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€350,000 in damages for breaching fiduciary obligations

December 2017 - Employment. Legal Developments by Mamo TCV Advocates.

More articles by this firm.

In the recent judgment of M.A.I.N. Services Limited et v Albert Galea et (case 1246/07 JZM) delivered on the 28th September 2017, the Court examined in quite extensive detail the nature and the effects of fiduciary duties.

The defendant had been a director and a trusted employee of the plaintiff company. Following his resignation from the company, a major foreign supplier ceased its business relationship with the company and started doing business with the defendant.

In its judgment, the Court deemed that even following his resignation from the company as employee and director, the defendant had remained a fiduciary of the company. The Court considered that even before his resignation, the defendant had already been planning to operate a business similar to that of the plaintiff and had already applied for a VAT number. The defendant used to solely represent the plaintiff company with the foreign supplier and had knowledge of this supplier because of his position as employee/director. The Court held that the defendant could not proceed to open an identical or nearly identical business to that of the plaintiff company, considering the position he had held and his access to sensitive data belonging to the company. In doing so had breached his fiduciary duties owed towards the plaintiff company.

Having established this, the Court went on to liquidate damages. It commented that the issue was not whether the plaintiff company had ended up with less profit and with no presence in the market but that the defendant had breached his fiduciary duties. As a consequence of this, the profit of the plaintiff company had decreased. It was not necessary to establish that the plaintiff had actually and materially suffered damages but it was enough to prove that the defendant had made a gain and that gain effectively had to be made by the plaintiff. The Court commented that in similar cases, the courts must not only arrive at a liquidation of damages suffered but must make sure that the person who had breached his fiduciary obligations does not continue benefitting from that breach (if such a request if effectively made by the plaintiff in the case). The court took into consideration several factors: the average profit which used to be earned by the plaintiff company; the period of time between the breach and date of judgment; the need to act reasonably; the fact that competition in the market for the activities of the defendant had increased; the fact that the plaintiff company was still making a profit from the sale of products from other suppliers; and the fact that the defendant had failed to cooperate during the proceedings in establishing his earnings. After taking into account all these factors, the Court liquidated damages and ordered the defendant to pay to his ex-employer the sum of €350,000. 

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