A director must pay compensation after hijacking one of his company’s potentially lucrative contracts and using it to set up a new business.
The director had been approached as a representative of his company to provide a service checking and maintaining aircraft. During the negotiations, he decided that he would bypass his company and set up a new business so he could receive the full benefit of the contract.
He then resigned after telling his company that it had lost the contract. He did not inform his former colleagues that the business had been awarded to his new firm.
The company later discovered what had happened and took legal action alleging that the director had breached his fiduciary duty – that is, his obligation to act in the company’s best interest.
The High Court held that the director had failed to act in good faith. He had sought to make a profit out of his role as a director and put himself in a position where there was a conflict between his self-interest and his duty to his company.
He had also failed in his duties as an employee of the company. He had not acted in good faith and the information he had gained as an employee had been used for his own purposes. The director and his new firm were therefore liable for damages.
Please contact us if you would like more information about the issues raised in this article.