Health & Case Management Ltd v The Physiotherapy Network Ltd

A contractual obligation to act in good faith may be breached by covert and opportunistic conduct, even where the contract contains no exclusivity or minimum-volume obligation. The obligation requires adherence to the spirit of the contract, reasonable commercial standards of fair dealing, the agreed common purpose and justified contractual expectations. A clause stating that a party “anticipates” making approximately a specified number of referrals does not create a binding minimum-volume commitment where the language is otherwise clear. Database right protects substantial investment in obtaining, verifying or presenting pre-existing data. Passing off requires evidence of deception or confusion, not merely evidence that a sign or system has been used.

HCML provided case-management services to insurers and used TPN’s physiotherapy network to arrange treatment. Their Services Agreement referred to approximately 700 monthly referrals, imposed duties of confidentiality and good faith, and contained no express exclusivity or non-compete provision.

HCML later developed its own network, Innotrex. TPN alleged that HCML had breached the Services Agreement and a separate oral agreement, infringed TPN’s database right, misused confidential information, breached the good-faith obligation and passed off TPN’s FCA score as its own. The central issues concerned the meaning and effect of the referral clause, the use of TPN’s database, the scope of the good-faith obligation and the elements of passing off.

1. Referral obligation. Clause 2.3 of the Services Agreement did not oblige HCML to make approximately 700 referrals each month. The words “anticipates” and “circa” were inconsistent with a binding commitment, and the agreement supplied no ascertainable tolerance level. The agreement remained commercially meaningful without a guaranteed referral volume. The deletion of the words “but there are no guaranteed minimum volumes” from the Pilot Agreement did not establish the converse proposition. Earlier contractual wording could be considered, but deletions required caution and did not necessarily carry contractual significance.
2. Light Touch Agreement. Even assuming that a concluded oral agreement existed, the evidence showed that HCML could not guarantee any particular number of referrals. The alleged referral obligation was therefore not established.
3. Database right. A database right subsisted in the TPN Database. Its maintenance involved substantial qualitative and quantitative investment, including detailed and regularly updated clinic-usage data. TPN owned the right. HCML’s repeated transfer and use of data from the database constituted extraction of substantial parts. There was no consent because the data had been obtained by deception.
4. Confidentiality. Clause 14.1 restricted disclosure, not use. HCML’s use of TPN’s data to establish Innotrex therefore did not breach that clause. The court did not need to decide the confidentiality issue, although clinic-list information lacked the necessary quality of confidence while referral-volume data would have had that quality.
5. Good faith. Clause 3.1 required honesty, fair dealing, adherence to the spirit and common purpose of the agreement, and consistency with justified expectations. HCML dishonestly obtained TPN’s data, used it to establish a rival network, concealed Innotrex, diverted referrals while continuing to rely on TPN, and later denied the true position. That conduct was opportunistic, underhand and exploitative and breached clause 3.1. The absence of exclusivity or non-compete terms did not prevent that conclusion.
6. Passing off. TPN failed to prove goodwill, misrepresentation and damage. In particular, the evidence showed use of the FCA score but no deception or confusion. The passing-off claim was dismissed.
7. Orders. The claims based on clause 2.3, the Light Touch Agreement, clause 14.1 and passing off were dismissed. HCML was found liable for infringement of TPN’s database right and breach of clause 3.1.