118 Data Resource Ltd v IDS Services Ltd [2014] EWHC 3629 (Ch)

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Summary

A clause in an agreement gave a party the right to enter the offices of the other party to ensure compliance with the provisions of the agreement. However, it was not clear what the party was allowed to do once it had gained access to the offices. Consequently the Court was unable to allow summary judgment in the application for specific performance of the clause.

Although the contract in this case relates to the storage and usage of a database rather than the property itself, it is nonetheless useful guidance as to how the Courts are likely to approach such applications for any party who may wish to make a similar application relating to the use of property.

The Facts

118 Data Resource Ltd ("118") and IDS Services Ltd ("IDS") were business rivals who entered into an agreement for sharing information. The business of both parties included the sale and licensing of a database of contact details for businesses in the UK.

After the completion of the agreement, a dispute arose between the parties.

There was an express clause in the agreement which stated that:

    … "[IDS] undertakes and agrees with [118] that it will… permit any duly authorised     representative of [118] on reasonable prior notice to enter into any of its premises where any copies of [the database] are used, for the purpose of ascertaining that the provisions of this agreement are being complied with" …

When matters became contentious, 118 made an application for specific performance, or in other words, an injunction requiring IDS to allow access to its representative under this clause. It further applied to have the matter dealt with by way of summary judgment, rather than full trial.

The Decision

Although it was found that IDS was indeed in breach of the terms of the agreement, the application was nonetheless refused, because the meaning of the clause did not reach the requisite threshold of clarity to justify an order for specific performance.

The Court's reasoning was that there was a real lack of clarity as to what 118 was entitled to do once it had gained access to the IDS premises. The Court felt that there had to be some restrictions on the searches that 118 could carry out and that it must not seek any confidential or privileged information. For example, the Court considered whether the clause allowed 118 to see commercially sensitive material such as actual sub-licences granted by IDS.

Furthermore, the agreement was silent as to what steps 118 could take if it found a breach.

The Court also found that there was some evidence that 118 had attempted to use the proceedings as a tactic to gain a potential client. The Court considered that this demonstrated the importance of not allowing either company to have access to more information about the other than was accurately contemplated by the agreement.

Accordingly, 118 was not entitled to specific performance on an application for summary judgment.

Our Advice

Specific performance is an equitable remedy, and whether or not it should be granted rests entirely at the discretion of the Court. Whilst each case will turn on its own facts, it is very useful to have some guidance as to the approach that the Court is likely to take. It can be seen from this case that the Court will look very closely at the wording of the contract, and will take into account the effects upon both parties before determining whether or not specific performance should be allowed. It is clear that the Court is unlikely to be willing to set the parameters of the access itself.

If a party is entering into a contract that will allow rights of access to another party, it will be important to ensure that very careful drafting is used so as to preserve the possibility of applying for specific performance if it is ever needed. The relevant clause(s) should make it clear who has such right of entry, define the purpose of such access in narrow terms and provide a mechanism for the steps that should be taken if a breach is found upon inspection of the relevant premises.