Two former directors of CEL Solicitors have been cleared of breaching their duties in setting up a competing firm.
- The Court of Appeal maintained that preparatory actions taken by the directors were lawful and did not conflict with their previous roles.
- Key actions included registering a trading name and seeking regulatory approval, all deemed non-conflictual by the court.
- Judge Bever previously ruled these steps as non-breaching since no trading occurred during their tenure at CEL.
- CEL’s appeal aimed to overturn cost orders but lacked evidence of incurred damage.
The Court of Appeal recently upheld a decision that two directors formerly associated with CEL Solicitors acted within legal boundaries. These individuals, Tom Blanchfield and Mark Montaldo, resigned from their positions in January 2023 to establish a new legal entity. Their efforts were scrutinised as CEL Solicitors alleged these preparatory actions infringed upon fiduciary duties owed to the original firm.
Lord Justice Phillips supported the initial ruling by His Honour Judge Bever, affirming that the actions of Blanchfield and Montaldo, such as registering the business name ‘Complex Claims’, applying for professional indemnity insurance, and engaging in discussions with potential funders, did not constitute a breach. Despite these measures, the business did not commence operations before their departure from CEL, and all steps remained preparatory.
Notably, the discussions with litigation funders, including Deminor, were found to be non-conflicting. CEL had already engaged another exclusive funder, thereby minimising potential conflict. The arguments presented by CEL regarding possible conflicts were dismissed as tenuous, given the existing exclusive agreements.
CEL Solicitors did not seek immediate legal injunctions against the former directors, primarily due to the elapsed time since their actions. Instead, they pursued the appeal to contend the cost orders from the trial. However, their basis for claiming damages was unsubstantiated, as the preparatory activities undertaken by the directors did not translate into any calculable harm to CEL.
The appeal’s dismissal reaffirmed the original judgment, as any technical breaches were insufficient to overturn the initial cost ruling. CEL’s contention was perceived as largely strategic, aimed at altering financial implications rather than addressing substantive legal grievances.
The Court’s decision demonstrates that careful preparatory actions by directors do not inherently breach fiduciary duties.
