolicited via website direction and industry referrals after the date of termination of employment of the First and Third Defendant and would not have gone to the Claimant in any event.

(14)

It is denied that the job listed at paragraph 24(1)(a) could have been produced by the Claimant’s main acrylic producer to the Claimant due to limitations with their manufacturing capabilities.”

In his Defence Mr. Beckett made, at paragraph 11(9), (10) and (11), the same points as those pleaded at paragraph 11(12), (13) and (14) of the Defence of Mr. Fagliarone. He also made these admissions:-

“11… (6) It is admitted that the Second Defendant did divert to Jamy Limited (the Ninth Defendant) a total of 8 projects in relation to 5 clients (4 projects for PWC [paragraph 24(1)(iii)] and one each for the clients referred to at paragraphs 24(1)(c), (u), (lll), (www);

(a)

The first of these projects was diverted away from the Claimant to the Ninth Defendant in September 2008.

(b)

The diversion of the above-mentioned 8 projects took place between September 2008 to December 2008;

(c)

It is averred that if the Claimant had carried out the said projects it would have suffered a loss on the clients referred to at paragraphs 24(1)(c) and (www) and on the remaining projects the Claimant would have made a profit of approximately £3,400.

(d)

The Second Defendant denies diverting any business from the Claimant to Midton (the Seventh Defendant). Of the parties set out in paragraph 24(1), the only one in which the Second Defendant was involved was that set out at (xx), however it is denied that this was a client of the Claimant.

(6)

It is admitted that in relation to some of the jobs referred to at (8) and (9) [sic] above, the Claimant’s artwork was used.”

No Reply was served on behalf of TCP to any Defence served in this action.

I did not understand it to be in dispute that the points taken by Mr. Fagliarone and Mr. Beckett as to the effect of clause 17 of the contracts made between TCP and, on the one hand, Mr. Perry, and, on the other, Mr. Fagliarone in the light of the limitations upon which they sought to rely, was sound as a matter of the proper construction of clause 17. The issues between the parties appeared to focus on whether, on the evidence, the facts justified the conclusion that Mr. Perry, or Mr. Fagliarone, had not, by reason of his participation in some one or more of the transactions admitted by Mr. Perry, Mr. Beckett and Mr. Fagliarone, been in breach of the provisions in clause 17.2. Obviously that was only relevant to a transaction occurring after the termination of the employment of Mr. Perry, so far as the liability of Mr. Perry was concerned, or, so far as the liability of Mr. Fagliarone was concerned, a transaction occurring after the termination of his employment. However, the point was of significance to Mr. Beckett because of the allegations that he had conspired with Mr. Perry and Mr. Fagliarone that all of them should act in breach of contractual provisions. Mr. Beckett and Mr. Fagliarone could not have conspired with Mr. Perry to use unlawful means, in the form of breaching provisions of a contract binding upon Mr. Perry, if what Mr. Perry did was not actually in breach of his contract. Absent an intention to cause harm, it is not unlawful for two or more individuals to agree to do something which the law permits. The same analysis applies to what Mr. Fagliarone did after the period of his employment by TCP came to an end.

As against Mr. Perry reliance was placed, as justifying the claims against him, also upon the written compromise agreement (“the Perry Compromise”) dated 16 January 2009 made between TCP and Mr. Perry. Actually, as it seemed to me, the provisions of the Perry Compromise added nothing of value to the provisions of the contract of employment entered into between TCP and Mr. Perry. Apart from clause 7, which was concerned with secrecy and appeared to have little or nothing to do with any of the matters complained of in this action, the provisions in the actual Perry Compromise, as opposed to the schedules to it, which were specifically identified in the Particulars of Claim as relied upon were:-

“9.

Post-Termination Restrictions

In consideration of £100 which shall be subject to deduction of tax and National Insurance contributions at the applicable rate the Employee acknowledges and confirms that the obligations undertaken by the Employee under clauses 12 (confidentiality) and 17 (post-termination restrictive covenants) of the Service Agreement are now repeated and will remain in force and effect notwithstanding the termination of the Employee’s employment. They are set out at Schedule 4 for completeness.

10.

Past and Future Conduct of Employee etc

10.1

With the exception of those matters that led to the Employee’s suspension from duties on 7 January 2009, the Employee represents and warrants that he has not committed any breach of any obligations or duties (express or implied) owed to the Employer or any Group Member which could have justified his summary dismissal if he was still employed. With the exception of those matters that led to the Employee’s suspension from duties on 7 January 2009, the Employee further represents and warrants that he has not withheld or failed to disclose any material facts concerning the performance of his duties with the Employee or any Group Member or any breach of any material term (express or implied) of the Service Agreement which may influence the decision of the Employer to enter into this agreement or agree any of its terms.

10.2

The Employee represents and warrants that, at the date of this agreement, he is not employed or engaged in any business whether on behalf of himself or another, that he is not in receipt of any remuneration and that he is not in negotiations which are likely to lead to an offer of employment or any such engagement or to the receipt of remuneration and that he has not received or accepted or agreed to accept any such offer.

11.

Company Property

The Employee represents and warrants that except as expressly provided for in this agreement he will on or before the Termination Date return to the Employer all property, equipment, records, correspondence, documents, files and other information (whether originals, copies or extracts) belonging or relating to the Employer or any Group Member and that the Employee will not retain any copies. At the Employer’s request the Employee shall provide written confirmation of his compliance with this clause.”

The relevant obligations assumed by Mr. Perry under the Perry Compromise therefore simply repeated the obligations contained in his contract of employment.

It did not seem to me that, in the circumstances of the present case, the proper scope of any fiduciary obligation owed by any of Mr. Perry, Mr. Beckett or Mr. Fagliarone to TCP added anything of value in terms of liability to the claims based on alleged breaches of express or implied terms of the relevant contracts. There is sometimes a temptation to consider that employees, or employees holding a particular status within an employer’s organisation, owe, in addition to their contractual obligations, exotic fiduciary obligations which inhibit them from even thinking about breaching the terms of their contracts of employment without contravening the fiduciary obligations. The true position was explained in a very helpful, but lengthy, passage of the judgment of Elias J in University of Nottingham v. Fishel [2000] ICR 1462, at pages 1489D – 1493H:-

“What then are the underlying principles which enable the court to determine whether or not fiduciary obligations arise? Lord Millett, writing extra-judicially has identified three distinct categories of relationship: see his article “Equity’s Place in the Law of Commerce” (1998) 114 LQR 214. Two of them have no application in this case. These are, first, where the obligations arise out of the fact that one party is in a position of influence over another, and, second, where they arise from the fact that one is in receipt of information imparted in confidence by the other. Employees frequently fall into this latter category, because their work will often involve their being made privy to trade or business secrets of their employer. But although the existence of the employment relationship explains why the employee comes to be in possession of such information, and the contract of employment will define the purposes for which such information may be used, the employment relationship itself in such cases is really only incidental to the imposition of the fiduciary duties. As the Court of Appeal noted in Attorney-General v. Blake [1998] Ch 439, this fiduciary obligation of confidence often arises in the course of another fiduciary relationship but it is not derived from it. It is for this reason that the obligation of confidence can continue to subsist even when the employment relationship, and any fiduciary duties arising out of it, has terminated.

The third category identified by Lord Millett in his article, and described by him as the most important, is as follows:

“[it] is the relationship of trust and confidence, which arises whenever one party undertakes to act in the interests of another or places himself in a position where he is obliged to act in the interests of another. The core obligation of a fiduciary of this kind is the obligation of loyalty.” [See Blake, p. 454B]

In Bristol and West Building Society v. Mothew [1998] 1 Ch 1, 18 he elaborated on this analysis, and identified the duties which classically arise from such a fiduciary relationship, saying:

“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of the fiduciary obligations. They are the defining characteristics of the fiduciary.”

It is vital to recognise that, although the key feature identified is the obligation of loyalty, that has a precise meaning, namely the duty to act in the interests of another. This is the fundamental feature which, in this category of relationship at least, marks out the relationship as a fiduciary one. It is necessary to point out, however, that occasionally the concept of fiduciary has been used to describe relationships which lack this distinguishing feature. Millett LJ, strongly criticised the cavalier and imprecise use of the term in Bristol and West Building Society v. Mothew, at p. 16. Moreover, there has been a tendency to describe someone as a fiduciary simply as a means of enabling the courts to impose the equitable remedies. Again, the English courts have treated this as a wholly illegitimate use of the concept adopting, in Attorney-General v. Blake, the words of Sopinka J’s salutary warning in Norberg v. Wynrib (1992) 92 DLR (4^th) 449, 481: “Fiduciary duties should not be superimposed on those common law duties simply to improve the nature or extent of the remedy.”

Employees as fiduciaries

It is important to recognise that the mere fact that Dr. Fishel is an employee does not mean that he owes the range of fiduciary duties referred to above. It is true that in Attorney-General v. Blake [1998] Ch 439 Lord Woolf MR, giving judgment for the Court of Appeal, said that the employer-employee relationship is a fiduciary one. But plainly the court was not thereby intending to indicate that the whole range of fiduciary obligations was engaged in every employment relationship. This would be revolutionary indeed, transforming the contract of employment beyond all recognition and transmuting contractual duties into fiduciary ones. In my opinion the court was merely indicating that circumstances may arise in the context of an employment relationship, or arise out of it, which, when they occur, will place the employee in the position of a fiduciary. In Attorney-General v. Blake itself, as I have indicated, it was the receipt of confidential information. There are other examples. Thus every employee is subject to the principle that he should not accept a bribe and he will have to account for it (and possibly any profits derived from it) to his employer. Again, as Fletcher-Moulton LJ observed in In re Coomber; Coomber v. Coomber [1911] 1 Ch 723, 728, even an errand boy is obliged to bring back my change and “is in fiduciary relations with me.” But his fiduciary obligations are limited and arise out of the particular circumstances, namely that he is put in a position where he is obliged to account to me for the change he has received. In that case the obligation arises out of the employment relationship but it is not inherent in the nature of the relationship itself.

As these examples all illustrate, simply labelling the relationship as fiduciary tells us nothing about which particular fiduciary duties will arise. As Lord Browne-Wilkinson has recently observed in Henderson v. Merrett Syndicates Ltd. [1995] 2 AC 145, 206A: “The phrase ‘fiduciary duties’ is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case.” This is particularly true in the employment context. The employment relationship is obviously not a fiduciary relationship in the classic sense. It is to be contrasted with a number of other relationships which can readily and universally be recognised as “fiduciary relationships” because the very essence of the relationship is that one party must exercise his powers for the benefit of another. Trustees, company directors and liquidators classically fall into this category which Dr. P.D. Finn, in his seminal work on fiduciaries Fiduciary Obligations (1977), has termed “fiduciary offices”. As he has pointed out, typically there are two characteristics of these relationships, apart from the duty on the office holder to act in the interests of another. The first is that the powers are conferred by someone other than the beneficiaries in whose interests the fiduciary must act, and the second is that these fiduciaries have considerable autonomy over decision making and are not subject to the control of those beneficiaries.

By contrast, the essence of the employment relationship is not typically fiduciary at all. Its purpose is not to place the employee in a position where he is obliged to pursue his employer’s interests at the expense of his own. The relationship is a contractual one and the powers imposed on the employee are conferred by the employer himself. The employee’s freedom of action is regulated by the contract, the scope of his powers is determined by the terms (express or implied) of the contract, and as a consequence the employer can exercise (or at least he can place himself in a position where he has the opportunity to exercise) considerable control over the employee’s decision making powers. This is not to say that fiduciary duties cannot arise out of the employment relationship itself. But they arise not as a result of the mere fact that there is an employment relationship. Rather they result from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations. Where this occurs, the scope of the fiduciary obligations both arises out of, and is circumscribed by, the contractual terms; it is circumscribed because equity cannot alter the terms of the contract validly undertaken. The position was succinctly expressed by Mason J in the High Court of Australia in Hospital Products Ltd. v. United States Surgical Corporation (1984) 156 CLR 41, 97 as follows:

“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

The problem of identifying the scope of any fiduciary duties arising out of the relationship is particularly acute in the case of employees. This is because of the use of potentially ambiguous terminology in describing an employee’s obligations, which use may prove a trap for the unwary. There are many cases which have recognised the existence of the employee’s duty of good faith, or loyalty, or the mutual duty of trust and confidence – concepts which tend to shade into one another. As I have already indicated, Lord Millett has used precisely this language when describing the characteristic features which trigger fiduciary obligations. But he was not using the concepts in quite the same sense as they tend to be used in the employment field. Lord Millett was applying the concepts of loyalty and good faith to circumstances where a person undertakes to act solely in the interests of another. Unfortunately, these concepts are frequently used in the employment context to describe situations where a party merely has to take into consideration the interests of another, but does not have to act in the interests of that other. This narrower concept of good faith is graphically demonstrated by the decision of Sir Nicolas Browne-Wilkinson V-C in Imperial Group Pension Trust Ltd. v. Imperial Tobacco Ltd. [1991] ICR 524. The case concerned the nature of the employer’s power in a pension scheme to give or withhold consent to proposed pension increases. The Vice-Chancellor expressly agreed with the concession that this was not a fiduciary power, observing, at p. 532:

“if this were a fiduciary power the company would have to decide whether or not to consent by reference only to the interests of the members, disregarding its own interests. This plainly was not the intention.”

However, he then went on to consider the nature of the term and analysed it as follows, at p. 533:

“In every contract of employment there is an implied term: ‘that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee:’ Woods v. W.M. Car Services (Peterborough) Ltd. [1981] ICR 666, 670, approved by the Court of Appeal in Lewis v. Motorworld Garages Ltd. [1986] ICR 157. I will call this implied term ‘the implied obligation of good faith’”.

His Lordship held that, whilst it was legitimate for the company to look after its own interests in the operation of the scheme, it could not do so for a collateral purpose detrimental to the employees. It is plain that here the implied duty of good faith is being used in circumstances where no fiduciary obligation arises at all. Similarly, in Mahmud v. Bank of Credit and Commerce International SA [1997] ICR 606, the House of Lords confirmed the existence of the term relied upon by Sir Nicolas Browne-Wilkinson V-C although describing it as the duty of trust and confidence. In that particular context it was held to be a breach of the term for an employer to conduct a dishonest business. Clearly, however, the employer does not have to run his business solely by reference to the interests of the employees. Indeed, as Lord Steyn commented, the origin of the term is probably the duty of co-operation between contracting parties. This is consistent with the recognition that the duty is one where each party must have regard to the interests of those of the other, but not that either must subjugate his interests to those of the other. The duty of trust and confidence limits the employer’s powers, but it does not require him to act as a fiduciary. It is a contractual but not a fiduciary obligation.

Accordingly, in analysing the employment cases in this field, care must be taken not automatically to equate the duties of good faith and loyalty, or trust and confidence, with fiduciary obligations. Very often in such cases the court has simply been concerned with the question whether the employee’s conduct has been such as to justify summary dismissal, and there has been no need to decide whether the duties infringed, properly analysed, are contractual or fiduciary obligations. As a consequence, the two are sometimes wrongly treated as identical: see Neary v. Dean of Westminster [1999] IRLR 288, 290 where the mutual duty of trust and confidence was described as constituting a “fiduciary relationship.” Accordingly, in determining whether a fiduciary relationship arises in the context of an employment relationship, it is necessary to identify with care the particular duties undertaken by the employee, and to ask whether in all the circumstances he has placed himself in a position where he must act solely in the interests of his employer. It is only once those duties have been identified that it is possible to determine whether any fiduciary duty has been breached, as Lord Upjohn commented in Phipps v. Boardman [1967] 2 AC 46, 127:

“Having defined the scope of [the] duties one must see whether he has committed some breach thereof and by placing himself within the scope and ambit of those duties in a position where his duty and interest may possibly conflict. It is only at this stage that any question of accountability arises.”

It follows that fiduciary duties may be engaged in respect of only part of the employment relationship, as was recognised by Lord Wilberforce, giving judgment for the Privy Council in New Zealand Netherlands Society “Oranje” Inc. v. Kuys [1973] 1 WLR 1126, 1130C: “A person … may be in a fiduciary position quoad a part of his activities but not quoad other parts: each transaction, or group of transactions, must be looked at.””

In the context of the present case, as it seems to me, what one derived from that passage which was crucial was that the critical issue as to whether or not fiduciary duties arose in an employment context, and, if so, in what those duties consisted, was that what needed to be demonstrated to give rise to any fiduciary duty was an obligation on the part of the employee to act solely in the interests of his employer in a given set of circumstances. In my judgment it was obvious that the obligations implied into a contract of employment of good faith and fidelity and mutual trust and confidence involved, in the case of someone employed to sell for his employer, that he would not divert to himself opportunities to sell which properly belonged to his employer. Thus I find that each of Mr. Perry, Mr. Beckett and Mr. Fagliarone owed a fiduciary obligation to TCP during the period of his employment not to seek to divert away from TCP opportunities to sell which he should have sought to secure for the benefit of his employer. However, that obligation, as an obligation, added nothing to the contractual obligations of good faith, fidelity and mutual trust and confidence. All the fiduciary obligation added was a remedy, that in the event of breach there was a duty to account for the profits earned in breach of the fiduciary obligation. What that meant Elias J explained later in his judgment in University of Nottingham v. Fishel, at pages 1498H – 1499C:-

“The university is clearly entitled to an account of profits in respect of the fiduciary breaches I have identified. That is the appropriate remedy, but two issues arise in respect of it. First, how is the profit calculated? Second, should any allowance be given for the work and skill which Dr. Fishel displayed in assisting and generally supervising the work of his subordinates?

I am not at this stage concerned with the precise figures. There is disagreement about them, and a further hearing may be required if they cannot be agreed. I have been asked to indicate the principles on which the profits should be calculated.

In my view, the profits in this case are simply the sums received by Dr. Fishel in respect of the patients treated by the other embryologists employed by the university, less the payments made to those embryologists by Dr. Fishel himself. That is the measure of his profit. The university contended that no allowance should be made for the payments he made to the other embryologists save to the extent that it represents overtime payments which would have been earned had they been in England. I do not accept that. To refuse such an allowance would be unjust and would mean that a relevant expense was simply being ignored. In addition, I consider that Dr. Fishel should in principle be entitled to deduct any tax he has paid in respect of these profits, although this may need some qualification if he would be entitled to recover any such tax in consequence of this ruling. I shall if necessary hear further argument on this point.”

Mr. Perry denied any breach on his part of any fiduciary obligation. For the reasons which I have given I find that he did owe to TCP, during the currency of his employment, the same fiduciary obligation which Mr. Beckett and Mr. Fagliarone owed not to divert sales opportunities which should have been pursued for the benefit of TCP to himself, Mr. Beckett or Mr. Fagliarone, and that that extended to not seeking to exploit opportunities which had actually been diverted by Mr. Beckett or Mr. Fagliarone.

Although Mr. Fagliarone undoubtedly owed other fiduciary duties to TCP whilst a director of TCP, there was no evidence before me that, whilst a director, he breached any such obligation.

I was wholly unpersuaded that any of Mr. Perry, Mr. Beckett or Mr. Fagliarone owed any fiduciary obligation to TCP in relation to what any of them did after his employment with TCP had come to an end. Whilst the post-termination period could be regulated by appropriate contractual provisions, there was no justification for finding any fiduciary obligation in the circumstances of the present case.

Various alleged facts were relied upon as amounting to breaches on the part of Mr. Perry, Mr. Beckett and Mr. Fagliarone of the obligations contended for on behalf of TCP in the Particulars of Claim. As it seemed to me, it was neither necessary nor useful to consider the various pleaded allegations of breach which were not admitted by Mr. Perry, Mr. Beckett or Mr. Fagliarone to be breaches separate from the claims for damages said to be attached to the allegations of breach.

In the Particulars of Claim beneath the rubric “Remedy” were to be found, so far as is presently material, these averments:-

“31.

By reason of the matters set out above, the Claimant has suffered loss and damage as set out in Schedule D to these Particulars of Claim. In particular:

32.

(1) The Claimant has lost the profit from the business that has been diverted away by the Defendants.

(2)

The Claimant has suffered a decrease in cashflow which caused it to default on its obligations to its bank in the United States.

(3)

The Claimant has paid salary and other contractual benefits to Mr. Perry, Mr. Beckett and Mr. Fagliarone during the period that they were employed by the Claimant but were actually working wholly or mainly for the benefit of A.R.T. Design Group.

(4)

The Claimant has incurred considerable expense in investigating the wrongdoing of the Claimants, including wasted management time and other costs of investigating and mitigating the losses caused by the Defendants’ unlawful actions.

33.

Further or in the alternative, the Claimant is entitled to and claims from each of the Defendants an account of any profits earned by them in connection with the unlawful activities set out above.

34.

The Claimant is entitled to and claims delivery up of the items set out in paragraph 27 above or alternatively, damages representing the value of those items that have been wrongfully interfered with by being retained by one or more of the Defendants.”

The reference in paragraph 34 to paragraph 27 seemed to have been intended to refer to paragraph 28, which, as I have already observed, was not really pursued at trial and was not supported by any evidence.

Schedule D to the Particulars of Claim was, so far as is presently material, in these terms:-

“Loss of profit on work wrongfully diverted away from the Claimant

The Claimant has suffered significant loss of profit from the value of the work wrongfully diverted away from the Claimant by the Defendants. The value of this work totals £235,579.

A breakdown of this figure can be found in the attached schedule which has been prepared by the Claimant (Schedule 1).

The Claimant has calculated that based upon the amount of work diverted between March – December 2009 (£235,579) the Claimant will suffer an annualised loss of £282,694.

Based on the value of the work and given that the Claimant’s average profit margin on work of that kind would have been 70%, the loss of profit on the work identified to date is £164,905.

Wages and employment costs

During the period from March 2008 until November 2009 the Claimant paid various sums to Mr. Fagliarone, Mr. Perry and Mr. Beckett under the terms of their contracts of employment or in respect of their employment and/or its termination under the mistaken belief that the sums were due. However, during the periods in respect of which the payments were made, Mr. Fagliarone, Mr. Perry and Mr. Beckett were in fact working for their own benefit and/or the benefit of A.R.T. Design and not for the benefit of the Claimant. Accordingly, the Claimant is entitled to repayment of all the sums paid to them during those periods. A breakdown of this figure can be found in the attached schedule which has been prepared by the Claimant (Schedule 2)

£.

Robert Fagliarone

Gross salary March 2008 – June 2009 60,058.92

Bonus 10,994.18

Commission to September 2009 29,172.28

Employer’s National Insurance contributions

March 2008 – June 2009 11,763.26

111,988.64

Antony Perry

Gross salary March 2008 – December 2008 61,818.30

Three months’ pay in lieu of notice paid

under the Compromise Agreement 18,545.49

Severance payment under the Compromise

Agreement 7,011.36

Payment for post termination restrictions

in the Compromise Agreement 100.00

Employer’s National Insurance contributions

on the above 9,535.07

97,010.22

Andrew Beckett

Gross salary March 2008 – November 2009 87,500.07

Bonus payment October 2008 5,000.00

Bonus payment November 2008 5,000.00

Commission payments March 2008 –

November 2009 50,170.35

Employer’s National Insurance contributions

on the above 17,662.85

165,333.27

Additional expenses incurred in the

employment of the above 3,333.00

Management time and costs

The Claimant has been forced to invest a considerable amount of management time and expense in investigating the wrongdoings of the Defendants which it is entitled to recover from them.

£

Telephone charges 1,852.00

Travel 3,086.00

TCP management time 30,864.00

35,802.00

Professional fees as at 1^st February 2010 (excluding legal fees)

£

CRO 67,901.00

Technology investigation 5,185.00

Other research 679.00

73,765.00”

In advance of the trial Mr. Beckett had prepared a document called “Summary of ART Design Transactions” (“the Summary”) in which were set out, cross-referenced to documents in the trial bundles, details of each transaction into which Mr. Perry, Mr. Beckett and Mr. Fagliarone, or any of them, or ART, entered whilst employed by TCP, or after his employment came to an end, up to 11 December 2009. The summary gave details of the name of the job, the client, the contact at the client, whether the client was an existing customer of TCP, the gross sales value, the job cost, the profit, the supplier and the date completed. It was accepted at the commencement of the trial on behalf of TCP that the gross receipts from the activities covered by the Summary were in fact £180,082.51, as calculated by Mr. Beckett. In his witness statement Mr. Beckett stated that the gross profit from the various transactions details of which were included in the Summary was £55,711. As I understood it, the latter figure was calculated as the difference between the total gross sales revenues obtained in respect of each transaction and the total sums paid to Jamy or Midton for producing the Lucites in question.

Mr. Vivian Cohen was instructed on behalf of TCP to prepare a report in accordance with paragraph 4 of an order for directions made in this action on 7 November 2011 by Master Kay Q.C., which was in these terms:-

“The Claimant to serve a report from an expert in forensic accountancy by 4pm on 13^th January 2012, limited to consideration of the issues of the margin of profit which would have been made on the Claimant’s case and of the state of the Claimant’s business from 1^st January 2008 to 31^st December 2009. The Claimant to have liberty to apply if there are further issues on which it seeks to adduce expert evidence.”

TCP did not seek to take advantage of that liberty to apply. Mr. Cohen produced a report dated 26 January 2012 which dealt with the two points permitted by the order of Master Kay Q.C.

I have to say that it was not entirely clear what was the purpose of granting permission for expert evidence from a forensic accountant on the issues identified in the order of Master Kay Q.C. Gross margin is simply gross profit expressed as a percentage of sales revenue. If one knows the sales revenue and the cost of sales, determining the gross margin is a simple calculation. From the 2009 Accounts it appeared that the sales revenue, expressed in the 2009 Accounts as “Turnover”, was £1,997,681, whilst the cost of sales was £1,462,045. The gross profit was thus, as noted in the 2009 Accounts, £535,636. The gross margin is simply £535,636 divided by £1,997,681 with the result expressed as a percentage, namely 26.81.

What Mr. Cohen actually did was to calculate a gross margin of 68.1%. He did that by ignoring the actual sales performance shown in the 2009 Accounts, and concentrating his attention on the two preceding years’ accounts of TCP. According to his report, the gross margin in fact made by TCP in the year ended 30 September 2007 was 54.7%, whilst that made in the year ended 30 September 2008 was 56%. The average of those two gross margins is obviously 55.35%. However, Mr. Cohen then adjusted the gross margins shown by the accounts of TCP to take account of profits apparently made by ALB on the supply of Lucites to TCP for onward sale. By that mechanism he reached his conclusion that the appropriate gross margin was 68.1%. He was obviously a little bit nervous about ignoring the trading performance of TCP as shown in the 2009 Accounts, because he said, at paragraph 4.21 of his report:-

“If the Court decides that one cannot ignore the results of 2009 then the average [taken over three years] reduces to 59.9%.”

I shall return to Mr. Cohen’s approach, but the effect of his assessment was that, at the start of the trial Mr. Sendall told me that TCP was in fact seeking to recover as “Loss of profit on work wrongfully diverted away from the Claimant” 68.1% of £180,082.51, that is £122,636.18.

The claim for “Loss of profit on work wrongfully diverted away from the Claimant” calculated in the way in which Mr. Sendall explained obviously gave rise to a whole raft of questions. The claim assumed both that all of the work actually obtained by Mr. Perry, Mr. Beckett and Mr. Fagliarone on their own behalfs or for ART had been obtained in breach of some obligation owed to TCP and that, but for the alleged breach, that work would have been obtained by TCP at the prices at which it was in fact obtained by Mr. Perry, Mr. Beckett and Mr. Fagliarone or by ART. None of these propositions is self-evident.

As I have sought to explain, the obtaining by Mr. Perry, or by Mr. Fagliarone, after his employment by TCP had come to an end of work from a customer or prospective customer of TCP with whom the relevant employee had had no material dealings in the twelve months prior to the termination of his employment, did not have material knowledge of in the course of the last twelve months of his employment, and had not had, or supervised anyone who had, had material dealings with the customer in the course of the last twelve months his employment, was not a breach of any obligation contained in clause 17.2 (ii) or (iii) of the contract of employment of Mr. Perry or Mr. Fagliarone. Thus each was free to deal with any customer or prospective customer of TCP who fell within that category (a “Permitted Customer”). Moreover, the effect of clause 17.3 (a) and (b) was that Mr. Perry and Mr. Fagliarone were at liberty to deal even with a customer or a prospective customer of TCP who was not a Permitted Customer (a “Not Permitted Customer”) if he did so in relation to a matter of a type with which he had not been materially concerned in the twelve months immediately preceding the termination of his employment (a “New Matter”) or in a geographical location (a “New Location”) in which the business did not compete with TCP (note, not the “Group” as defined for the purposes of the relevant contract of employment). In order to establish that, by dealing with a particular party, Mr. Perry or Mr. Fagliarone had acted in breach of an obligation contained in clause 17 of his contract of employment, TCP thus had to demonstrate that that party was a Not Permitted Customer, that the business in question did not relate to a New Matter and was not conducted in a New Location.

It has to be said that it did not appear that TCP even attempted seriously to demonstrate that any particular transaction into which Mr. Perry or Mr. Fagliarone or ART entered after the respective terminations of the employments of Mr. Perry or Mr. Fagliarone amounted to a breach of the obligations on the part of the relevant defendant to be found in clause 17.2 of the material contract of employment.

The only evidence of fact adduced on behalf of TCP was that of Mr. Jeffrey Sehgal, President of The Corporate Presence Inc., and at one time a director of TCP, that of Mr. Albert Altro, a corporate recovery specialist who was brought in to try to rescue The Corporate Presence Inc. in about June 2009 when it had encountered financial difficulties, and that of Mr. Kendal Strickland, an associate of Chatham Capital, the institution which provided financial support to, and was the principal shareholder in, The Corporate Presence Inc. Neither Mr. Altro nor Mr. Strickland had any personal knowledge of any matter relevant to any issue in this action save telephone conversations with Mr. Beckett and Mr. Fagliarone the contents of which, as matters turned out, were not relevant. Mr. Sehgal, in his witness statement, explained the background to this action, but only really went beyond that in commenting on the admissions made in the action by Mr. Beckett and Mr. Fagliarone and the plausibility, or not, of points made by defendants who, by the end of the trial, were no longer parties. Mr. Sehgal did not attempt to deal in detail with any issue, and in particular not with the question which of the admitted transactions amounted to a breach by either Mr. Perry or Mr. Fagliarone after the termination of his employment of any obligation placed upon him by the provisions of clause 17.2 of his contract of employment.

When Mr. Beckett and Mr. Fagliarone came to give evidence each was, to an extent, cross-examined to the effect that a rather generally named customer – HSBC, RBS, Deutsche Bank or UBS were examples – was a “customer of TCP”. However, it was not put that any specific subsidiary of an enterprise organised as a group was a “customer of TCP”, or that a specific alleged “customer of TCP” was a customer or prospective customer with whom Mr. Perry or Mr. Fagliarone had had material dealings during the last twelve months of his employment, and it was usually unclear whether what was being put was that the named entity was a customer of TCP, or of The Corporate Presence Inc., or of a subsidiary of The Corporate Presence Inc. other than TCP.

Mr. Fagliarone accepted in cross-examination that he had used contacts which he had made whilst at TCP to seek business for ART. He also accepted that he had taken with him when he left TCP a contact list. Whilst Mr. Sendall asserted in his closing submissions that the evidence showed that Mr. Fagliarone had used the contact list in order to obtain business for ART, in fact the evidence was far less clear. Mr. Fagliarone had, by 2009, been in the Lucite business for some 12 years. He had contacts whom he had developed over that period. He also took a list of contacts. It was not investigated in cross-examination which, if any, contacts from the list he had used to obtain business for ART.

Thus TCP simply failed to prove by evidence that any transaction entered into by Mr. Perry or Mr. Fagliarone or by ART after the termination of the employment of Mr. Perry or Mr. Fagliarone, as the case might be, amounted to a breach of contract on the part of Mr. Perry or Mr. Fagliarone. If it was not a breach of contract, it could not be actionable against Mr. Beckett as part of a conspiracy, although as he had played a separate role, which I have described, in relation to the transaction in question he was liable for breach of his implied obligations of good faith, fidelity and mutual trust and confidence. In the same way Mr. Fagliarone was liable in respect of transactions entered into by Mr. Perry on behalf of ART in the period before the termination of the employment of Mr. Fagliarone.

The difficulties faced by TCP in relation to proof of breach of the provisions of clause 17 of the relevant contract of employment were not merely theoretical. In his witness statement prepared for the purposes of this action Mr. Fagliarone said:-

“23.

I admit that I did divert 11 projects away from the Claimant from September 2008 to 30 June 2009. A small portion of these items was produced by the Ninth Defendant, Jamy, from September 2008, the first month in which any project was diverted from the Claimant. From September 2008 to June 2009 approximately £18,000 in gross sales revenue generated profits of £5,900 from any and all projects with the Ninth Defendant, Jamy. After meeting with Midton Acrylics in March 2009, Mr. Perry began a working relationship with Midton after his departure from the Claimant in December 2008. I began a working relationship with Midton also in March 2009, diverting a project which resulted in a profit of approximately £480 and in addition in June 2009 I diverted two projects, resulting in a profit of approximately £3,000. No further projects were diverted to Midton from myself during my tenure with the Claimant. …

24.

The Claimant alleges approximately 80 projects were diverted by ART Defendants. In fact, the vast majority of these projects were not diverted at all as they initiated after my and Mr. Perry’s employment ended with the Claimant. These projects resulted from cold-calling new prospects in new industries, the Energy industry with particular regard to renewables, and new markets where the Claimant was not aggressively involved, to include North Africa and the Gulf States; refer to Exhibit 9, a sample of my July and August 2009 phone records. In addition, a portion of these projects came to ART unsolicited via website direction and industry referrals after I had ceased employment with the Claimant, and therefore would not have gone to the Claimant. One project in particular could not have been produced by the main acrylic producer to the Claimant due to limitations within their manufacturing capacity.”

Mr. Beckett said in his witness statement:-

“50.

The vast majority of work produced by ART was not diverted from TCP and were procured by sales calls made by Tony Perry and to a lesser extent Robert Fagliarone between (March 2009 and December 3^rd 2009), or by referrals by clients or clients contacting ART directly.

51.

The main areas of focus for ART were not clients of TCP nor in the same geographical area and/or fields. Energy companies for instance and oil companies in the Middle East were given priority focus.

…

64.

The focus for ART Design Group was on the Middle East and/or non financial industry companies and therefore not in competition with the Claimant. The Claimants clients were exclusively investment banks.

The largest project produced by ART was called Rabigh. The client, ACWA Power International was unknown to the Claimant and had no trading history with the client. Equally the client ACWA had, to my knowledge, no awareness of the existence of the Claimant and therefore no reason to assume this client would have sourced TCP to produce the commemorative. Also, the project chosen by the client could not have been produced by the Claimants factory due to the intricate nature of the design. This project totalled £25,835.66. This project was carried out by the First Defendant Tony Perry and I had no involvement in this project.

65.

Another project for a Middle East client (non financial) was a perfect replication of an Arabic branded Pepsi bottle. With my many years of experience working with the limitations of the Claimants factory I can confirm they would find such production impossible to perfect and meet the demanding standards of such clients. This project was completed in March 2009 by the First Defendant Tony Perry and totalled £12,966.82. I again had no involvement in this project.

66.

Another project produced by Midton on behalf of ART [which] could not have been produced by the Claimant was an embedded Carlsberg bottle. The Claimants found such production impossible and therefore the Claimant do[es] not warrant damages for such projects. The client contacted ART directly to procure this project at a total cost of £2150.”

Mr. Sehgal was cross-examined about whether TCP had operated in the Middle East, by which I think was meant particularly countries in the Arabian Gulf; about whether sales of Lucites to non-financial entities amounted to a type of matter with which TCP had not been concerned prior to the termination of the employments of Mr. Perry and Mr. Fagliarone; about whether particular transactions had been entered into with existing customers of TCP; and about the capacities of ALB to produce particular types of Lucite. Unhappily the answers which he gave were not as helpful as they might have been. Mr. Sehgal seemed to have great difficulty in distinguishing between the activities of TCP, on the one hand, and the activities of The Corporate Presence Inc. and its subsidiaries other than TCP, on the other. He tended to speak of global operations, and of customers in all parts of the world, other than South America. Thus, from his perspective, it appeared, it was unnecessary to consider whether a particular investment bank group was organised with different subsidiaries in different countries and also unnecessary to consider the actual structure of the group of which The Corporate Presence Inc. seemed to be the head (no group structure chart was produced) – the group was the entity which mattered. If Mr. Sehgal were correct in his approach, the fact that an investment bank incorporated in a particular State of the United States of America which had been a customer of The Corporate Presence Inc. had a subsidiary in, say, France, which had never been a customer of TCP, would mean that business between Mr. Perry and the French subsidiary was prevented by the terms of clause 17.2 of his contract of employment. That analysis was, as a matter of law, plainly wrong, but the misconception meant that understanding the evidence of Mr. Sehgal was difficult. About operations in the Middle East, so it seemed, the first response of Mr. Sehgal was that The Corporate Presence Inc. group acted globally, save in South America, so the Middle East was not a New Location. Mr. Sehgal then explained that the Middle East was covered by one of the outposts in Tel Aviv, Israel. This outpost was apparently a single sales representative, but it was unclear for whom this representative worked. In the same part of his evidence as that in which he explained the representative in Tel Aviv, Mr. Sehgal mentioned other outposts in the United States of America, which presumably operated for the benefit of The Corporate Presence Inc. The role of the representative in Tel Aviv was rendered even more obscure by the subsequent evidence of Mr. Sehgal that a lady called Jessica Lindroos had been out to the Middle East, on some occasions with Mr. Perry. Why she went if TCP had a representative based in Tel Aviv who covered the Middle East did not emerge.

The position was no clearer in relation to the issue whether selling Lucites to customers other than those operating in the financial sector was, or was not, an area in which TCP operated during the currency of the employment of Mr. Perry and Mr. Fagliarone. When cross-examined Mr. Sehgal said, in effect, “A Lucite is a Lucite” and TCP would supply one to anyone who wanted to have one. However, in his witness statement prepared for the purposes of this action Mr. Sehgal spoke, in paragraph 4, of the business of the group of which TCP was a member in this way:-

“The main focus of the business around the world has been on providing these specialty commemoratives to banks and other financial institutions.”

Moreover, from his own e-mails Mr. Sehgal seemed to recognise that the financial sector was separate from other areas in which there might be interest in obtaining a Lucite, for, in an e-mail dated 17 January 2008 to Mr Perry, he wrote:-

“Just a little more detail now before my visit. But I wanted to be sure you understand my thinking. In my opinion now is the wrong time to hire (or even think about anything) outside of financial Lucite sales, London’s financial lucites sales – our core business – needs all the time and attention as you have to give it as per all my past emails etc.”

The question who was, and who was not, an existing customer of TCP was also bedevilled by the failure of Mr. Sehgal to differentiate between different corporate entities. All groups of companies any member of which had purchased a Lucite from any member of the group comprising, inter alia, The Corporate Presence Inc. and TCP Mr. Sehgal treated as customers of TCP.

Concerning the capacities of ALB to produce particular Lucites which Mr. Fagliarone and Mr. Beckett contended it could not produce Mr. Sehgal simply said, in a general way, that he had asked an unnamed production manager whether particular identified Lucites could have been produced and, save in one instance where drawings were lacking, had received the answer yes. No explanation was offered of whether the alleged difficulties to be overcome in production actually were difficulties or, if so, how they could have been overcome.

In the result, as I have said, I was not satisfied on the evidence that it had been proved that any transaction for the sale of any Lucites entered into by Mr. Perry, Mr. Fagliarone or ART after Mr. Perry, or, as the case might be, Mr. Fagliarone, had ceased his employment with TCP amounted to a breach of the provisions of clause 17.2, or any other clause, of the relevant contract of employment or any breach of a fiduciary obligation owed by Mr. Perry or, as the case might be, Mr. Fagliarone.

The position was different in relation to the transactions which it was admitted Mr. Beckett or Mr. Fagliarone had diverted from TCP. It was obvious from the circumstances that the customer in each case was, at least potentially, a customer of TCP. The diversion of the opportunity of obtaining the transaction was wrongful – in breach of the implied terms of good faith, fidelity and mutual trust and confidence, and in breach of the fiduciary obligation which I have found. Mr. Beckett accepted in cross-examination that each of the diversions admitted occurred as a result of an agreement of each of Mr. Perry, Mr. Beckett and Mr. Fagliarone to divert it. Whilst he described the situation as a developing one, in which, originally perhaps, Mr. Beckett and he made his own decisions about trying to divert work, I think that Mr. Fagliarone accepted that there came a time at which all three of them were aware of what Mr. Beckett and Mr. Fagliarone were doing, and that the money to be raised from the diverted transactions was to be received, in the first instance, by Mr. Perry. Those, on the face of them, were admissions both by Mr. Beckett and by Mr. Fagliarone that the three of them combined to the effect that Mr. Beckett, or Mr. Fagliarone, as the case might be, should breach at least his obligations of good faith, fidelity and to maintain a relationship of mutual trust and confidence with TCP in a manner which was likely to cause harm to TCP, and the fiduciary duty which I have mentioned. Mr. Perry elected not to give evidence. I accept the evidence of Mr. Beckett and Mr. Fagliarone concerning the combination. I was impressed by both Mr. Beckett and Mr. Fagliarone as witnesses. It seemed to me that they each took considerable care to put before the court as accurately as he could his recollection of the events relevant to the claims made in this action. I accept all of the evidence of Mr. Beckett and that of Mr. Fagliarone as to matters of fact without reservation. I have already indicated my view that the opinions of Mr. Fagliarone on some matters of law were erroneous.

However, it did not follow, from the findings which I have made in relation to the transactions which were diverted from TCP, that TCP had sustained any particular loss. Whether TCP had sustained any loss, and if so, what, depended upon evidence.

That was also the position in relation to any loss sustained by TCP consequent upon my findings that Mr. Beckett was in breach of his obligations of good faith, fidelity and mutual trust and confidence, as well as in breach of his fiduciary duty, as a result of the fact that the business of ART was being conducted for his benefit, albeit without any real participation from him, during the period of his employment by TCP, and that Mr. Fagliarone was similarly in breach in the period between the commencement of the business of ART and him ceasing employment by TCP.

In his witness statement Mr. Beckett made a number of points relevant to the issue of loss:-

“34.

…

(c)

The decision, made by Jeff Sehgal after consultation with Nick Licamelli (who had no European sales or industry experience) to dramatically increase European clients pricing by 100%. This was implemented in April 2008 when the economy was in freefall and budgets for Lucite products had been heavily reduced or cut altogether. The impact obviously led to a number of projects being cancelled and client relationships badly damaged, resulting in short term and long term loss in revenue for TCP. This new higher pricing policy was only rolled-out in Europe whereas the New York office continued to be cost competitive. It also allowed a new competitor on the scene, Icon, to rapidly grow by offering low pricing, thus further compounding TCP Europe.

…

39.

Standard practice for clients, when requiring a Lucite commemorative, is to submit quotation requests to several parties.

The client would supply the text and logos and very often a specific design they would like to see drafted and quoted.

40.

From 2007 to 2009 these requests were for more basic pieces as clients did not have the budgets and did not want to be seen as over indulgent, which is still an issue for some investment banking clients today.

41.

At TCP Europe, between 2007 and 2009, around 70% of projects would fail to go into production. Some salespeople, one of whom was the highest salaried person in London (and flown from Hong Kong to London offices despite recession) had higher failure rates.

Reasons clients chose not to proceed would vary from price, quality, design, personal choice, service or client chose not to produce due to budget constraints, deal collapse, or because simply no-one wanted a Lucite.

…

48.

When raising concerns with senior management of TCP over the decision making and economic instability they were instantly rebuffed and any such thoughts were deemed highly unsatisfactory and subsequent actions by management resulted in fears of employees job security. One such example in January 2008 at a staff meeting in London was Jeff Sehgal refusing to acknowledge the existence of the credit crunch in the UK and that it would affect sales. In this same meeting he reiterated his firm belief that no other vendor should win work TCP is bidding for. It was completely inconceivable to him that if a client knew of TCP then that client would [not] place their order with TCP, regardless of the competition, poor quality in previous TCP projects and clients preferences.”

Mr. Beckett was not seriously challenged as to the accuracy of what he said in these passages. In cross-examination it was suggested that in fact he, as a salesman, was able to decide at what level to quote for a particular job, but he elaborated that in fact the instructions were, from about the end of March 2008, that all jobs were to be commissioned from ALB, and ALB was to determine the price to be quoted for the job. He illustrated the problem in relation to one of the jobs which he accepted that he had diverted from TCP. That was a project called “Cube” for the French bank Calyon. Mr. Beckett told me that, in accordance with the instructions which he had received from his superiors, having commissioned artwork from the TCP art department, he sent the details of the project to ALB for pricing. The price quoted was extraordinarily high, and Calyon said that it would not proceed. It was following that that Mr. Beckett made contact with Jamy and obtained a price at which Calyon was prepared to proceed. Plainly in that instance TCP had no prospect in fact of obtaining the work at the price originally quoted. The freedom of the salesman to quote a price for TCP to a client was, apparently, restored in about February 2009.

It was a feature of how the claim for “Loss of profit on work wrongfully diverted away from the Claimant” was put that it was based not on what it was contended were the prices which TCP quoted, or would have quoted, for the work in question, but on the prices at which Mr. Perry, Mr. Beckett and Mr. Fagliarone, or ART, in fact obtained the work. That rather obscured the important issue of whether, but for the work being diverted, TCP would have obtained it at all.

I think that it was accepted by Mr. Sehgal in cross-examination that TCP had competitors in the market-place for Lucites and that competition in particular focused on questions of design and price. While there were, apparently, some companies which, on some basis which did not emerge during the trial, had entered into some sort of arrangement to the effect that The Corporate Presence Inc. was either “the” or “a” “preferred” or “exclusive” supplier of Lucites, it was not suggested that any of the transactions which were diverted from TCP (“the Diverted Transactions”), or were jobs (“ART Jobs”) obtained by ART which were not Diverted Transactions, had constituted a breach of such an exclusive or preferred relationship, assuming such to be legally enforceable. Thus it was necessary to proceed on the basis that TCP was at least potentially in competition for the relevant business with persons lawfully able to compete. Although, plainly, TCP had a chance of obtaining each of the Diverted Transactions, possibly a good chance (subject to the issue of price), success was not assured. The prospects of TCP obtaining ART Jobs were substantially less certain, given the evidence that some of the customers were not known to TCP already and operated in sectors of the economy in which TCP had not traditionally sought business, or in geographical areas in which TCP had not traditionally concentrated selling efforts, or both.

By paragraph 9 of his order made on 7 November 2011 Master Kay Q.C. directed that:-

“The trial of liability and quantum in this claim to be listed with a time estimate of 11 days during the period 30^th April 2012 to 31^st July 2012. Category B.”

However, TCP took an unusual course in relation to the implications of that direction, for the witness statement of Mr. Sehgal prepared for the purposes of the trial of this action, dated 3 October 2011, concluded, at paragraph 57:-

“Pending any direction from the court, I am advised and do not propose to address the issues of quantum in this witness statement.”

Mr. Sehgal did not make any further witness statement with a view to the contents being put forward at trial as part of his evidence. Mr. Altro and Mr. Strickland each said nothing at all in his witness statement prepared for the purposes of the trial about any issue of quantum.

Civil Procedure Rules Part 32.5 contains these provisions, so far as presently material:-

“(1)

If –

(a)

a party has served a witness statement; and

(b)

he wishes to rely at trial on the evidence of the witness who made the statement,

he must call the witness to give oral evidence unless the court orders otherwise or he puts in the statement as hearsay evidence.

(2)

Where a witness is called to give oral evidence under paragraph (1), his witness statement shall stand as his evidence in chief unless the court orders otherwise.

(3)

A witness giving oral evidence at trial may with the permission of the court –

(a)

amplify his witness statement; and

(b)

give evidence in relation to new matters which have arisen since his witness statement was served on the other parties.

(4)

The court will give permission under paragraph (3) only if it considers that there is good reason not to confine the evidence of the witness to the contents of his witness statement.”

When Mr. Sehgal was called to give his evidence no application was made to me pursuant to the provisions of Civil Procedure Rules Part 32.5(3) for permission to amplify his statement to deal with questions of quantum. Had such an application been made, I think that I should have been bound to refuse permission by reason of the provisions of Civil Procedure Rules Part 32.5(4) – Mr. Sehgal had apparently deliberately decided not to say anything relevant to any issue of quantum in his witness statement. What did happen, at the end of the re-examination of Mr. Sehgal, was that Mr. Sendall attempted, without seeking permission, to ask him questions about the “management time and costs” part of Schedule D to the Particulars of Claim. It seemed to me that that was wholly impermissible and I refused to allow the questions, whatever they were, to be put.

Thus at the end of the trial, quite bizarrely, but by deliberate decision on the part of TCP or its legal advisers, no direct evidence of loss suffered by TCP as a result of the admitted wrongdoing of Mr. Beckett and Mr. Fagliarone, and the wrongdoing which I have found on the part of Mr. Perry, had been adduced before the court.

If “management time and costs” or “professional fees as at 1^st February 2010 (excluding legal fees)” had in truth been incurred by TCP, then evidence of the relevant time and costs could have been put before the court, and, subject to whatever questions might have arisen in the light of the particular evidence, damages taking into account that time and those costs might have been assessed. By its own deliberate action, so it appeared, TCP had determined to deprive itself of the opportunity of having damages assessed taking into account those elements.

There were always logical difficulties about the claims for damages in respect of “wages and employment costs”. The sums paid were paid pursuant to the provisions of contracts between the relevant individuals and TCP. Unless the material contracts were wholly unperformed by the appropriate individual in each case, there was consideration for the contract, but only if consideration for the contract had wholly failed could there have been any foundation for a claim for restitutionary repayment. No such total failure of consideration was alleged in relation to any material contract. The evidence of Mr. Beckett was that he was the highest performing salesman for TCP in the last month of his employment, and that Mr. Fagliarone had been the third highest performing salesman. I think that Mr. Sehgal did not dispute that. At paragraph 13 of his witness statement he commented that, “Robert Fagliarone and Andrew Beckett were among TCP’s top performers. Their jobs were to secure orders from banks and their advisers for trophies to commemorate successful deals.” The facts that both Mr. Beckett and Mr. Fagliarone both were paid significant amounts of commission, and bonus, in the period in respect of which repayment of the sums paid to them as wages was sought only served to emphasise that there was no proper basis of claim, whatever misdeeds either had committed. Conceptually, I think, the appropriate analysis was that each of Mr. Perry, Mr. Beckett and Mr. Fagliarone was paid under his contract of employment sums which in part were the purchase price of the performance of all of the obligations which they, respectively, accepted to TCP under the contract, including obligations restrictive of their freedom of action in their own interests. The price had to be paid to secure performance, including performance of negative obligations, such as not to divert work. If there was a failure of performance, TCP could recover as damages any loss which could be proved, but to permit it also to recover the sums which it had had to pay to secure the promise of performance in the first place would have amounted to double recovery, quite apart from being unjustified just as a matter of logic and analysis.

In his closing submissions Mr. Sendall contended that, if he were in breach of some one or more of his obligations under the Perry Compromise, in particular the warranties contained in clause 10, Mr. Perry was bound to repay the sums paid to him under the Perry Compromise by reason of the provisions of clause 12.3(d) thereof. That basis of claim had not been pleaded in the Particulars of Claim. What had been pleaded was that the repayment of the sums paid under the Perry Compromise and under the contracts of employment of Mr. Beckett and Mr. Fagliarone was appropriate because, by reason of the breaches of their respective contracts with TCP and their respective fiduciary obligations, Mr. Perry, Mr. Beckett and Mr. Fagliarone, “were actually working wholly or mainly for the benefit of the A.R.T. Design Group” (paragraph 32(3)) or (Schedule D) “were in fact working for their own benefit and/or the benefit of A.R.T. Design and not for the benefit of the Claimant”. No allegation was made in the Particulars of Claim that Mr. Perry was liable on some separate basis, not applicable to Mr. Beckett and Mr. Fagliarone, to repay the whole or some part of the sums paid under the Perry Compromise. No application was made to amend the Particulars of Claim specifically to plead clause 12.3(d) of the Perry Compromise or to claim against Mr. Perry repayment of any sum said to have been due pursuant to the provisions of that clause.

The provisions in the Perry Compromise governing the payments made under it were these:-

“3.2

The Employer shall pay to the Employee the sum of £18,545.49, representing 3 months notice (the “Notice”), less the appropriate tax and employee National Insurance contributions. Such payment shall not be made until the Employer has received the evidence set out at clause 5 (the “Evidence”) and shall be made on the following terms:

(a)

£6,181.83 shall be paid 14 days after the Employer receives the Evidence.

(b)

£6,181.83 shall be paid 6 weeks after the Employer receives the Evidence.

(c)

£6,181.83 shall be paid 10 weeks after the Employer receives the Evidence.

The three Notice payments shall be paid subject always to the Employee’s compliance with this agreement and specifically, but not limited to, clauses 7 and 9. In the event that the Employee breaches the terms of this agreement he accepts that the Employer shall be entitled to stop making the Notice Payments referred to in herein [sic] and shall reserve their right to pursue the Employee for repayment of the Notice and the Severance Payment.

…

5.

Subject to the Employee’s compliance with his obligations under and the satisfaction of the conditions in this agreement and the representations and warranties of the Employee contained in this agreement being true and accurate, including but not limited to those in clauses 10 and 11 the Employer shall, as compensation for loss of employment but without admission of liability, pay to the Employee within 28 days following the later of (i) the date of this agreement, (ii) the Termination Date, (iii) receipt of the completed and signed Adviser’s Certification in the form set out in schedule 1, (iv) compliance with clause 11, (v) written confirmation to the Employer’s reasonable satisfaction that, at no cost to the Employer, the Employee’s car rental agreement with Vikings Canterbury has been transferred solely into the Employee’s name and that any connected direct debit or other payment arrangement in the Employer’s name has been transferred into the Employee’s name with immediate effect, and (vi) receipt of the signed resignation letter referred to in clause 2.2, the sum of £7,011.36 (the “Severance Payment”) which shall be paid without deduction of tax.”

It is plain that clause 3.2 prescribed a number of conditions precedent to the liability of TCP to pay the total sums of £18,545.49 for which that sub-clause provided. Equally, there were obvious conditions precedent to the making of the payment provided for in clause 5. If any of the relevant conditions precedent had not been satisfied the liability to make the appropriate payment would not have arisen. However, the payments were made. The question arose, therefore, in the event that some one or more of the conditions precedent was not in fact complied with, what followed as a matter of law. Subject to any question as to whether the payment in fact made was made under a mistake of fact, a question which did not arise in the present case, the answer would be that TCP was entitled to damages in respect of any loss suffered as a result of any breach of contract which the breach of the condition precedent amounted to. The answer was not, as Mr. Sendall in effect submitted, that the sum paid was repayable. The correctness of that analysis is, as it seems to me, demonstrated by the circumstances in the present case. It was said that Mr. Perry was in breach of his warranty in clause 10 of the Perry Compromise that he, “has not committed any breach of the obligations or duties (express or implied) owed to the Employer”. On my findings he was indeed in breach of that warranty. However, the measure of damages for breach of warranty is the sum needed to put the person to whom the warranty is given in the position in which he would have been had the warranty been true. The calculation of that sum did not depend upon how much was paid for the warranty. In the present case the damages payable for breach of warranty were whatever loss TCP had suffered as a result of Mr. Perry acting with Mr. Beckett and Mr. Fagliarone to divert business away from TCP. The sum paid to get the warranty had to be paid in order to obtain the warranty. If it had not been obtained, and therefore paid for, it could not have been sued upon.

As it was not pleaded as a basis of claim against Mr. Perry, it is not actually necessary to consider clause 12.3(d) of the Perry Compromise. However, it did contain this, amongst a whole range of other provisions:-

“….if any of the warranties given by him in this agreement is inaccurate or untrue …. without prejudice to any other remedy which may be available to the Employer the Employee agrees he will repay the Severance Payment to the Employer immediately as a debt and on demand …”

Thus, on my findings, had any claim based on the provisions of clause 12.3(d) been made in the Particulars of Claim against Mr. Perry, I should have found that TCP was entitled to be repaid by him the amount of the Severance Payment, £7,011.36. The sums paid pursuant to clause 3.2 of the Perry Compromise were not expressed, in clause 12.3(d), to be repayable in any circumstances.

Where one then reached was the contention that TCP was entitled to recover from Mr. Perry, Mr. Beckett and Mr. Fagliarone an amount calculated as the actual proceeds of sales made by the three of them, or ART, multiplied by Mr. Cohen’s gross margin. However, that contention did not relate to any loss which TCP itself had suffered. All it had lost, on my findings, was the loss of the opportunity of making profits on the sale of the Diverted Transactions or on the sale of the ART Jobs. In order to evaluate whether TCP had suffered any, and, if so, what loss, it was necessary to consider, in respect of each of the Diverted Transactions and each of the ART Jobs: (i) what prospect, but for the diversion (in the case of the Diverted Transactions), TCP had of obtaining that work; (ii) whether, had it obtained that work, TCP (and not any other company in the group controlled by The Corporate Presence Inc.) would have made a profit on the job in question; (iii) if a profit would have been made by TCP, how much it would have been. No evidence was led on behalf of TCP to address any of these questions. It followed, inevitably, that TCP failed to prove that it had suffered any loss as a result of the misdeeds of Mr. Perry, Mr. Beckett and Mr. Fagliarone.

I have already explained why it was not appropriate to assume, in favour of TCP, that, but for the diversions, TCP would have obtained the Diverted Transactions, or the ART Jobs, at the prices in fact charged by Mr. Perry, Mr. Beckett and Mr. Fagliarone. However, had that assumption been appropriate, I think that it is clear that what TCP lost did not fall to be calculated by reference to the gross margin calculated by Mr. Cohen. His adjustments to allow for profit lost by ALB were incorrect. ALB was not a claimant. None of Mr. Perry, Mr. Beckett or Mr. Fagliarone was in breach of any obligation owed to ALB. Moreover, Mr. Cohen’s approach of calculating an average gross margin for TCP based on the accounts of TCP for the years ended 30 September 2007 and 30 September 2008 was also wrong. What needed to be calculated, assuming that there was any need at all to calculate a gross margin, was a gross margin which would have been achieved in the period September 2008 to June 2009. That was a period during which, on the evidence, the attractiveness of Lucites in the market place was declining, with a consequent effect on the numbers of orders and on the value of individual orders. The evidence of Mr. Beckett was that, at the same time, costs of supply were increasing because of increases in oil prices. The material out of which Lucites were made was derived from oil, and price increases also affected the costs of shipping completed Lucites. Mr. Cohen was either unaware of, or chose to ignore, those market conditions. If one took them into account, the only possible conclusion was that the relevant gross margin was that demonstrated by the 2009 Accounts.

Although the allegation that, “The Claimant has suffered a decrease in cashflow which caused it to default on its obligations to its bank in the United States” was set out at paragraph 32(2) of the Particulars of Claim, that allegation was not repeated in Schedule D to the Particulars of Claim or ultimately pursued by Mr. Sendall in his closing submissions. At paragraph 17 of his witness statement Mr. Sehgal explained that:-

“TCP Inc’s [that is, The Corporate Presence Inc.’s] sales fell dramatically from $26m per year globally to an annualised or “run” rate of approximately $8m based on average monthly sales from mid 2008 (the final results for 07/08 were approximately $12m sales). The company started to run at a loss. The decreased cash flow led ultimately to TCP Inc defaulting on its obligations to its bank in the United States. At the lowest point in the financial crisis the business struggled desperately with cash flow. TCP Inc quite literally ran out of cash and so had to turn to its bank – Chatham Capital for further funding to avoid becoming insolvent.”

From the evidence of Mr. Altro in cross-examination also it appeared that the alleged default had been that of The Corporate Presence Inc., and not TCP, and that the bank in question was Chatham Capital. Certainly no evidence was adduced before me to suggest that TCP had defaulted on any obligation to any bank.

In the result, although I am entirely satisfied that Mr. Perry, Mr. Beckett and Mr. Fagliarone did act in breach of their respective contracts of employment by TCP in diverting work away from TCP, and thereby acted in breach of a fiduciary obligation which each owed to TCP not to do so, and that such diversions were also pursuant to a conspiracy between the three of them to breach their contractual and fiduciary obligations by diverting the work in question, TCP wholly failed to prove that it suffered any loss in consequence. TCP also failed to prove that it had suffered any loss by reason of the breach by Mr. Fagliarone of the obligations to which I have just referred constituted by him benefiting from the activities of Mr. Perry in the period between the cessation of the employment of Mr. Perry by TCP and the termination of Mr. Fagliarone’s own employment, or by reason of the breach by Mr. Beckett of those obligations constituted by him benefiting from the activities of Mr. Perry after the termination of the employment of Mr. Perry, and then the activities of Mr. Fagliarone, after the termination of the employment of Mr. Fagliarone.

The way in which the claim for “Loss of profit on work wrongfully diverted away from the Claimant” was explained by Mr. Sendall at the commencement of the trial was actually a variation on a claim for an account of profits. I have already mentioned the guidance of Elias J in University of Nottingham v. Fishel, supra, as to how, in a case such as the present, an account of profits is to be approached. Essentially the object of the exercise is to deprive the wrongdoers of the benefit of their wrong. Thus the focus is on the net profit made by the wrongdoers, not the gross profit, and to permit as proper deductions the costs and liabilities (such as in respect of tax) incurred in order to pursue the activity in which the liability arose. What Mr. Sendall in effect invited me to do was to take the gross receipts in fact received by Mr. Perry, Mr. Beckett and Mr. Fagliarone, or ART, but apply to it a gross margin to reach a gross profit which it was contended TCP would have made on the work in question, if it had undertaken that work. Thus I was invited to calculate a gross profit, rather than a net one, and by applying notional costs of production and selling.

The issue arose whether TCP was going to elect to pursue claims for damages in respect of the matters complained of as against Mr. Perry, Mr. Beckett and Mr. Fagliarone, or to seek an account of profits. In his written closing submissions Mr. Sendall adopted a sort of hybrid position:-

“59.

In respect of the loss of profits or account of profits claim, the Claimant may need to elect between damages and an account of profits. The election only arises if the court finds that there are breaches of the equitable obligations of confidence or breaches of fiduciary obligations or if the court is satisfied that an equitable remedy should otherwise be available – see A-G v. Blake [2001] 1 AC 268.

60.

In any event, the Claimant only intends to elect to claim an account of profits in respect of work that did not emanate from an existing TCP client. The reason for this is that it is the Claimant’s case that had it undertaken the work in fact undertaken by ART, the Claimant would have been able to make a greater profit as its gross profit margin. C has obtained expert forensic accounting opinion to support its contentions in that regard (pp296-327). Despite having the opportunity to instruct their own expert, the Defendants have chosen not to do so and were unable to adduce any expert opinion evidence to counter the evidence of C’s expert.”

I enquired, during the course of Mr. Sendall’s closing submissions, whether I was being invited, in effect, to award damages to TCP, if and insofar as I found liability to be established and damages to be proved, but, if I found liability to be established for breach of a fiduciary obligation or obligations, but not that damages were proved, to award an account of profits. Mr. Sendall said not. He invited me to consider the transactions admitted by Mr. Perry, Mr. Beckett and Mr. Fagliarone as falling within one or other of three categories, namely: (i) the Diverted Transactions, in respect of which what was elected was to claim damages; (ii) the ART Jobs in respect of which it was contended on behalf of TCP that the customer was a “client of TCP”, in relation to which, again, the choice was to seek damages; and (iii) the ART Jobs in which TCP accepted that it could not be shown that the customer was a “client of TCP”, in respect of which the election was to seek an account of profits. Mr. Sendall identified the eleven cases said to fall in category (iii) as those relating to: (i) project Vorlage for Kreissparkasse Koln; (ii) project Autostrada for Autostrade per l’Italia; (iii) project CDA for Marketing Boulevard Dubai; (iv) project Kaust for HSBC Riyadh; (v) project Liquidity House for Liquidity Management House, Kuwait; (vi) project Centrobanca for NextEnergy Capital, Milan (vii) project Procuritas for Procuritas AB, Stockholm; (viii) project LaFarge for Bank Audi, Beirut; (ix) project Curved for BP, London (x) project Talgo for Noqca Partners, Madrid and (xi) project Aldar Ferreri for ADCB, Dubai. In the Summary the gross profits on these various projects were set out, using the same numbering as I have in identifying the projects, as (i) £260; (ii) £910; (iii) £1,005; (iv) £1,329; (v) £1,872; (vi) £602; (vii) £0; (viii) £1,214; (ix) £100; (x) £446; (xi) £95. These figures total £7,833. The contemporaneous documentation copied before me at the trial indicates that the first five projects were undertaken after Mr. Perry had left TCP, but while Mr. Fagliarone and Mr. Beckett were still there, but the remainder were undertaken when only Mr. Beckett still worked for TCP. Consequently, so it appeared, TCP was seeking an account from Mr. Fagliarone and Mr. Beckett jointly, on my findings, in respect of a maximum amount of £5,376, with a further claim for an account against Mr. Beckett only for a maximum of £2,457.

The election of TCP as to those items in respect of which it sought damages and those in respect of which it sought an account of profits was a matter for it. I have already explained why it is, in my judgment, that the claims for damages all fail for want of proof. On the taking of an account the necessity for proof does not arise in quite the same way, for the exercise is an investigation of the benefit which wrongdoers have derived from their wrongdoing. TCP has limited its claims for an account to the transactions which I have identified, and consequently to an amount not exceeding £7,833. It may well be that sums in addition to the cost of production of the actual Lucites fall to be taken into account in establishing what actual profit was made by ART from the transactions to which TCP has confined its claims. Hence, the appropriate order seems to be to direct an account in relation to those items, on the basis that, on my findings, Mr. Fagliarone and Mr. Beckett jointly are liable for the first five, and Mr. Beckett alone for the rest.

In the result, the claims against Mr. Perry for substantial damages fail for want of proof of loss. The claim for £7,011.36 which would have succeeded had it been properly pleaded fails because it was not properly pleaded. However, as breach of contract on the part of Mr. Perry was proved, TCP is entitled to nominal damages in the traditional sum of £2.

The claims against Mr. Fagliarone succeed only to the extent that I direct that an account be taken of the profit made by ART in respect of the transactions which I have identified by the numbers (i) to (v) inclusive, the maximum value of which is £5,376 and in respect of which Mr. Beckett is jointly liable, together with nominal damages of £2 for breach of contract.

In addition to his liability jointly with Mr. Fagliarone, I hold that Mr. Beckett is liable to pay to TCP the sum found to be the net profit made by ART on the transactions which I have identified by the numbers (vi) to (xi) inclusive, the maximum amount being £2,457, plus £2 nominal damages for breach of contract.

Although I have indicated that it would have been appropriate for the claim against Mrs. Eveleigh to have been struck out, but for the fact that judgment had been entered against her in default of Defence, as that judgment has not been set aside, technically it falls to me to assess the damages which she should pay to TCP in respect of that judgment. Mrs. Eveleigh was not in any contractual relationship with TCP, so no question arises of TCP being entitled to nominal damages against her. She was not under any fiduciary obligation to TCP, so the remedy of an account of profits was not available against her. To recover any damages at all against Mrs. Eveleigh, TCP had to prove loss. It did not. I assess the damages to be paid by Mrs. Eveleigh to TCP at nil.

I have already observed that, by Mr. Miskella’s letters dated 11 December 2009 and 23 December 2009 he offered, on behalf of Mr. Perry, Mr. Beckett and Mr. Fagliarone, that all of the assets of ART, including cash of some £30,000, be delivered up to TCP, and that each of Mr. Perry, Mr. Beckett and Mr. Fagliarone pay TCP an amount of £3,500. It is obvious that, had TCP accepted what was offered, it would have been substantially better off than it can be as a result of this judgment. In short, this action and the trial before me over eight days has been a complete and utter waste of time and money. It is not surprising that that should be so. Mr. Miskella gave very careful and sound advice to Mr. Perry, Mr. Beckett and Mr. Fagliarone as to the consequences of their misdeeds and how those consequences should be rectified. His advice was correct, as this judgment shows, unless TCP could prove against them that it had suffered loss greater than the aggregate amount being offered. It did not really try to do so.