Medenta Finance Ltd v Hitachi Capital (UK) Plc

In construing a commercial contract, the court must give words their ordinary meaning in the context of the agreement as a whole. A replaced agreement may be considered as part of the factual matrix, but with caution. Contractual terms are implied only where necessary for commercial or practical coherence, or where they are so obvious that they go without saying. Rectification requires convincing proof that the executed instrument failed to record a continuing common intention. A restraint of trade is enforceable only so far as reasonably necessary to protect a legitimate business interest. Information obtained by an agent for its principal is not confidential to the agent merely because the agent compiled it.

Medenta acted as Hitachi’s agent in establishing and administering dental and medical finance schemes. Their 2011 agreement regulated commission, marketing activity, termination, and dealings with Suppliers and customers. After Hitachi gave notice of termination, Medenta sought declarations and injunctive protection concerning the construction of clauses 15(8) and 17(4), rectification, an implied term, restraint of trade, and confidentiality.

The court determined the liability issues at an expedited trial. The principal questions were whether Hitachi was restricted from marketing third-party products or soliciting existing Suppliers, whether the agreement should be rectified or supplemented, and whether Medenta could assert a proprietary or confidential interest in Supplier information.

1. Construction. The words “third party products” in clause 15(8) meant products of persons other than Hitachi and Medenta. “Supplier” meant a Supplier currently party to an existing Supplier Agreement, both in clause 15(8) and clause 17(4). The court considered the 2010 agreement as part of the factual matrix, but adopted the cautious and sceptical approach stated by Rix LJ in HIH Casualty and General Insurance v New Hampshire Insurance Co [2001] EWCA Civ 735.
2. “Solicitation” meant seeking the business of a potential customer, and “marketing” meant offering products for sale to a potential customer. Both required positive, direct or targeted conduct. Hitachi could explain the termination and continued operation of existing Supplier Agreements, but could not solicit existing Suppliers or market third-party products to them.
3. Rectification and implication. The evidence showed that the executed agreement reflected the parties’ continuing common intention. Rectification therefore failed. The proposed implied term was neither necessary for commercial or practical coherence nor so obvious that it went without saying. It would also contradict or rewrite clause 15(8), so implication failed.
4. Restraint of trade. On the assumed basis that clause 15(8) extended to former Suppliers, it would be wider than reasonably necessary to protect a legitimate business interest and would be an unreasonable restraint of trade. The issue did not arise on the court’s actual construction.
5. Confidentiality. Supplier information had been obtained by Medenta as Hitachi’s agent and was information Hitachi was entitled to receive and use to service existing Supplier Agreements. It was not confidential to Medenta.
6. The liability claims failed. Relief and consequential orders were reserved.

First-instance decision. The judgment records no prior appellate decision.