Senior employees and directors owe fiduciary duties to their employer which require them not to make secret profits from their employer. A breach of such a duty may entitle the employer to claim for an account of the profits made by the employee with no requirement on the employer to show that it has suffered loss.
In Samsung Semiconductor Europe Ltd v Docherty and another, the Outer House of the Scottish Court of Session set out useful guidance on the circumstances in which an employee may be in a position to owe fiduciary duties to his employer. In this case Mr Docherty was employed as a quality assurance manager for SSEL, responsible for managing and overseeing the relationship with key clients and handling a large budget. The court found that Mr Docherty had assumed fiduciary duties by virtue of the nature of his role. Mr Docherty also held a 50% shareholding in DKV, a fact he did not disclose to his employer. SSEL contracted with DKV to provide engineering and quality control services and for a number of years Mr Docherty took steps to ensure that SSEL continued to work with DKV and gave misleading information to SSEL about DKV’s competitors to ensure the work remained with DKV.
When SSEL became aware of Mr Docherty’s interest in DKV it issued proceedings for an account of profits that he had received arising out of his interest in DKV. The court, having found that Mr Docherty owed fiduciary duties to SSEL, further found that there was a clear conflict between these duties and his interest in DKV. He was ordered to account for £340,808.