Helmet Integrated Systems (HIS) makes helmets and employed a Mr
Tunnard as a salesman for a number of years. Tunnard had an idea
for a new kind of helmet and ended up leaving HIS and taking his
design to a rival company, Lion Apparel Systems.
HIS took and lost a case arguing that Tunnard breached his
fiduciary duty to it by preparing to develop the helmet while
working for it and for failing to report his activity, since part
of his job was to report activity by firms or individuals that were
in competition with HIS. It then appealed its case and lost
again.
In employment law, a fiduciary duty is what some employees owe
their employer, and it means that the employee acts in the best
interests of the company. This may encompass a duty to report
wrongdoing and even to confess one's own wrongdoing.
Not every employee owes his employer a fiduciary duty. Directors
all owe it to their companies, and some senior employees can have
similar duties written into their contracts. The lesser duty which
all employees owe is one of good faith and loyalty, or fidelity,
but that does not necessarily involve an employee putting a
company's interests above their own.
Tunnard argued that the only work he carried out while working
for HIS was preparatory work, and did not engage in actual
competition with HIS. Preparatory work is permitted in law in order
that employees' freedom to change jobs or set up in competition
with past employers.
The case turned on whether or not Tunnard owed a fiduciary duty
to HIS and whether or not that duty was breached. Lord Justice
Moses, in his adjudication, said that Tunnard's behaviour could
have been a breach of fiduciary duty, but that such duty did not
exist.
"I have accepted that Mr Tunnard's activities would have
amounted to 'competitor activity' if undertaken by a competitor and
I have accepted that he owed an obligation as a fiduciary not to
misuse information about such activity for his own benefit or for
the benefit of someone other than HISL," said Moses. "But it does
not follow that he was under any obligation, be it fiduciary or
otherwise, to inform HISL of his own activities or such activities
undertaken on his own behalf."
"There seem to me two fundamental reasons why Mr Tunnard was
under no obligation to report his own activities," said Moses.
"Firstly, the words of the job specification do not restrict Mr
Tunnard's freedom to prepare for competition on leaving. Secondly,
he was under no relevant fiduciary obligation to HISL."
The court found that since Tunnard's contract of employment did
not specify any further obligations, they could not exist. Tunnard
was employed as a salesman, not a product designer, so it could not
be assumed that rights in product design ideas he had would
automatically be restricted.
HIS argued that a subsequently issued job description restricted
his activity in relation to competitive activity, but Moses said
that if such a fundamental change in his rights as an employee was
intended, "then far clearer words would be required".
"Clear words are needed to restrict the ordinary freedom of an
employee who is considering quitting his employment and setting up
in competition to his former employer," he said.
Ultimately Moses said he had to find for Tunnard because HIS
"had not restricted the freedom which Mr Tunnard had to prepare for
future competition on his departure."
