The customer list belonging to a business can be one of its biggest assets. It is therefore important to be careful when disclosing customer information, particularly to competitors. Often if two parties are considering working together and wish to enter into discussions during which customer details will be released, a confidentiality agreement is signed. This is what happened in the recent Court of Appeal case of Personnel Hygiene Services Ltd (formerly UK Hygiene) and others v Rentokil and others.
The parties entered negotiations concerning a potential subcontracting arrangement between them and as part of their discussions UK Hygiene disclosed details of their customers. A confidentiality agreement was signed between them, to protect this information. Subsequently, a subcontract was signed which contained no reference to confidentiality of customer lists. Following termination of the subcontract, Rentokil directly approached UK Hygiene’s customers with a view to providing services to them.
The Court held that the confidentiality obligation persisted, despite the conclusion of the subcontract. It also held that new customer details not included in the original confidentiality agreement were also protected. The Court held that in the circumstances, a springboard injunction against Rentokil was appropriate as they had obtained a head start through their unlawful use of the confidential information and damages would not have been adequate to compensate UK Hygiene. Overall, a potentially tough and expensive remedy for breach of confidentiality.
The Court was not convinced by Rentokil’s argument that this was akin to imposing an unenforceably wide restrictive covenant upon them. Also interestingly, the judgement made no mention of the presence of an entire agreement clause in the subcontract. Such a clause is intended to prevent the parties to a written agreement from raising claims that pre-contractual statements or representations constitute additional terms to the contract.
Often confidentiality agreements are thought to have their limitations when it comes to enforcement and therefore this case will provide comfort to those providing information to potential competitors that genuinely confidential information will be protected.
The lesson for those on the other side of the fence is to be cautious about using customer details which do not derive from your own business. In such circumstances you must be very careful that you have the necessary legal rights to use the data.
For further information on protecting your business critical information please contact me.