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January 25 2016


Commercial Law - Employment Law - Interpretation of Regards to Employment Contract

Employment law firm
The situation of Helmet Integrated Systems Ltd v Tunnard yet others [2006], involved a dispute over what actions could be allowed underneath the terms of a work contract. The claimant ("HISL") produced and sold protective clothing. In 1993, it commissioned a brand new helmet design which was successfully marketed especially towards the London Fire Brigade. The defendant would be a senior salesman using the claimant.

Employment law firm
Whilst in the claimant's employment, the defendant had the concept to get a new modular helmet. He thought that his employers are not considering developing a new helmet, particularly on the European market, where he perceived there to be a gap for such a product to get a foothold.

Between September 2001 and the 28th of February 2002, the defendant took a number of steps to advance his idea. He obtained some funding and arranged for designers to organize initial drawings of his concept. He handed as part of his notice of resignation around the 1st of February 2002 and worked until the end of his notice period until he left on the 28th of February.

The defendant incorporated Modular Helmet Systems Ltd ("MHSL") 2 months after his departure in the claimant. Shortly thereafter, a competitor company to HISL, Lion Apparel Inc ("Lion") invested in a big part shareholding in MHSL. The claimant brought claims alleging that the defendant had acted in breach of his duty of fidelity in developing a safety helmet which would take competition with HISL's safety helmet, together acted in breach of his fiduciary duties in failing to report his activities while still under HISL's contract of employment.

Those claims were rejected from the judge inside the patents county court. He figured that acts of preparation before departure weren't actionable and that there wasn't any breach of duty of good faith or fidelity by the worker. He held the employee was allowed to opt to set up a business competing with his employer which the preliminary steps taken to achieve this were permitted. Also, he figured there wasn't any breach of any fiduciary duty because this kind of obligation must be limited to his duty like a sales representative.

The claimant appealed using this decision. On appeal the claimant trusted the truth that the defendant's printed contract of employment provided it had been his duty to advise his employer on the activities of competitors and their pricing structures. They argued which he was, therefore, under a duty to report such activities whether they were undertaken with a competitor or alone in their intend to take on his former employer.

The appeal was dismissed. It absolutely was held:

- Underneath the circumstances, even though defendant's activities could have amounted to competitor activity if undertaken by way of a competitor (and that he therefore might have owed a fiduciary obligation to not misuse information about such activity for his or her own benefit or for the benefit of someone apart from the claimant), this didn't imply that he was under any obligation to inform HISL of his or her own activities.

- What of the job specification did not restrict the defendant's freedom to prepare for competition on leaving. He was employed as a salesman not just a designer plus it wasn't in contemplation of either party which he would produce a helmet. Clear words were necessary to restrict the ordinary freedom of the employee who was simply quitting his employment and creating in competition to his former employer, that your defendant's job specification didn't do.

- He was under no relevant fiduciary duty for the claimant. The defendant owed no fiduciary obligations in terms of the creation of a basic concept to get a new helmet. Therefore he wasn't in breach of any such obligation by trying to raise funds for such a project while still in employment. The defendant was working on his idea as part of his own some time and as a result the idea developed belonged to him.

Don't be the product, buy the product!