When a contractual arrangement breaks down or is terminated, both parties may be tempted to contact their common customers to offer to continue the service. That can, however, be an expensive mistake if the contact list does not belong to you as Rentokil has recently discovered.
UKH and Rentokil entered negotiations concerning a subcontracting arrangement during which, as is often the case, a confidentiality agreement was entered in respect of certain customer details which UKH shared as part of the discussion. Subsequently they entered a subcontracting agreement in which no reference was made to confidentiality of customer lists.
Several years later, UKH (actually Personnel Hygiene Services Limited which had acquired UKH) terminated the subcontracting agreement as it wished to take the subcontracted services back in house. Rentokil contacted several customers both on the original list and who had subsequently taken up the services after the original list was provided, inviting those customers to transfer to it. UKH argued that the client lists still belonged to it and applied to stop Rentokil from contacting the customers as well as ‘springboard’ compensation (ie compensation for the benefit Rentokil may have obtained from using the contact lists).
The court’s view was that the contact lists were still confidential information and the absence of a specific term in the subcontracting agreement to that effect did not matter. It also held that new customer details not included in the original confidentiality agreement were protected. The confidentiality provisions could be enforced by injunction, and no restrictive covenants were required.
The court also held that on the facts a springboard injunction was appropriate in this case as the defendants had obtained a 'head start' through their unlawful use of the confidential information and damages would not have been adequate to compensate the claimants. Overall this is potentially quite a tough and expensive remedy for breach of confidentiality.
The lesson is to be cautious about use of customer lists when they do not derive from your own business. If the origin of the client contact is with another business, companies should be very careful to ensure that they have legal rights to the data before using it. In addition, companies should be careful about data protection obligations in respect of the information they are given access to – including the reasons for which they have been given access to it.
The authors Ian Tucker and Alice Scott-Gatty advise clients on confidentiality breaches and springboard actions.