High Court confirms that a sole director and company can conspire

Overview

In Lux Films Ltd v (1) Andrew Fowler (2) Andrew Fowler Media Ltd [2026] EWHC 963 (KB), the High Court held that a director who systematically diverted business opportunities to a competing company under his sole control, using confidential information and resources belonging to the company of which he was a director, was liable for breaches of fiduciary, statutory and employment duties. The judgment also considered whether a sole director and his company can conspire together as a matter of civil law, concluding that such a claim is legally viable. 

Background

The Claimant (‘C’) is a small UK media production company specialising in video content, incorporated in February 2016. Its three equal shareholders and directors had worked together since 2008. There was no shareholders' agreement. From February 2022, all three became salaried employees and the company invested significantly in premises, equipment, staff and training.

Relations between the directors deteriorated in early 2023. The First Defendant (‘D1’) indicated a wish to exit the business, but discussions continued for some months without an exit being agreed. While remaining a director and employee of C, D1 began undertaking work independently through the Second Defendant (‘D2’), a company of which he was the sole director and shareholder.  C alleged that D1 diverted business opportunities to D2 using confidential information, C’s employees and resources, and its goodwill, including by replacing C’s name on testimonials and representing to clients that D2 was a rebranding of C.

C suspended D1 and obtained an injunction against him for delivery up and deletion of C’s documents, providing certain information on competitive activity and limited springboard relief.  The information disclosed showed that D2 had generated over £450,000 in gross revenue from diverted work and D1 subsequently resigned on short notice.

Shortly before trial, both D1 and D2 entered insolvency arrangements without prior notice to C. The court declined to stay the proceedings and determined liability in the defendants’ absence on the basis of C’s evidence and contemporaneous documents.  

The court’s findings

Defences rejected

The court rejected each of D1’s defences in turn. His contention that C was a loose freelance arrangement was contradicted by evidence that C operated as a single corporate enterprise with salaried employees and shared revenue. His argument that he was excluded from management was rejected. D1 had continued to control C’s systems, manage employees, liaise with clients and receive salary throughout the relevant period, distinguishing the case from In Plus Group Ltd v Pyke [2002] EWCA Civ 370. The defence that the diverted work was work C was unable or unwilling to perform was misconceived, a fiduciary may not appropriate a corporate opportunity falling within the company's line of business regardless of whether the company would ultimately have pursued it. Finally, D1’s characterisation of his conduct as mere preparatory steps for future competition was unsustainable: he had actively solicited clients, performed work and received payment through D2, while still in office at C. The court found D1 liable for breaches of fiduciary, statutory and employment duties and held that his resignation on seven days' notice was a breach of an implied term requiring reasonable notice of six months.

Unlawful means conspiracy: sole director and company can conspire

D2 was also held liable for knowing receipt: it had received substantial benefits, diverted client contracts, revenues and profits, derived from D1’s breaches, and D1’s knowledge as its sole director and controlling mind was attributed to it.

In respect of the claim in tort for unlawful means conspiracy, D2 argued that a sole director and his company cannot form the requisite ‘combination’, relying by analogy on the criminal law principle in R v McDonnell [1966] 1 QB 233. 

Mr Justice Sweeting rejected the attempt to read across criminal law principles into the civil claim under the tort of unlawful means conspiracy, observing that the offence of criminal conspiracy is directed at  the agreement itself, irrespective of whether harm results, whereas the civil tort focuses on the practical consequences of coordinated unlawful conduct between separate legal persons. It follows that the policy considerations underpinning the criminal offence do not govern the scope of the civil cause of action.

Following Gloster J in Barclay Pharmaceuticals v Waypharm [2012] EWHC 306 (Comm) who in turn relied on the Irish Supreme Court authority of Taylor v Smyth [1991] IR 142, the court held that the tort is “concerned with the practical reality of concerted action by separate legal persons causing harm”. A company and its controlling individual can satisfy the requirements of the tort where the company is deployed as the instrument through which unlawful conduct is carried out and its proceeds captured. On the facts, the court identified a clear distinction of capacities: D1, acting as C’s director and employee, committed the underlying breaches of duties, while D2, acting through D1 in his capacity as director, contracted with diverted clients, invoiced for work and captured the resulting profits. The court characterised these as “sequential and interlocking steps in a single scheme”. In unlawful means conspiracy, an intention to injure must be proved, whereby the defendant knows that a harm is an inevitable consequence of the action taken, albeit it need not be the predominant purpose of the conduct. Because D2 could not have obtained the diverted business without C being correspondingly deprived of it, the requisite intention to injure was made out.

Key takeaways

• Unlawful means conspiracy re-defined: The judgment provides the first determination at trial of whether a sole director and his one-man company can conspire together in civil law. The answer is yes. 
• A company and its controlling individual may be capable of conspiring where the company is used as the instrument through which unlawful conduct is carried out.  “The corporate form cannot be deployed as a shield to defeat liability where it is itself part of the wrongful combination.” [172]
• The question is whether there is evidence of concerted action between two legal persons, rather than two independent minds.  “Where a director acts in one capacity to procure unlawful conduct, and in another capacity causes the company to receive and exploit the fruits of that conduct, the requirement of combination is satisfied.” [173]
• Directors in breach of their duties cannot seek to shelter behind a company as an alter ego. As the court observed, “[e]quity does not permit a fiduciary to evade liability by interposing a company under his control”. [145]
• In this case, the breach of duty supplied the unlawful means and D2’s conduct realised the gains – this was the culmination of sequential and interlocking steps in a single scheme rather than unilateral acts.  The loss to C was the inevitable counterpart of the gain. [176]  The fact that D1 controlled D2 explained how the combination operated effectively (and did not negate the existence of a combination). [177]
• Different considerations underpin criminal and civil conspiracy: there are conceptual and functional differences between the two – criminal conspiracy criminalises the agreement itself whereas civil unlawful means conspiracy is concerned with the damage caused by concerted actions using unlawful means. “The focus is therefore on the combination in fact and the resulting injury, not on the policy reasons which underlie the criminalisation of an agreement by individuals to commit an offence whether or not the agreement has been acted upon.” [171]

The court would not accept an attempt to elide criminal and civil theories of harm just because “conspiracy” appears in both.  This is an example of the court looking through technical arguments by wrongdoers attempting to sidestep liability, continuing a trend in how civil fraud is dealt with in practical and clear-eyed terms by the English courts.

This article was co-authored by Shabbir Bokhari, Trainee Solicitor at CMS.