ML Covered - December 2025

We are pleased to share our latest instalment of ML Covered, our monthly round-up of key events relevant to those dealing with Management Liability Policies covering D&O, EPL and PTL-type risks.

Company founder successfully defends breach of duties claim in the High Court

In Friend Media Technology Systems and another v Jonathan Friend and another [2025] EWHC 2897 (KB), the High Court dismissed a claim that a founder and former director had breached his duties or misused confidential information, following a disagreement with the new private equity owners.

Background

Jonathan Friend (the Defendant) was the founder and former director of Friend MTS Limited (Friend MTS) as well as being a non-executive director and substantial shareholder of Friend Media Technology Systems Limited (FMTS), a Jersey-registered parent company (together the Claimants).

In 2022, a private equity firm made a significant investment into the Claimants. Divisions soon emerged between the Defendant and the private equity firm's management appointees to the Claimants, and the Defendant was removed as a director of Friend MTS on 22 November 2024.

The Claimants alleged that, following his removal, the Defendant breached his fiduciary duties by seeking to compete with the Claimants, which resulted in a lost opportunity to win back a previous customer in a deal worth £1.8 million, and an alleged missed chance to acquire a rival business valued at £5.42 million. The Defendant had also established a company, Friend TP Ltd (Friend TP), for this purpose.

The Defendant denied the allegations, asserting that he had acted pursuant to his duties and that the allegations were an attempt on the part of the Claimants to put pressure on him in relation to separate proceedings between them in the Employment Tribunal and in Jersey.

Decision

The judge dismissed the claims in their entirety. In respect of the lost opportunity to win back a past customer, the judge concluded that, based on the contemporaneous documents, the Defendant had neither contacted nor attempted to contact the previous customer in relation to the provision of services. Regarding the allegation that the Claimants had missed the chance to acquire a rival business, the judge determined the supporting evidence to be "inadequate," and that the alleged £5.42 million loss was unjustifiable and had likely been included "in the context of their wider dispute."

The judge also determined that the Defendant incorporating Friend TP months earlier, and which also remained dormant, did not constitute competitive activity and therefore did not breach any restrictive covenants.

Overall, the judge criticised the lack of supporting evidence for many of the allegations made by the Claimants. The judge assessed the Claimants' losses as being "entirely without foundation" and also highlighted that the Claimants could have cleared much of their suspicion of the Defendant if they had made further enquiries of what had been discussed at the time.

Commentary

The judgment illustrates that companies who suspect that a director may not be acting within their duties should adequately investigate the matter to fully ascertain the facts before bringing a claim for breach of duty. The judgment also highlights that companies are expected to adequately evidence their claimed losses, which can potentially be challenging in circumstances where it is alleged that a company has lost an opportunity.

To read more, please click here.

Director who transferred company assets after liquidation found to be in breach of fiduciary duty

In Mitchell and another (Joint Liquidators of MBI International & Partners Inc (In Liquidation)) (Appellants) v Sheikh Mohamed Bin Issa Al Jaber (Respondent) No 2UKSC/2024/0076, the Supreme Court held that a director had breached his fiduciary duties by transferring company assets after the company had entered liquidation.

Background

Sheikh Mohamed Al Jaber (the Respondent) was the director of MBI International & Partners Inc (the Company). In March 2009, the Company acquired 891,761 shares (the Shares) in JJW Inc, another company associated with the Respondent. The Shares were transferred in return for sums of money which were to be “paid on demand” by the Company. Payment was never demanded, and no payments were made.

The Company was wound up on a creditor’s application on 10 October 2011, and the Respondent's powers as director came to an end, although the Company was still the registered owner of the Shares. In 2016, the Respondent, without the knowledge of the Company's liquidator, signed undated share transfer forms in his capacity as director to transfer the Shares to a new company, JJW Guernsey.

In May 2019, the Company’s liquidator commenced proceedings against the Respondent claiming that the 2016 share transfer was void, the Respondent had acted in breach of fiduciary duty or in breach of trust for transferring the Shares, and that JJW Guernsey was a knowing recipient of the Shares.

The trial judge and Court of Appeal ruled in favour of the liquidators, but the Court of Appeal allowed the Respondent to appeal on the ground that the liquidators had failed to establish any loss (see our blog on the Court of Appeal's decision here).

Decision

The Supreme Court held that the Respondent was in breach of fiduciary duty for transferring the Shares. The Court rejected the Respondent's argument that a single indivisible act cannot both create a fiduciary duty and be a breach of that duty.

The Court also held that the Company did suffer financial loss because the Shares were not acquired subject to a vendor’s liens, as claimed by the Respondent. The Court found that the intention behind the Company acquiring the Shares had been to enable an initial public offering of the shares in JJW Inc. However, the Court found that the existence of an unpaid vendor’s lien on the Shares would have prevented their sale in the IPO, meaning there was nothing to suggest the parties intended to create the lien.

The Court also ruled that the loss suffered by the Company should be calculated by reference to the value of the Shares at the date of the breach of fiduciary duty. Compensation was calculated at €67,123,403.36.

Commentary

The case demonstrates that insolvency practitioners have a flexible and broad discretion to pursue fiduciaries in instances where they believe fiduciaries have breached their duties. More specifically, the case serves as a reminder that if a fiduciary wishes to rely on a later event as breaking the chain of causation between their breach and the beneficiary’s loss, the burden lies on the fiduciary to prove that later event, and that it impacts causation.

To read the judgment, please click here.

Employment Rights Bill update: the Commons consider the Lords' amendments

The Employment Rights Bill (ERB) reached a pivotal stage on 5 November 2025, as the House of Commons reviewed a further set of amendments from the House of Lords, following their debate on 28 October. This ongoing parliamentary ‘ping-pong’ reflects the process of refining the Bill’s final wording before it can proceed to Royal Assent.

We previously covered the Commons’ initial response to the Lords’ amendments in our October edition of ML Covered (see here).

The latest Commons debate demonstrates the Government’s determination to deliver its original reform agenda, even where the Lords have proposed more measured or clarifying changes.

Key outcomes from the Commons

Unfair dismissal: Labour ministers agree six-month qualifying period

A central point of contention was the qualifying period for unfair dismissal protection. The Lords advocated reinstating a six-month qualifying period, allowing employers a probationary window to assess new staff. The Commons then rejected this, upholding the Government’s stance that unfair dismissal protection should apply from day one of employment. However, Labour ministers have now agreed to introduce the right to make a claim after six months of service instead of on day one, with a start date of 1 January 2027. This follows backlash from business groups.

Guaranteed hours and zero-hours contracts

The Commons voted down a Lords amendment that would have allowed workers to request guaranteed hours where their actual working patterns exceeded those stated in their contracts. Instead, the Government’s original proposal stands: employers must issue contracts that accurately reflect established working patterns. This represents a significant change for sectors reliant on flexible staffing, including hospitality, retail, social care, and logistics, and will necessitate closer monitoring of hours and more frequent contract updates.

Seasonal work definitions and coverage

Another area of disagreement was the definition of seasonal work. The Lords sought to narrow this definition, which would have excluded some workers from predictable-hours protections. The Commons disagreed, maintaining that the existing clause and regulations provide sufficient flexibility. The broader definition will bring more workers in cyclical or short-term roles within the scope of new rights, increasing administrative responsibilities for industries such as agriculture, tourism, and events.

Trade union procedures and industrial action rules

The Commons also considered technical amendments relating to trade union political funds and voting thresholds for industrial action. While the Lords supported retaining elements of the existing, more restrictive regime, the Commons favoured the Government’s streamlined approach. Although largely procedural, these changes may facilitate union ballots and industrial action, potentially increasing operational uncertainty for employers amid ongoing industrial activity.

What's next?

The Bill now returns to the House of Lords for further consideration of the Commons’ latest positions, with another round of exchanges anticipated before the final text is agreed.

Update: On 17 November 2025, the Lords debated the final amendments, including motions confirming the Commons’ disagreement with earlier Lords amendments (such as those relating to guaranteed hours) and agreeing to Government amendments in lieu (for example, on unfair dismissal and trade union provisions).

In parallel, the Government has launched consultations to shape the practical operation of the reforms. These cover topics such as union access to workplaces, employer duties to inform workers of union rights, bereavement-related leave (including pregnancy loss), and enhanced protections from dismissal for pregnant employees and new mothers. These consultations, expected to conclude in early 2026, will inform the secondary legislation and guidance underpinning the new regime.

Takeaways for Insurers

For insurers, the recent Commons and Lords debates reinforce the clear direction towards a more protective employment rights framework, with implications for risk profiles across the sector.

The Commons’ commitment to stricter obligations regarding contractual terms, signals a future claims landscape characterised by increased early-service disputes and challenges around contractual entitlements and worker classification. The more permissive approach to union ballot procedures may also lead to a rise in industrial disputes.

Insurers should monitor these developments closely. As further details emerge, it will be essential to review internal processes, update risk models, and adapt client communications to reflect the evolving regulatory environment.

Conclusion

The ERB is nearing its final form, with the Commons largely maintaining the Government’s original proposals despite Lords’ interventions. The forthcoming consultations and secondary legislation will be critical in determining how these reforms are implemented in practice. Employers and insurers alike should prepare for a more robust employment rights regime, with heightened obligations and increased scrutiny of employment practices.

To ensure that you stay abreast of this fast-moving area and the relevant changes being proposed, please sign up to our live ERB Tracker, and for all things employment, don’t forget our fortnightly podcast, The Work Couch. 

2025 Autumn Budget pension announcements

The Autumn Budget has introduced numerous changes to pensions, the most notable of which is the change to salary sacrifice rules.

A salary sacrifice scheme allows employees to reduce their salary in return for a non-cash benefit – in this context, it allows employees to contribute a portion of their salary to their pension and, in exchange, the employer makes an agreed contribution. Presently, the employee's salary sacrifice contributions are not subject to income tax or National Insurance (NI). However, this is set to change from April 2029.

The Government has highlighted that the costs of the tax relief associated with salary sacrifice schemes have increased from £2.8bn in 2016/17 to £8bn (projected) in 2030/31 and therefore reform is required. Consequently, from April 2029, NI relief on salary sacrifice contributions into pension schemes will be capped to the first £2,000 per year. Over this amount, NI will be payable on salary sacrifice contributions at the normal rate.

Many in the pensions industry have suggested that the decision undermines the work that is being done to address pension inadequacies and the drive to encourage individuals to save for their retirement (thus to avoid an overreliance on the State). However, the Government has suggested that the NI tax relief disproportionately benefitted higher earners and that the new cap will shield 74% of basic rate taxpayers using salary sacrifice and the Government will continue with its efforts to support pension saving through auto-enrolment and tax relief.

Given that the changes are four years away, it will be interesting to see how attitudes develop during this time.

Unused pension funds and inheritance tax: an update

In last year's Autumn Budget, it was announced that from April 2027, unused pension funds and death benefits will no longer be exempt from inheritance tax (IHT) and will contribute to the value of an individual's estate. This means that where an individual's assets exceed the nil rate band of £325,000, IHT will also become payable on a member's pension pot.

The change was brought around following the realisation that some pension schemes were being sold as a tax planning tool to enable high net worth individuals to transfer wealth without their estate incurring an IHT charge. The Government's aim was to introduce measures to tackle the loopholes associated with inherited wealth and make IHT fairer.

However, the changes only appear to have exacerbated the issue: pension pots are now being treated as assets in the context of estate planning and a survey has found that nearly half of pensions advisers say that clients are reducing their pension contributions to invest in IHT solutions ahead of the April 2027 deadline or exploring the making of gifts. Similarly, the change appears to have an adverse effect on pension saving with attitudes of the over 55s having soured. This cohort are therefore less likely to maintain contributions in circumstances where they consider it likely that their pension pot will be taxed on their death.

It can be expected with any change to tax rules that there will be a proportion of society that is not in support. Pensions advisers need to ensure that individuals are not making rash or risky decisions with their pension funds which could lead to greater losses than the potential IHT charge payable by their estate.