Question

Downing Ltd specializes in IT installations for retailers. Sam, a director of Downing Ltd, was approached in a private capacity as a well?known expert in the field and invited to join the board of Twilight Ltd, whose business mirrors to a certain extent of Downing Ltd’s business. Sam accepted the invitation to be their director while remaining on the board of Downing Ltd. Having developed a rival system to Downing Ltd, Twilight Ltd organized a public launch of the new product. For the launch, Sam contacted a number of Downing Ltd’s clients. The launch led to the signing up of a number of major clients, including some clients of Downing Ltd.

Questions: (Answer the questions bu using Common Law System)

(1) Advise the board of Downing Ltd whether Sam has breached any legal duty to the company.

(2) Would your answer be different if Sam resigned from Downing Ltd before he joined the board of Twilight Ltd? State your reasons.

Answer 1

Q1) Being an employee of the company Downing Ltd., it is illegal and can be considered as a breach of the duty of fidelity to Downing as Sam worked in private capacity with the firm's rival company Twilight Ltd. Apart from helping Twilight Ltd in the product development similar to the one in Downing, Sam also helped the firm get new clients as well as attract existing clients of Downing Ltd. Hence, Sam should be subjected to any punitive actions by his current employer Downing on the grounds of infidelity.

Q2) If Sam resigned from Downing Ltd., before he joined the board of Twilight Ltd, then he is free to work on the product development as well as attracting and winning new clients as well as those of Downing Ltd. as his fidelity now remains with Twilight Ltd.