QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 (QB)

An insurance underwriter secretly planned to establish a competing business while still employed. He misused the employer's confidential information and solicited colleagues to join him. The High Court held this was a flagrant breach of his contractual and fiduciary duties.

Facts

The claimant, QBE Management Services (UK) Ltd (‘QBE’), a Lloyd’s of London managing agent, brought a claim against several of its former employees. The first defendant, Mr Dymoke, was a senior and highly remunerated underwriter for QBE’s Professional Indemnity business. While still employed by QBE, Mr Dymoke secretly planned to set up a new, competing business (codenamed ‘Project P’) with the other defendants, who were junior colleagues. To facilitate this plan, Mr Dymoke accessed, copied, and used QBE’s confidential information, including detailed renewal information and financial projections. He shared this information with potential third-party backers to secure funding for the new venture. He also actively encouraged his colleagues to resign and join him. He did not disclose any of these activities to QBE before his resignation. QBE discovered the plan and initiated legal proceedings for breach of contract and breach of fiduciary duty.

Issues

The central legal issues before the court were:
1. The scope of an employee’s implied contractual duty of good faith and fidelity, particularly regarding lawful preparatory steps to compete versus unlawful acts.
2. Whether Mr Dymoke, as a senior employee, owed fiduciary duties to QBE in addition to his contractual duties.
3. Whether Mr Dymoke’s actions, including the creation of a business plan using confidential information and the solicitation of colleagues, constituted a breach of his contractual and/or fiduciary duties.
4. Whether the copying and use of QBE’s business information amounted to a misuse of confidential information.
5. The liability of the other employee defendants for their involvement in the plan.

Judgment

Mr Justice Haddon-Cave found comprehensively in favour of the claimant, QBE. The judgment provided a detailed analysis of the duties owed by employees, particularly senior ones.

Contractual and Fiduciary Duties

The court affirmed that all employees owe an implied duty of fidelity. However, for senior employees like Mr Dymoke, a stricter standard of loyalty applies. The judge had no hesitation in finding that Mr Dymoke was a fiduciary due to his senior managerial position, the trust placed in him, and his access to sensitive commercial information. As a fiduciary, he owed a duty of ‘single-minded loyalty’.

In my judgment, Mr Dymoke was plainly a fiduciary in relation to QBE. He was part of the senior management of MSUL… He owed QBE the single-minded loyalty of a fiduciary.

Breach of Duty

The court held that Mr Dymoke’s actions went far beyond permissible ‘preparatory steps’ to set up a competing business post-employment. The secret development of a detailed business plan using the employer’s confidential data, procuring funding, and enticing a team of colleagues to leave were deemed a ‘flagrant breach’ of his duties.

In my judgment, Mr Dymoke’s activities in the period March to 8 June 2011, in researching and preparing ‘Project P’ went well beyond the line of legitimate preparation. The case against him is overwhelming that he was in flagrant breach of his contractual duty of fidelity and his fiduciary duty of loyalty to QBE throughout this period…

Misuse of Confidential Information

The judgment meticulously detailed how Mr Dymoke copied sensitive commercial data, referred to as the ‘May list’, which contained key renewal dates and premium information. The court found this was a deliberate misuse of QBE’s property for his own competitive advantage.

Mr Dymoke copied and deliberately misused QBE’s confidential renewal information for the benefit of Pro-Bind and his business plan.

The other defendants were also found to be in breach of their (contractual) duty of fidelity by knowingly assisting Mr Dymoke’s plan and failing to report it.

Implications

The case serves as a leading authority on the obligations of senior employees and ‘team moves’. It reinforces the distinction between an ordinary employee’s duty of fidelity and the more stringent fiduciary duty of loyalty owed by senior management. The judgment provides a clear warning that activities such as misusing confidential information, soliciting colleagues, and secretly developing a competing business while still employed will be treated as serious breaches of duty, far exceeding the bounds of lawful preparation. It underscores the importance for senior employees to act with undivided loyalty and for employers to protect their confidential information.

Verdict: The court found in favour of the claimant, QBE. The first to fifth defendants were held to be in breach of their contractual and/or fiduciary duties. The question of remedies was to be dealt with at a subsequent hearing.

Source: QBE Management Services (UK) Ltd v Dymoke [2012] EWHC 80 (QB)