Thursday, 28 June 2012

UK: England and Wales: fiduciary duties and employees

The Court of Appeal gave judgment yesterday in Ranson v Customer Systems plc [2012] EWCA Civ 841, an important decision on the circumstances in which employees will be subject to fiduciary duties. The decision, which has not yet been published on BAILII, also contains interesting dicta on the fiduciary duties of directors and the extent to which the standards to which directors are subject are appropriate for non-director employees.

At first instance (see [2011] EWHC 3304 (QB)) the trial judge held that an employee (Mr Ranson) had acted in breach of fiduciary duty when, two days before leaving a company, he canvassed for work in competition with the company and did not inform the company of what he was doing. The Court of Appeal held that there had been no breach of fiduciary duty and suggested that the trial judge's approach, whereby the law was analysed in terms of cases involving breaches of duty by directors, was one likely to lead to confusion and that the judge's analysis had "got off on the wrong foot" by not first having regard to the employee's contract of employment. The contract of employment was, in the court's view, the starting point for determining whether fiduciary duties were owed and the scope of those duties.

One of the arguments made on appeal was that the Court of Appeal's decision in Item Software (UK) Ltd v Fassihi [2004] EWCA Civ 1244 had "changed the legal landscape" with regard to the disclosure obligations of employees in respect of their own wrongdoing. The court rejected this argument but recognised that a disclosure obligation could arise out of the terms of the contract of employment.

Update (28 June 2012) - a copy of the judgment is now available on BAILII: see here.

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