Luke Tucker Harrison, Senior Associate Solicitor in Debenhams Ottaway Business Services team recently acted for Nick Manoudakis, the first employee and former CFO of easyJet and easyGroup in respect of a successful High Court action against easyGroup. easyGroup’s, whose sole witness was Sir Stelios Haji-Ioannou (“Sir Stelios”) was represented by Travis Smith who were named Litigation Firm of the Year in 2010.
Mr Manoudakis’s claim was for monies due under a consultancy agreement that he entered into in 2005 with easyGroup and which was due to be paid to him under the terms of the same in 2006. easyGroup defended the action on the basis of an alleged breach of Mr Manoudakis’s fiduciary duties as a Director of an easyGroup service company. In particular it was alleged that Mr Manoudakis had used his corporate credit card for personal expenses without the knowledge of Sir Stelios. easyGroup had marked all expenses as personal until Mr Manoudakis provided a valid receipt so there was no suggestion that he was passing off personal expenses as business expenses.
The Court found that Sir Stelios had actual knowledge of Mr Manoudakis’s use of the card and that the practice had gone on for many years with Mr Manoudakis periodically reimbursing the company for personal expenses incurred on the easyGroup corporate credit card. Judgment was accordingly awarded in Mr Manoudakis’s favour with an order for costs. It is of note that Mr Manoudakis had chosen to fund the claim with a Conditional Fee Agreement (or No Win No Fee agreement) and had insured his risk against adverse costs with an After the Event insurance policy. Such funding arrangements will no longer be viable if Lord Jackson’s recommendations are implemented in Legal Aid, Sentencing and Punishment of Offenders Bill currently going through parliament.
The case involved two further important issues that have a wider ranging impact on businesses and their directors. Firstly it is critical that businesses have in place a clear and unambiguous expenses policy and that use of a corporate credit card for personal expenses is expressly prohibited if that is the business’s intention. We have seen a number of claims recently, both in the Employment Tribunal and in the County/High Court involving expenses. Where our clients have good policies in place their positions are invariably much stronger.
Secondly the Court implied a warranty into Mr Manoudakis’s consultancy agreement that he had not been in breach of his fiduciary duty to easyGroup Holdings Ltd. Had the Court found Mr Manoudakis in breach of duty it could have allowed easyGroup to escape its liability to him. Directors who remain as consultants should, therefore, consider disclosing matters which may amount to a breach of fiduciary duty to their employers prior to entering into ongoing consultancy agreements, compromise agreements or any other form of contract relating to the termination of their employment.
The case was extensively reported in the Daily Telegraph in the following articles:-
For further advice about expenses or credit card policies please contact Michael Kerrigan on 01727 837161 or via email to mk@dolegal.co.uk
For further advice about directors duties please contact Luke Tucker Harrison on 01727 735639 or via email to lth@dolegal.co.uk
