In Kynixa Limited v Hynes and others the High Court considered the activities of 3 key employees who left Kynixa to join a competitor. Mr Hynes was a director of Kynixa, signed the shareholders agreement (which contained restrictive covenants), the statement of terms and conditions (the Statement) and accepted the terms of the staff Handbook. As a director, he owed fiduciary duties to his employer. Ms Preston was also a senior member of the team and subject to an implied duty of fidelity as well as the terms of the Handbook and Statement and the shareholders agreement. Ms Smith was relationship manager, bound by the Statement and the Handbook and subject to the duty of fidelity.
Over a period of six months each of the employees resigned from Kynixa and started working for a competitor company, Scion. At no time did any of them inform Kynixa that they intended to work for Scion and at no time after their departure did they volunteer the fact that they had gone to work for Scion even though they had each spent considerable time negotiating their new terms of employment. The High Court found that all three employees were in breach of their duties of fidelity to Kynixa and Mr Hynes and Ms Preston were in breach of their fiduciary duties by concealing their true intentions and misleading their employer.
Mr Hynes and Ms Preston were also held to be in breach of the non compete/non solicit covenant in the shareholders agreement. The High Court held that the period of restriction of 12 months was reasonable in the circumstances (and therefore enforceable) and it was irrelevant that Ms Preston had a comparatively small shareholding. She was a highly valued and key employee.
Mr Hynes and Ms Preston were also held to be in breach of their fiduciary duties by failing to inform Kynixa of the very real possibility that they and Ms Smith would take up employment with Scion.
A separate hearing was held to consider relief, at which Mr Hynes and Ms Preston were ordered to make interim payments of costs (£250,000 and £100,000 respectively) while assessment of the company’s costs was undertaken. The case is a sobering lesson to employees who attempt to sidestep their duties to their employer by hiding their true intentions. Further, it should remind employees that their obligations are not simply contained in their contracts of employment but can be implied as well as express, and contained in other contractual documentation.