Personnel Hygiene Services Ltd & Ors v Rentokil Initial UK Ltd (t/a Initial Medical Services) & Ors

A contractual duty to keep confidential information confidential can continue after the parties enter the business relationship for which the information was disclosed, including information supplied about later customers. Confidentiality protection is distinct from a covenant restraining competition or dealings. The absence of a post-termination restrictive covenant does not prevent an injunction against misuse, and the restraint-of-trade reasonableness test does not govern ordinary confidentiality protection. Springboard relief may be granted where improper use gives a defendant a head start measured against the position without that misuse. It may include a time-limited restriction on customer approaches, calibrated to neutralise residual advantage. A real risk of misuse and difficulty proving customer diversion or goodwill loss may justify injunctive relief rather than damages.

Personnel Hygiene Services Ltd acquired the clinical waste services business formerly operated by Andrew Peake and Michael Prendergast. Rentokil Initial had provided subcontracted services to the business under a confidentiality agreement and a subsequent subcontract. After notice terminating the subcontract, Initial contacted customers using information supplied by the business and made misleading statements encouraging them to transfer their custom.

The High Court granted a time-limited injunction restraining misuse of confidential information and a springboard injunction restricting contact with customers previously approached. Initial appealed against those orders, arguing that the confidentiality obligation did not continue under the subcontract and that post-termination relief required an express restrictive covenant. The central issues were whether the confidentiality obligation continued and whether the injunctions were justified.

Rimer LJ gave the leading judgment. Lewison LJ agreed and added clarification concerning the earlier authority on confidential information. Briggs LJ agreed with both judgments.

1. Appeal dismissed. The judge was entitled to grant both the non-user injunction and the springboard injunction.

2. Continuing confidentiality. Clause 5 of the confidentiality agreement provided that its terms continued whether or not the parties entered a business agreement. It therefore supported the conclusion that the information about existing customers remained confidential after the subcontract was made. The same obligation applied to comparable information supplied about new customers. Use of the information for performing the subcontract was authorised, but use for competing purposes was not.

   In any event, where a contract gives one party confidential information for the purposes of, or in connection with, the contract, the law implies an obligation to treat it confidentially even if the contract is silent: Saltman Engineering Coy. Ld,. Ferotec Ld and Monarch Engineering Coy (Mitcham), Ld v. Campbell Engineering Coy., Ld. (1948) 65 RPC 203.

3. Confidentiality distinguished from restraint of trade. The absence of an express covenant preventing dealings with customers did not prevent an injunction enforcing the continuing obligation not to misuse confidential information. Caterpillar Logistics Services (UK) Ltd v Huesca de Crean [2012] EWCA Civ 156; [2012] ICR 981 distinguished between barring-out relief, which required an express reasonable covenant, and protection against misuse of confidential information, which did not. The appellant’s attempt to subject the confidentiality obligation to the restraint-of-trade reasonableness test was therefore rejected.

4. Springboard relief. The relevant head start was the advantage Initial obtained compared with the position it would have occupied without improper use of the information, not Initial’s advantage over the claimants. A residual advantage could remain despite the claimants retaining the same information and despite undertakings temporarily stopping the conduct. The period and scope of relief were matters for the trial judge’s discretion and could be measured by the time reasonably required to identify customers and their requirements from public sources.

5. There was a real risk of further misuse. Damages would create difficulty in proving customer diversion and valuing the resulting goodwill loss. The judge was therefore entitled to conclude that injunctive relief was appropriate.

• Court of Appeal (Civil Division). In [2014] EWCA Civ 29, the court dismissed Initial’s appeal.
• High Court of Justice, Queen’s Bench Division, Bristol District Registry Mercantile Court. His Honour Judge Havelock-Allan QC granted a non-user injunction and a springboard injunction by orders dated 17 April 2012 and 28 January 2013.