Company in contempt after salesman disobeyed

Posted: 31st May 2013

RCJIn a salutary warning to employers that they can be held responsible for actions taken by their staff, even if they are carried out contrary to instructions, a company has been held in contempt of court after one of its salesmen breached undertakings to refrain from soliciting prohibited clients.

Two of the company’s directors had established a business to compete with their former employer who operated in the same field. The former employer alleged that the directors had breached their fiduciary duties and the post-termination provisions of their contracts. A breach of contract claim was also brought against a salesman who had moved to the newly-formed company.

Those matters were settled by the directors, their new company and the salesman giving agreed undertakings to the court that, for a fixed period, they would not solicit business from a list of 279 prohibited clients to whom their former employer had provided chargeable services in the year preceding the resignations.

The former employer returned to High Court having become suspicious that those undertakings had been breached. The court found the salesman in contempt after he admitted sending an email to one of the prohibited clients in an attempt to solicit that client’s business.

The two directors were exonerated on the basis that they had taken sufficient steps to alert staff to the terms of the undertakings and had not authorised the actions of the salesman and a colleague who had also attempted to solicit business from a prohibited client but the court concluded that the fact that the two salesmen, who were paid on commission, had acted contrary to instructions did not excuse the company from liability for contempt of court. The court left over for further argument issues in respect of the appropriate penalties, if any, to impose.