Commercial Law - Employment Law - Interpretation of Terms of Employment Contract

Employment law firm
The situation of Helmet Integrated Systems Ltd v Tunnard and Others [2006], involved a dispute over what actions could possibly be allowed under the regards to an employment contract. The claimant ("HISL") produced and sold protective equipment. In 1993, it commissioned a fresh helmet design which was successfully marketed especially for the London Fire Brigade. The defendant was obviously a senior salesman with the claimant.

Employment law firm
Within the claimant's employment, the defendant had the concept for any new modular helmet. He thought that his employers are not considering creating a new helmet, particularly about the European market, where he perceived there to be a gap for this kind of product to gain a foothold.

Between September 2001 and also the 28th of February 2002, the defendant took several steps to succeed his idea. He obtained some funding and arranged for designers to get ready 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") 8 weeks 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 how the defendant had acted in breach of his duty of fidelity in having a safety helmet which will maintain competition with HISL's safety helmet, coupled with acted in breach of his fiduciary duties in unable to report his activities while still under HISL's contract of employment.

Those claims were rejected from the judge in the patents county court. He determined that acts of preparation before departure weren't actionable which there wasn't any breach of duty of good faith or fidelity on the part of the employee. He held that the employee was permitted to decide to generate a business competing together with his employer which the preliminary steps come to achieve this were permitted. He also figured that there wasn't any breach of the fiduciary duty because this type of obligation needed to be restricted to his duty like a sales representative.

The claimant appealed against this decision. On appeal the claimant used the fact that the defendant's printed contract of employment provided it had been his duty to advise his employer about the activities of competitors and their pricing structures. They argued he was, therefore, under a duty to report such activities whether they were undertaken by way of a competitor or by himself as part of his want to contend with his former employer.

The appeal was dismissed. It was held:

- Under the circumstances, although the defendant's activities might have amounted to competitor activity if undertaken by a competitor (and he therefore would have owed a fiduciary obligation to not misuse details about such activity for their own benefit or for the advantage of someone other than the claimant), it did not imply that he was under any obligation to share with HISL of his or her own activities.

- The words with the job specification did not restrict the defendant's freedom to prepare for competition on leaving. He was employed as a salesman not really a designer and it was never in contemplation of either party he would create a helmet. Clear words were needed to restrict the ordinary freedom of your employee who was quitting his employment and setting up in competition to his former employer, that the defendant's job specification didn't do.

- He was under no relevant fiduciary duty towards the claimant. The defendant owed no fiduciary obligations in relation to the introduction of an initial concept for any new helmet. Therefore he had not been in breach associated with a such obligation by trying to raise funds for such a project while still in employment. The defendant was working on his idea in his own serious amounts of as a result the idea developed belonged to him.