An Agency Called England v Fuse8

But the ructions at An Agency Called England were significantly worse than usual. And it has left a debris strewn battle field that is well worth picking over for those wanting to avoid similar conflicts themselves.

For the sort of strife suffered is the thing of nightmares for most agency managers. The sense of dread that spreads when it becomes apparent certain employees are suddenly working against your business, the paranoia of not knowing what staff are involved, and the shock of discovering the trust you have given has been apparently abused are all emotions England MD Tony Stanton says he went through.

But unusually Stanton also went through the High Court seeking compensation for a breach of trust and fiduciary responsibility by the people who left him; Nigel Hunter, Zoe Ward and Stephen Dixon and also Fuse8, for using intellectual property that belonged to England.

The case was settled in December with Fuse8 agreeing to pay England £210,000 in compensation. Although the agency has agreed to pay, the three other defendants have given guarantees making them personally responsible for the money if Fuse8 defaults on a payment schedule; which committed it to paying £90,000 by the end of November last year and then £8,000 a month until February 2009.

An Obsession

It is a battle that became an obsession for Stanton over the course of last year. “This was an absolutely horrible experience, horrid. It meant 2007 was really a lost year for me and I am now looking forward to being able to focus on developing the business again. For example we are quite close to completing a major acquisition.”

He says the dispute was not about sophisticated restrictive covenants or other subtle, hard to enforce contractual clauses. The issues at its heart were a lot more straightforward.

“This case was about the basic fiduciary responsibilities and duty of trust every employee has towards their employer,” he says, “And these responsibilities include not working for anybody else, unless they have express permission, agreeing not to steal – whether that is a client database or pint of milk – and basically always acting in their employer’s best interest.”

The row first took root in March 2007 when Nigel Hunter resigned. “We got a letter, together with a doctor’s sick note saying he was resigning and – because of ill health – would not be working his notice. The doctor said Nigel was suffering from one of the ‘worst cases of work related stress’ he had ever seen.”

However, when the other two main players Zoe Ward and Stephen Dixon also resigned alarm bells really started to ring. Market gossip and a spate of client queries prompted Stanton to investigate the emails of his former employees.

Said Stanton, “With our background in IT we checked our systems and came up with eight or nine emails our lawyers later described as a smoking gun.

“One, from Nigel, even spoke about how good it was having a doctor’s line because it meant he did not have to go to work.

“But later it became clear they were diverting client information and leads to Fuse8. This included going to London on our time, entertaining clients to the tune of £300 on our expense account, when they were really looking for new business for Fuse8. Zoe was seconded, for example to one of our clients in Hull. While there she was using a Fuse8 blackberry to send emails.”

The legal process was soon under way. It started – as these things always do – with a letter asking Fuse8 to comment on the various allegations that were now being raised. Hunter replied angrily that is was unacceptable that his integrity was being called into question.

Despite agreeing to pay out a substantial amount of money Hunter is still defiant. “We still maintain we did not breach our contract obligations,” he says, “I have no recollection of this trip to London. And yes, while on secondment to a client in Hull, Zoe did get a new mobile which is now paid for by Fuse8.

“But it was not used for commercial reasons. Any contact Zoe had with Fuse8 while working at England, was simply the sort of contact any employee would have when speaking to a new employer.

“From my perspective I was signed off sick by a doctor, and put on anti-depressants which I am still on. If Tony wants to suggest there is an incompetent doctor working in Leeds, then that is up to him.

Determined

“However, when I resigned I did not have a job to go to. I was just determined I was not going to work for him any longer.

“So I resigned in March. But I did not actually start speaking to Fuse8 until May.

“Obviously the suggestion is being made that Tony won because we have agreed to pay a lot of money. But the reality is we simply paid to get this to go away. I suspect what we offered did not even cover his legal bill.”

And the reason these legal bills can be so high is because these disputes are rarely black and white. The next stage in the process involved England going to the High Court to get a preservation order, preventing Fuse8 from deleting any computer information in advance of an order to examine their IT systems, which was also soon granted.

“Price Waterhouse Coopers carried out a forensic examination of their systems,” says Stanton, “Fuse8 had denied they had any of our information, in the event we had Lever Arch folders of the stuff.”

The process was a traumatic one for those at Fuse8. Says Hunter, “He wanted full access to all our computers – not only at work but the ones we had at home too. They came and took a copy of everyone’s hard drives.

“And that included everything that had been on my files including some very personal stuff. Particularly upsetting was the fact that my PC contained the only photographs of my baby son, who unfortunately died.

“But there was nothing on there you would not imagine should be. All the files that were relevant to England were the ones created when we worked there. Any employee is likely to have files relating to their employer on their personal computer systems.”

Meanwhile, during this time England started taking a considerable amount of flak.

“It was as though somebody was out to deliberately destroy this business,” said Stanton “Allegations were being circulated that we were overcharging our clients and exaggerating our expenses. We also had staff targeted with texts suggesting the business was in trouble, and their details were given to recruitment companies and head-hunters.

“Our business was also given a listing on a ‘crap companies’ website and clients were sent the url so they could see ‘the type of company they were associating with’.

“It was horrible. We had junior staff in tears after receiving texts. We had clients demanding explanations about the expense allegations.

“At one stage the accounts affected represented 70 percent of our gross profit.”

Disgruntled

Hunter denies the Fuse8 team has any involvement in this smear campaign. “For example, they had that crap companies listing for two or three years. In recent years they have lost some staff in far from happy circumstances. There are many disgruntled people out there.”

Meanwhile the legal process ground on. The next stage was to apply for an Interim Injunction preventing the Fuse8 team talking to England clients and staff until a full hearing to decide the issues could take place.

That was granted and a High Court trial date was set. However, rather than go to the expense of a court appearance a mediation day was arranged. This is a quasi judicial process in front of an independent chairman.

Both sides met with their representatives to see if a deal could be hammered out. Any agreement is then enshrined in what is known as a Tomlin Order, which has the force of a High Court Order.

However, it meant that none of the England allegations were actually tested in court.

Perhaps this is why Stanton found the mediation process particularly difficult. He says “This mediation day was a stressful event. A lot of people were crowded into the room when you take into account all the Fuse8 people and their legal representatives.

“But what we do not understand is why Fuse8 did not roll over sooner. They really forced us to go as far as we had to. It must have been an expensive episode for them when you take into account their legal expenses – which must be in the region of six figures – the fact that they have four new salaries to pay and now the £210,000 claim in our favour.”

But Hunter believes England was calling the shots throughout. “There was a lot of bitterness here. For some reason Stanton became totally obsessed with us. He had run up an enormous legal bill against us working with expensive lawyers like DLA Piper and a London barrister. He was seeking seven-figures in damages. Eventually we took the view that it would be cheaper for us looking to offer him what we had put aside in order to pay for our defence.”

Human nature

But what lessons can be learnt? Stanton believes the reason he was vulnerable is because the culture of his agency is one of trust – where supervision is light.

“One of the issues we faced is that it is so difficult to imagine that people could do the sort of things which happened here. But we are determined not to change the way we manage the business. We trust our people to get on with their jobs. At the end of the day we feel the Fuse8 people abused that trust. But you can’t stop believing in human nature.”

At Fuse8 meanwhile Hunter is looking forward to putting the whole thing behind him, “Under the agreement we have certain restrictions about approaching England clients and so on. That running out will provide a natural end to this matter. After that I hope I never come across this man again.”