AAA & Anor v CCC

A contractual confidentiality covenant may restrain disclosure of information acquired through an employment or directorship and confidential to the business, even where the information is alleged to reveal unlawful conduct. Truth is not necessarily a defence: disputed information outside the public domain may remain adverse, derogatory, harmful or reputationally damaging. A contractual party may obtain an injunction protecting directors or employees who are not parties to the contract, although independent enforcement by the protected person may raise separate privity questions. Injunctions must remain within the covenant’s scope and be sufficiently certain. Ordinary language such as “adverse or derogatory” and “liable to or might lead to” may be sufficiently clear in context.

AAA and BBB sought summary judgment and permanent injunctive relief against CCC, a former director, employee, business partner and equal shareholder. The claims relied on confidentiality, non-disparagement and related covenants in a settlement agreement between all three parties and an employee compromise agreement between AAA and CCC.

The High Court, HH Judge Eyre QC, granted summary judgment and ordered CCC not to disclose specified information, identify the claimants, make adverse or derogatory comments, or damage their businesses. CCC appealed on the construction and certainty of the contractual provisions and the terms of the injunction. The central issues were whether the information fell within the contractual definitions, whether BBB could benefit from an injunction based on a covenant in an agreement to which he was not party, and whether the order was sufficiently clear.

The appeal was dismissed, subject to two amendments to the injunction. Patten LJ gave the judgment, with King LJ and Singh LJ agreeing.

1. The information in Confidential Schedule 1 was obtained through CCC’s employment or directorship and was confidential to AAA’s business. It therefore fell within the broad definition of Confidential Information in the settlement agreement. The contractual restriction applied even though the allegations, if true, might disclose unlawful conduct. The enforceability of the agreement on public-policy grounds had not been raised, and the contractual breach was not arguably defensible.
2. The truth of disputed allegations was not a defence to breach. Information could be true yet adverse, derogatory, harmful or capable of bringing a person into disrepute where it was not otherwise in the public domain. The injunction restraining disclosure under paragraph 3(a) was therefore justified.
3. Although BBB was not party to the employee compromise agreement, AAA could enforce CCC’s covenant in its full terms, including the restraint protecting AAA’s directors and employees. The court could grant injunctive relief for the benefit of persons who were not parties. The separate question whether BBB could independently seek committal for breach was left open; see the discussion of Clarke v Chadbourn [1985] 1 WLR 78.
4. The protection in paragraph 3(c) could not continue indefinitely. It was amended to apply to BBB only so long as he remained a director or employee of AAA.
5. The expressions “adverse or derogatory comments”, “liable to” and “might lead to” were sufficiently clear in context. The references to “purported” information and “the allegations” did not create uncertainty. The possible difficulty of knowing whether a person was an employee concerned practical compliance, not the validity of the order.
6. The concluding words of paragraph 3(d), concerning matters arising out of CCC’s engagement with AAA, added little to the wide definition of Confidential Information and risked uncertainty. Those words were deleted.

• Court of Appeal (Civil Division): In [2020] EWCA Civ 846, the appeal was dismissed, subject to limiting paragraph 3(c) and deleting the concluding words of paragraph 3(d).
• High Court of Justice, Business and Property Courts in Manchester, Business List (ChD): HH Judge Eyre QC granted summary judgment and made the final injunction order dated 14 November 2019.