A recent Employment Court judgment highlights the financial consequences an employee can face for breaching their duty of fidelity, and the value courts place on an employer’s lost business opportunities.
In Manawatu Motors 1970 Ltd t/a Robertson Motors v Renner [2025] NZEmpC 68, the Court ordered a former sales manager to pay $900,000 in damages for loss of a chance, after he used relationships built on behalf of his employer to undermine its business while still employed.
The facts
Mr Renner was employed by Manawatu Motors 1970 Ltd (Robertson Isuzu) as a sales manager from 2004. Around 2011, he identified an opportunity to import truck attachments from Japanese company ShinMaywa. At his suggestion, Robertson Isuzu entered into an exclusive NZ distribution agreement with ShinMaywa. Mr Renner signed that agreement Robertson Isuzu’s behalf and became its principal contact with ShinMaywa.
In mid-2023 Mr Renner resigned. A week later, ShinMaywa advised Robertson Isuzu it wished to end the exclusive arrangement. Suspicious, Robertson Isuzu collected Mr Renner’s work laptop and found that while still employed, Mr Renner had been providing Robertson Isuzu’s customer contact details to ShinMaywa, facilitating direct dealings between ShinMaywa and Robertson Isuzu’s customers, and negotiating with a competitor to work with ShinMaywa after his departure.
The breaches
Mr Renner argued that Robertson Isuzu’s losses arose from its own failings:
- Not planning for his resignation;
- Not building multiple contact points with ShinMaywa;
- Not understanding the importance of relationships in Japanese business culture; and
- Not having enforceable restraint of trade in the employment agreement (it was incomplete).
The Court did not accept these arguments. It found that many of the alleged failures were in fact Mr Renner’s own. His employer could not be blamed for reasonably trusting a long-serving employee whose job was to build and maintain those very relationships. The Court held that Mr Renner had breached the non-solicitation clause in his employment agreement, and his obligations of fidelity and good faith.
“Loss of chance”
Loss of chance recognises that, where a plaintiff has lost the opportunity to achieve a favourable outcome, but it is uncertain whether that outcome would have happened, the court can award damages reflecting the value of the lost opportunity.
The Court found in this case that Mr Renner’s conduct was a very substantial factor in causing ShinMaywa to end its exclusive relationship with Robertson Isuzu and causing customers to deal directly with ShinMaywa rather than through the employer.
Rather than awarding the full $2,240,000 claimed for lost profits, the Court accepted that 40% of the claimed loss ($900,000) was an appropriate amount for Robertson Isuzu to be awarded by way of damages for loss of chance.
Takeaways
- Employees can take preparatory steps to compete while still employed, without informing their employer. However, they must not breach their duty of fidelity by acting in a way that could damage the employer, i.e. letting clients know of plans to leave and compete in a way that becomes known to others but not the employer.
- Robertson Isuzu was unable to rely on some restraint of trade clauses as they were incomplete. Employers should ensure their agreements adequately protect their interests.
- For employees, the common law duty of fidelity applies regardless until employment ends.
