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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Lapthorne v Eurofi Ltd [2001] EWCA Civ 993 (20 June 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/993.html Cite as: [2001] EWCA Civ 993, [2001] UKCLR 996

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BIRMINGHAM DISTRICT REGISTRY
MERCANTILE LIST
(HIS HONOUR JUDGE PERRETT QC)

		Royal Courts of Justice The Strand London
		Wednesday 20 June 2001

Wednesday 20 June 2001

1. LORD JUSTICE TUCKEY: In these proceedings the respondent, Mr Lapthorne, claimed among other things consultancy fees due to him under the terms of a consultancy agreement ("the contract") made in 1985 with the appellants, Eurofi Ltd. The appellants counterclaimed damages for among other things breach of two of the terms of the contract. After an eight-day trial in the Birmingham Mercantile Court, Judge Perrett QC gave judgment for the respondent for his fees and largely dismissed the counterclaim on the facts and because the terms in question were in restraint of trade. On this appeal the appellant challenges the judge's findings on the counterclaim.
2. The respondent is a Chartered Management Accountant with expertise in many aspects of accountancy. The appellant provides financial services to businesses in connection with the submission and negotiation of grants and loans from the United Kingdom Government and the European Union.
3. By clause 1 of the contract, the respondent (described as "the Consultancy") agreed to provide services to the appellant (described as "the Company") for the purpose of:

"(a) promoting, developing and extending the business of the Company

(b) securing contracts between the Company and clients for the provision of the Services (as hereinafter defined) by the Company to such clients

(c) discharging on behalf of the Company the Company's obligation to clients under contracts which have been concluded as a consequence of (b) above and otherwise by providing the Services to the clients on behalf of the Company

The services to be provided as described under 1(b) and 1(c) shall be of a financial consultancy nature and principally concerned with the provision to the client of assistance advice and guidance in obtaining grants, loans and other financial benefits from Governmental Departments or Agencies in the UK or elsewhere ('the Services')".

4. In relation to "Services" the judge said:

"The evidence in the case disclosed that Eurofi did hold itself out as being available to undertake 'services' for clients as well as 'Services'; such 'services', however, were very rarely, if at all, used by 'non-Services' clients and the preponderance of Eurofi's trading, if not its virtual entirety, was the provision of 'Services', even to Small [or] Medium Enterprises by whom they were retained."

5. Clause 2 of the contract said:

"DURING the continuance of this agreement but subject to the provisions of Clause 3 the Consultancy shall restrict its activities to the supply of the Services and shall supply the Services solely to the clients of the Company on behalf of the Company."

6. Clause 3 contained the terms relied on in the counterclaim:

"3(a) SUBJECT to the provisions of Clause 4(b) hereof if the Consultancy wishes to provide services other than the Services to clients which are not clients of the Company the Consultancy is entitled to provide such other services on its own account but subject to the previous consent in writing of the Company such consent not to be unreasonably withheld.

(b) If the Consultancy provides services other than the Services to clients of the Company, the Company alone shall be entitled to invoice for and retain for its benefit fees including but not limited to introduction fees in respect of such services."

7. Clause 4 says:

"IN consideration for the discharge of the Consultancy's obligations hereunder the Company will --

....

(b) offer to the Consultancy opportunities to discharge its obligations under Clause 1(c) hereunder on a scale which will reasonably justify the restriction on the Consultancy activities represented by the provisions of Clause 3(a). Such restrictions shall cease to apply if the total income of the Consultancy earned from discharging the Services hereunder in any period of twelve months fails to exceed £12,000 per annum...."

8. Clauses 4(c) and (d) and 6 of the contract provided for payment to the respondent of fees to be agreed for any work done under the provisions of clauses 1(a) and 1(b) of the contract, and 45% of the fees paid to the appellant for any work done by the respondent for its clients under clause 1(c).
9. The contract could be terminated by three months' notice by either party. The respondent did so with effect from the end of June 1995. It was clear that the appellant's Chairman and Managing Director, Mr Harris, was not happy about this. By that time he considered that the respondent had become his right-hand man and was devoting about 80% of his time to the appellant's business.
10. Mr Harris was also concerned that the appellant would become a competitor. The contract contained a post termination restraint of six months upon what the respondent could do. However, the judge held that this clause was drawn too widely and so was unenforceable. This finding is not the subject of the appeal.
11. The breach of contract claim with which this court is concerned arose out of the respondent's activities before termination in relation to two companies: George Turnock Ltd ("Turnock's") and Albion Graphics Ltd ("Albion"). I will deal with the history relating to each company in turn.
12. In 1988 the appellant was retained by Turnock's to prepare and make an application for loan finance. The respondent acted as the appellant's project director for this work between June 1988 and June 1989, by which time a grant had been obtained from the Department of Trade and Industry, and a loan from the ECSC and the appellant had been paid its agreed success fee for this work.
13. The judge heard evidence from Turnock's Managing Director, Mr Taylor, that he considered that the appellant had been involved in a one-off specific project to obtain the grant and the loan, which had been completed by June 1989, after which time Turnock's would have had no further need for their services. At trial Mr Taylor also said that, as a result of their earlier acquaintance, in December 1989 he contacted the respondent to ask for help with the installation of a new accounting system. The respondent agreed, and for the next two years provided services for which he was paid on his own account. These facts were not referred to in either Mr Taylor's or the respondent's written statements, although they did refer to the fact that in January 1992 the respondent participated in a management buy-out of Turnock's which resulted in him acquiring a personal equity stake in, and becoming the finance director of, the company. After that he was paid by Turnock's for providing accountancy services.
14. With one exception, to which I will come shortly, it was not suggested by the appellant that any of the services provided by the respondent to Turnock's from December 1989 were "Services". The appellant relied on clause 3(b), saying that the "services" provided by the respondent were provided to a client of the company; if Turnock's were not a client of the company, then it relied on clause 3(a) because it had not consented to the respondent providing such services.
15. The judge resolved the issues of fact raised by these allegations as follows:

"Having reviewed the whole history of Mr Lapthorne's involvement with Turnock's and Turnock's honestly held perception from mid 1989 onward that they were no longer a client of Eurofi, it is my conclusion and my judgment that when Turnock's were introduced by Mr Lapthorne to Fintec [a vehicle through which the respondent provided services] for Fintec to provide 'services' to Turnock's, Turnock's could no longer be properly described as a client of Eurofi, so that Eurofi alone were entitled to invoice for and retain for its benefit those fees. I am also satisfied that at no time prior to January 1994 did Mr Lapthorne, in accordance with clause 3(a) of the consultancy agreement, attempt to obtain the company's previous consent in writing to the provision of such 'services' by Mr Lapthorne to Turnock's.

I am also satisfied, however, that if Mr Lapthorne had told Mr Harris that he wished to provide services to Turnock's, it would have been wholly unreasonable, in 1990, for Mr Harris to have withheld his consent. It is abundantly clear from the bank correspondence in the period immediately preceding the award of the DTI grant and the ECSC loan in mid 1989 that Turnock's had been granted the maximum grant that they were likely to achieve from the DTI and that their bankers who administered the ECSC loan as well as Turnock's overdraft, that there would be very little prospect of any further grants or loans being successfully applied for in the future. Hence it seems to the court that it would have been entirely unreasonable for Mr Harris to stand in the way of Mr Lapthorne providing services to Turnock's on his own account."

16. The exception to which I have referred related to a time in 1991 when the respondent gave Turnock's some advice and assistance when the ECSC were considering whether to demand a rebate of their loan. The judge said of this:

"I do, however, conclude also that even if it was only by innocent neglect, Mr Lapthorne, for however short a period he was involved, should have thought to invoice Turnock's on behalf of Eurofi for the 'Services' which he provided for the further attention needed in the maintenance of the ECSC loan rebates in the summer of 1991."

17. To that extent the counterclaim made by the appellant succeeded, although the amount they recovered was small.
18. The position in relation to Albion is more straightforward. On its own admission the respondent provided advice to Albion about how to improve their accounting system between March and June 1995 when Albion admittedly were clients of the appellant. This therefore entitled the appellant to rely on clause 3(b), if it was enforceable, and made it necessary for the judge to consider that question. He also considered whether clause 3(a) was enforceable. That was unnecessary so far as the Albion claim was concerned, and was only relevant to the Turnock claim if his finding that the appellant could not reasonably have objected to the provision of services by the respondent to them was wrong.
19. The judge's starting point was that the appellant had a legitimate interest in protecting its core business as specialist purveyors of "Services". As to clause 3(a) he said:

".... it is for .... Eurofi to produce evidence to show what it is with regard to the provision of 'services' to non-Eurofi clients by consultants that will, or may, endanger the provision by Eurofi of 'Services' to past or potential clients who enquire about or ask for advice and assistance with European Union or United Kingdom Government loans. For all Mr Harris's present insistence on his wish to be asked for consent with regard to such activity by consultants, I can find no way in which, for its own commercial well-being, Eurofi needed to be told before such 'services' are supplied to non-clients by Eurofi's self-employed consultants, such as Mr Lapthorne.

Mr Harris had never in the course of the consultancy agreement sought to enforce or to mention his requirement for Mr Lapthorne to get his consent before providing 'services' to non-Eurofi clients, which is, may be, some indication that he did not fear for the well-being of Eurofi's business when Mr Lapthorne was providing 'services' to non-Eurofi clients."

20. If, as he found, clause 3(a) was not reasonably necessary for the protection of the appellant's core business, the clause could not, he said, be saved by clause 4(b) which provided no more than a safety net.
21. The judge reached the same conclusion about clause 3(b) for much the same reasons. He relied on the fact that this was a non- exclusive consultancy agreement where from the outset the appellant knew that the respondent was also engaged in providing financial management services to small and medium-sized enterprises. Clause 3(b) did not in terms prevent him from providing such services to the appellant's clients. From that observation I assume that the judge concluded that it was unreasonable for the appellant to be entitled to receive all the fees which the respondent charged for the provision of such services as clause 3(b) requires.
22. The appellant had put its case in the alternative on the basis of breach of fiduciary duty, relying on the well-established equitable rule that a director or other senior employee owing a fiduciary duty to his company could not divert a maturing business opportunity properly belonging to the company to himself. Having referred to various authorities, the judge concluded:

"In my judgment when Mr Lapthorne decided in 1989 to provide 'services' to Turnock's on his own account (even though he did so without informing Mr Harris) no conflict of interest or reasonably foreseeable possible conflict either arose or could reasonably have been contemplated within the degree of 'real, sensible possibility' enunciated by Lord Upjohn [in Phipps v Boardman] for I am not persuaded that it would have been within the contemplation of either party that Mr Lapthorne would provide anything other than 'services' to Turnock's."

23. The appellant says that the judge should not have concluded that clauses 3(a) and 3(b) were in restraint of trade. He was also wrong, they say, to find that Turnock's were no longer a client by the time the respondent started to provide services to them. But even if they were not a client, the judge was wrong to conclude that the appellant could not reasonably have withheld its consent to the respondent providing such services. Finally, the appellant says that the judge was wrong to reject the claim which was made by the respondent in the alternative for breach of fiduciary duty.
24. If Turnock's were a client, the appellant's claim falls to be considered under clause 3(b). As the Albion claim also falls within this clause, it is convenient to start by considering whether the judge was right to say that it was unenforceable. Mr Bloch QC for the appellant submits that the restraint was entirely reasonable, given that it operated in an arms-length agreement between two consultancies and only during the currency of the agreement, which could be terminated relatively swiftly. Based on passages in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269, he suggested that as the restraint was incidental and normal to the positive commercial arrangements at which the contract was aimed, there was no restraint of trade and so no question of reasonableness arose. However, for the purposes of his argument he accepted the statement of the law in paragraph 17-113 in Chitty on Contracts (28th edition), which says under the sub-heading "Restraint during currency of employment":

"It now appears probable that even restraints which operate only during the currency of employment are subject to the doctrine of restraint of trade, at any rate if they have as their objects the sterilisation rather than the absorption of a man's capacity for work, or perhaps are such that one of the parties is so unilaterally fettered that the contract loses its character of a contract for the regulation and promotion of trade and acquires the predominant character of a contract in restraint of trade. When a contract ties the parties only during the continuance of the contract and the negative ties are only those which are incidental and normal to the positive commercial arrangements at which the contract aims even though those ties exclude all dealings with others, there is probably no restraint of trade within the meaning of the doctrine and no question of reasonableness arises."

25. Mr Bloch says that the only reported cases where restraints during the currency of a contract have been struck down are extreme cases where there has been an obvious inequality of bargaining power and/or cases where it would be oppressive or unconscionable to allow the restraint to stand. Mr Bloch further relies on the fact that under clause 1(a) of the contract the respondent was to promote the appellant's business. Clause 3(b), he says, was entirely reasonable because the appellant had a legitimate interest in protecting its client base against consultants and so as to avoid conflicts of interest and disputes about whether "Services" or "services" were being provided. He elaborated on what he meant by "protection of the client base" by saying that the appellant had a legitimate concern that the consultant would build up a relationship with the client by providing "services" to the point where he felt he would be asked to provide "Services" at which point he could terminate his consultancy and provide "Services" on his own account. The appellant had a legitimate interest in protecting itself against this.
26. As the passage in Chitty to which I have referred makes clear, the doctrine that all covenants in restraint of trade are, prima facie, unenforceable applies to restraints which operate during the contract, as well as those which operate after it has ended. This is confirmed by the decision of the House of Lords in Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308. Such a covenant can only be justified if it is reasonably required to protect the legitimate interests of the party relying on it, or, as Chitty says in the paragraph relied on by Mr Bloch, it is incidental and normal to the positive commercial arrangements at which the contract aims. I do not think there is any real difference between these two concepts. The principle is the same whether one is considering a restraint during the contract or a post-contract restraint, although this difference is obviously one of the relevant factors to be taken into account when considering whether the restraint is reasonable. So also is the fact that the contract can be terminated, although this is in no sense determinative of the question, particularly in this case where the appellant sought to protect itself by a post-contract restraint as well.
27. The contract in this case recognises that the respondent will not be required to devote all his time to the consultancy. If that was in any doubt (and it is not, in my view), the exchange of letters, which the judge summarises at page 7 of his judgment, which took place shortly after the contract was made, makes this point clear. Equally, beyond the provisions of clause 4, the appellant was not required to provide the consultant with work. This is in no sense therefore a contract of service. The fact that in due course the respondent ended up devoting 80% of his time to the consultancy is irrelevant. The matter has to be judged at the time the contract was made.
28. The appellant clearly had a legitimate interest in protecting their business of providing "Services" to their clients. But what interest did they have in preventing the respondent from providing "services" to anyone? Their only interest, it seems to me, was to ensure that their consultant did not provide "Services" on his own account to their clients. Clause 2 of the contract gave them this protection. Clause 3(b) gives the entire benefit of any services provided by the consultant to the appellant. Commercially this had the effect of preventing the respondent from providing any services to any client whether or not "Services" were being provided to that client at the time or not, and the clause does not even seek to limit itself to clients with whom the respondent has had contact during the course of providing "Services". The appellant could protect itself from the situation referred to by Mr Bloch by a suitably worded post-termination covenant. In fact it sought but failed to do just that.
29. For these reasons I have no doubt that clause 3(b) was too widely drawn to protect the legitimate interests of the appellant. I therefore think that the judge was right to conclude that such a restraint was unreasonable.
30. With the exception of the alternative case based upon breach of fiduciary duty, this conclusion effectively disposes of this appeal for the reason I have already given. But for the sake of completeness I will shortly state my conclusions on the other points which were advanced by the appellant. First, for the reasons I have already given, and for those given by the judge, I think that clause 3(a) was unenforceable as well as clause 3(b). This means that if the Turnock's claim falls be considered by reference to that clause, it fails because the clause is unenforceable.
31. I think the judge's conclusion that Turnock's were not a client at the time the respondent started to provide services to them is questionable because this was only four months after "Services" had been provided to them in circumstances where it was likely, as subsequent events showed, that further advice would be required about the loans and grants which had been obtained but which were payable over a period.
32. In his skeleton argument Mr Bloch invited the court to give some guidance about the meaning of the word "client" in an agreement of this kind. It would have been open to the parties to define the term in the contract itself. But who is or is not a client will depend upon the circumstances of each case. The nature of the services being provided is obviously of prime importance. When services are actually being provided the person to whom they are provided will obviously be a client. He may cease to be a client the day the services are completed and paid for, or remain a client for many years whilst there is a real prospect that further services will be required. It all depends.
33. If the judge's finding that Turnock's were no longer a client was right, Mr Bloch attacks his finding that the appellant could not reasonably have refused to consent to the respondent providing services to Turnock's under clause 3(a). Mr Bloch says that the judge construed the requirement for the appellant's consent as meaning no more than: "If you are going to do it, I would like to be told". He should have held that it would have been perfectly reasonable for the appellant to have refused to permit the respondent to make private gain from their ex-client whom he had only met through the appellant and to whom he had only recently been providing "Services" on its behalf.
34. I do not accept these submissions. The judgment shows that the judge took the view that the appellant through Mr Harris was not concerned with the fact that the respondent was providing "services" to non-clients. He said, "It is apparent that clause 3(a) was not operated in practice." Mr Harris's concern only arose when the respondent gave notice. For these reasons, and because the appellant would not have been protecting any legitimate interest by refusing consent, I do not think the judge's conclusion in this respect can be faulted.
35. I turn, finally, to the judge's rejection of the claim for breach of fiduciary duty. As I have already said, the equitable rule relied on by the appellant is well-established. It dates back to the eighteenth century, but a more recent exposition of the rule is to be found in Phipps v Boardman [1967] 2 AC 46, 123 and following pages. It is said to be a rule of universal application. It was applied in Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443, where the Managing Director of a company resigned in order to acquire for himself a contract which he had been involved in negotiating for his company. The conflict of interest involved in such a case is self-evident, as is the need to provide a remedy where such conduct has taken place.
36. Mr Bloch, however, has been unable to show us any authority where the rule has been applied to a self-employed consultant under a contract like the one in this case. Assuming, however, that the respondent had some fiduciary duty in respect of maturing business opportunities for the appellant, the question is whether that duty extended to "services" as well as "Services". Mr Bloch submitted that it did because it was unduly restrictive of the duty to differentiate between opportunities for "Services" and "services", particularly where they were, or were to be, provided to the same client and in the light of the respondent's general obligation to further the appellant's business under clause 1(a) of the contract.
37. I do not accept these submissions. I do not think it would be right to impose a fiduciary duty of the kind contended for on the respondent in respect of "services" in circumstances where it was contemplated that he would provide such services on his own account, and the appellant had little or no interest in providing such services themselves. Although the judge did not put it quite this way, I think this is what he meant in the passage which I have quoted. At all events, I think he reached the right conclusion on this alternative way of putting the counterclaim.
38. For those reasons I think this appeal should be dismissed.
39. LADY JUSTICE ARDEN: I agree that the appeal should be dismissed for the reasons given by Tuckey LJ. I wish to add a few observations of my own on the last issue.
40. Mr Bloch has sought to argue that the unenforceability of clause 3(b) of the contract makes no difference in this case because Mr Lapthorne owed a fiduciary duty to Eurofi and accordingly his performing services, including "Services", for clients of Eurofi was, as a result of the imposition of that duty, a breach of duty for which Mr Lapthorne is accountable. He submits that Mr Lapthorne could not put himself in a position where his interests conflicted with that of his duty as a consultant and that he was accordingly accountable for business opportunities to perform "services" and "Services" for Albion and Turnock, which he exploited for his own benefit. As it is put in the notice of appeal, "the appellant seeks on this appeal judgment on the counterclaim against Mr Lapthorne for fees earned by him and/or Fintec and/or John Lapthorne Associates in respect of all "services" and "Services" provided by him and/or Fintec and/or John Lapthorne Associates to Turnock's and/or Albion, alternatively, for damages in respect thereof, as claimed by Eurofi". Fintec and John Lapthorne Associates were companies or trading names bodies through or under which Mr Lapthorne conducted his business of providing "services".
41. The judge rejected this claim. The judge did not state what the fiduciary duty was because it was, as we are told, accepted before the judge that Mr Lapthorne owed such a duty in respect of contracts for "Services" for clients of Eurofi which he obtained while the contract which he had with Eurofi was in force. There was a very small amount of work which he did for Turnock's which fell into this category. The only issue therefore before the judge was whether Mr Lapthorne was under a similar liability in respect of "services". The judge deals with that issue in this passage:

"I was referred by the Defendants to the case of Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 in furtherance of the argument that in providing services to Turnock's from late 1989 onward, on his own account, Mr Lapthorne placed himself in a position in which his fiduciary duty to Eurofi and his own personal interests conflicted.

In that case Roskill J, at page 449, referred to Lord Upjohn's reference in Phipps v Boardman [1967] 2 AC, to the Lord Chancellor's speech in Aberdeen Railway v Blaikie [1854] where the Lord Chancellor said:

'And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.'

Lord Upjohn continued:

'The phrase "possibly may conflict" requires consideration. In my view it means that the reasonable man looking at the relevant fact and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in a conflict.'

In my judgment when Mr Lapthorne decided in 1989 to provided 'services' to Turnock's on his own account (even though he did so without informing Mr Harris) no conflict of interest or reasonably foreseeable possible conflict either arose or could reasonably have been contemplated within the degree of 'real, sensible possibility' enunciated by Lord Upjohn for I am not persuaded that it would have been within the contemplation of either party that Mr Lapthorne would provide anything other than 'services' to Turnock's.

However, in the summer of 1991 when ECSC were considering a claw back of rebate payments made in relation to Turnock's ECSC loan, a conflict of interest did arise, not because Turnock's was still a client of Eurofi but because Mr Lapthorne was in fact providing 'Services' to Turnock's and by the terms of the consultancy agreement he could only do that on behalf of Eurofi. If a fee was to be charged for his services, then, clearly, it was a fee that should have been invoiced by Eurofi. The work on the opposition to the reimbursement, insofar as it involved Mr Lapthorne's participation, may have been something which Eurofi would not have considered making a charge for; the amount in issue was just over £14,000, and the fee, if any, would have been very modest, but Eurofi were never given the opportunity of earning such fee and they should have been.

I am entirely satisfied that Mr Lapthorne's involvement with Turnock's gave rise to no other conflict of interest or breach of the fiduciary duty that he owed to Eurofi and that the relief properly available to Eurofi in respect of Mr Lapthorne's failure to charge Turnock's on behalf of Eurofi is an account and [of(?)] the net fees in Eurofi's hands for the work involved in assisting Turnock's opposition to the ECSC claim for reimbursement."

42. (The words "and the net fees in Eurofi's hands" in the last paragraph quoted would appear to mean "of" those net fees.)
43. However, although that is the only passage in which the judge expressly deals with the point arising on breach of fiduciary duty, clearly that passage has to be read in the context of the judgment as a whole. It is a lengthy judgment, extending to 80 pages. It contains a full exposition of the facts. At page 44 the judge said this:

"The evidence in the case disclosed that Eurofi did not hold itself out as being available to undertake 'services' for clients as well as 'Services'; such 'services', however, were very rarely, if at all, used by 'non-Services' clients and the preponderance of Eurofi's trading, if not its virtual entirety, was the provision of 'Services', even to Small Medium Enterprises by whom they were retained.

The clear object of the contract was to protect Eurofi qua purveyors of advice regarding 'Services' which was, for all practical purposes, the only 'commodity' in which Eurofi dealt as a specialist; it was the core business, as Mr Harris agreed."

44. From this it seems clear that Eurofi had no business of any significance, other than the provision of "Services". Likewise, Mr Lapthorne's own responsibilities revolved around "Services". Under clause 1 of his contract, he had a duty of fidelity to promote the business of Eurofi. But if Eurofi was not itself concerned with the expansion of business into "services", that duty did not impact on him in any positive or active way in respect of "services". His real duties were set out in clause 1(b) and 1(c), namely securing contracts between Eurofi clients for the provision of "Services" by the company to such clients and discharging, on behalf of the company, the company's obligation to clients under such contracts and otherwise by providing the "Services" to the clients on behalf of the company. So Mr Lapthorne's responsibility related only to the specialist "Services" business of Eurofi.
45. I have summarised Mr Bloch's submission which is that there was a fiduciary duty, and a duty in these circumstances not to exploit opportunities which came his way as a result of his engagement by Eurofi to perform "services" for Eurofi. There has been no issue about "Services", and there was a very small amount of "Services" which fell into that category.
46. In my judgment, there are a number of responses to Mr Bloch's point. First, no authority has been cited either in this court or to the judge to show that an independent consultant or employee owes a duty to account for the benefit of business opportunities equivalent to the business opportunities to perform services in this case. As I see it, in the light of the judge's findings regarding the business of Eurofi, it must be very doubtful whether any business opportunity to perform "services" was a business opportunity which belonged to Eurofi and on which any duty such as is alleged was engaged.
47. Secondly, if there was such a duty under the general law, then as a matter of general principle it could be relaxed or excluded. This is subject to there being in the normal situation full and fair disclosure of the opportunity sought to be excluded. In this case there was correspondence at the inception of the relationship between Mr Harris of Eurofi and Mr Lapthorne, in which Mr Lapthorne set out his wish to set up Fintec in order to provide "services". He did not say that those "services" would be provided to clients of Eurofi, though he specified the sort of contact he proposed to use. That was in May 1985. In June 1985, Mr Harris responded, saying that in principle he saw no problem or conflict here and believed that it would be a useful additional activity.
48. We are informed that Fintec went into liquidation at some point. Moreover, it is clear from the judge's judgment that Mr Harris did not believe that the "services" would be provided to Eurofi's own clients. However, despite the liquidation of Fintec, Mr Lapthorne continued to provide services. The judge's finding at page 45 was that Mr Harris well knew that Mr Lapthorne was from the very beginning of the consultancy agreement providing "services" either via Fintec or on his own account to other non-Eurofi clients.
49. Mr Lapthorne sought to cover his tracks when he provided "services" to Eurofi's clients. For instance, he sought to defer invoicing Albion and was not frank about performing services for Eurofi clients in his original witness statements. Mr Bloch naturally placed reliance on that as showing that there was breach of a duty under the general law.
50. However, it seems to me, looking at the matter in the round, that Eurofi gave its consent for Mr Lapthorne to carry on business of providing "services" without any qualification. It is important to bear in mind that Eurofi did not engage Mr Lapthorne on the terms of an exclusive consultancy or one which was expected to take up all of Mr Lapthorne's time. Moreover it would appear that Eurofi had no wish to develop its "services" business. We are told that there was some evidence at the trial on this point, but the judge made no finding to the effect that Eurofi had any intention to develop that business. Rather he made the finding set out above that "the preponderance of Eurofi's trading, if not its virtual entirety" was in the provision of Services. From these factors it seems to me that the right conclusion, as far as any fiduciary duty is concerned, is that, as a practical matter, Eurofi must be taken to have waived its rights, if any, to any further disclosure, especially having given its general consent to Mr Lapthorne providing "services" for those to whom he chose to provide those services, whether or not they were Eurofi's clients.
51. Mr Bloch referred to clause 3(b) of the contract, which provides for Mr Lapthorne to account to Eurofi for fees earned in providing "services" to clients of Eurofi. It seems to me that the existence of this clause could be very well one of the reasons why Mr Harris was content for Mr Lapthorne to carry on the business of providing services. Be that as it may, Mr Bloch's point is that the existence of this clause indicates that there was thought to be a conflict of interest in this situation. The argument runs that if a consultant has access to clients and provides them with "services", he might be tempted to build up his contacts with a view to leaving the engagement with Eurofi, setting up on its own account and taking the benefit of that contact with it.
52. The answer to that point can be found in the judge's application of Lord Upjohn's analysis, namely that in this particular context there was no realistic conflict between the interests of Eurofi on the one hand, and the duty of Mr Lapthorne. His activity of providing services was an entirely separate activity from the very specialist activity of Eurofi. As I see it, the presence of clause 3(b) does not assist the appellant in the way it seeks to rely on it here unless there was a realistic conflict of interest. The judge held that there was not a realistic conflict of interest. The question whether a conflict of interest is a realistic one or not it a question of fact. The judge was not satisfied. That is a finding of fact and there is no basis on which this court can disturb that finding.
53. I have referred to Lord Upjohn's dissenting speech in Phipps v Boardman [1967] 2 AC 46, 124. It echoed what he said in Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606, when he was in the Court of Appeal. His analysis of conflict of interest has found favour in many commentaries: see, for example, the Law Commissions' recent report on Company Directors Regulating Conflicts of Interest and Formulating a Statement of Duties (Law Com No 261) (Sect Law No 173) (1999) at paras 8.27 to 8.30. It may well be that the modern view of the equitable rule dealing with conflicts of interest and duty in a commercial context is that there has to be a real sensible possibility of conflict. However, that is a question which has not been fully argued in this case and must await another occasion.
54. Likewise, I would record that the extent of Mr Lapthorne's liability, if he had been in breach of fiduciary duty, did not arise in this case. It was claimed that it extended down to 1999, four years after the termination of his engagement with Eurofi. That might have been correct, but I can express no view upon it.
55. For those reasons I, too, dismiss the appeal.
ORDER: Appeal dismissed with costs assessed in the sum of £8,506.65; leave to appeal refused.