Helmet Integrated Systems Ltd v Tunnard & Others

JurisdictionEngland & Wales
JudgeLord Justice Moses,Lord Justice Lloyd,Lord Justice May
Judgment Date15 December 2006
Neutral Citation[2006] EWCA Civ 1735
Docket NumberCase No: A3/2006/0529
CourtCourt of Appeal (Civil Division)
Date15 December 2006
Helmet Integrated Systems Ltd
Tunnard & Others

[2006] EWCA Civ 1735

[2006] EWPCC 1


Lord Justice May

Lord Justice Lloyd and

Lord Justice Moses

Case No: A3/2006/0529




His Honour Judge Fysh QC

Royal Courts of Justice

Strand, London, WC2A 2LL

Andrew Stafford QC and Douglas Campbell (instructed by Messrs Mathys & Squire) for the Appellant

Mark Platts-Mills QC and Benet Brandreth (instructed by Messrs Field Fisher Waterhouse) for the Respondent

Lord Justice Moses

Introduction and Background


Between 1993 and 28 February 2002 Mr Tunnard, the first respondent in this appeal, was a senior salesman for Helmet Integrated Systems Ltd ("HISL") , the appellant. All his working life Mr Tunnard has been a salesman. HISL produces and sells protective equipment. In 1993 it commissioned a new helmet design, which has subsequently been successfully marketed as the F600 Helmet. Its largest customer is the London Fire Brigade. It took some four and a half years to develop the design of the F600. Once it was approved, in 1997, sales started in 1998 and continue to this day.


Mr Tunnard was not a designer. But, whilst still in the employment of HISL in 2001, he hit upon an idea for a new modular helmet, primarily, but not exclusively, for fire-fighters. He believed that his employers were not interested in developing a new helmet, particularly on the European market, where he perceived there to be a gap. The London Fire and Emergency Planning Authority had itself convened a briefing day, in September 2000, publicly to consider the development of the next generation of protective clothing, in particular an integrated clothing project. There was a further meeting in relation to such equipment in June 2001. But since the judge did not find that it constituted a maturing business opportunity for exploitation by HISL alone, but merely represented an opportunity for the entire industry as a whole, it is of no further significance in this case. The helmet which Mr Tunnard was thinking of developing, it was hoped, would be of such flexibility as to form part of the concept of integral protective clothing.


Between September 2001 and 28 February 2002 Mr Tunnard took certain steps to advance his idea. He applied for and obtained a SMART award, to provide some funding from the DTI to advance his project. He arranged for product designers, AME, to prepare, on his behalf, initial concept drawings. He discussed the project with a friend, Mr Steve Tyrrell, a consultant to Lion Apparel Systems Limited ("Lion") , the UK subsidiary of Lion Apparel Inc, of Ohio, a rival company engaged in the manufacture and supply of safety clothing and equipment. Mr Tyrrell had previously acted as consultant to HISL. Mr Tunnard showed Mr Tyrrell AME's drawings, on the basis of confidentiality, and agreed that Mr Tyrrell should show those drawings to Lion. All of this activity took place before Mr Tunnard left the employment of HISL following his notice of resignation on 1 February 2002. He was asked to and did work out his notice before he left on 28 February 2002.


The new modular helmet, which came to be called the TARGA helmet, was developed over a period of three years. Mr Tunnard incorporated Modular Helmet Systems Limited ("MHSL") two months after his departure from HISL, on 30 April 2002. Shortly thereafter Lion took up a majority shareholding in that company. Lion will no doubt seek to market the TARGA helmet in competition with HISL's F600, which is still being bought by the London Fire Brigade under an existing contract of supply.


HISL brought claims for infringement of design right. His Honour Judge Fysh QC, in the Patents County Court, rejected those claims. They were not the subject of any appeal. But HISL also brought claims contending that Mr Tunnard had acted in breach of his duty of fidelity by developing a safety helmet which would be in competition with the HISL F600 safety helmet, and had acted in breach of his fiduciary duties in failing to report his activities while still in HISL's employment. It is those claims, rejected by His Honour Judge Fysh QC, which form the subject matter of this appeal.


HISL contend that the judge erred in failing to identify a fiduciary duty owed by Mr Tunnard and in failing to find that he breached that duty and a duty of fidelity by reason of his activity between September 2001, when he lodged the SMART application form, and the conclusion of his employment. Establishing a breach of fiduciary duty is of particular importance to HISL since, if it is successful, it could reap for itself the benefit of any successful development and exploitation of the TARGA helmet.

Mr Tunnard's Activities Whilst Still in Employment with HISL


Mr Tunnard needed finance if he was to develop his idea. He was a middle-ranking manager with a salary of £31,300.00 per annum. Mr Tunnard had arranged to borrow some money from HSBC. The SMART award scheme, operated by a local branch of the DTI, would provide an additional source of finance, if he could advance a viable business plan. In his application to SMART for finance for the design and development of a modular safety helmet, he identified Lion as his preferred option for a partnership agreement, identified MHSL as the business he would use to develop the idea and, importantly, identified HISL as a competitor.


On 7 November 2001 a SMART award was made to Mr Tunnard. On 19 November 2001 he instructed AME to proceed with the design of a new helmet and for that purpose handed over a number of examples of competitors' fire helmets including HISL's F600.


In November and December Mr Tunnard met AME and on 20 December AME showed Mr Tunnard initial concept drawings with a product realisation plan, which it had prepared.


In January 2002 the concept produced by AME was further discussed with AME's designer, Mr Rosie. In February 2002 Mr Tunnard considered it with Mr Tyrrell, Lion's consultant. On 12 February Mr Tyrrell sent some of AME's drawings, under confidential cover, to Mr Schwartz, Lion's corporate counsel. On 1 February Mr Tunnard tendered his resignation from HISL and, on being asked to work out his notice, continued to work for HISL as a salesman until he left on 28 February 2002.

The Judge's Conclusions


The essential ground on which the judge rejected HISL's allegations of breach of the duty of fidelity and as a fiduciary was based on his view that Mr Tunnard's activity, whilst in employment, was no more than preparatory to competitive activity.

"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 [1932] 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 [1996] 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)


The judge concluded that:-

"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)


The judge found, in relation to the activities starting with the first working meeting with AME that those activities were legitimate activities:-

"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...

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