Personnel Hygiene Services & Ors v Rentokil & Anor (2014)

This case operates as a warning to all those who enter into confidentiality agreements, that the obligation of confidence arising under such agreements may well continue even if subsequent agreements make no mention of it and moreover, that the courts are prepared to enforce the confidentiality obligation by way of injunction.

A clinical waste services business, UKH, had provided Rentokil, as potential sub-contractor, with confidential information and Rentokil signed a confidentiality agreement providing that the agreement applied whether or not the parties entered into business with each other.

Clause 4: “The Confidential Information shall be held by the party to whom it is disclosed in complete and strict confidence and shall not be disclosed or used for any purposes other than the Authorised Purposes without the prior written consent of the other party. In no event shall the Confidential Information (or any part thereof) be used to the detriment of the other party.

Clause 5: The terms and conditions contained in this Agreement shall continue to apply whether or not the Parties conclude an agreement for joint participation in the Business.

Rentokil’s subsequent contract with UKH did not restrain Rentokil from competing with UKH after its termination.  Nor did it contain any express term controlling the use of confidential information. When another company, Personnel Hygiene Services Ltd, bought UKH, it terminated UKH’s subcontract with Rentokil. Using confidential information provided by UKH, Rentokil contacted UKH’s customers to invite them to transfer to Rentokil. Rentokil appealed against the injunction which was granted restraining it from using that confidential information, arguing that it had not obtained a head start by its use of the confidential information and   that damages was an appropriate remedy.

The Court of Appeal found that Rentokil had had a head start in comparison with the position it would have been  in if it had not made improper use of the confidential information. Critically, the duty of confidence continued to bind Rentokil as a result of clause 5 of the confidentiality agreement that it had entered into with UKH. This obligation applied to information regarding new customers as much as to existing customers. The Court concluded that a reasonable person would not hesitate to reach this conclusion. The Court observed that the omission to obtain a fresh covenant (to restrain use of the confidential information) did not preclude separate enforcement of this duty of confidence. Nor was it wrong to enforce Rentokil’s confidentiality obligation by injunction. There was a real risk that, if no injunction was granted, Rentokil would continue to use the confidential information to target customers.

The Court commented that if “the claimants were left to a remedy in damages, they would be faced with inevitable and obvious problems in proving their case in respect of any customer they claimed had been diverted from them by reason of the wrongful use of the confidential information; and a loss of customers would also be damaging to PHS’s goodwill, being damage which would be hard to measure”.

http://www.bailii.org/ew/cases/EWCA/Civ/2014/29.html