IN THE SUPREME COURT OF JUDICATURE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
19 July 2001
B e t w e e n :
Claimaints
-and-
Defendants
----------
Michael Supperstone QC and Andrew
Clutterbuck (instructed by Eversheds) for the claimants.
David Oliver QC and Thomas Moody-Stuart (instructed by DLA) for the first defendant.
The second defendant was not represented and took no part in the proceedings.
Hearing dates: 12-16 February, 30 April, 28- 29 June.
1. The trial of this action has taken a somewhat unusual course. After the hearing was concluded but before judgment the claimants applied for leave to call further evidence and to amend their pleadings further. Neither the first defendant, Mr Oakes, nor the second defendant, GoGas (UK) plc (GoGas), which was not represented in the course of the trial, objected. After a further directions hearing and more disclosure by each side, I heard two more days evidence and argument.
2. This is a claim against Mr Oakes for acting in breach of his fiduciary duties as a director of the first claimant, Coleman Taymar Ltd (Taymar), the terms of his employment contract and his equitable duties of confidentiality. It is said that he entered into wrongful competition, while an employee and director of Taymar, personally and through the agency of his company, the second defendant GoGas. It is further said that he secretly negotiated with Taymar's landlords to take over the factory premises at Stockport which Taymar was vacating and at the same time, without regard to his duties, negotiated the terms of Taymar's surrender of the premises. Third, it is said that he misused confidential information for his own and GoGas's benefit. Fourth, it is said that as a director of Taymar he purchased equipment from Taymar by deception for use in his own new business.
3. These allegations arise against the background of the progressive transfer of Taymar's business to another company in the Coleman Group, and Mr Oakes' departure from Taymar. It is said that as a result of Mr Oakes' wrongful activities, he was successful in setting up a new business, GoGas, which was able to compete effectively in the market within a short time of his departure. It is said that had it not been for Mr Oakes' activities, his effective competition would have been delayed by up to a year.
4. The claimants' case is that as a result Taymar and the other companies in the Coleman Group of which it forms a part, have suffered loss and that Mr Oakes has obtained valuable advantages for which he is obliged to account. For reasons which are a matter of dispute, GoGas did not prove to be a successful venture and is now in administrative receivership.
5. The Coleman Co Inc (Coleman Inc) was itself until 2 March 1998 owned by Kansas Acquisition Corp. On that day the Coleman Group was acquired by the Sunbeam Corporation. Taymar and Coleman (UK) were then subsidiaries of Coleman Europe BV, which was itself the subsidiary of Coleman Inc.
6. Taymar had become a part of the Coleman Group in 1993 when it was acquired by Coleman Inc from Mr Oakes, his brother Kenneth Oakes and Betty Oakes for approximately £6m.
7. After that acquisition, goods manufactured by Taymar were all sold within the Coleman Group. The goods were then sold on by Coleman UK at an enhanced price to well-known retailers. That company specialised in outdoor leisure goods such as tents, sleeping bags, stoves, lanterns and gas cartridges. Taymar manufactured such items as gas torches, blowlamps and heat guns for the DIY and camping market. In 1996 Coleman Inc acquired Applications de Gaz SA, the well-known manufacturer of Camping Gaz trademark gas appliances.
8. The way in which the European subsidiaries were managed was that all major decisions were taken in Brussels by Coleman Europe and only day-to-day management decisions were taken by the local companies. In its turn, Coleman Europe was kept on what appears to have been a fairly tight leash by the parent board in the United States.
9. Both Mr Oakes and his brother had, with others, been retained on the board of Taymar after it was acquired by the Coleman Group. They were in form directors, but the evidence showed that board meetings took place only when required by law, and that all decisions of any substance were imposed from Brussels.
10. Mr Oakes entered into an employment agreement on 4 October 1993. This was in consequence of the take-over of Taymar by Coleman Inc. The parties to the agreement were Taymar, Coleman Inc and Mr Oakes. By Recital B, it was provided: 'Coleman or its subsidiary is the sole stockholder of Taymar and is guaranteeing Taymar's performance of this Employment Agreement.' After various provisions concerning the term of the contract, termination, duties, by which Mr Oakes was expressed to be engaged as an executive officer of Taymar and a clause setting out his benefit package, the agreement provided at cl 6:
Employee shall devote his full time, attention, and energies to the business of Taymar between the hours of 9 a.m. and 5 p.m. on weekdays and further including such additional hours and weekend hours as reasonably required to appropriately discharge Employee's assigned responsibilities, and shall not, during the term of this Employment Agreement engage in any other business activity, whether or not such business activity is pursued for gain, profit, or other pecuniary advantage. Other than on the boards of charitable organisations and trade organisations, Employee agrees not to serve as an officer, manager, partner, or consultant of any other corporation or business entity without the prior written consent of Taymar.
11. At cl 9 the contract provides:
Employee recognises and acknowledges that the lists of Taymar customers and suppliers and Taymar's methods of operation, processes, formulae, trade secrets, methods of determination of prices, financial condition, profits, sales, net income, indebtedness, and other information as to the business affairs of Taymar as the same may exist from time to time are confidential information and are valuable, special and unique assets of Taymar's business. Employee, therefore, agrees that he will not, during or after the term of his employment, disclose any of such lists (or any part thereof), or any such methods, or other information as to the business affairs of Taymar to any person, firm, corporation, association, or other entity for any reason or purpose whatsoever or to use such lists, methods or information for his own benefit without the prior consent of Taymar ...
12. Clause 11 of the agreement contains a restrictive covenant. Counsel on both sides indicated that there were doubts as to the enforceability of this covenant and neither side sought to rely on it.
13. Clause 12 of the agreement is in these terms:
Employee agrees that, in addition to all other remedies otherwise available to Coleman or Taymar, Coleman and Taymar shall have the right to injunctive relief to restrain and enjoin any actual or threatened breaches of the non disclosure obligations under Section 8 or of the restrictive covenants contained in Section 10 [these are in fact mis-numberings: the reference should be to ss 9 and 11] and that if in any litigation that might arise over the provisions of either Section 8 or Section 10, a court shall determine that the restrictions contained in either are too broad or too long in duration only such provisions as such court might find unenforceable are to be amended and then only so much as shall be necessary in order for the restrictions contained therein to be enforceable ...
14. Clause 18 of the agreement provides: 'Coleman guarantees Taymar's performance under this Employment Agreement.'
15. The significance of cl 12 is that in the course of argument counsel for Mr Oakes submitted that the only purpose of joining Coleman Inc in the employment agreement was as a guarantor, and that as a matter of construction Coleman Inc could not enforce any of the terms of the employment agreement. In my judgment, the terms of cl 12 make it clear that Coleman Inc was intended to be able to enforce the terms of the agreement and that the provisions as to disclosure of information and trade secrets were intended to be not only for the benefit of Taymar but also for the benefit of Coleman Inc. In my judgment the argument advanced that Coleman Inc could not sue for damage done to it by any breach of the agreement, is without foundation.
16. The witnesses whose evidence I heard on behalf of the claimants were as follows: Mr Robert Rosenzweig, then the vice-president and general counsel Europe for the Coleman Group, who is now the general counsel for Europe, Africa and the Middle East of the Sunbeam Corp; Anthony Lenders, who was until May 1998 the president of Coleman Europe BV; Richard Jamie Strode, the managing director of Coleman (UK); Jeffrey Taylor who was the chief accountant of Taymar until 27 March 1998 and thereafter did some work for Taymar as an independent contractor; Daniel Ray Peterson, who was the European chief financial officer of Coleman Europe and whose evidence was given by way of witness statement under the Civil Evidence Act, he being now resident in Evergreen, Colorado; Roger Christie Nellthorp, who at the material time was managing director of HTD, a customer of the Coleman Group; Michael John Andrews, a director of a company which supplied Taymar; and Stephen Willis Green, a director of another company which supplied Taymar. On behalf of the defendants, I heard evidence from: Mr Oakes; Anthony Simon Weightman, a solicitor and a partner in the firm of Dibb Lupton Alsop now called DLA, solicitors to Mr Oakes whose firm also acted for Taymar in relation to the surrender of the leases of the premises occupied by Taymar; David Jeffcock, a director of a company which had been interested in purchasing GoGas from the administrative receiver; and Eric Budsworth, who was for many years an employee of Taymar. In addition, I heard evidence from Andrew John Bradburn, who was called on behalf of Mr Oakes as an expert witness to deal with various questions concerning the leasehold properties.
17. I was urged on behalf of Mr Oakes to accept him as 'a transparently honest witness'. Although no doubt Mr Oakes did his best to tell the truth in relation to most matters, I am satisfied, having seen him in the witness box and having heard his answers in relation to a number of the contemporary documents, that he is a man who was anxious to underplay the extent to which he had set about preparing GoGas for its launch before the end of March 1998, that he deliberately underplayed the extent of the contact which he had had with the agents for the landlords of Taymar's premises before the surrender of the various leases took place, and that he did not tell the truth in respect of the sale of certain assets of Taymar which ended up being used by GoGas. On the other hand, I regard him as being a witness with a substantially better memory than Mr Lenders. Mr Lenders firmly asserted that he had never heard of the firm of solicitors acting for Taymar in the surrender of their leases, and indeed also acting for Mr Oakes in the grant of the leases to him, until it was pointed out to him that there was cogent evidence, including a number of documents, which demonstrated that he had attended a meeting with a representative of those solicitors. Mr Lenders was at this time in the process of dealing with the take-over of Coleman by the Sunbeam Corporation. I have no doubt that he had many more significant matters on his mind, not least his own position after the take-over was completed. Mr Rosenzweig put the situation thus in the course of his evidence:
Again, at this point in time, we must also remember that April of 1998- subsequent to the take-over of the Coleman Group by Sunbeam Corporation, there was a period of eight weeks when senior decision-making became very difficult. In the United Kingdom you may know Sunbeam Corporation had a gentleman that was managing the company called Al Dunlap, who has the nickname "the Chain-Saw". People were very, very concerned during that period about the continuity of the operations. It may be that during that period not much was done about this.
18. Mr Lenders was made redundant on 9 May, and I have no doubt that his attention was taken up with matters other than the detail of the closure of Taymar's plant which was a decision which had been taken some considerable time earlier. In particular, I am satisfied that, despite Mr Lenders' lack of recollection, he did have a telephone conversation with Mr Oakes on 27 March 1998.
19. The remaining witnesses were all, I am satisfied, doing their best with varying degrees of success, to recall events precisely as they happened, though Mr Rosenzweig was markedly hostile to Mr Oakes throughout his evidence.
20. The leases which Taymar held in Stockport, and from which it operated both its manufacturing and its research and development arms fall into two classes. At the Meadow Industrial Estate there were units 27B, 39 and 40. These were owned by the Hewer White Trust. The agents for the trust were Garner & Sons and the solicitors were Smith Forts. These properties were used for manufacturing and storage purposes. At Wear Mill, Taymar had premises on the first, second and third floors which were used for their research and development department. Premises on the ground, first and second floor were used together with unit 2 at Wear Mill as part of the manufacturing division. There was a storage area and some parking which was sublet by Taymar to a third party. The Wear Mill property was owned by Trownbay Property Company Ltd. Leslie Fink Ltd acted as Trownbay's property agents and the solicitors were Pariser & Co.
21. The premises on the Meadow Industrial Estate were not used after the transfer of Taymar's manufacturing business to Lyon, which was complete by November 1997. Units 39 to 41 were let to Taymar on a lease for seven years expiring on 28 September 1998. On 31 October 1997 Mr Taylor, the chief accountant of Taymar, instructed DLA to give notice to the landlords that Taymar did not wish to continue the tenancy after the term date. In the event a surrender of these premises was concluded on 6 April 1998, though Taymar had to pay the rent till the end of the term. In October no notice was given in relation to unit 27B which was let on an oral tenancy and which was overlooked at the time. Instructions to terminate this tenancy were given to DLA on 18 December 1997 and on 22 December 1997 DLA, on behalf of Taymar, gave notice to Garner & Sons to terminate the tenancy on 25 March 1998 and that Taymar intended to vacate the premises on 24 December 1997. No allegation of any wrongdoing by Mr Oakes is made by the claimants in respect of unit 27B.
22. So far as the Wear Mill premises are concerned, the leases fell into three categories.
23. First there were those parts which related to the manufacturing activities of Taymar. Parts of the ground and first floor were subject to a lease dated 6 November 1995 for a ten-year term from 29 September 1993. This lease could be determined by Taymar at the end of the first five years, 28 September 1998, following three months notice on condition that rent was paid up to September 1998. On 31 October 1997, Taymar gave notice under the break clause that it wished to determine the lease on 28 September 1998. In the event Taymar were allowed to surrender these premises on 27 March 1998, but were required to pay the rent up to September. Taymar was holding over in parts of the second and fourth floor following a three-year lease which had expired in 1995. This tenancy could be determined on three months notice terminating on a quarter day. On 31 October 1997, Taymar gave notice to terminate the tenancy on 25 March 1998. Unit 2 was also occupied under a quarterly tenancy which could be determined on a quarter day. Again, notice was given on 31 October 1997 to terminate the tenancy on 25 March 1998.
24. Secondly, there were those parts of the first, second and third floors of Wear Mill, which were occupied by the R & D department of Taymar. These were let on a written tenancy dated 29 September 1993. The tenancy could be determined on three months notice on 28 September 1998, subject to rent being paid to the break date. By letter dated 3 February 1998, following instructions received from Mr Taylor on behalf of Taymar, DLA gave notice that it wished to determine the lease in September 1998.
25. Thirdly, there was a lease relating to the car park and storage area which was in part vacant and in part occupied by a third party. Notice that Taymar intended to vacate these premises on 7 April 1998 was given on 5 March 1998. No allegation of wrongdoing by Mr Oakes is made in respect of this part of the premises.
26. I propose to deal with the facts in chronological order. Many of them are not in dispute and these can be dealt with briefly. Others of them are controversial and as and when I come to them in the chronology, I shall make the necessary findings of fact. I shall deal with Mr Oakes' competition with Taymar separately.
27. Following the take-over of Taymar by Coleman and Mr Oakes entering into his employment contract, matters proceeded smoothly enough until 1997. In 1997 the Coleman Group was making a loss. As part of the process to arrest these losses the decision was taken to close Taymar's manufacturing process at Stockport and to transfer manufacturing to Lyon. On 6 May 1997 the decision to close the manufacturing process was made public. The local press already had suspicions that closure was imminent and had written of the possibility a day or two earlier. As a consequence of the decision, Taymar instructed DLA, solicitors both to Taymar and to the Oakes family, to report on its leases. The report was made to Mr Oakes on 16 June 1997.
28. In the early Autumn, Coleman Europe decided that the boards of its European and UK subsidiaries should be reorganised. This was part of a more general restructuring for tax purposes. According to Mr Rosenzweig, there was a decision to have a board of three for each subsidiary comprising two people in Brussels, one financial and one legal, and a local director. After that decision, at the end of October a flurry of faxes passed between Edwards Geldard (another firm of solicitors used by parent companies of Taymar Group), Coleman Inc, Taymar and Coleman Europe. Amongst those faxes was one, signed on behalf of Kansas Acquisition Corp, which was at this stage still the ultimate parent company of Taymar. It was addressed to Taymar and is in these terms:
Gentlemen,
This notice is given pursuant to Article 19 of your Articles of Association. We hereby: a) appoint Robert Rosenzweig as an additional director of your company; and b) remove Malcolm Campbell Oakes, Larry Eugene Sandford, Ronald Josef Nold, as directors of your company. For and on behalf of Kansas Acquisition Corporation.
And then the signature of someone described as duly authorised.
29. That was sent to Edwards Geldard under cover of a fax which begins:
In reply to your telefax request dated today, are attached the copies of the following documents which were executed by me today at Robert Rosenzweig's request. Signed originals are being sent to you tonight via overnight courier.
30. Article 19 of Taymar's articles of association provides, so far as material:
any member holding ... a majority in nominal value of such of the issued share capital for the time being of the company as carries the right of attending and voting at general meetings of the company may by notice in writing signed by or on behalf of him ... and delivered to their office [that must mean registered office] at any time and from time to time appoint any person to be a director ... or remove any director from office no matter how he was appointed.
If therefore the notice under art 19 which I have read was delivered to the registered office of Taymar, it was effective to remove Mr Oakes as a director.
31. There is, however, no evidence that the notice was delivered. The contemporaneous evidence makes it most unlikely that the original was delivered. At the same time as this art 19 notice, draft minutes of a proposed board meeting were sent by Edwards Geldard to Taymar. Those draft minutes included the resignation of Mr Oakes. Mr Oakes' reaction to that was to fax Mr Lenders in these terms:
Dear Antony,
I was very upset and unhappy to receive the following set of papers from Edwards Geldard asking me to resign as a director of the company without any prior notice or discussion. We tried on Friday last to contact somebody to discuss this, but nobody was available until Jeff Taylor eventually spoke to Robert Rosenzweig, when it was agreed we should re-type the minutes removing my resignation as a director. I have now signed the revised minutes and a copy set is enclosed. The original set has been posted to Edwards Geldard and a copy set has also been faxed to them today. I wish to discuss with you on Thursday and I reserve all my rights in this matter.
Best Regards ...
32. The minute which was produced does not show Mr Oakes as resigning. Mr Rosenzweig's evidence was that he had originally proposed that Mr Oakes should be removed from the board, in pursuance of the policy of there being only one local director on each subsidiary, and because he took the view that Mr Oakes' brother, as the older brother, was the one who should remain. But, he said, when he appreciated Mr Oakes' strong feelings and he realised the family connections with the company, it was decided that both the Oakes brothers should remain on the board. Hence it was that the minutes eventually signed did not include Mr Oakes' resignation. I am satisfied that the art 19 notice was never served and that Mr Oakes was therefore never removed as a director pursuant to that notice.
33. Very shortly after this Mr Oakes was told that the research and development facilities of Taymar would also be closed. Although, when the decision to close the manufacturing plant had been taken, it had been decided to leave the research and development (R & D) facility to see whether it could be profitably run, by November when the manufacturing facility had been closed it was decided by Coleman Inc (contrary to the wishes of Mr Lenders) that the R & D facility would have to close as well. That decision was communicated to Mr Oakes on 6 November.
34. It was asserted by the claimants, without calling any admissible evidence to support the assertion, that on 11 November 1997 Mr Oakes contacted Garner & Sons, the landlord's agents for the Meadow Industrial Estate, about the possibility of taking a personal lease of some of the premises let to Taymar. That day Mr Oakes and his family flew out to Barbados on holiday by a flight leaving Heathrow at 11.15 am. His evidence was that he did not contact Garner & Sons on that day, that he took no mobile phone with him on holiday and that he made no telephone call to them from the airport. I accept this evidence.
35. At this stage Mr Oakes' position must have appeared to him to be extremely precarious. His role within Taymar was as director of R & D. The manufacturing process had ceased, and now the R & D Department was to close. All that Taymar would then have left would be artificial trading, buying inventory from other members of the group and selling it on within the group, in order to use its tax losses. It would continue to hold certain intellectual property, but it was clear that its trading days were over.
36. On 5 December 1997, Leslie Fink, the agent of the other of Taymar's landlords, wrote to Mr Oakes about the grant of a new lease to him personally of part of the Wear Mill property. The letter is headed 'subject to final lease'. The substance of the letter commences: 'Further to our discussions. We set out below terms and conditions which the landlords are prepared to accept ...' It then sets out fairly detailed terms for units 1, 2, 3, and 4 at Wear Mill. Mr Oakes' evidence was that this letter arose from inquiries as to the possibility of taking the premises plus wanting to have some storage units for himself. In my judgment, although Mr Oakes had not at this stage committed himself to taking a lease of these premises, it is disingenuous to describe the process which resulted in this letter as being merely a tentative inquiry. It clearly went considerably deeper than that.
37. At some time between this date and 16 December, Garner & Sons, the agents for the landlords of units 39, 40 and 41 Meadow Industrial Estate, inspected the premises. This inspection was pursuant to the notice which Taymar had given to terminate their subsisting lease on its expiry date, 29 September 1998. The purpose was to prepare a schedule of dilapidations. Mr Garner was accompanied on his inspection tour by Mr Oakes. On 16 December Mr Garner wrote to DLA enclosing a schedule of dilapidations. He also wrote to Mr Oakes, without prejudice, subject to contract and lease, setting out the terms on which those units could be let to Mr Oakes personally. The opening paragraphs of that letter read as follows:
Further to our recent discussions, I understand that Coleman Taymar Ltd., have now served Notice terminating their subsisting Lease of the above mentioned premises on the expiry date of 29 September 1998. I also understand they may wish to negotiate terms for an earlier Surrender of that Lease in or around January 1998. Assuming satisfactory terms can be agreed with Coleman Taymar Ltd., for a Surrender of the residue of their leasehold interest, I am pleased to confirm that my clients are willing to grant to you a new Lease of the subject premises, on the following terms and conditions ...
Various terms were set out in particular the following:
[5] Rent commencement date on the understanding that Coleman Taymar Limited will pay all rental due up to the expiry date of their lease on 29 September 1998, you will enjoy the benefit of a rent free period from the date of commencement of your new Lease until 29 September 1998. The commencement date for payment of rental under your new Lease will therefore be 30 September 1998.
38. At no stage before the issue of these proceedings did Mr Oakes ever reveal these negotiations, or any other negotiations, for him to take a lease of any Taymar premises to anyone else in authority in the Coleman Group.
39. There was then a short passage of correspondence about unit 27B, in respect of which notice had not been given, owing to an oversight. On 31 December Mr Weightman wrote to Mr Oakes at Taymar recommending that he instruct a surveyor or other professional to advise as to whether the works set out in the schedule needed to be carried out. On 19 January 1998 Mr Oakes had a meeting with Mr Weightman at which he instructed Mr Weightman to act for him personally in connection with his proposal to take leases of the property previously occupied by Taymar. Mr Weightman wrote to each of the agents on that same day. He did not contact anyone at Taymar to confirm that Taymar had no objection to what Mr Oakes was doing.
40. The remaining staff of Taymar, the R & D staff, had been told on 13 January 1998 that the department would close on 31 March 1998. No new work was undertaken, but the department continued to work on at least six projects for production at Lyon. Mr Oakes, in my judgment, put the minimum possible amount of effort into his work for Taymar over this period. He took two holidays in the early part of the year. Whilst I have no doubt that the calls on the R & D department were diminishing over the first three months of 1998, I reject Mr Oakes evidence that there was effectively nothing for him to do. There must have been pressure on the department to complete its remaining projects by the end of March. On 28 January Mr Lenders and Mr Rosenzweig went to Taymar's premises at Stockport and formally gave notice to Mr Oakes that all manufacturing related facilities of Taymar would be closed. The following day DLA were instructed by Mr Taylor, the chief accountant of Taymar, to terminate the leases of the premises used by Taymar in connection with their R & D work. On 30 January 1998 GoGas, under its original name Broomco (1451) Ltd, was incorporated: it changed its name to GoGas on 16 March 1998.
41. During February the question of the Oakes brothers' terms of severance was discussed and on 3 March Mr Lenders wrote Mr Oakes a letter setting out what he regarded as a generous offer.
42. On 9 March 1998 solicitors for the Hewer White Trust, the landlord of the Meadow Industrial Estate premises occupied by Taymar, supplied DLA with a draft deed of surrender for Taymar and a draft lease for Mr Oakes. Two days later the landlords of the Wear Mill premises supplied DLA with a draft lease to Mr Oakes and a schedule of dilapidations. Just over a week later DLA passed the schedule of dilapidations to Mr Oakes. On 23 March 1998 DLA wrote to the solicitors for the landlord of Wear Mill about a compromise on dilapidations at £40,000. On the evidence before me that was a proper compromise and one in the negotiation of which Mr Oakes played no part. It appears that Mr Taylor, the chief accountant, and members of the finance department in Brussels were the persons who agreed that £40,000 was an appropriate figure and within the Coleman Group's budget for the closure of Taymar. No surveyor was ever instructed on behalf of Taymar.
43. On 25 March Mr Oakes filed a trademark application for the name GoGas. Two days later there was a telephone conversation between Mr Lenders and Mr Oakes about the terms of Mr Oakes' severance. In the course of that conversation the parties reached agreement as to the terms on which Mr Oakes would leave, but those terms were to be reduced to a formal agreement. I am fortified in this conclusion by an internal memorandum of DLA dated 5 May 1998, long before any question arose as to whether or not there had been a telephone conversation on 27 March between Mr Oakes and Mr Lenders. That memorandum contains the following passage:
4. Following on that letter [that is to say the letter of 3 March] the clients negotiated directly and agreed for an additional £6,000 to be made as contribution to pension. Dan Peterson (accountant in Brussels) confirmed to Geoff Taylor (accountant in UK) that this was acceptable.
5. They also negotiated and agreed the purchase of their motor vehicles. This followed discussion between the Chairman, Mr Lenders and Malcolm Oakes when Malcolm explained why they wanted a cheaper than book price (to reflect the loss of use of next 12 months). Again Dan Peterson came back with figures on £25k and £22k (their suggested figures not ours).
6. Malcolm said to Mr Lenders that they needed to get everything documented formalised, with resignation letters. Mr Lenders said, "send us your draft docs and we will deal".
7. Malcolm Oakes and Ken Oakes volunteered to record these terms in a compromise agreement which was faxed on 1st April 1998 recording the terms agreed ...
44. On 30 March Mr Oakes employment came to an end. On 31 March Mr Oakes and his wife were appointed directors of GoGas. On 1 April 1998 DLA sent to Mr Rosenzweig by fax copy letters of resignation from Malcolm Oakes and his brother and compromise agreements and letters relating to the purchase of their vehicles. These were under cover of a fax sheet which bore the words 'Subject to client's final approval'. Contrary to the skeleton argument of counsel on behalf of the claimants there is nothing to suggest that this indorsement was part of some plan on Mr Oakes' part to remain a director of Taymar for negotiating purposes. Mr Rosenzweig deliberately held up the finalisation of the transaction 'given recent events here in Brussels' as he wrote to a Mr Blomberg on 18 May 1998. By that date Mr Rosenzweig was aware that Mr Oakes was intent on competing with Coleman through a new vehicle, that is to say GoGas, but he advised 'that we move forward with proposed transaction as presently structured to put finality on the situation'.
45. In the event the Coleman Group did not move forward as Mr Rosenzweig had advocated and Mr Oakes was compelled to commence proceedings on 1 July. By this time I am satisfied that members of the Coleman Group were aware that he had taken over the old Taymar premises and was setting up in competition with the Coleman Group. GoGas had in fact by then acquired leases of former Taymar premises both at the Meadow Industrial Estate and at Wear Mill and, with the assistance of former Taymar employees whom Mr Oakes had hired, GoGas had commenced in business since early April. On 31 July a compromise agreement was entered into to conclude Mr Oakes' litigation. That compromise agreement was for all practical purposes in the terms of the 'subject to contract' agreement which had been reached with Mr Lenders at the end of March, and included agreement that Mr Oakes' employment had ceased on 30 March.
46. At the end of August Taymar ceased trading. Since March it had traded only in an artificial manner. It had, on paper, bought in goods from members of the Taymar Group and then sold them on at a mark-up to other members of the Taymar Group. The object of this was to use up its available tax losses. By the end of August these had been used up and thereafter Taymar did nothing save hold certain intellectual property rights. On 21 December 2000 it was put into members voluntary liquidation. The competition from GoGas made not a scrap of difference to Taymar's trading.
47. In July 1999 the claim form in these proceedings was issued. In September 1999, as Mr Oakes said, Mr Oakes and Mr Rosenzweig met at the GoGas stand at the SPOGA Fair (an industry exhibition in Germany). There was what is best described as a full and frank exchange of views. I have no doubt that Mr Rosenzweig told Mr Oakes in no uncertain terms what he thought of him and that Mr Oakes responded forcibly. I am satisfied that Mr Rosenzweig is incorrect when he places this meeting in September 2000.
48. On 9 May 2000 the trial of this matter was adjourned by Rattee J. On 18 September 2000 GoGas went into administrative receivership.
49. In order to understand Mr Oakes' attempt to set up in competition with the Coleman Group, it is necessary to go back to the middle of 1997. The Coleman Group at this time was making a loss and it decided that one way to stem the losses was to concentrate all its European manufacturing processes at Lyon. This involved the end of manufacturing by Taymar at Stockport, and in effect the destruction of a large part of the Oakes family company. Mr Oakes was clearly dedicated to the company and to the industry in which it operated, much more so than his elder brother. When the decision was taken to close the manufacturing process, Mr Oakes was told by Coleman Europe that the R & D function had a guaranteed future in to '1998 and possibly beyond'. It then became apparent fairly quickly that the survival of the unit was unlikely. No new development projects were being fed through. By early November 1997 the remaining staff, the R & D staff, were demoralised. They held the view that once current projects were completed the unit would close and they would be made redundant. On 6 November 1997 it was made plain to Mr Oakes that their fears were justified and that closure of the R & D department was unavoidable. Before this Mr Oakes had considered in vague terms what might happen if Taymar were closed entirely but in the course of the next month he started seriously to contemplate his options when the unavoidable happened. At this stage he had not finalised any plans as to what he should do when his inevitable redundancy occurred, but it is clear that by Christmas he had in his mind the idea of starting business on his own account once Taymar had ceased operations altogether.
50. It was suggested on behalf of the claimants that from this period onwards Mr Oakes was approaching customers of the Coleman Group with a view to obtaining business from them. The only evidence called to support this assertion was that of Mr Nellthorp. I accept Mr Oakes evidence that his meeting with Mr Nellthorp was after his employment with Taymar had ceased. Mr Nellthorp himself did not say anything inconsistent with this and his witness statement is at best equivocal as to when the meeting took place. On the evidence it is clear that in mid-April Mr Oakes was in discussions with Taymar customers but there is no evidence of his conducting such discussions before the end of March. This pattern of waiting to break cover until after his employment ended fits with his waiting till 31 March until he became a director of GoGas and waiting to apply to register GoGas for VAT until 14 April.
51. To achieve his ambition Mr Oakes needed premises, personnel, plant and product.
52. So far as premises were concerned, he made an initial approach to Leslie Fink, the agent for one of Taymar's landlords, about the possibility of a new lease being granted to him personally. By 19 January he had instructed DLA to act for him personally in dealing with the landlord's agents. Throughout this period, oblivious of his duty as a director and employee of Taymar, he did not disclose his actions or intentions because he was aware that they would not be well received by the Coleman Group. He saw no reason why he should tell anyone in the group and he did not.
53. In my judgment it was important, if Mr Oakes was to be able to do what he wanted, for him to obtain those premises. Whilst it would have been possible for him to have used facilities in Italy for gas filling of cartridges, the finding of other premises in Britain would not have been easy and would have necessitated a delay in his plans. In addition to time spent finding appropriate premises, there would have been considerable time spent in obtaining the necessary permissions for the bulk storage of gas. To this extent in particular the obtaining of the old Taymar premises was important to him. As it was GoGas was able to occupy the old Taymar premises very shortly after they were surrendered by Taymar.
54. It was also suggested that obtaining the Taymar premises was important in other respects and that Mr Oakes obtained material advantages from going into those premises. I am not satisfied that this is so. The major items of equipment which remained in the premises were, on the evidence, two large gas tanks. Those belonged, not to the landlords or to Taymar, but to the gas companies which had the contracts for keeping them replenished. So far as other services were provided such as electrical wiring and burglar alarms, I accept the evidence of Mr Bradburn, the surveyor called on behalf of Mr Oakes, that such installations are basic commodities provided by virtually all landlords. Indeed, he pointed out that there were statutory obligations to provide, for example, fire alarm circuits in multi-tenured buildings. Similarly I accept his evidence that the six-month rent-free period was a period that an arms-length tenant coming to the property without any knowledge of its previous history would have expected to get. As it happens, in the circumstances of this case, that rent-free period was (at least in relation to the Meadow Industrial Estate premises) funded by Taymar as a part of the deal by which they were allowed to leave the premises early, but that would have been of no interest to an arms-length tenant.
55. So far as personnel is concerned, complaint was made that Mr Oakes employed former Taymar staff. The complaint comes in two parts. The first is baseless. There is no suggestion that he induced anyone at Taymar to break any contract of employment. What he did, perfectly properly, was give employment to workers whom Taymar had chosen to put out of a job. The staff who were taken over began formal employment with GoGas on 1 May 1998, which Mr Oakes regarded as GoGas' official start-up date.
56. There is however substance in the second part of the complaint. Before Mr Oakes' employment with Taymar ended he did make use of Taymar staff in preliminary work in preparing for the setting up of his new business. In particular Mr Burgess, Mr Reed, and Mr Dougherty were in my judgment used by Mr Oakes in various capacities for the purposes of his preliminary work on what became GoGas whilst they were employees of, and being paid by, Taymar. Mr Burgess assisted Mr Oakes in 'doing the figures and projects and ideas and things'; Mr Reed provided designs for Mr Oakes; and Mr Dougherty obtained quotations for Mr Oakes in February 1998. This was a breach by Mr Oakes of his fiduciary obligations to Taymar. It was suggested that in addition there was a breach of duty in respect of work done by Mr Taylor. He did work on figures on his computer for Mr Oakes. Mr Oakes puts that work as being in April, as to which I have considerable doubts, but the evidence is that Mr Taylor did the work on his own computer at home and in those circumstances I do not find any improper use of Mr Taylor's services by Mr Oakes.
57. What Mr Oakes was doing between January and March, apart from proceeding with his attempts to take leases of the Taymar properties, was to finalise his business plans. There were a number of ways in which he could have returned to the business which he knew. He could, for example, have acted merely as an intermediary. He could also have had products manufactured for him, for example in China, and then sold them under his own brand in the UK. That, however, was not the route which he preferred to go. Indeed, in my judgment, Mr Oakes throughout wished to obtain the old Taymar premises and to operate from them manufacturing goods for sale himself. Although, no doubt, he did consider other options (such as selling on goods manufactured for him in China) I am satisfied that his true intention throughout was, if possible, to take over the old Taymar premises and use them for his new business. I am re-enforced in this view because it is clear that he made no effort to look at other property and there is no evidence in the documentation of any business plan based on anything other than his occupation of the Taymar premises.
58. One of the indications of Mr Oakes intentions can be seen in his dealings with Mr Andrews of Data Moulding and Mr Green of Willis Green & Co. These dealings were the subject of the additional two days of evidence and submissions after I had reserved judgment and related to plant which, according to the claimants Mr Oakes was acquiring for his proposed business. Put shortly, Taymar asserted that Mr Oakes did deals with Mr Andrews and Mr Green whereby he sold unwanted equipment belonging to Taymar to their companies on the basis that the equipment would then be sold back to Mr Oakes at the same price.
59. There was a question raised as to how the claimants' became aware of these two transactions. It seems to me to be pretty clear that Mr Nash, who eventually purchased GoGas (or its assets) from the administrative receiver, was the source of the information, and that he gave the information in the hope that it would embarrass Mr Oakes and perhaps assist him in litigation which Mr Oakes contemplates against Mr Nash. It does not follow (as Mr Oakes contended) that Mr Andrews and Mr Green were put up to tell deliberately false stories. Although there were inaccuracies in their evidence in my view they were trying to assist the court to the best of their (sometimes limited) recollection. On Mr Oakes' behalf Mr Jeffcock was called to suggest that there was some sort of tie-up between Mr Andrews, Mr Green and Mr Nash which prompted Mr Andrews and Mr Green to give false evidence. Mr Jeffcock was an unsuccessful bidder for GoGas. I am in no position to say whether the sale of GoGas or its assets to Mr Nash's company was properly conducted, but (and this is in no sense a criticism of Mr Jeffcock) I did not find the evidence which Mr Jeffcock was able to give of any real assistance in resolving the issues before me.
60. So far as Mr Oakes' dealings with Mr Green are concerned, I find that in December 1997 Mr Green met Mr Oakes at Mr Oakes' house and there was a discussion about products for the new company which Mr Oakes contemplated launching when he was contractually free to do so. In January 1998 there was a meeting at Taymar's premises at which Mr Oakes broached the subject of selling unwanted Taymar equipment. According to Mr Green whose evidence I accept on this point Mr Oakes proposed that Taymar should sell the equipment to Mr Green's company which would sell it back to Mr Oakes at the same price. The object was to provide Mr Oakes with equipment when his new company took off.
61. Mr Oakes funded the purchase at a price of £3,300 plus (payable in three instalments) and paid the instalments. The payments to Taymar were made either at the same time as Mr Oakes paid Willis Green or (in the case of the second and third instalments) after Mr Oakes paid Willis Green. The reason he did so was because the sale was made at his suggestion for his benefit. The suggestion that he lent the purchase price to Willis Green as a matter of good will because Willis Green needed the equipment and was in financial difficulty is simply nonsense. Equally the suggestion that the invoice dated 30 January 1998 was provided by Willis Green to Mr Oakes as some form of security in case Willis Green failed with the loan unrepaid seems to me to be unsustainable.
62. The equipment the subject of the sale was, in my judgment, all delivered to Willis Green. In this regard I prefer the evidence of Mr Oakes and more particularly Mr Budsworth, the warehouse manager of Taymar, to that of Mr Green. Mr Budsworth who had been an employee of the Oakes family businesses for many years and whose loyalties clearly lay with Mr Oakes, was able to speak to the loading of much of the equipment and the redelivery of all of it. He was in my judgment a witness of truth speaking from memory. By contrast Mr Green was speaking largely from reconstruction and was a somewhat slapdash witness. He had initially stated none of the equipment was delivered, which he later acknowledged was a mistake. As his company also employed a Mr Lomas from Taymar to operate the Dessoutter drill, which was one of the pieces of equipment, his failure to remember the equipment or its operator indicates a considerable lack of care in preparation of his witness statement. Mr Green was also, I think, somewhat unwilling to acknowledge the extent to which his company had made use of the equipment whilst it had it.
63. So far as Mr Andrews was concerned, there is a direct conflict of evidence between him and Mr Oakes. I am satisfied that, as Mr Andrews said, he was asked to purchase, through Data Moulding, equipment (including a shadowgraph) from Taymar and pass it straight on to Mr Oakes at the price at which Data Moulding was invoiced by Taymar. None of the equipment was ever delivered to Data Moulding.
64. The shadowgraph was invoiced to Data Moulding on 22 January 1998, a purchase order was raised by DML, on Mr Andrews' instructions, on 26 January 1998, and on 4 February 1998 Data Moulding invoiced Mr Oakes. On 10 February there was a meeting between Mr Oakes and Mr Burgess of Taymar and Mr Andrews at Data Moulding's premises. There was a discussion about tooling costs in relation to Mr Oakes' proposed new business, and (as I find) an agreement for a second 'sale' by Taymar to Data Moulding and on to Mr Oakes. The list of equipment was handed over by Mr Burgess at that meeting. On 13 February 1998 Mr Oakes paid Data Moulding for the shadowgraph (although Data Moulding did not pay Taymar till a year later). On 16 February Data Moulding faxed an offer to purchase the other equipment to Taymar. On 20 March Taymar invoiced Data Moulding for this equipment. On 29 May Data Moulding invoiced Mr Oakes, who paid for the equipment on 22 June. Data Moulding paid Taymar at the same time as it paid for the shadowgraph on 19 February 1999.
65. The account that Mr Oakes gives that Mr Andrews wanted the shadowgraph, but changed his mind and Mr Oakes decided to preserve the goodwill of a potential supplier by purchasing it off Data Moulding personally because Taymar would not have had it back, and that Mr Oakes then simply transferred the equipment to his personal storage area at Taymar for convenience is not in my view credible. Similarly I cannot accept his account that there was a sale of miscellaneous small equipment which Mr Andrews wanted for Data Moulding, but a few weeks later he agreed with Mr Andrews that the equipment should remain with GoGas on the premises which it had never left.
66. There is no evidence to suggest that any equipment was sold at an undervalue or that Mr Oakes was not properly authorised to sell it. The vice in the transaction lies in the fact that on each occasion there was a purchase by a fiduciary in breach of his fiduciary obligations.
67. The evidence of Mr Andrews is that from early in 1998 there were discussions between him and Mr Oakes about tooling with a view to Data Moulding producing components for Mr Oakes' proposed new business. At least by 16 March 1998 there was a file on Mr Andrews' computer relating to proposed work for Mr Oakes: the file was saved as 'Malgas'. Matters are complicated by the fact that Mr Andrews was using Mr Reed, the Taymar employee who was assisting Mr Oakes for some freelance work on another project as well, so it is not possible to assume that references in Mr Andrews' documents to Mr Reed relate to work for Mr Oakes unless there is other material pointing to that conclusion. The actual component to be manufactured was a blowlamp handle. On 27 March according to Mr Andrews Data Moulding was sending a sub-contractor (Terbo) drawings which had been supplied to Data Moulding by Mr Oakes. The first jobsheets (according to Mr Andrews 'a record of our hours maintained by our toolmakers on construction and manufacture of components for the blow lamp handle') relate to 6 April 1998, after Mr Oakes had left Taymar. However an order had been placed with Terbo on 27 March for tooling (a bolster set) for a blow lamp handle.
68. According to Mr Oakes, Mr Reed came to Mr Oakes' house on the evening of 31 March or 1 April and they went through some ideas in detail. Mr Reed, according to Mr Oakes, did some basic drawings at the end of March or early April, and he was asked to incorporate certain other matters in the drawing in a telephone call from Mr Oakes in Italy where he was seeing a firm called Narley. Mr Oakes said further information was added by Data Moulding. In my view, in the light of the order placed on 27 March, whatever Mr Oakes and Mr Reed discussed on 31 March or 1 April, there must have been earlier discussions and work which enabled that order to be placed.
69. On this state of the evidence, I am satisfied that the claimants have established on the balance of probabilities that Mr Oakes had taken steps beyond permissible preliminary preparation to procure a product for his new business before he ceased to work at Taymar.
70. During the course of the case the issue of DLA's position was the subject of some debate. DLA were originally instructed by Mr Taylor, the chief accountant of Taymar, to act on Taymar's behalf in relation to the surrender of the various leases. Thereafter, Mr Weightman, the solicitor dealing with the matter dealt both with Mr Taylor and with Mr Oakes. He was subsequently instructed on behalf of Mr Oakes in relation to Mr Oakes' desire to take leases of premises being vacated by Taymar.
71. Mr Weightman gave evidence that he is neither an employment lawyer nor a company or commercial lawyer. He took the view that there was no conflict of interest in his firm acting both for Taymar and for Mr Oakes. He formed this view because he knew that Taymar were closing down and because he believed that Mr Taylor and others at Taymar knew of Mr Oakes' plans. He said that had he appreciated the possibility of a conflict he would never have acted.
72. He did not consult Mr Oakes as to whether there was a possible conflict of interest. That, he said, was a matter for him. Mr Oakes never consulted him as to whether he had any conflict of interest or as to whether he had any obligation to make disclosure to Taymar as to what he was doing.
73. In these proceedings the only relevance of Mr Weightman's failure to appreciate, or to advise on, the difficulties in the positions of DLA and Mr Oakes is that Mr Oakes cannot rely on having taken legal advice as a factor in determining that he should be excused from liability for any breach of duty under s 727 of the Companies Act 1985.
74. Coleman (UK) made claim for relief against Mr Oakes on the basis that he had misused its confidential information, in particular knowledge of its pricing structures. That allegation was abandoned in the course of the hearing, and it follows that it has no subsisting claim for anything against Mr Oakes or GoGas.
75. As a director and senior employee of Taymar Mr Oakes owed Taymar both fiduciary and contractual duties. He had an obligation to 'do [his] best to promote its business and to act with complete good faith towards it' (see Scottish Co-operative Wholesale Society Ltd v. Meyer [1959] AC 324 at 366 per Lord Denning).
76. One part of the fiduciary duty was not to place himself in a position in which his personal interests conflicted with those of Taymar. In my judgment the statement in Palmer's Company Law at 8.156 accurately reflects the law:
Like other fiduciaries directors are required not to put themselves in a position where there is a conflict actual or potential between their personal interests and their duty to the company and a duty owed to another person.
As it was put by Lord Cairns LC in Parker v. McKenna (1874) 10 Ch App 96 at 118: 'No man can in this Court, acting as an agent, be allowed to put himself in a position where his interest and his duty will be in conflict.'
77. Where a director has a conflict of interest because he is interested directly or indirectly in a contract or a proposed contract with the company, he has a statutory duty to disclose his interest at a meeting of the directors of the company. This duty arises under s 317 of the Companies Act 1985. Failure to do so in the prescribed manner renders the director liable to a fine. In my judgment however it does not give the company a separate right of action for damages against the director. Any right of action arises from the breach of fiduciary duty and not from the section.
78. A director, like an employee, owes a duty of fidelity to his company (see Hivac Ltd v. Park Royal Scientific Instruments Ltd [1946] Ch 169 at 174 per Lord Greene MR). One of the facets of the fiduciary duty is not to compete or to assist another to compete with the company and a further facet is not to use confidential information obtained as director or employee otherwise than for the purposes of furthering the company's interests.
79. A company is entitled to elect whether to claim damages (perhaps more accurately called equitable compensation) or an account of profits against a director who is in breach of his fiduciary duty.
80. In this particular case the general duties of good faith and fidelity were reinforced by the terms of Mr Oakes' contract of employment, notably cll 6 and 9 which are set out above. However, it seems to me that as a matter of common sense and equity Taymar cannot recover twice for the same wrongdoing merely because it can claim that those acts were both a breach of Mr Oakes' duty as a director and a breach of his employment agreement. Having opted for an account of profits in respect of Mr Oakes' breach of duty as a director, Taymar cannot in addition claim for damages for breach of contract arising out of the same actions.
81. The general fiduciary duties of a director or an employee do not prevent a person from forming the intention, whilst still a director, to set up in competition after his directorship or employment has ceased. Nor do they prevent the taking of any preliminary steps to investigate or forward that intention so long as there is no actual competitive activity whilst the directorship or employment continues (see Balston Ltd v. Headline Filters Ltd [1990] FSR 385). The question will frequently be whether the activities during the course of the employment or directorship went beyond the taking of preliminary steps.
82. By s 727 (1) of the Companies Act 1985, if in any proceedings for negligence, default, breach of duty or breach of trust against (amongst others) a director it appears to the court that he is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, the court may relieve him either wholly or partly, from his liability on such terms as it thinks fit.
83. It was argued by Taymar that this section had no application in the present case because it had elected to claim an account of profits and the wording of the section was not apposite to enable a court to grant relief against an account of profits. In support of this proposition I was referred to the Singaporean decision Hytech Builders Pte Ltd v. Tan Eng Leong [1995] 2 SLR 795 at 806 in which Warren LH Khoo J doubted that s 391 of the Companies Act (cap 50, 1994 edn), which is in the same terms (so far as material) as s 727 of the English Act, could apply to relieve a director against a claim for an account. He said:
On the face of it, this section of the Act appears to be more applicable to a case where the misfeasance results in a loss to the company. It would be meaningful then to speak of exoneration, or "excusing". It seems far-fetched and unreal to speak of exoneration when the result of it would be to let the offending director keep gains which should not have gone to him in the first place.
He went on to conclude that section of his judgment by saying: 'I have no doubt at all that Mr Tan is in no position to ask the court to exercise its discretion under s 391 in his favour even if that section in principle applies to the situation in hand', so it may be that he was not expressing a concluded view on the point.
84. I regret that I cannot agree with the view of the learned judge, whether concluded or not. In my judgment there is nothing in the wording of the section which disentitles a director from asking the court to excuse him under s 727 merely because the relief sought is an account of profits rather than damages. The section refers to relief from liability. Liability to account is just as much liability as liability to pay damages.
85. Section 727 requires an 'essentially subjective approach' (see Re Produce Marketing Consortium Ltd [1989] 1 WLR 745 at 750 per Knox J). In my view this subjective approach must be limited to the 'honesty' element of 'honestly and reasonably'. I do not see how the reasonableness requirement can be a subjective requirement. Any reasonableness test must by its very nature be objective.
86. It does not follow that merely because a director has acted (subjectively) honestly and (objectively) reasonably the court is bound to excuse him. Proof that a director has acted honestly and reasonably are pre-conditions of the court's jurisdiction. Once the conditions are fulfilled, the court must consider whether in all the circumstances the director ought fairly to be excused, and if so may (not must) relieve him either absolutely or partly on the terms the court thinks fit (see National Trustees Co of Australasia Ltd v. General Finance Co of Australasia Ltd [1905] AC 373 at 381 (PC)).
87. So far as Coleman Inc's claim was concerned it was argued that it had no claim in law, because (it was said) its claim merely reflected the loss suffered by its subsidiary, Taymar, and as such was irrecoverable by the parent company. I was referred to Johnson v. Gore Wood & Co (a firm) [2001] 2 WLR 72 (HL).
88. I would have accepted this argument if that had been the sole basis on which Coleman Inc were advancing their claim, but it is not. The claim is that Coleman Inc had suffered loss because its investment in Coleman (UK) has lost value as a result of Mr Oakes' breach of contract which enabled there to be competition from GoGas earlier than might otherwise have been the case and that there should be an inquiry as to the extent of that loss. For Coleman Inc to be entitled to an inquiry there must be at least some small indication that an inquiry might reveal some loss. There is none.
89. Mr Oakes was a director of Taymar until late June 1998, though from the end of March he was a director in name only and not in substance.
90. The information that Taymar was determining its leases and wished to surrender them before their expiry in September 1998 was plainly confidential information belonging to Taymar. It was not information in the public domain.
91. Mr Oakes used that confidential information belonging to Taymar for his own benefit when he approached Taymar's landlords in order to obtain leases in favour of himself and/or his new company.
92. Mr Oakes had a conflict of interest so far as the determination of the Taymar leases was concerned. In particular on the Meadow Industrial Estate Taymar's obligation to pay rent for the period from the end of March 1998 to the term date of the lease in September and its obligation to comply with the schedule of dilapidations were directly material to the terms the landlords were offering Mr Oakes.
93. Mr Oakes was obliged to disclose to the board of Taymar his interest in taking leases of the Taymar properties and not to use the information he had without the consent of Taymar both because of his fiduciary duty as a director and under the terms of his employment agreement.
94. If Mr Oakes had done so, then Taymar would have been able to take steps to prevent him, through GoGas, coming into competition with them as quickly as he did and to negotiate a different severance package from the one that Mr Lenders agreed on 27 March.
95. Although it was not suggested that Mr Oakes had, subjectively, acted dishonestly, objectively he did not act reasonably in going behind the back of Taymar to negotiate personal leases with Taymar's landlords. The question of whether it would be appropriate to grant him relief under s 727 in respect of this breach of duty therefore does not arise.
96. Mr Oakes did not do anything which could properly be regarded as competing with Taymar before the end of March. However he did take more than preliminary steps towards the commencement of his competing business so as to amount to a breach of the terms of s 6 of his employment agreement. The preliminary steps taken in his dealing with Data Mouldings and in contracting to acquire equipment from Data Mouldings and from Willis Green did amount to 'engaging in other business activity'.
97. Mr Oakes acted in breach of his fiduciary duties as a director when he used employees of Taymar to assist him in the preliminary work which he undertook towards setting up his new business before the end of March 1998.
98. Mr Oakes acted in breach of his duty as a director and so fiduciary of Taymar in purchasing equipment from Taymar for use in his proposed new business via Data Moulding and Willis Green, even though the purchase was at full value.
99. From very shortly after his employment ceased Mr Oakes did engage in competition with Taymar even though he was technically still a director. In doing so he acted honestly and reasonably.
100. In all the circumstances it would be reasonable to grant him relief from any liability in respect of the purely technical breach of his duty as a director in respect of his competition with Taymar after the termination of his employment. He was, so far as the evidence goes, given no information about the progress (such as it was) of the company, nor was he paid anything, nor was he asked to do anything. Neither Taymar nor anyone in any part of the Coleman Group treated him as a director after the end of March. The attempt of Taymar and Coleman Inc to rely on his continuing directorship as ground for claiming an account of all he has received from his efforts in launching GoGas is particularly unattractive given that it was the Coleman Group's deliberate decision to hold up finalisation of the 'subject to contract' agreement reached by Mr Lenders for their own reasons.
101. There is no evidence that the value of Coleman Inc's investment in Coleman (UK) has been diminished which would justify the ordering of an inquiry. Coleman Inc is entitled only to nominal damages for Mr Oakes' breach of his employment agreement which I assess at £2.
102. There is no evidence that Taymar suffered any loss at all as a result of Mr Oakes' breach of duty and breach of his employment agreement. So far as Taymar is concerned, it is entitled to an inquiry as to the benefit accruing to Mr Oakes (if any) as a result (i) of his failure to notify Taymar of his conflict of interest and his misuse of confidential information as to Taymar's intention to surrender their tenancies, (ii) of his use of Taymar staff in connection with his preliminary steps before the end of March 1998 towards setting up his new business, and (iii) his indirect purchase of equipment belonging to Taymar. This is not a finding that there was any such benefit, but there is sufficient material before me to warrant an inquiry.
103. The inquiry will be limited to an account of the benefits received by Mr Oakes as a result of the three matters listed at para 102.
104. Whilst the effect is a matter for the inquiry, one matter which the inquiry will have to take into account is that Taymar's intention to rid itself of its Stockport properties cannot have been confidential after 13 January 1998 when the announcement of the closure of the R&D department was made to the workforce. Whether the very minor steps taken by Mr Oakes before that date thereby misusing confidential information, caused any benefit to accrue to him is likely to be an interesting question.
105. Mr Oakes was in breach of contract in engaging in other business activity to the limited extent found in this judgment before 31 March 1998. There is no evidence which would justify an inquiry as to damages for this breach. Taymar are entitled to nominal damages for this breach which I assess at £2.
106. Taymar is not entitled to any other damages in addition to its inquiry.
107. Coleman (UK)'s claim was abandoned during the course of the hearing and must be dismissed.
108. No claim has been made out against GoGas and the claims as against GoGas must be dismissed.