The High Court delivered a judgement establishing a corporate seller's liability for breaching post-sale contractual covenants and fiduciary duties by assisting commercial rivals, even in a non-executive capacity, following the sale of his controlling interest in a large manufacturing group.
Facts:
Mr. Wishart had a long career in the waste paper and manufacturing industry, founding his own business in 1986 and opening his first steel fabrication workshop in 1989. Over the years, his business expanded through various corporate vehicles, including Empteezy Ltd., and the acquisition of production facilities abroad, including Romold Ltd. and companies in Spain, Germany, Italy, and Belgium. He formed Empteezy Medio Ambiente Iberica SL (Emtez Spain) around 2002 and developed a strong relationship with its senior managers, Ms. Leen Sandor and Mr. Juan Carlos Serrano, whom he regarded as personal friends.
By December 2022, the Empteezy Group had ten companies collectively selling steel, plastics, and absorbents. The consideration for Mr. Wishart's shares in Empteezy Holdings was approximately £27.6 million. By the share purchase agreement (the SPA) between Mr. Wishart and Spill Bidco, Mr. Wishart covenanted, for a period of three years, not to be concerned or interested in a competing business. and the covenants in the investment agreement limited competition in the restricted area (including the UK, France, Germany, Spain, Italy, Belgium) for 18 months from the date Mr. Wishart ceased being a director or shareholder.
At the time of the sale, Mr. Wishart was 68 but remained a director of Livingstone Self-Storage Ltd. (Livi) and Wishco Ltd. Livi, initially dormant, began trading the following year, accumulating fixed assets of £536,868 by November 2024, although it carried net liabilities.
Mr. Wishart's involvement with the Spanish rival, Apex Safe Solutions, began after Mr. Serrano and Ms. Sandor were suspended and Mr. Serrano was dismissed due to alleged financial irregularities at Emtez Spain, which subsequently filed for insolvency in November 2024. Mr. Wishart, acting in sympathy for the couple, provided financial support, transferring several thousand Euros to Ms. Sandor for personal use and a total of £149,900 to an account in the name of "APEXARCH" (Apex Safe Solutions) between January and February 2025.
In the UK, a rival business, Loxxer Ltd., was set up by Mr. Wishart's acquaintance, Mr. Matthew Bulman. Loxxer supplies cabinets for lithium battery storage. Mr. Wishart allegedly assisted Loxxer by allowing it to store stock at Livi's premises and by attending a trade exhibition in April 2025 with Ms. Sandra Geddes, an Empteezy UK sales manager, to promote Loxxer's products.
Following the commencement of proceedings, Spill Midco 1 served Mr. Wishart with loan note redemption notices, seeking to cancel over £12.2 million of his outstanding loan notes for an aggregate value of nil, citing the alleged breaches as a material default under the investment agreement.
Decision:
The High Court found Mr. Wishart liable for breaches of his contractual obligations and his fiduciary duties as a director, but the determination of the final remedies (injunctions and damages) was deferred. The Court’s reasoning centred on the interpretation of the term "concerned" in the restrictive covenants, the application of the restraint of trade doctrine, and the objective assessment of his actions in supporting rival businesses.
As a director, Mr. Wishart owed Spill Topco a core duty of loyalty and was required to act honestly and in good faith in its best interests, avoiding any conflict of interest. By financially supporting, advising, and assisting businesses in direct competition with Spill Topco's subsidiaries, he placed his personal interest (helping his friends) directly in conflict with his duty to the claimants. This included his failure to notify Spill Topco of the business opportunities he learned about and passed on to its rivals.
Implications:
The judgement provides a sharp reminder of the scope and application of fiduciary duties, even for non-executive directors of non-trading holding companies. The Court affirmed that a non-executive director (NED) owes the same core fiduciary duties of good faith and loyalty to the company as an executive director, regardless of the reduced time commitment or their non-executive status. The duty to act in the company's best interests is absolute.
The case clarifies that the interests of a holding company are intrinsically aligned with the success and protection of its trading subsidiaries. Therefore, an NED of a holding company that undermines a subsidiary through competition breaches their duty to the parent.
The ruling confirms that the term "concerned" in a restrictive covenant is broad enough to catch actions that fall short of being an owner or employee. Providing financial support, critical advice, or logistical assistance to a rival, especially in combination, can make the vendor "concerned" and constitute a breach.
