In a landmark judgment delivered on March 11, 2025, in the names of Associated Supplies Limited v. Joseph Mizzi, the Court of Appeal extended the scope of fiduciary duties to employees in senior or managerial positions, confirming and upholding the lower court’s interpretation of Article 1124A of the Civil Code (Chapter 16 of the Laws of Malta).

Background

The defendant, Joseph Mizzi, was employed as a General Technical Manager with Associated Supplies Limited (“ASL”). During his tenure, the defendant was entrusted with leading the negotiations with Burmeister & Wain Scandinavian Contractor (“BWSC”) on behalf of ASL, in connection with BWSC’s bid for a tender concerning the extension of the Delimara Power Station. The terms of ASL’s involvement were to be set out in a consultancy agreement to be concluded between ASL and BWSC. In its negotiations with ASL regarding the consultancy, BWSC made Mizzi’s continued involvement a key condition for entering into a contract with ASL. This did not go down well with ASL, and thus no agreement was ultimately concluded.

Following his resignation from ASL due to ill health, Mizzi allegedly used insider knowledge gained during his employment to pursue the same business opportunity, and acted as BWSC’s representative in his personal capacity, and later through his company, Typeset Company Limited.

The plaintiff company brought an action against Mizzi, alleging that he had breached his fiduciary obligations in terms of Article 1124A of the Civil Code, as well as the covenants set out in his employment contract.

Court of Appeal’s Decision

The Court of Appeal confirmed the decision of the First Hall of the Civil Court, ruling in favour of ASL. The Court found that Mizzi was indeed in breach of fiduciary duties owed to his employer for the following reasons:

• Misuse of Confidential Information: Mizzi used contacts and sensitive information obtained during his employment with ASL for personal gain.

• Diversion of Business Opportunity: He failed to protect the interests of ASL by intentionally redirecting a potential contract between ASL and BWSC to his own company, despite doubts over ASL’s ability to secure the deal.

• Replication of Negotiated Terms: The agreement Mizzi later concluded with BWSC through Typeset Company Limited was identical to the draft agreement previously negotiated on ASL’s behalf, further implying misuse of insider information.

• Unauthorised Profit: Mizzi derived personal gain from his position with ASL.

The Court of Appeal affirmed that Typeset Company Limited played a central role in facilitating the breach of fiduciary duties and, as a result, held it jointly and severally liable with Mizzi for the resulting damages, amounting to €1,697,658.25 – representing the total commission payments received by Mizzi.

Legal Analysis

Codification of Established Principles

The Court noted that although Article 1124A of the Civil Code was enacted in 2004 – after the defendant had entered into his employment contract with ASL – the concept of fiduciary duty it embodies is not novel, but rather a codification of a principle deeply rooted in Roman Law and long recognized within Maltese jurisprudence.

Fiduciary Duties Beyond Job Titles

The Court emphasised that the job title or designation alone is not indicative of the existence of fiduciary obligations; rather, one must consider whether the employee was actively involved in the management of the company, exercised discretion, and had access to confidential information during the course of employment.

Managerial Employees as Agents

With respect to employees holding positions which are inherently managerial in nature, the Court referenced Professor Joseph A. Micallef’s commentary in his Notes on Commercial Law, where he states: “The Manager is therefore in relation to his principal an administrator, namely a mandatory and a lessor of work while in relation to third parties he is the representative that binds the principal and therefore is his agent.” Therefore, a managerial role imposes duties and obligations that go beyond those emanating from an employment contract.

The “No Conflict” and “No Profit” Rule

The Court echoed principles outlined in the FHR European Ventures LLP case, notably the:

– No conflict rule: a fiduciary must avoid conflicts between personal interest and duty.

– No profit rule: a fiduciary must not profit from their position without the principal’s informed consent.

Mizzi’s actions breached both.

Fiduciary Duties May be Activity-Specific

A key takeaway from the judgment is that fiduciary obligations may attach only to certain activities carried out by an individual. This underscores the Court’s fact-sensitive approach that fiduciary obligations arise from what the employee is doing, not simply who they are.

Obligations Survive Termination of Employment

Fiduciary duties may continue beyond the end of employment, particularly where the former employee uses confidential information acquired during their tenure for personal benefit.

Conclusion

This case reaffirms the fundamental importance of fiduciary obligations owed by employees holding positions of authority or discretion, requiring them to act with utmost good faith and honesty, not only during their employment but also after it has ended. It serves as a reminder to employees that breaches of fiduciary duties, whether intentional or not, can have serious legal and financial consequences.

Authored by Dr Neil Grixti.

This article is intended for informational purposes only and should not be construed as legal advice. Readers are encouraged to seek professional verification before acting on any information presented.