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Personal Relationships and Workplace Conflicts of Interest

In a cautionary tale for employers, a High Court case has strikingly underlined how office affairs and family relationships are capable of creating conflicts of interest which can compromise the integrity of even the most trusted worker.

Company A was awarded a multi-million-pound maintenance contract and subcontracted with company B to provide much of the labour required. The boss of company B was the brother of company A’s operations manager, who was in charge of administering the contract. The latter was also involved in a personal relationship with a colleague whose task it was to countersign company B’s invoices prior to payment.

The operations manager later suffered a serious road accident and was off work from that date. It was discovered in his absence that company B’s invoices did not have any timesheets attached to them. An inquiry ensued and the brother and company B were accused of fraud and overcharging. The operations manager’s girlfriend also came under suspicion and was ultimately dismissed.

Company A launched proceedings against the brothers and company B, alleging that it had been overcharged by more than £185,000. The brothers were accused of joint participation in a deceitful conspiracy and to have induced or procured company B’s breaches of contract.

The Court found that, after they fell under suspicion, the brothers had engaged in a misguided bid to create a false trail of back-dated documents. However, company A had failed to prove to the required standard that they had been involved in fraud at an earlier stage. Company A was at all times aware of the potential for conflict in the operations manager authorising payments to his brother’s company and the Court found that neither man was naturally dishonest.

The absence of timesheets amounted to a breach of contract by the brothers and company B and overtime payments in respect of the latter’s labourers had not been authorised by company A. Company B’s invoices were likely to have been inaccurate with a margin of error of 15 per cent. The parties were left to calculate the amount due to company A in respect of the overpayments and other matters.