Item Software (UK) Ltd v Fassihi

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date30 Sep 2004
Neutral Citation[2004] EWCA Civ 1244

COURT OF APPEAL

Before Lord Justice Mummery, Lady Justice Arden and Mr Justice Holman.

Item Software (UK) Ltd
and
Fassihi

Director - failure to disclose own misconduct - breach of duty of loyalty

Director betrayed loyalty to his company

A company director who failed to disclose his own misconduct to the company was in breach of his duty of loyalty to the company because he had tried to divert the company's business to another company established for his own purposes.

An employee who was paid monthly in arrears and was summarily dismissed was entitled to be paid to the date of his dismissal.

The Court of Appeal so held, dismissing an appeal by the defendant, Kouroush Fassihi, from a decision of Mr Nicholas Strauss, QC, sitting as a deputy judge of the Chancery Division ((2003) 2 BCLC 1) that he was in breach of a duty to disclose his own misconduct as a director of the claimant, Item Software Ltd, in diverting Item's business to another company that he had established for the purpose, and allowing an appeal from the judge's decision on a counterclaim by the defendant, under section 2 of the Apportionment Act 1970, for the payment of his salary to the date of his dismissal even though the date for payment had not then been reached.

At the relevant time, the a major part of Item's's business was the distribution of software products for another company, Isograph Ltd.

The directors of Item were Mr Fassihi and one other. Mr Fassihi was employed from May 1 1995 under a contract which provided for him to receive a salary of Pounds 28,000 a year, payable monthly in arrears on the last working day of each month, terminable on three months' notice.

The contract expressly provided that Mr Fassihi should not use confidential information belonging to Item for his own purposes.

In November 1998, Item decided to negotiate more favourable terms with Isograph.

At the same time Mr Fassihi secretly approached Isograph with his own proposals which involved establishing his own company to take over the contract.

Negotiations failed because Item insisted on terms that Isograph was not prepared to meet. Isograph terminated the contract by giving 12 months' notice expiring on May 11, 2000.

Item then discovered Mr Fassihi's misconduct in seeking to divert Item's business to his own company, and he was summarily dismissed on June 26, 2000.

Item brought proceedings against Mr Fassihi alleging that he was in breach of duty as a director and employee in seeking to...

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63 cases
  • Manoudakis v Easygroup Holdings Ltd
    • United Kingdom
    • Queen's Bench Division
    • 20 October 2011
    ...94 In relation to the duty of disclosure to which I have already referred, I should say that reliance was placed on the case of Item Software UK Limited v Fassihi (2004) BCC 994, but I think that that is a long way from this case. I find that since the use of the credit card was authorised ......
  • Brandeaux Advisers (UK) Ltd and Others v Chadwick
    • United Kingdom
    • Queen's Bench Division
    • 17 December 2010
    ...But in a decision which is binding on me the authorities were comprehensively analysed. I refer to the judgment of Arden LJ in Item Software (UK) Ltd v Fassihi [2005] ICR 450, with which the other members of the court agreed. It was there held that a director was under a duty as a fiduciary......
  • GHLM Trading Ltd v Anil Kumar Maroo and Others
    • United Kingdom
    • Chancery Division
    • 23 January 2012
    ...192 Recent authority establishes that it can be incumbent on a director to reveal his own wrongdoing. The leading case is Item Software (UK) Ltd v Fassihi [2004] EWCA Civ 1244, [2005] 2 BCLC 91. In Item Software (UK) Ltd v Fassihi, Arden LJ (with whom Mummery LJ and Holman J expressed agre......
  • FM Capital Partners Ltd v Frédéric Marino
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 11 July 2018
    ...faith considers to be the best interests of his company (see s.172 CA 2006), he is required to disclose his own misconduct: Item Software (UK) Limited v Fassihi [2004] BCC 994 at [41], [63–68]. (4) Authorisation: fully-informed consent 78 A fiduciary will be absolved from liability in rela......
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1 firm's commentaries
  • Employee Competition: Recent Cases
    • United Kingdom
    • Mondaq United Kingdom
    • 7 July 2010
    ...Collins J); British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523 (Hart J); Item Software (UK) Ltd v Fassihi [2005] ICR 450, [2004] IRLR 928 (CA); Shepherds Investments Ltd v Walters[2007] IRLR 110 (Etherton J); Helmet Integrated Systems Ltd v Tunnard [2007] IRLR 12......
2 books & journal articles

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