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High Court awards damages against former UCFX trio

High Court awards damages against former UCFX trio

Microsoft partner UCFX succeeds in High Court with reduced damages

Damages awarded against three defendants in UCFX case.

Damages awarded against three defendants in UCFX case.

Credit: Illustration 110551495 © Maxkabakov - Dreamstime.com

Three local ICT industry figures have been ordered to pay damages variously for breaches of fiduciary duty, confidentiality and conspiracy to appropriate business.

According to a judgment dated 19 December, High Court judge Gerard van Bohemen awarded $681,212 in damages to Auckland-based unified communications company UCFX. 

The long-running civil case dates back to 2015, when in March of that year a serious split developed between the defendants and UCFX CEO, director and controlling shareholder Kevin Plumpton.

That split apparently centred on various issues of pay, positions within the company and the defendant's apparent concerns that Microsoft unified communications partner company UCFX was not operating sufficiently separately from other businesses operated by Plumpton.

A series of disclosures were made by the defendants to various outside parties relating to the establishment of a new business, dubbed "NewCo" in correspondence.

Two of the defendants in the case, James Terry and Brent Colbert, were found to have breached their fiduciary duties under the Companies Act as directors of UCFX not to act in conflict of interest and not to divulge confidential information.

They, along with Scott Maynard, were also found to have breached their obligations of confidence to UCFX not to disclose to third parties information confidential to UCFX and to have made false and malicious statements to employees that UCFX was about to close down in an effort to persuade the employees to leave UCFX and join them in a new company.

The trio were also found to have: "conspired to appropriate the staff, clients and business opportunities of UCFX by unlawful means, namely ... breaches of directors’ duties, breach of obligation of confidence and false statements."

The plaintiffs, UCFX and Plumpton, alleged that the defendants planned to "steal the business" and would have proceeded with that plan if the plaintiffs had not intervened.

They claimed the steps they had to take to protect and restore their business after the defendants’ plan had been discovered resulted in costs  and loss of profits and sought damages of $1.5 million.

The defendants said they had no plan to steal the business and that the dispute was a disagreement among shareholders about the direction of the business. 

"The defendants say the plaintiffs have misinterpreted documents which were prepared and circulated to various third parties for the purposes of analysing future business opportunities and have misunderstood related internal communications among the defendants and principal software architects in the company," the judgment said.

The defendants also said the documents and communications in question related to "precautionary measures" taken in the context of a "toxic environment".

However, the court disagreed.

While Colbert was a registered director of UCFX, neither Terry nor Maynard were formally registered. Terry, however, was found to be a deemed director of the company. 

Terry, while not formally employed by UCFX, was found to have taken an active part in the company's work and was appointed to or filled, de facto, the role of chief operating officer.

Maynard, the company's lead software architect, was found not to be a director.

"That finding does not lessen Mr Maynard’s involvement in the plan which the three defendants had put together to take over the business of UCFX," the judgment said. 

"But it excludes Mr Maynard from potential liability under causes of action pleaded on the basis of breach of directors’ duties."

Reseller News sought comment from the respondents last week. Two of the three have indicated they will not be commenting.

“Now that the judge has ruled in our favour we can put all this behind us and focus on building UCFX and working with some great partners in the unified voice market," UCFX founder Kevin Plumpton said.

“This has been a huge distraction and a cost to the business and now the truth is out it’s a huge relief to be able to move on.

“I’d also like to thank those people who supported us in doing the right thing by coming forward and offering to help. 

"It was difficult to win this case without dragging customers and partners into court.”

Costs and who pays them are yet to be determined.


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