Lux Films Ltd v Fowler [2026] EWHC 963 (KB)

Successful claim in a shareholder dispute against a director for diversion of business

The High Court considered what was, in substance, a breakdown of a small, closely-held business between shareholder-directors.

While still a director, shareholder and employee, one of the founders diverted clients and business opportunities to his own competing company, using the company’s confidential information, systems, staff and goodwill.

The court found sustained breaches of fiduciary duties, statutory duties under the Companies Act 2006, and employment duties, and held the competing company liable for knowing receipt and unlawful means conspiracy.

This is not, on its face, a classic unfair prejudice petition. But in reality it reads like a shareholder dispute in another form: a breakdown of trust between owner-managers, followed by one party extracting value from the business while still inside it.

This was not a case about preparing to compete after departure. It was active competition during the the director’s office and employment. The director used confidential information built up over years such as client relationships, pricing structures, proposal materials, production methodologies and archived footage, to win and service work through a new company. He did so while continuing to use the company’s office, IT systems and employees, and while drawing a salary.

The court made clear that a deterioration in relations does not release a director from ongoing duties.

This was not characterised as “mere preparation” for future competition. This was operating a rival business in real time, using the company’s assets and information.

The court had little difficulty in holding the competing company liable, not only as a knowing recipient of the benefits of the breaches, but also for unlawful means conspiracy.

The case underlines a simple but often overlooked point. Until a director-shareholder has effected a clean break, their duties continue in full. Acting against the company’s interests while still in office is not simply sharp practice, it is likely to be characterised as a deliberate and sustained breach with serious consequences.

Lux Films is a powerful illustration that the moment relationships break down is precisely when discipline around duties matters most, not least because that is when they are most likely to be breached. And it shows that resolving the dispute, through mediation or similar, may avoid painful and costly cases like this ever having to be issued.

Lux Films Ltd v Fowler [2026] EWHC 963 (KB) Judgment: https://lnkd.in/erch7eqi