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 to the London Fire Brigade. The defendant was a senior salesperson with the plaintiff.
While working for Plaintiff, 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 felt 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 secured some funding and arranged for product designers to prepare initial concept drawings for him. He served his notice of resignation on February 1, 2002 and worked until the end of his notice period until he left on February 28.
The defendant incorporated Modular Helmet Systems Ltd (“MHSL”) two months after his departure from the plaintiff. Shortly thereafter, a rival HISL company, Lion Apparel Inc (“Lion”), invested a majority stake in MHSL. Plaintiff filed lawsuits alleging that Defendant had breached his duty of fidelity by developing a safety helmet that would compete with HISL’s safety helmet, and had breached his fiduciary duties by failing to report his activities while still under a Contract of Employment of HISL.
Those claims were rejected by the judge in the county patent court. He determined that the acts of preparation before departure were not actionable and that there was no breach of duty of good faith or fidelity on the part of the employee. He argued that the worker was allowed to decide to set up a company in competition with his employer and that the previous steps taken for it 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 plaintiff appealed against this decision. On appeal, the plaintiff relied on the fact that the defendant’s paper employment contract stated that it was his duty to advise his employer about 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:
– Under the circumstances, although Defendant’s activities would have been competitive activities had they been conducted by a competitor (and, therefore, it would have had a fiduciary duty not to misuse information about such activity for its own benefit or for the benefit of someone other than the complainant), did not mean that he was obligated to inform HISL of his own activities.
– The words of the job specification did not restrict the defendant’s freedom to prepare for the competition upon leaving. He was employed as a salesman, not a designer, and never thought of any part that he would develop 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 do.
– Had no relevant fiduciary duty to the plaintiff. The defendant had no fiduciary obligations 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 he was still employed. The defendant was working on his idea in his own time and, as a result, the concept developed 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 issues discussed nor does it constitute legal advice. Its sole purpose is to highlight general issues. Specialized legal advice should always be sought in relation to particular circumstances.
