Basic Civil Engineering first year Notes- Chapter 4 Building.pptx
The law relating to
1. The law relating to “team poaching” has come up for consideration in the past few years
before the Courts. Typically, in such cases (where employees move en masse to a
competitor) Courts are concerned with balancing the freedom of employees to leave
employment and set up new ventures with the duty of fidelity owed to employers. Typically,
the more senior the employer, the more onerous the duties he owes to his employer. If the
employee concerned is also a director, questions of fiduciary duties, the no conflict/no profit
rules etc. may also arise. Particularly in cases of team moves, Courts are also concerned to
ensure that employees leaving en masse in a planned manner does not result in the new
venture getting an unfair competitive lead over the employer. These issues were elaborately
discussed at first instance recently inQBE Management v. Dymoke, [2012] EWHC 80 (QB).
Justice Haddon-Cave summarized the law in this relation as follows (see para 169 onwards):
“(1) It is indisputable that an employee owes his employer a contractual duty of „fidelity‟,
but how far it extends will depend on the facts of each case (per Lord Green MR in Hivac v
Park Royal [1946] Ch 169 at 174).
(2) The more senior the staff the greater the degree of loyalty, fidelity and diligence
required (per Openshaw J. in UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008]
IRLR 965 at paragraph [10]).
(3) The first task of the court is to identify the nature of the employee‟s obligations of
fidelity and then to decide whether the employee‟s activities are in breach (per Moses L.J.
in Helmet Integrated Systems v Tunnard [2007] IRLR 126 at paragraph [32]).
(4) The mere fact that activities are described by an employee as „preparatory‟ to
competition does not mean that they are legitimate (per Moses L.J. I Helmet Integrated
Systems v. Tunnard [2007] IRLR 126 at paragraph [28]).
(5) It is a breach of the duty of fidelity for an employee to recruit or solicit another
employee to act in competition (see British Midland Tool v Midland International Tooling
Ltd [2003] 2 BCLC 523).
(6) Attempts by senior employees to solicit more junior staff constitutes particularly serious
misconduct (Sybron Corp v. Rochem Ltd [1984] Ch 112).
(7) It is a breach of the duty of fidelity for an employee to misuse confidential information
belonging to his employer (see Faccenda Chicken Ltd v Fowler[1987] Ch 117).
(8) The court should ask whether the activities in which the employee is engaged affect his
ability to serve his employer faithfully and honestly and to the best of his abilities
(see Shepherds Investments Ltd v. Walters [2007] IRLR 110 at paragraph [131]).”
This general discussion of the duty of employees was supplemented by the following
propositions, particular to “team moves” or “team poaching” (see para 170 onwards):
2. “In the context of 'team moves' or 'team poaching', four recent cases provide useful
guidance and illustrations of what may constitute illegitimate conduct… In Shepherd
Investments Ltd and Anr v Walters & another [2006] EWHC 836 (Ch), Etherton J. held that
when former directors and employees set up a competing business, diverting business
opportunities and misusing confidential information, they had acted in breach, not only of
their fiduciary obligations, but also their implied obligation of fidelity, from the moment that
they procured the services of attorneys in the Cayman Islands to set up the rival business.
On the facts of that case, Etherton J, held that a former employee was also in breach of
obligations as a fiduciary, whether or not he was to be regarded as a director, and that he
was in breach of his duty of fidelity… In UBS Wealth Management v. Vestra Wealth
LLP (supra) Openshaw J. said at paragraph 24: "I cannot accept that employees, in
particular senior managers, can keep silent when they know of planned poaching raids upon
the company's existing staff or client base and when these are encouraged and facilitated
from within the company itself, the more so when they are themselves party to these plots
and plans. It seems to me that that would be an obvious breach of their duties of loyalty
and fidelity to [their employer]". In Kynixia v. Hynes [2008] EWHC 1495 Wyn Williams J.
said at paragraph 283: "I simply do not see how one can be acting as a loyal employee
when one knows that three senior employees (including oneself) may transfer their
allegiance to a group of companies which includes a competitor and yet not only fail to
divulge that knowledge but also say things which would have the effect of positively
misleading the employer about that possibility." In Tullett Prebon plc v. BCG Brokers
LP [2010] IRLR 648 Jack J. said at paragraphs 68-69: "[A] desk head must not do anything
to assist the recruitment of his desk... Where a desk head decides that he is in favour of the
recruitment of his desk and thereafter assists the recruitment in such small or large ways as
may arise, he is in plain breach of his duty: he has crossed the line between observing his
duty to his employer and acting in the interest of his employer's rival." The position as
regards mutual soliciting by employees is usefully summarised as follows
in Goulding on Employee Competition (2nd Edition) at paragraphs [2.164] to
[2.166]: "Discussions between employees as to proposed concerted competitive activity will
rarely if ever be acceptable, given the near-inevitable damage to the employer as a result of
such concerted activity. It remains possible that a discussion between close friends at a
similar level within the business as to the potential of working together in the future would
give rise to no breach. In such circumstances, neither employee would be soliciting the
other and neither would be encouraging the other to terminate their employment with the
employer. However, as set out in the British Midland Tool case, once an irrevocable
intention to compete is formed, resignation and disclosure of the intention is probably the
only certain means of avoiding a breach.”…”
What is also particularly interesting about this decision is that the Court found that the non-
compete covenants in the employment contracts were not enforceable (see para 237):
however, the Court in any case granted injunctive “springboard” relief to prevent the
employees from gaining an unfair competitive advantage. This is an interesting point, and I
3. am unaware of an Indian Court refusing to enforce contractual restrictive covenants (say,
because of s. 27 of the Contract Act; but then substantially giving the same relief on other
grounds). Another interesting point which comes up is this: to what extent is the duty of
“fidelity” similar to a fiduciary duty? Justice Haddon-Cave approvingly refers to the following
passage from Nottingham University v Fishel[2000] ICR 1461:
“... in determining whether a fiduciary relationship arises in the context of an employment
relationship, it is necessary to identify with care the particular duties undertaken by the
employee, and to ask whether in all the circumstances he has placed himself in a position
where he must act solely in the interests of his employer.”
A more detailed discussion will follow subsequently.
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Labels: Contract law, Equity, Interim measures / temporary injunctions
Tuesday, February 7, 2012
New decision of Presumption of Resulting trust and Presumption of
Advancement
An extremely interesting discussion of the role of the “presumption of resulting trust” and
the “presumption of advancement” is found in the decision of the Supreme Court of Western
Australia (per Edelman J.) in Anderson v. McPherson (No. 2), [2012] WASC 19, available on
AustLII here. Interested readers are referred to the discussion from paragraph 87 onwards.
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Labels: Equity, Property law, Restitution, Trusts
Wednesday, January 4, 2012
Looking back at 2011: Income tax
A post looking back at some important tax issues decided in 2011 is available on the indian
Corporate Law blog, here.
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Labels: Income tax, Income tax - corporate taxation, Income tax - digest of cases, Income tax - Income Tax
Act, Income tax - international taxation
Wednesday, November 23, 2011
Public Law Symposium at NLSIU, Bangalore
The National Law School of India Review, the flagship journal of National Law School of India University,
Bangalore is pleased to present the firstNLSIR Public Law Symposium to be held on 10 December,
2011 at the National Law School campus. The theme of the symposium is "Adjudication of Socio-
Economic Rights by the Indian Supreme Court", an issue which has seen significant legal
developments in the recent past. The symposium will be attended by renowned legal luminaries including
Justice Muralidhar, Mr. T. R. Andhyarujina, Mr. Shyam Diwan and Mr. Arun Kumar Thiruvengadam,
amongst others.
The discussion will be divided into two sessions. In the first session (scheduled between 10.30 A.M.-
12.30 P.M.) the panel will discuss the substantive adjudication of socio-economic rights undertaken by
the Supreme Court concerning questions of the ever-widening ambit of Article 21 and the content of the
new rights so evolved. The changing nature of the relationship between Part III and Part IV of the
Constitution due to such expansion will form an important part of the session. The second session
(scheduled between 1.30 P.M.-3.30 P.M.) will focus on the manner in which the Supreme Court has
enforced these rights and consider the variety of procedural innovations employed for the same, including
PILs and continuing mandamus.
The registration fee for the symposium is Rs. 500 for professionals. There is no registration fee for
students. All those interested are requested to register their attendance at the following link:
<https://docs.google.com/spreadsheet/viewform?formkey=dEdkRTJua21BY2R5Snh1UWl1QXRCREE6M
Q>.
For any further details regarding the symposium, please contact Krishnaprasad K.V. (Chief Editor, NLSIR)
at +91-9916589670 or Ashwita Ambast (Deputy Chief Editor, NLSIR) at +91-9986478265 or email us
at mail.nlsir@gmail.com.
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Labels: Events and Conferences
Saturday, November 5, 2011
Lifting the Veil: England & India
In this post on Indian Corporate Law, I have discussed two recent judgments – one of the
Bombay High Court, another of the England & Wales High Court – on lifting the corporate
veil. The two judgments are Great Pacific Navigation v. M.V. Tongli Yantai and Linsen
International v. Humpuss Sea Transport.
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Labels: Company Law
Friday, October 7, 2011
Equitable Set-off and Limitation
A reader in his comments on a previous post pointed out that the 2004 Calcutta High Court
decision in Peerless General Finance had stated that section 3 of the Limitation Act, 1963,
does not affect an equitable set-off. This decision, however, had not taken into
consideration an older line of authority (1915, Madras High Court, Chetty v. Desikar) which
appears to hold that the statute of limitations does apply to equitable setoff. This
contradiction raises an interesting issue: can an equitable set-off be raised in answer to a
claim, even where the equitable set-off could not be pleaded as an independent claim on
account of limitation?
On principle, the argument for allowing an equitable set-off to be pleaded would run thus:
Limitation bars the remedy but does not extinguish the right. Equitable set-off is a
substantive defence. As long as the right is not extinguished, there is no reason why
equitable set-off should not be set up as a substantive defence. On the other hand, it might
be contended that equitable setoff operates as a substantive defence on the basis that the
two claims are so closely connected, that equity would regard them as one. Hence, when
one claim is barred (as a matter of the right to recover, as opposed to a matter of the forum
of recovery), equity may not regard the claims as being one. Further, equity must run
according to the law and not in derogation thereof.
I have not come across any Indian authorities discussing the issue and the authorities in
detail; however, there appears to be substantial discussion in relation to this issue in
English law. Lord Denning MR in Henriksens Rederi v. Rolimpex (The Brede) [1974] 1 QB
233 stated, “In point of principle, when applying the law of limitation, a distinction must be
drawn between a matter which is in the nature of a defence and one which is in the nature
of a cross-claim. When a defendant is sued, he can raise any matter which is properly in the
nature of a defence, without fear of being met by a period of limitation. No defence,
properly so called, is subject to a time-bar. But the defendant cannot raise a matter which is
properly the subject of a cross-claim, except within the period of limitation for such a
claim.” However, in that case, the majority left this specific point open. Lord Denning‟s view
was, however, approved in Westdeutsche v. Islington Borough, [1994] 4 All ER 89; and
then in Filross Securities Ltd v Midgeley [1998] EWCA Civ 1248.
6. [The decision of the House of Lords in Aries tankers v. Total Transport, [1975] 1 WLR 185,
where the House held that a claim beyond time could not be pleaded as equitable set-off, is
explained on the basis that in that case, the contract between the parties had incorporated
Article III Rule 6 of the Hague Rules. The effect of Rule 6 is that the right itself is
extinguished – so, Rule 6 is to that extent different from a mere limitation provision which
only bars recovery.]
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Labels: Equity
Friday, August 26, 2011
Links of Interest
1. This article by Mr. V. Umakanth discusses put and call options in the context of securities
regulation in India. From the abstract: “This article embarks on the modest task of mapping
out the legal landscape that presently shapes the enforceability of put and call options in
Indian companies. It seeks to review applicable legislation and analyze key judicial
pronouncements that hold sway over the field. It finds that the current legal regime
governing put and call options in investment agreements is fragmented and hazy and
unnecessarily restricts the ability of investors in Indian companies to enter into such
arrangements to protect their own interests. It calls for a reconsideration of the legal regime
so that physically settled options that are customary in investment agreements may be
treated as valid and legally enforceable…”
2. This post on the UKSC Blog discusses a recent decision of the UK Supreme Court, Belmont
v BNY, where the Supreme Court has discussed the “anti-deprivation rule” in insolvency
law. The rule is effectively that “There cannot be a valid contract that a man’s property shall
remain his until bankruptcy, and on the happening of that event shall go over to someone
else and be taken away from his creditors…” Ex p Jay; Re Harrison [1880] 14 Ch D 19. The
Supreme Court has held that the rule applies only when there is a deliberate intention to
evade insolvency laws, and does not hurt genuine commercial arrangements. Lord Mance‟s
judgment notes the background of the rules: “I am satisfied that there are, and ought to be,
two principles in this area. One is the principle applied in British Eagle, which precludes a
bankrupt from agreeing to distribute his, her or its property other than pari passu in
7. bankruptcy (although it does not preclude creditors from agreeing inter se on the
distribution inter se of their pari passu shares: In re Maxwell Communications Corpn plc
[1993] 1 WLR 1402). The other is a concurrent principle, whereby dispositions of property
on bankruptcy may be invalidated as being in fraud or an evasion of the bankruptcy laws…
While the two principles are conceptually distinct, they are quite closely allied. British Eagle
addresses what happens in bankruptcy. An anti-deprivation principle addresses what
happens on bankruptcy. If contracting out of the statutory rule requiring pari passu
distribution in bankruptcy is impermissible, it would be surprising if there were no
concurrent principle capable of invalidating certain dispositions which, by removing property
from the bankrupt on bankruptcy, had the same ultimate effect… “ He then laid down a
three-fold test to apply in anti-deprivation cases: “The existence of a contractual scheme,
which is said to create the relevant property interest, but at the same time to include
provisions providing for its illegitimate deprivation on bankruptcy, raises several questions:
First, how far did the scheme confer any property interest on the subsequently bankrupt
party? Second, how far did it deprive him of any such property on bankruptcy? Third, in so
far as it did deprive him of any such property on bankruptcy, did this amount to an
illegitimate evasion of the anti-deprivation principle?”
3. In this post on Indian Corporate Law, I have discussed the judgment of the Bombay High
Court in Retailers Association v Union of India, where the Court upheld the constitutional
validity of service tax on renting of immovable property.
4. This post discusses a recent decision of the England & Wales High Court, where the Court
held that members of an limited liability partnership do not as such owe fiduciary duties to
one another.
5. This post on the Lex Arbitri blog discusses the historical development of arbitration law in
India.
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Thursday, August 11, 2011
Call for Submissions: National Law School of India Review
The National Law School of India Review is now accepting submissions for its upcoming issue
- Volume 24(1).The National Law School of India Review(NLSIR) is the flagship law journal of
the National Law School of India University, Bangalore, India. The NLSIR is a bi-annual,
8. student edited, peer-reviewed law journal providing incisive legal scholarship on issues that are
at the forefront of contemporary legal discourse. Over the last 20 years, the NLSIR has regularly
featured articles authored by judges of the Indian Supreme Court, Senior Counsel practicing at
the Indian bar, and several renowned academics.
The most recent issue of the NLSIR, Vol. 23(1), featured contributions by Mr. Justice Altamas
Kabir (Judge, Supreme Court of India), Professor Christopher Forsyth (Cambridge
University), Professor Julian Roberts (Oxford University), Professor Lea Shaver (Yale Law
School), Professor Ariel Ezrachi (Director, University of Oxford Centre for Competition Law
and policy) and Mr. K. Swaminathan (Head of the Direct Tax Practice at Lakshmikumaran &
Sridharan) among several others. Moreover, in August 2009, NLSIR attained the unique
distinction of being the only Indian student-run law journal to be cited by the Supreme Court of
India, in Action Committee, Un-Aided Private Schools v. Director of Education. NLSIR has
also recently been cited in Justice R. S. Bachawat's Law of Arbitration and Conciliation, a
leading treatise on arbitration law in India.
Papers may be submitted as Long Articles (approximately 8000 words), Essays (approximately
5000 words) or Notes (approximately 2500 words). Submissions may be made
to mail.nlsir@gmail.com. Queries regarding submission may be sent to the same email address.
The last date for submissions is November 1, 2011. Formore information, please visit -
www.nlsir.in.
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Monday, May 23, 2011
Update
I have posted a short note on Indian Corporate Law, dealing with some issues in MAT. The
note is available here.
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Thursday, April 14, 2011
Event Announcement: NLSIR Symposium
4th ANNUAL NLSIR SYMPOSIUM: INDIA’S TAXATION REGIME: PERSPECTIVES ON
THE PROPOSED CHANGES
The Annual NLSIR Symposium has earned the reputation of being a unique forum for the
consideration of contemporary legal developments having attracted leading practitioners
such as Mr. Nishith Desai, Ms. Bijal Ajinkya, Mr. Sandeep Bhagat, Mr. Stephen York, Mr.
Padam Khincha, Mr. Gourab Banerji, Mr. Arvind Datar, TP Ostwal and renowned academics
9. including Mr. V. Umakanth, Assistant Professor, National University of Singapore, and Mr.
Sandeep Parekh, Professor, IIM-A amongst others.
This year, the NLSIR Symposium is themed on “INDIA‟S TAXATION REGIME: PERSPECTIVES
ON THE PROPOSED CHANGES”. The first of the four sessions will deal with the implications
of the anti-avoidance measures incorporated in the Direct Taxes Code Bill. The DTC
introduces one of the most sweeping GAARs - treating tax avoidance almost on par with tax
evasion. Whether the distinction between tax avoidance and tax evasion will continue to be
retained after the coming into force of GAAR – and if so, how it will apply in practice – is an
open question which the Symposium seeks to address as also the structuring of business
transactions in light of GAARs and its impact on DTAAs. The second session aims at
addressing taxation of e-commerce. Tax treatment of such transaction, i.e. whether source
based or residence based taxation is to be followed assumes crucial importance. It also
seeks to reflect upon issues involving taxation of software transactions and whether
taxation should be in the nature of sales tax or service tax. The third session focuses on
some of the contentious issues in indirect taxation today. The first is the hotly debated GST.
Another controversial issue which this Session addresses is in reference to the interpretation
and implications of Part XIII of the Indian Constitution and Art. 301‟s interpretation and
interplay with the rest of the provisions in Part XIII which has given rise to significant
controversy over the years. The fourth and the final session addresses the future of India‟s
Tax regime. With provisions such as taxing FIIs through the capital gains, the new Branch
Profit Tax etc., it is clear that the government is seeking to cast a wide net to pull in
revenue from multiple fronts through DTC and such changes are sought to be analyzed in
this session.
This years' Symposium is scheduled on the 16th and 17th of April 2011, and will
be held at the International Training Center, National Law School of India
University, Bangalore. The banquet will be at the Chancery Pavilion. The line-up of
speakers includes partners of India's top law firms such as AMSS, AZB, SNR and
Khaitan, senior advocates and judges.
Those interested in attending the Symposium can visit the NLSIR website
(www.nlsir.in) for further details. Please register on the website
(http://www.nlsir.in/symposium.html) or e-mail us (mail.nlsir@gmail.com). All
registered delegates will be awarded a certificate of participation.