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Contracts of employment: Duty to disclose own breach of fiduciary obligation

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    Tesco Stores Ltd v Pook and others [2004] IRLR 618 CA (0 other reports)

Key points

In Tesco Stores Ltd v Pook the High Court holds:

  • A secret receipt of payment through fraudulent invoices by a senior employee, as a bribe from a company doing business with his employer, gave rise to a conflict of interest and was tantamount to a secret commission. Accordingly, the employee held the payment in trust for the employers and was under a positive obligation to account for it.
  • Company directors and senior employees have a positive fiduciary obligation to disclose breaches of trust, even if committed by themselves. It would be absurd for the duty to extend only as far as an obligation to disclose wrong-doing by others.
  • In light of the employee's various breaches, the employer was entitled to refuse to permit the employee to exercise options granted under an employee share scheme before his dismissal: it was an implied term of the scheme that the option should not be exercisable by the employee while in such breach of contract as would entitle the employer to terminate the contract of employment summarily.