COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE PATENTS COUNTY COURT
His Honour Judge Fysh QC
 EWPCC 1
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE MOSES
| HELMET INTEGRATED SYSTEMS LTD
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|TUNNARD & OTHERS
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Mark Platts-Mills QC and Benet Brandreth (instructed by Messrs Field Fisher Waterhouse) for the Respondent
Crown Copyright ©
Lord Justice Moses :
Introduction and Background
Mr Tunnard's Activities Whilst Still in Employment with HISL
The Judge's Conclusions
"A number of other authorities were in fact drawn to my attention in this connection including Balston v Headline Filters Ltd, supra at 412 ff and Bell v Lever Bros  AC 164 upon which it (and the other authorities) draw. Not surprisingly, acts of preparation before departure are not actionable; there is no breach of the duty of good faith and fidelity on the part of an employee to decide to set up in competition with his employer and take preliminary steps to do so: Balston supra at 413. The law does not require a working lacuna between jobs and recognises the social utility to an employee and to the community of the acquisition of expertise and knowledge from his employment. This obviously applies even to an employee whose job it is to promote sales and to report on competitive activity. To do otherwise would I consider result in such an employee being either locked in corporate bondage or unable to get a running start were he to leave. Either way, this would be against public policy. I was also referred to Hivac Ltd v Park Royal etc Instruments, supra and to Lancashire Fires v SA Lyons  FSR 629 in this connection but they do not take the matter further. It seems to me that to succeed under this head, the claimant must show actual competition or misuse of particular and valuable information (a fortiori confidential information) in his possession which should properly be regarded as being his employer's and not his." (see para 61)
"until the SMART award was actually made and more realistically, until the team at AME actually accepted the potential viability of Mr Tunnard's ideas, there was in reality no new helmet project. It was still a 'wish list' in Mr Tunnard's mind, a commercial idea. Unless the law imposes upon fiduciaries (a fortiori upon mere employees) a duty to confess to their employer even potentially competitive thoughts the entrée for this enquiry into the legitimacy of Mr Tunnard's preparations for his departure must I think begin after AME were instructed and provided with the essential data for their preliminary work to begin. I am satisfied that the law imposes no such Orwellian obligation on employees and in the next Part, when I match the facts with the law, I shall therefore begin with the first working meeting with AME in the second half of November 2001 – which I regard as the moment from which true preparation for competitive activity can be said realistically to have begun." (see paragraph 46)
"carried out preparatory to his departure and having regard to the subject matter, well preparatory to any actual competition". (see paragraph 65)
He based that conclusion upon the fact that all Mr Tunnard had done was to accumulate practical information and that his activities were:-
"all reasonable and necessary acts of preparation for departure". (see paragraph 62 of the judgment)
He concluded that up until the time that he left he had undertaken no actual competitive activity nor made any offer to sell. (sic, see paragraph 62).
"such an obligation…must be confined to his duty as a salesperson. He was not therefore obliged to 'report' any of his own 'paper' preparations for his future which one day might possibly (the judge's emphasis) to enable him to compete." (sic, see paragraph 63 of the judgment).
(a) there was no allegation of breach of confidence or misuse of confidential information;
(b) it was not alleged he was in breach of any restrictive covenant. There was no such covenant;
(c) no other HISL employee was involved;
(d) Mr Tunnard carried out his activities entirely in his own time without use of any HISL property;
(e) there was no commercial agreement or arrangement made before Mr Tunnard left and no actual competition;
(f) Mr Tunnard was neither a director nor an employee of similar rank, he was a middle-ranking senior salesman. (See paragraph 27 of the judgment.)
The Terms of Mr Tunnard's Contract of Employment
"there is a duty upon the employee to act at all times with the best interests of the company in mind…"
"no employee will be permitted to undertake any work or arrange the undertaking of any work which can be seen to affect adversely or be in competition with the Company." (Clause 10.1).
"to advise on competitor activity and pricing structures".
" the appointment and training of a global network of distributors and agents, "
still less "to get HISL Cromwell range of fire products specified globally with fire brigades and petrochemical companies." In short, to introduce reliance upon that specific provision at the appeal, has deprived Mr Tunnard of the opportunity to rebut its significance, which would have been available had the point been taken at the proper time. He contended, in reliance upon the notes to CPR 52.8.2, that justice required that so radical a change in argument should not be permitted.
The Obligations and Rights of Mr Tunnard as Employee
The Legitimacy of Preparatory Activity
"miraculously sidestepped by intoning the magic formula (breach of fiduciary duty)" (see Lord Millett in "Equity's Place in the Law of Commerce" (1998) 114 LQR 214 at 217).
"…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 interest 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" (Para 1494, page 22).
Thus when the renowned university embryologist, Dr Fishel, worked abroad he did not act in any breach of fiduciary duty. He was under no obligation to give his employer the benefit of:-
"every opportunity falling within the scope of its business" (see para 1497, page 24).
But he might well have been in breach of a fiduciary duty had he treated patients at a competing clinic (see paragraph 1497, page 24).
Mr Tunnard's Fiduciary Obligation, the Argument
"in a situation where equity imposes these rigorous duties in addition to the contractual obligations". (see para 1491, page 21, University of Nottingham)
"his helmet now shall make a hive for bees" (Peele: A Farewell to Arms)
" which can be seen to affect adversely, or be in competition with the company".
But Mr Stafford QC expressly disavowed any intention to rely upon that negative obligation as imposing a positive fiduciary obligation to report on his own activity. I do not think that the words of the general condition enlarge the meaning of "competitor activity" to cover Mr Tunnard's own preparatory activities, undertaken in the exercise of his freedom to assess the viability of his concept for a new helmet. 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.
Lord Justice Lloyd:
Lord Justice May: