Litigation and Dispute Resolution

Misleading and deceptive conduct? Trivago

28 January, 2020

It is well known that directors of a company owe fiduciary duties to the company in addition to the statutory duties imposed by the Corporations Act 2001 (Cth).

‘Fiduciary duties’ are often loosely referred to as duties of loyalty and good faith as they essentially require a director to ensure that:

  • they don’t misuse and personally profit from their fiduciary position; and
  • when faced with a conflict they prefer the interests of the company over their own interests.

When a director resigns from a company, their fiduciary duties do not simply end. The question is, what is the scope of a director’s fiduciary obligations once they have left the company and when can a director properly begin to compete with his or her former company?

These questions were considered in the recent decision of Advanced Fuels Technology Pty Ltd v Blythe & Ors [2018] VSC 286.

Key facts

The first defendant, Mr Blythe, had a business with Mr Thompson in the compressed natural gas industry that was conducted through Advanced Fuels Technology (AFT). Mr Thompson died and his shares were passed to his widow, Mrs Thompson.

For two years following Mr Thompson’s death, Mr Blythe continued as a director and the CEO of AFT but after coming into conflict with Mrs Thompson about the direction of the company and unsuccessfully attempting to buy out her share in the business and resolve the deadlock between them, Mr Blythe resigned from AFT on 18 February 2013.

Not long after Mr Blythe left AFT:

  • He took up consultancies with clients of AFT, Clean Air Power Pty Ltd and Tas Gas;
  • A company called NGV Group Pty Ltd (NGV) was incorporated on 26 April 2013.  The sole director and secretary of NGV was Mr O’Leary, who appeared to be a friend or associate of Mr Blythe. The shareholders of NGV were:
    • 70% – Envirotrans Pty Ltd (Envirotrans), a company owned and controlled by Mr Blythe;
    • 10% – a company associated with the father of Mr Wilson, an employee of AFT; and
    • 20% – a company owned and controlled by Mr O’Leary, who as above appeared to be a friend or associate of Mr Blythe.
  • Mr Wilson, a valued employee of AFT with technical expertise, gave his notice of resignation became an employee of NGV on 6 May 2013. Prior to leaving AFT, he sent himself a mixed list of personal and business contacts and uploaded some AFT documents to a SkyDrive.

Neither Mr Blythe or Mr Wilson were subject to any contractual restraint of trade provisions in their employment contracts with AFT.

Mr Blythe and Mr Wilson through NGV subsequently competed for work with AFT and pursued some business opportunities that AFT alleged were its business opportunities.

Key allegations by AFT

AFT alleged that:

  • Mr Blythe, Mr Wilson and Mr O’Leary reached an agreement that amounted to a dishonest and fraudulent design in resigning from AFT, setting up NGV and wrongfully using information and confidential information from AFT to take up AFT’s business opportunities;
  • NGV and Envirotrans entered into commercial arrangements with 8 companies who were or had been customers or business prospects of AFT;
  • NGV and Envirotrans were aided in the above by using information (including allegedly confidential information) which Mr Blythe and Mr Wilson obtained whilst working at AFT;
  • its own business was hampered by the wrongful failure of Mr Blythe and Mr Wilson to return vital company records and information upon resigning from AFT;  and
  • in breach of Mr Blythe and Mr Wilson’s various contractual, fiduciary duties and ss180-183 of the Corporations Act 2001 (Cth) (the Act), Mr Blythe and Mr Wilson retained or misused AFT information, planned their departures and took up AFT’s business opportunities as set out above.

Key issues to be decided

  • Whether Mr Blythe and Mr Wilson:
    • misused their position in allegedly usurping maturing business opportunities of AFT and in doing so, breached any contractual, fiduciary duties and/or statutory duties or provisions under the Act;
    • retained or misused any information from AFT, including confidential information.
  • Whether Mr Blythe, Mr Wilson and others associated with them engaged in any dishonest and fraudulent design or lawfully obtained business that might otherwise have being acquired by or remained with AFT.

What did the Court decide?

AFT’s claims against all defendants were dismissed. In summary, the Court found that:

No breach of fiduciary duty by Mr Blythe

  • The factual background and reason for Mr Blythe’s resignation decision was important when assessing the character of his conduct against the fiduciary duties owed by him. In this instance, his resignation was found to be a forced choice to employ his business skills in a new way not restrained by a business partner who refused to negotiate or resolve a deadlock rather than a planned scheme of disloyalty, bad faith or preference of self interest over duty to AFT.
  • Having regard to the facts, the scope Mr Blythe’s fiduciary duty and the restraint upon Mr Blythe from competing with AFT should be relatively limited to prohibit him in the short term from using information obtained while at AFT to compete for clearly established customers of AFT or opportunities of AFT that were so well developed they were imminently close to being secured by AFT as its own.
  • There was no breach of fiduciary duty by Mr Blythe to AFT where:
    • NGV competed against AFT and won a contract some 4.5 months after Mr Blythe left AFT where a quote was provided by NGV from scratch, with no evidence of any misuse of information;
    • there was no evidence of Mr Blythe pursuing AFT’s alleged business opportunities or NGV actually obtaining contracts with other potential clients/prospects of AFT as alleged;
    • the business opportunities allegedly lost by AFT were not realistic opportunities for AFT or were so far removed from the original opportunities available to AFT that they were not imminently close to being secured by AFT as its own; and
    • Mr Blythe took up consultancies with former clients of AFT which were different in nature to, and were not comparable to, any former arrangement those clients had previously had with AFT. A consultancy by its nature is often dependent upon the personal skills and experience of the individual consultant, with Mr Blythe having particular skills, knowledge and experience in the industry.

No fiduciary duty owed by Mr Wilson

  • Mr Wilson who was an employee was subject to the duties in s182 (improper use of position) and s183 (improper use of information) of the Act. However, as Mr Wilson did not hold a senior role he did not owe fiduciary duties to AFT nor was he an ‘officer’ of AFT so as to be subject to the obligation of good faith under s181 of the Act.

Misuse of information by Mr Wilson

  • Whilst Mr Wilson was in breach of section 183(1) of the Act (improper use of information) by retaining some AFT company documents and later using two of these documents, there was no evidence that AFT suffered any loss as a result of this breach.

No misuse of confidential information by Mr Blythe/Mr Wilson

  • There was no evidence that Mr Blythe retained or misused any confidential information.
  • With respect to Mr Wilson, contact details on mobile phones and devices that were a mixture of business and personal contacts did not have the necessary characteristics to amount to information that was confidential to AFT and there was no breach by Mr Wilson in erasing this data from his phone, retaining it or using it after he resigned from AFT.

No dishonest and fraudulent design

  • There was no evidence that the defendants engaged in a dishonest and fraudulent design.


Fiduciary duties of directors do not just end once they resign from office. However, the scope of the fiduciary obligations that bind a director once they have left a company and when they can begin to properly compete with the company will be a question of fact and will depend on the circumstances and the conduct of the individual director in question.

In this case, the scope of the fiduciary duty of the director and restraint upon him competing with his former company was found to be relatively limited due to the circumstances in which he left the company and the nature of his conduct leading up to his resignation. As a result, the Court found the scope of his duty prevented him from using information obtained from the company to compete for clearly established customers of the company or business opportunities of the company that were about to be secured by the company.

Practical tips and lessons to be learned from this case

  • Companies should ensure that appropriate contractual restraint of trade and confidentiality provisions are included in the employment contracts of any directors and employees to protect the company and provide the company with additional causes of action in the event of potential breach once directors or employees have left the company.
  • In claims where it is alleged that business is obtained by an ex-director or ex-employee that might otherwise have been acquired or remained with the company, it is important that the company has evidence of the involvement of the ex-director or ex-employee in securing that business or taking up business opportunities as well as evidence that these were business opportunities that were available to and might otherwise have been acquired or remained by the company.
  • If allegations are made that an ex-director or employee have improperly used information (including confidential information) obtained from the company, it is important that there is evidence that this information was in fact improperly used to secure work or business opportunities that might otherwise have been secured by the company.
  • The application of the law in this area is very fact specific so it is important to seek legal advice if you find yourself in a similar situation.

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