Disputes over the interpretation of restrictive covenants and over the use of confidential information mostly arise within the context of a failed employment relationship. It is therefore interesting to see the way in which the Courts deal with these issues when both parties involved are substantial commercial organisations.
Background
One such recent opportunity arose in the Court of Appeal case involving a dispute between Personnel Hygiene Services Ltd and others (“UKH”) – v Rentokil [2014] EWCA Civ 29. UKH was the main contractor in relation to the supply of services involving the disposal of medical waste. In 2007 it approached Rentokil to see if Rentokil would be prepared to provide all of those services on a subcontracted basis. Pursuant to a confidentiality agreement, Rentokil was provided with confidential information to enable it to prepare a bid. This included information about the customers of UKH, the nature of the services with which they were being provided and the nature of the agreements that had been entered into. UKH accepted Rentokil’s bid and a subcontract was entered into on some very basic terms which did not include a repeat of the confidentiality clause within the confidentiality agreement under which information had originally been provided.
As the contract unfolded, some of the existing customers fell away and new customers were added to the contract but in January 2012, as a result of a takeover, UKH decided that it was going to bring the contract in-house and gave 3 months’ notice to Rentokil to that effect.
Rentokil decided immediately to make approaches to customers of UKH notifying them of the fact that Rentokil’s services were going to end on 15 April 2012 and that it would be open to any customer to transfer its custom to Rentokil once the minimum period of that customer’s contract with UKH had run its course.
UKH applied for and obtained an interim injunction in February 2012 and then a final injunction in April 2012 following an expedited hearing. The injunction prevented Rentokil from using confidential information for 12 months from the date when the first approaches had been made. The Judge also granted a “springboard” injunction to prevent the Defendant from carrying on any business with the customers who had been approached in January 2012 and this was expressed to continue until July 2012.
The Defendant’s appeal to the Court of Appeal was unsuccessful. The Defendant relied heavily upon the fact that the subcontract itself had not contained any confidentiality provisions but the Court made it clear that it was prepared to extend the effect of the confidentiality provisions set out in the earlier confidentiality agreement. It also indicated that, if it had needed to do so, it would have been prepared to imply a term into the subcontract itself restricting the use of the confidential information even though there was no express term.
Interestingly the Defendant also argued that since the term as to the use of confidential information was not restricted in time or scope the Court was entitled to strike it out as being too wide and therefore unreasonable and that it should not be enforced at all. The Court rejected that submission as well and held that in such circumstances it was open to the Court to decide the length of time for which it would be reasonable to grant an injunction.
Summary
The case illustrates that the Court will not be slow to allow one commercial organisation to protect its confidential information from use by another even within the context of commercial arrangements even where it might appear that no confidentiality provision applied. Any subcontractor faced with a similar “opportunity” to use confidential information which has come from a third party with which it has contracted should be aware that it is highly likely that they will face injunction proceedings if they decide to use it.