The case of Helmet Integrated Systems Ltd v Tunnard et al. [2006], involved a dispute over what actions might be permitted under the terms of an employment contract. The claimant (“HISL”) produced and sold protective equipment. In 1993 he commissioned a new helmet design which was successfully marketed especially for the London Fire Brigade. The defendant was a senior salesperson with the plaintiff.
While working for the plaintiff, the defendant had the idea for a new modular helmet. He believed that his employers were not interested in developing a new helmet, particularly in the European market, where he perceived there was a gap for such a product to take hold.
Between September 2001 and February 28, 2002, the defendant took a series of steps to advance his idea. He obtained some funding and arranged for product designers to prepare initial concept drawings for him. He handed in his notice of resignation on February 1, 2002, and worked through the end of his notice period until he left on February 28.
Defendant incorporated Modular Helmet Systems Ltd (“MHSL”) two months after his departure from Plaintiff. Shortly thereafter, a rival company of HISL, Lion Apparel Inc (“Lion”), invested in a majority stake in MHSL. The plaintiff filed lawsuits alleging that the defendant had breached his duty of fidelity by developing a hard hat that would compete with HISL’s hard hat, and had breached his fiduciary duties by failing to report on his activities while still under the HISL Employment Agreement. HISL.
Those claims were rejected by the judge in county patent court. He determined that the acts of preparation before departure were not appealable and that there was no breach of duty of good faith or fidelity by the employee. He maintained that the worker was allowed to decide to set up a company in competition with his employer and that the prior steps taken to do so were allowed. He also concluded that there was no breach of any fiduciary duty because such duty had to be limited to his duty as seller.
The applicant appealed against this decision. On appeal, the plaintiff relied on the fact that the defendant’s printed employment contract stated that it was his duty to advise his employer on the activities of competitors and their pricing structures. They argued that he therefore had a duty to report such activities, whether carried out by a competitor or by himself as part of his plan to compete with his former employer.
The appeal was dismissed. It was carried out:
– In the circumstances, although the respondent’s activities would have been competitive activities had they been conducted by a competitor (and therefore would have had a fiduciary duty not to misuse information about that activity for its own benefit or for the benefit of someone other than the complainant), did not mean that you were required to inform HISL of your own activities.
– The words of the job specification did not restrict the defendant’s freedom to prepare for the competition upon departure. He was employed as a salesman, not a designer, and never thought of any of the parts that he would develop into a helmet. Clear words were needed to restrict the ordinary liberty of an employee who resigned from his employment and entered into competition with his former employer, which the defendant’s job specification did not.
– Did not have any relevant fiduciary duty to the plaintiff. Respondent had no fiduciary duties in connection with the development of a preliminary concept for a new hull. Therefore, he did not breach any of those obligations by trying to raise funds for said project while still employed. The defendant was working on his idea in his own time and, as a result, the developed concept belonged to him.
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© RT COOPERS, 2007. This Information Note does not provide a comprehensive or complete statement of the law relating to the subjects discussed nor does it constitute legal advice. Its sole purpose is to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.