Health & Case Management Ltd v The Physiotherapy Network Ltd

When it was commenced on 23 November 2015, this action started life as a claim for a declaration that the Claimant had not acted in breach of contract or confidence. By dint of a counterclaim that was then brought by the Defendant alleging such breaches, it raises the conventional issues, albeit with the parties reversed. To avoid confusion, in this judgment I shall refer to the Claimant as HCML and the Defendant as TPN.

HCML is a company that, amongst other things, provides services to insurance companies by managing referrals to physiotherapy clinics on behalf of the insurance companies’ insured.

Individual patients who had suffered muscular skeletal injury would be referred to HCML by an insurance company. One company from whom HCML received referrals was Aviva Health UK Limited (“Aviva Health”). HCML would then look to place that patient with a geographically convenient clinic suitable for his/her injury. HCML used a range of providers to source clinics to whom it could refer patients for treatment. In the period between 2010 and 2014, HCML’s panel of providers included TPN. The Chief Executive Officer of HCML is Keith Bushnell (“Mr Bushnell”).

TPN is a company that has established a nationwide network of physiotherapy clinics. Dale Naylor is the sole director and 75% shareholder in TPN (“Mr Naylor”). Between 1996 to 2002, Mr Naylor recruited a network of around 900 physiotherapy practices and some 1,200 individual physiotherapists. Ultimately, this business was taken over by TPN when it was incorporated in 2002. In 2002, TPN served England, Wales, Scotland, Northern Ireland and the Channel Islands with a network of clinics that offered physiotherapy services within 5 miles of any patient (excluding some areas with low population density). TPN is the largest physiotherapy network in the country.

TPN used a scoring system developed by Mr Naylor designed to monitor the effectiveness of treatment. He called this the functional assessment score or “FCA score”. It sought to measure the outcome of treatment by use of a two-digit indicator. The first digit was a letter from “A” to “E”, denoting work status. “A” indicated that the patient was fully-functioning at work and “E” indicated that the patient was off work with hindered activities of daily living. The following digit – a number – showed the patient’s level of pain, function and range of movement. Numbers from 1 to 10 indicated a range from no pain to very severe pain. When combined, A1 would indicate the best score or outcome and E10 the worst. Capturing the score at various stages of treatment enabled monitoring of effectiveness and review of a patient’s progress. From the insurer’s perspective, it was able to show when treatment was no longer providing any further benefit.

TPN derives its income from introduction fees which it generates through referrals to clinics in its network. Individual clinics would not, typically, be exclusive to TPN. Most would receive referrals from other networks or would provide physiotherapy services directly to patients.

In 2010 the parties explored a working relationship where HCML would refer patients to TPN to be placed with a local physiotherapist clinic which was part of its network. Thereafter, in return for a fee from HCML, TPN would manage the treatment of that patient by arranging initial and subsequent treatment sessions and reporting back to HCML on the progress of the treatment. A meeting took place on 22 September 2010 with a view to formalising the relationship. It was attended by Mr Naylor and Lesley Abbs, Group Manager of TPN (“Ms Abbs”) for TPN, and James Deadman and Operations Manager, Scott Olsen (“Mr Olsen”) for HCML. TPN indicated that, on average, it handled 400-600 referrals per month. HCML anticipated making around 200 referrals per month to TPN during a pilot period of 3 months.

In consequence, the parties entered what has been called a “pilot agreement” (“the Pilot Agreement”). The Pilot Agreement had a commencement date of 1 October 2010 and was due to run for 3 months (terminating on 31 December 2010). Consistent with discussions at the 22 September 2010 meeting, clause 2.3 the Pilot Agreement provided:

“HCML anticipates making circa. 200 referrals per month to TPN during this three month pilot, but there are no guaranteed minimum volumes.”

Clauses 3.1. and 4.1 imposed on the parties a reciprocal duty to act in good faith to one another.

Pursuant to the Pilot Agreement, from about the beginning of October, HCML began to refer patients to TPN. During the Pilot, on 30 November 2010, Ms Abbs wrote to Mr Bushnell confirming a ‘volume discount’:

“Based on high current and predicted referral volumes we will be able to offer efficiency savings in the form of a refund of £15 per referral.”

The Pilot Agreement proved to be successful, and so towards the end of the 3 months, the parties entered what was titled a ‘Services Agreement to Supply Physiotherapy Services’ (“the Services Agreement”).

The Services Agreement is dated 11 January 2011. It was apparently drafted by HCML. The recitals recorded that HCML was a provider of healthcare services to Aviva Health and that, following the Pilot Agreement:

“HCML and TPN have agreed that TPN will work with HCML in the provision of the Service to their customers and customers of AH having made a decision to extend and expand the TPN Service provision from 1 January 2011 onwards.” (“the Recital”)

“Service” was defined as:

“… the Service that comprises early intervention and end to end case management of relevant back and spine conditions and the planning, arranging and/or provision of Services to assist in the management of the conditions including (without limitation): triage assessment, telephone based advice, physiotherapy appointment services and referrals which HCML has agreed to provide direct to the Patient pursuant to the terms of an Agreement between HCML and [Aviva Health]”

“TPN Services” were defined as:

“… physiotherapy appointment, assessment, reporting and treatment services and referrals which TPN has agreed to provide direct to the Patient as part of the Service pursuant to the terms of this Agreement.”

Clauses similar to ones in the Pilot Agreement were included in the Services Agreement. The relevant clauses are:

“2.1

The Parties agree that TPN shall continue the provision of TPN Services from 31 December 2010 with the parties further agreeing to extend/expand this Agreement.

2.2

TPN shall perform the TPN Services (physiotherapy appointment, assessment, treatment and reporting) at the Clinics as requested by HCML from time to time.

2.3

HCML anticipates making circa. 700 referrals per month to TPN, and volume discounts from time to time for this level of referrals.

3.1

HCML shall act in good faith towards TPN at all times.

6.1

In consideration of TPN providing the TPN Services to HCML, HMCL shall pay to TPN… the Fees which are £60 for the Initial Assessment/Treatment Session and £45 for subsequent Physiotherapy Treatment Sessions…

14.1

HCML and TPN will keep confidential, both before and after the expiry or termination of this Agreement, all information of the other Party obtained under or in connection with this Agreement (including but not limited to any and all information obtained by TPN in respect of other HCML suppliers, HCML’s supply chain and HCML’s commercial arrangements with its other suppliers) (the “Confidential Information”) and will not (except as provided for in Clause 15.3 below) disclose any of that information to any third party without the prior written consent of the other.

14.2

Each Party hereby undertakes to keep the terms of this Agreement confidential and will not disclose any of the terms of this Agreement to a third party without the prior written consent of the other

14.3

Each Party will be entitled, but only to the extent reasonably necessary, to disclose the Confidential Information or any part of it:

14.3.1

to its officers, employees, servants, agents, advisers, insurers or other professional advisers to the extent necessary to enable it to perform (or to cause to be performed) or to enforce any of its rights or obligations under this Agreement subject in each case to the Party making the disclosure ensuring that the person(s) in question keeps the Confidential Information confidential and does not use it except for the purposes for which the disclosure is made; or …

14.3.3

to the extent that the Confidential Information has, except because of breach of confidentiality, become publicly available or generally known to the public at the time of the disclosure; or

14.3.4

to the extent that it has obtained the Confidential Information from a third Party who is not in breach of any obligation or confidentiality to the other Party”.

“Clinic” was defined as “an individual or organisation who is a member of TPN’s [network of physiotherapists and locations to which TPN has access and from, or by, which the TPN Services can be provided]”.

One of the key disputes to be resolved in this dispute is whether clause 2.3 of the Services Agreement imposed upon HCML an obligation to make “circa. 700 referrals per month” to TPN. I will return to this below.

TPN contends that there was a separate oral agreement with HCML made at a meeting on 15 December 2010 attended by Ms Abbs for TPN and James Deadman and Michael Everett from HCML. The terms of this alleged agreement are rather difficult to ascertain. The pleaded case is that, at the meeting, the parties discussed, and agreed, a pilot period of 4 months for an additional 50-60 personal injury referrals per month (“the Light Touch Agreement”). There is a note of the meeting of 15 December 2010 which records, so far as material:

“1.

Based on the relationship built up with Aviva… HCML have earned the opportunity to pilot as an alternative to the existing supplier for a Very Light Touch Third Party Assistance Programme…

[terms of a service level agreement are set out]

4.

The pilot should start towards the end of Jan/beginning of Feb 2011 and run for four months.

5.

During that time, we will be exclusively using TPN for physio provisions and we anticipate 50 to 60 referrals being sent through to TPN each month during this pilot period…”

TPN contends that it was agreed that the Light Touch Agreement was to be on the same terms as the Services Agreement, with the same fee being paid for each referral. TPN’s case is that the Light Touch Agreement was separate from the Services Agreement not a variation of it.

In its submissions, TPN contends that the Light Touch Agreement was extended by agreement in July 2011 to provide for referrals of 250-300 per month. There was an email exchange between Mr Naylor and Mr Bushnell on 27 June 2011 which TPN accepts bore on the terms of the Light Touch Agreement. The exchange took place prior to a meeting between the two men the following week. Mr Naylor had asked Mr Bushnell whether he would be willing to sign a one-year contract between TPN and HCML “based around current guaranteed/predicted referral numbers or percentage referrals”. Mr Bushnell responded:

“I have no guarantee of volumes from Aviva Health which makes it impossible to guarantee volumes to you. I can do no more than guarantee that you will be on our panel of providers. We will have to go into these negotiations with a degree of trust. I think that I have been totally up front that the percentage of our business going to TPN in future will be highly dependent on the strength of our future strategic relationship. My expectation is a win win solution but I have to do a deal with a network provider to meet my commitments to Aviva Health, and I want that deal to be with TPN – hence you are top of the list to negotiate with and I won’t be talking to others unless we fail to reach agreement.”

The evidence as to the terms of this July 2011 oral agreement is scant. All Mr Naylor says in his witness statement is that the parties:

“… agreed to expand the scope of the Light Touch Pilot… to include an additional 250-300 monthly referrals of personal injury cases and general insurance cases, this was to be in addition to the existing 700 referrals a month… [An] oral contract was in place for the referrals to be provided under the terms of the Services Agreement”.

TPN contends that HCML is in breach of the Light Touch Agreement (or, confusingly, in breach of the Services Agreement) by failing to provide 250-300 referrals per month in the period from November 2012 to July 2014. In his witness statement, Mr Bushnell says nothing at all about the meeting at which agreement is said to have been reached. There are apparently no other documents that shed light on the issue.

There is a dispute between the parties as to whether HCML did make around 700 referrals to TPN each month under the Services Agreement. Mr Spackman relies upon an internal spreadsheet prepared by HCML dated 25 June 2012 as indicating that HCML had been making around 688 referrals per month between January 2011 to January 2012. Mr Kinnier QC suggests that the figure was lower than this. I do not think that it is necessary to resolve this point because, whatever the true number, it is clear that the rate of referrals was regarded by TPN at the time to be satisfactory as there were no complaints about the number being received. Certainly, at the time, there was no suggestion that the number of referrals was at a level that might be a breach of Clause 2.3 of the Services Agreement.

From about late 2012 until a point in 2014, the number of referrals made by HMCL to TPN reduced until they ceased completely. The reason for the decline was principally HMCL’s decision to set up its own network of clinics (although see paragraph 51 below).

In around June 2011, HCML had preliminary discussions with TPN with a view to HCML acquiring TPN. The discussions were made subject of a separate confidentiality and non-disclosure agreement dated 22 June 2011 (“the CNDA”). Ultimately, nothing came of the discussions and TPN was notified of the decision not to pursue the acquisition in October 2011. TPN originally based its breach of confidence claim (in part) on terms in the CNDA, but this claim has not been pursued.

Whether as a result of the decision not to acquire TPN or independently (and I do not need to resolve this issue), at around this time HCML began work on building its own network of physiotherapy clinics. In his evidence, Mr Bushnell explained his reasons. First, selection by HCML of the members of its network would ensure a higher quality level. Second, it would be financially beneficial to HCML to operate its own network. Third, it would help to ensure that HCML satisfied Aviva Health’s requirement that there be no interruption in treatment services in the event that any one of HCML’s panel of providers ceased to trade. Fourth, Mr Bushnell considered that there was a gap in the market for a high-quality network of physiotherapists that presented an opportunity to HCML. Judged simply from a financial standpoint, formation of its own network would enable HCML to reduce its costs by cutting TPN out of the arrangement.

The creation of this network – called Innotrex - is a second key area of dispute in these proceedings. TPN contends that its creation, and HCML’s diversion of referrals that would otherwise have gone to TPN to Innotrex, was (1) a breach of the Services Agreement (clause 2.3 and/or clause 3.1); (2) a breach of the Light Touch Agreement; and/or (3) a misuse of TPN’s database of clinic information and/or TPN’s confidential information.

Mr Bushnell said that HCML looked to recruit most of the members of Innotrex from two existing networks of physiotherapy clinics: D2physio Network (“D2”) and PhysioWorld. To assist in setting up Innotrex, HCML engaged David Bingham of Opus Health Limited (“Mr Bingham”) as a consultant.

The day-to-day responsibility for the Innotrex project was given to Mr Olsen. In his evidence, Mr Bushnell stated that HCML:

“… undertook a well resourced and properly organised exercise to source its members. In some cases that involved visiting the premises of prospective clients, interviewing the principal players and going through a disciplined process to establish suitability on a wide range of fronts.”

And later in his witness statement, Mr Bushnell was categoric:

“As is made abundantly clear in the witness statement of Scott Olsen TPN’s database was not used in the formation of Innotrex”

Mr Olsen gave further details in his witness statement of the process of recruiting clinics to Innotrex. The description he gave in his statement is of his, indeed, creating the Innotrex network ‘from scratch’.

At least by the stage of February 2012, TPN had an electronic database of the clinics in its network. The database consisted of information relating to the clinics including: name, address (including postcode), the name of the lead physiotherapist, the number of referrals made to – and the number of physiotherapy sessions undertaken at – each clinic and the pricing structure (“the TPN Database”).

On 8 February 2012, Mr Olsen had sent an email, with high importance, to Ms Abbs requesting that she provide him with information from TPN’s Database:

“We are doing some work with Aviva to look at the difference in treatment sessions geographically across the UK. Unfortunately with the information in our system we can only search… by home postcode and we know a relatively large percentage of our clients’ treatment is more than likely undertaken closer to work which would not give us a fair representation. Are you able to therefore please assist in providing the following information on an excel spreadsheet –

•

Postcode of clinic

•

Number of cases that have been referred to that clinic

•

Number of treatment sessions that have been undertaken in total

We have been wanting to do a spread of the whole UK so would include all clinics that have been used for Aviva PMI cases only.

I am assuming your system is able to extract this type of information and ideally we require this ASAP if able…

Ms Abbs responded the same day:

“It is something I can do, but I can only let you have this for a specific period of time, would last year be OK?”

Mr Olsen said that data for the whole of 2011 would be fine and Ms Abbs confirmed that she could provide the data, “but it will take a couple of days as the database is so large, I have to do it by month”.

On 9 February 2012, Mr Olsen sent a further request to Ms Abbs for an up-to-date clinic list. The reason he gave was: “We are building a search engine internally to make the searching of clinics more efficient so just require an up to date list to add to this.” On 16 February 2012, Ms Abbs emailed to Mr Olsen a spreadsheet entitled “TPN physio list” (“the 16 Feb 2012 Spreadsheet”). HCML admits that the 16 Feb 2012 Spreadsheet included a list of TPN’s clinics and associated postcodes. Further emails were exchanged up to 5 March 2012 regarding the information that was included in spreadsheets that Ms Abbs sent to Mr Olsen. I am satisfied that the data contained in these spreadsheets had been extracted from the TPN Database.

When cross-examining about these emails, Mr Spackman asked Mr Olsen whether it was a coincidence that he was asking Ms Abbs for this information while he was working on setting up Innotrex. Mr Olsen said that it “could have been”. He claimed that Aviva had wanted to understand the geographical representation of treatment to have a geographical pricing model (“the geographical pricing model”). Pointing to the lack of documentation, Mr Spackman asked whether the discussions with Aviva about the geographical pricing model had been conducted orally. Mr Olsen initially answered “possibly”, before confirming that they had been entirely oral. Surprisingly, there was no mention in Mr Olsen’s witness statement of either his requests to Ms Abbs in February 2012 for information from TPN’s Database or work on a geographical pricing model for Aviva Health. There is no evidence of any report on the geographical pricing model actually being provided to Aviva Health.

Mr Olsen explained that most of the information he had requested was available on the HCML system, but it would have been a time-consuming and arduous task manually to obtain it. Some of the information – relating to actual treatment – was not available from HCML’s data.

I found Mr Olsen’s evidence in relation to the request for information that he had sent to Ms Abbs unconvincing and I do not accept it. I reject his claim that the data was requested to assist with the preparation of the geographical pricing model. There is a complete lack of any contemporaneous documentation to demonstrate that work on any geographical pricing model had been requested or was carried out at this time. The suggestion that Aviva Health would have been satisfied to receive the data from such a pricing model orally is plainly not credible. I am satisfied that this was simply a device to give a plausible reason why Mr Olsen was requesting the data and one which he hoped would not arouse suspicion at TPN. I am satisfied that Mr Olsen had requested the information to assist with the setting up of Innotrex. Indeed, later in his evidence, Mr Olsen accepted that he did actually use the information provided by TPN for this purpose.

On 23 February 2012, Mr Olsen also requested a list of clinics from PhysioWorld. When asked about this in cross-examination, Mr Olsen confirmed that he was assembling a database for use of HCML’s case managers. He was reluctant to agree when it was put to him that these steps were being taken, and the data obtained, for the purposes of building the Innotrex network.

On 21 March 2012, Mr Olsen emailed Mr Bingham. I note that Mr Bingham was only engaged on the Innotrex project. Mr Olsen sent him a spreadsheet which identified individual physiotherapy clinics, by area, and showed the number of clinics and the number of referrals that each had received. When cross-examined, Mr Olsen was inclined to accept that he had obtained this information from the spreadsheet sent by Ms Abbs in February. In the email to Mr Bingham, Mr Olsen explained the attached “geographical analysis” (faithful to the original text):

“I have taken the top four hotspots from the top four geographical region for referrals (Outer London and SE, SW inc Bath/Bristol, NW inclu Manchester/Liverpool and Scotland incl Edinburgh/Glasgow) and have provided a breakdown of how many referrals were referred into that region and a breakdown of the clinics that were used and number of referrals into these clinics. From this we should be able to identify what clinics to approach and if they fit onto your list.”

When he was cross-examined about this email, Mr Olsen accepted that the data in the spreadsheet had come from TPN, but he sought to suggest that HCML would already have had the information “in some shape or form”. It was put to him by Mr Spackman that it would have been a very laborious process for him to have extracted the information from HCML’s systems. Mr Olsen did not give a direct answer to that suggestion (perhaps thinking that he had already accepted that it would have been “arduous” – see paragraph 30 above), but he did accept that he had not obtained the information in this way and that he had simply used the data provided by TPN. Mr Olsen accepted that this data had enabled HCML to identify the geographical areas with the highest referral volumes in order to recruit clinics in those areas to Innotrex. Such information would have been (a) very valuable to HCML; and (b) difficult (if not impossible) to obtain without recourse to the data provided by TPN.

From around April 2012, HCML was actively pursuing a policy of diverting referrals away from TPN and was devising IT handling processes to ensure that this was done.

A business plan for Innotrex was finalised in June 2012. In a section headed “Competitor Response”, which would have included TPN, it recorded:

“Those companies with their own network will see this move as a threat and although HCML plans to maintain the use of existing networks whist at the same time building the Innotrex network, HCML will become less reliant on external networks over time.”

This was consistent with the strategy adopted by HCML to make fewer referrals to TPN.

On 25 June 2012, Mr Olsen and Mr Bingham completed an “Innotrex Update Report”. A spreadsheet prepared at this time broke the country down into regions showing the percentage of cases that had been referred by TPN in the period from January to June 2011 (“the Update Spreadsheet”). The Update Spreadsheet actually refers to “TTN”, but it appears to be common ground that this is a typographical error for “TPN”. The underlying data was detailed enough to identify, by region, the total number of cases, total number of sessions and current average charge. From this, various scenarios were modelled using enhanced costs. Mr Olsen was not asked directly to confirm that the data underpinning this spreadsheet had been provided by TPN, but I am satisfied from the information itself that this must be the case. It is inconceivable that it could have come from any other source.

By this stage, it is clear that HCML had completed assembling its own database of information relating to the network of clinics which Mr Kinnier QC called the “Clinic Locator” (“the HCML Database”). I am satisfied that at least part of the information contained in HCML Database had come from TPN’s Database using the information supplied by Ms Abbs. That is clear from the information that was presented in the Update Spreadsheet.

By August 2012, HCML had prepared an internal presentation. Under the heading, “Why set up Innotrex?”, several answers were given, including:

By mid-September 2012, HCML had recruited a total of around 30-40. Following a meeting with Aviva Health in early September, Mr Olsen identified that a key part of HCML’s strategy for Innotrex was to provide easily accessible clinics to service Aviva Health’s top large corporate customers. To pursue this, Mr Olsen had prepared a spreadsheet of the top 50 organisations that had private medical insurance cover provided by Aviva Health (“the Top 50 Spreadsheet”). HCML wanted to be able to provide an Innotrex clinic within 10 minutes’ walking distance in central London and up to 2½ miles’ drive elsewhere. After identifying the relevant corporate client and its address, the Top 50 Spreadsheet showed by column whether an Innotrex Clinic was available and its distance away from the relevant company. Two further columns showed the distance from the relevant corporate client of a clinic provided by PhysioWorld and TPN. Mr Olsen accepted in cross-examination that the information about TPN clinics had come from the information provided by TPN.

In his evidence, Mr Olsen suggested that this was an analysis of the availability of clinics to the key corporate clients of Aviva Health to enable referrals to all three networks. I am not convinced by this answer. The only clinics identified were those belonging to the Innotrex network. The columns relating to PhysioWorld and TPN simply identified the distance from the corporate client of a competing clinic. It seems clear to me that the ostensible purpose of this document was not to enable referrals to PhysioWorld or TPN (the relevant clinics from these networks were not identified), but to identify current gaps in the coverage of the Innotrex network. This document is consistent with the clearly understood long-term goal of HCML to eliminate referrals to networks other than Innotrex.

On 3 October 2012, Mr Eeles reported by email to Mr Bushnell. Although sent by Mr Eeles, it is clear from the document that Mr Olsen had also had an input. Under a heading, “Unknowns/Risks at this stage”, the email noted that there were some areas of the country that were not presently covered by Innotrex (or PhysioWorld) clinics. Mr Eeles’ proposal was to utilise clinics provided by another network – Recover – and:

“… if a Recover clinic cannot be found, we can as a last resort use a manual handoff to TPN – however this ‘unmasks’ Innotrex to TPN – as we would need an Innotrex branded treatment report template to be filled out… Both of these solutions carry the issue that we lose control of the clinical quality of the report, but will be mitigated as we continue to ramp up the Innotrex recruitment. Obviously, using TPN reduces the margin on the cases…”

When cross-examined, Mr Olsen accepted that TPN had not been told about Innotrex by this stage.

On 10 October 2012, there was a meeting between Mr Naylor, Ms Abbs and Mr Olsen. HCML had prepared a document which was provided at the meeting. The document noted that “referral volume has been steady and consistent to [TPN] across all HCML business streams”. Under a heading “Future Opportunity”, it stated:

“HCML is due to imminently start a new business opportunity within the medico-legal setting providing a case management, medical reporting and treatment services offering. As a result, HCML will be developing its own small network of physiotherapy clinics named Innotrex to cover core locations around the UK. As part of the treatment offering within this package, HCML will be offering rehabilitation to Innotrex therapists in the first instance. If there are gaps within this coverage referrals will then be channelled through to TPN. As aligned to the HCML Aviva services, service level agreements and pricing (£60/£45 including £15 referral fee) will be offered to TPN with a slight, yet efficient change in workflow.”

In cross-examination, Mr Olsen agreed that what was being described to Mr Naylor and TPN was a new niche business venture involving medico-legal referrals from claims management companies that would not be affecting referrals to TPN. He accepted that, as a description of Innotrex, it was not full or candid.

In my judgment, the report given to TPN about Innotrex was not only lacking in candour, it was deliberately misleading. As Mr Bushnell accepted in his evidence, Innotrex would have been a competitor of and seen as a threat by TPN. HCML knew, and intended, that, once assembly of the Innotrex network was complete, it would dispense entirely with the services of TPN. As is clear from the chronology, the coverage of the Innotrex network was not yet large enough to enable HCML to dispense with TPN. Consequently, and as expedience dictated, HCML needed to retain TPN to service some of its referrals. But, within HCML, there was a concern that the existence of Innotrex was likely to become known to TPN. In my judgment, the limited and misleading disclosures made to TPN at the 10 October 2012 meeting were designed to provide a plausible cover for Innotrex’s existence and activities. The motive for this subterfuge was not explored in evidence but I infer that it reflected a concern on HCML’s part that, if TPN discovered its true intentions for Innotrex, TPN would have terminated the Services Agreement leaving HCML possibly to struggle to service its referrals.

On 18 October 2012, Mark Sharpe at Aviva Health emailed Mr Olsen to seek information about the locations of Innotrex, PhysioWorld and TPN clinics in relation to particular postcodes. Mr Olsen responded the following day with an example of a table of data showing the location of the clinics on the three networks to given locations and asked whether that was what Mr Sharpe wanted. By this stage, of course, Mr Olsen had the HCML Database at his disposal and it is likely that the data shown in the table in this email was derived from that. However, it is clear that the data regarding the location of TPN clinics had been extracted from the TPN Database.

Meanwhile and continuing into January 2013, Mr Olsen was ensuring that HCML continued its policy of ensuring that work was placed with TPN only as a last resort. When cross-examined, Mr Bushnell denied that, by 2013, HCML had already taken a decision to divert business away from TPN. I cannot accept that answer. The contemporaneous documents demonstrate clearly such a decision had been made (see e.g. paragraph 36 above).

By the end of February 2013, a total of around 170 clinics had been recruited into Innotrex against a target of 190. In an email on 28 February 2013, Mr Olsen noted that a meeting with Mr Naylor was to take place on 6 March 2013 “to discuss ongoing TPN relationship with a view to reduce referral volume to TPN and replace with Recover”.

On 6 March 2013, Mr Bushnell, Mr Olsen and Mike Kingsley from HCML duly met Mr Naylor. There are handwritten notes of the meeting and a subsequent email of 2 April 2013 from Mr Naylor to Ms Abbs summarises the meeting. In his evidence at trial, Mr Naylor said that, before this meeting, he had become aware that HCML had been “tapping up” clinics in the TPN network. In his witness statement, Mr Naylor said that he was also concerned about what was happening with Innotrex and that he was considering legal action against HCML because of what he believed had been HCML’s use of the TPN Database. Mr Bushnell’s recollection of the meeting was that Mr Naylor was threatening legal action against Aviva Health because of the decision to refer cases to Nuffield Health.

Mr Naylor’s evidence was that, at the meeting, Mr Bushnell informed him that Aviva Health was “pushing the work towards Nuffield [Health]”. In his witness statement, Mr Bushnell stated that Aviva Health had informed HCML in early 2013 that it planned to transfer all private medical insurance (“PMI”) physiotherapy treatment to Nuffield Health (although this transfer was not apparently completed until January 2014). As a result, he said, the transfer of PMI cases to Nuffield Health reduced the number of referrals that went to TPN.

On the point about against whom TPN was contemplating legal action, I prefer the evidence of Mr Naylor on this point. A claim against Aviva Health by TPN was inherently implausible as TPN had no contractual relationship with Aviva Health and there was no other obvious basis on which to claim against Aviva Health for lost business. The meeting note contains a reference to “IP” and a “barrister’s advice” and this supports Mr Naylor’s evidence that he had referred to a claim against HCML for using the TPN Database.

When cross-examined at trial about the 6 March 2013 meeting, Mr Bushnell was asked about what his plans for Innotrex were at that stage. He said that HCML had been building Innotrex throughout 2012. The original contract with Aviva had been for neck and spine injuries. In 2011 and 2012 HCML had been running pilots with Aviva Health on other muscular skeletal areas and during 2012 Mr Bushnell said it had become clear to him that these other areas were going to be a “runaway success” and that he had found out from Aviva Health that they were likely to make changes that would see more work referred in that direction. He said his expectation throughout 2012 was that HCML might see a doubling of the volume of physiotherapy work. He said, against that, it came as a “bolt out of blue” when, in January 2013, Aviva Health said that it had decided to direct all physiotherapy work to Nuffield Health. Aviva Health indicated to HCML that the transfer to Nuffield Health would be effective immediately, the issue “dragged on” and it was not until the fourth quarter of 2013 that Nuffield Health began a pilot as part of the handover of the work from HCML. It appears to be common ground that the impact of Aviva Health switching to Nuffield Health was not felt until January 2014. Indeed, it was not until 8 January 2014 that Mr Olsen emailed Ms Abbs to confirm: “we have now been instructed to send all new Aviva PMI referrals to Nuffield”.

It was not until May 2014, however, that Mr Naylor complained formally to HCML. On 14 May 2014 he sent an email to Philip Eley, the Finance Director of HCML (“Mr Eley”):

“Now that all the referrals that used to come through TPN to my network are going through Innotrex, there are issues extending beyond the withheld treatment fees and referral fees. I would hope Keith or Scott may find time to discuss…”

Mr Eley and Mr Olsen did speak to Mr Naylor on 16 May 2014. Mr Naylor sent an email summarising the discussions after the call. Included was the following:

“TPN have been told by practices that the referrals we were sending are now coming through the Innotrex (HCML) Network and HCML case managers have been telling TPN that the Innotrex network is the TPN database. Scott confirmed ‘hand on heart that the Innotrex network was developed from HCML data and built from that’. [Mr Naylor] stated it certainly looks like it is TPN’s database. [Mr Naylor] agreed to put something together to send to Scott on this matter.”

An email from Ms Abbs to Mr Naylor on 16 May 2014 provided figures of new HCML referrals to TPN during 2013. The figures show generally decreasing referrals from 555 in January 2013 to 81 in December 2013 (i.e. before the impact of Nuffield Health).

Mr Olsen sent an email to Mr Naylor on 18 May 2014. It purported to be an explanation of why Mr Naylor was wrong to conclude that HCML had used the TPN Database to create the Innotrex network. Mr Olsen stated:

“Thanks for your earlier email. I have provided a breakdown of events which we believe have contributed to the misunderstanding that HCML has used the TPN database of physiotherapy clinics to build its own Innotrex network…

I mentioned during our conversation that HCML has used its own internal data, based on home postcodes, to determine where we require an Innotrex clinic…

We also have an internal physiotherapy search tool which lists the TPN, Innotrex, d2physio and PW clinics that we use (screenshot attached). I can only assume that unfortunately, a case manager has misinterpreted this physiotherapy search tool as the Innotrex database. Obviously, this was incurred and I have clarified this understanding with all internal line managers…

Dale, I hope the above provides reassurance that we have not used the TPN database to build our own network nor do we state that the TPN network falls under Innotrex…”

I set out my conclusions on the issue of whether HCML had used TPN’s data to set up Innotrex below (paragraph 61(ii) below), but I simply note here that Mr Olsen’s statement in this email to Mr Naylor that HCML had not used information from TPN’s Database to build the Innotrex network was not true and, as the person who had been closely involved in the use of the data, must have been known by Mr Olsen to be untrue.

In setting out the chronology above, I have referred above to parts of Mr Olsen’s evidence where that has a bearing on the relevant event. I should state separately my assessment of Mr Olsen’s evidence.

Consistent with HCML’s case (and Mr Bushnell’s evidence – see paragraph 24 above), in his witness statement for trial, Mr Olsen stated:

“From January 2012 I was charged by Keith Bushnell to assist him in creating HCML’s own network of clinics to be known as Innotrex and to organise the recruitment of clinics into Innotrex. It was made clear to me [by Mr Bushnell] that the network was to be created ‘from scratch’ and in accordance with a strict recruitment process in order to distinguish the Innotrex clinics from our competitors, including the ones in the TPN network. There were at this time approximately 45,000 registered physiotherapists practising in the UK so I did not think that it would be unduly difficult to find members as there was a very large pool to choose from. The challenge was going to be to find clinics of the requisite quality.”

The thrust of Mr Olsen’s evidence in his witness statement was that HCML had invested a large amount of resources (and he personally a large amount of time) researching, identifying, checking and assessing candidate clinics for the Innotrex network. In its Defence, HCML had denied that it had made use of TPN’s Database. I reject that. The true position is, I find:

I have made the findings above based on the evidence of Mr Olsen and evidence from the documents. I should briefly refer to the other witness evidence from HCML.

Following the order of Master Yoxall on 6 July 2016, this trial has concerned only the issue of liability. The following issues fall to be determined:

Issues (iii) and (iv) substantially overlap. TPN had originally pleaded its claim based on breach of confidence alone. After close of the evidence, it applied for, and was granted, permission to amend its counterclaim to add a claim for infringement of database rights.

It is common ground that in ascertaining the meaning of a particular term, the contract must be read as a whole. The proper approach to the interpretation of contractual provisions was set out by the Supreme Court in Arnold -v- Britton [2015] AC 1619. Lord Neuberger (with whom Lord Sumption and Lord Hughes agreed) said this:

Lord Carnwarth (although he dissented on the ultimate conclusion) identified the following principles of contractual interpretation:

Ascertaining the “intention of the parties” is an objective exercise: Sirius International Insurance Co -v- FAI General Insurance Ltd [2004] 1 WLR 3251 [18] per Lord Steyn. In Dumbrell -v- The Regional Group of Companies Inc (2007) DLR (4^th) 201, Doherty JA said:

“In my view, when interpreting written contracts, at least in the context of commercial relationships, it is not helpful to frame the analysis in terms of the subjective intention of the parties at the time the contract was drawn. This is so for at least two reasons. First, emphasis on subjective intention denudes the contractual arrangement of the certainty that reducing an arrangement to writing was intended to achieve. This is particularly important where, as is often the case, strangers to the contract must rely upon its terms. They have no way of discerning the actual intention of the parties, but must rely on the intent expressed in the written words. Second, many contractual disputes involve issues on which there is no common subjective intention between the parties. Quite simply, the answer to what the parties intended at the time they entered into the contract will often be that they never gave it a moment’s thought until it became a problem.”

Mr Spackman submits that the deletion from clause 2.3 of the Services Agreement of the words “but there are no guaranteed minimum volumes” which had appeared in the equivalent clause in the Pilot Agreement is material and indicates that the parties had agreed that HCML would make circa 700 referrals per month to TPN. He accepts that evidence of prior negotiations or previous drafts of a written agreement would not be admissible as an aid to interpretation, but, relying upon Punjab National Bank -v- De Boinville [1992] 1 WLR 1138, 1149b per Staughton LJ, he submits that the Court can have regard to a prior concluded agreement when determining whether the deletion of words in a later agreement is material to the interpretation of the relevant term.

Mr Kinnier QC for HCML takes as his starting point that TPN contends that clause 2.3 means that, during the course of the Services Agreement, it would receive around 700 referrals per month. The inclusion of the word “around” indicates that TPN could receive more than 700 referrals per month or fewer than 700 referrals in what TPN calls a ‘reasonable tolerance level’. In his witness statement, Mr Naylor described this clause as providing a “guarantee of 700 referrals per month”. If one thing is clear from the wording of the clause, it was not offering any sort of guarantee. Once that construction is rejected, the contract is silent as to what would be a ‘reasonable tolerance level’. How was compliance with this clause to be measured, asks Mr Kinnier.

Mr Kinnier QC disputes that it is permissible for the Court to construe clause 2.3 of the Services Agreement by having regard to the equivalent clause of the Pilot Agreement. He submits that the starting point in construing clause 2.3 of the Services Agreement is the term itself. Although the Court will construe a contract against the background circumstances, the detail of previous contracts and prior negotiations between the parties are irrelevant: Prenn -v- Simmonds [1971] 1 WLR 1381 at 1383H-1385D (per Lord Wilberforce); and Berkeley Community Villages Ltd -v- Pullen [2007] EWHC 1330 (Ch); [2007] 3 EGLR 101 [44]-[56] (per Morgan J).

On the question of whether the Pilot Agreement is admissible on the issue of the construction of clause 2.3 in the Services Agreement, in my judgment Mr Spackman is correct. There are very clear reasons why inchoate negotiations are not admissible in the construction of the ultimate term. By definition, these earlier negotiations or drafts are not ‘agreed’. An earlier contract between the parties is different. It is the product of agreement. Where, as here, the subject matter of the contract is essentially the same, changes that are made to the terms of the agreement may shed light on the proper construction of the disputed term.

However, I do accept Mr Kinnier’s submissions that, even if admissible, some caution needs to be adopted in determining what assistance can really be derived from the deletion of certain words from a subsequent contract. He has referred me to Mineralimportexport -v- Eastern Mediterranean Maritime Ltd (“The Golden Leader”) [1980] 2 Lloyd’s Rep 573 in which Lloyd LJ considered the relevance of deletions to a particular clause, and said (at p.575):

“… it seems to me quite another thing to say that the deletion itself has contractual significance; or that by deleting a provision in a contract the parties must be deemed to have agreed the converse. The parties may have had all sorts of reasons for deleting the provisions; they may have thought it unnecessary; they may have thought it inconsistent with some other provision in the contract; it may even have been deleted by mistake”.

Similarly, in Mopani Copper Mines plc -v- Millennium Underwriting Ltd [2008] 2 All ER (Comm) 976; [2008] 1 CLC 992; [2009] Lloyd's Rep IR 158; [2008] Bus LR D121, Christopher Clarke J said:

In contending that clause 2.3 represents a binding commitment on the part of HCML to send and TPN to receive around 700 referrals per month for the duration of the Services Agreement, Mr Spackman relies upon the following:

For HCML, Mr Kinnier QC submits that the verb “anticipates” means “expects”. It does it provide an absolute assurance of a minimum level of monthly referrals. It is no more than an indication of expectation. This construction reflected the practical and commercial context in which the Services Agreements was made. In his witness statement, Mr Bushnell said:

“The companies’ contractual relationship was regulated at that time by the Services Agreement which made no provision for guaranteed referrals and there was no possibility of that situation changing. As I have said, the reason for the reference to the number of anticipated referrals at clause 2.3 of the Services Agreement was to ensure that TPN had the capacity to deal with that level of referrals in a way which would ensure that, as stated in my email of 27 June 2011, HCML would be able to “meet [its] commitments to Aviva Health”.

Mr Kinnier says that it is telling that, during the term of the Services Agreement, there was a significant variation in the number of monthly referrals to TPN. In February, April and June 2012, the number of referrals was significantly below 700 but there is no contemporaneous evidence of concerns or complaints being raised by TPN with HCML in relation to the number of referrals in these months or any other month in which the alleged threshold of circa 700 was either not met or, alternatively, the number of referrals fell below a ‘reasonable level of tolerance’.

On that latter point, TPN’s contention that the clause guaranteed “more or less than 700 referrals per month within a reasonable tolerance level” is inherently contradictory. The Services Agreement made no provision for a “reasonable tolerance level”. This is a concept that TPN has been driven to insert in recognition of the fact that the Services Agreement did not provide for a set level of referrals each month. If the construction urged by TPN is accepted, it is impossible to determine what number of referrals below 700 would have placed HCML in breach of the Services Agreement.

I reject TPN’s contention that clause 2.3 imposed an obligation on HCML to make referrals to TPN at a level of around 700 per month. My reasons are:

In consequence, I find that there has been no breach of clause 2.3 by HCML.

Mr Kinnier QC had advanced a subsidiary point on behalf of HCML that, because of Aviva Health’s decision to send work to Nuffield Health (see paragraphs 51-53) the Services Agreement had been frustrated. Given that I have found that there has been no breach of clause 2.3, I need not resolve this point.

Having resolved the issue of clause 2.3 of the Services Agreement, I can deal with the alleged breach of the Light Tough Agreement very shortly.

I have real doubts whether the evidence demonstrates a concluded agreement (see paragraphs 14-17 above) whether in December 2010 or July 2011 or its terms. But even making every assumption in favour of TPN as to the existence and terms of the Light Touch Agreement, TPN faces an insuperable difficulty. One thing is clear: HCML (in Mr Bushnell’s email of 27 June 2011 – see paragraph 16 above) made it plain that it could not guarantee any particular number of referrals. In my judgment, if there existed a concluded oral agreement, like the Services Agreement, it did not include a term obliging HCML to make any particular number of referrals to TPN. In the premises, I reject TPN’s claim that there has been a breach of the Light Touch Agreement (if any such concluded agreement existed).

TPN contends that it owns a database right in the TPN Database within the terms of the European Parliament and Council Directive 96/9/EC (“the Database Directive”) and now recognised in s.3A(1) Copyright, Designs and Patents Act 1988 (“the CDPA”) and that HCML has infringed TPN’s database right.

The Database Directive includes the following operative provisions:

“CHAPTER I

SCOPE

Article 1

Scope

1.

This Directive concerns the legal protection of databases in any form.

2.

For the purposes of this Directive, ‘database’ shall mean a collection of independent works, data or other materials arranged in a systematic or methodical way and individually accessible by electronic or other means…

CHAPTER II

COPYRIGHT

Article 3

Object of protection

1.

In accordance with this Directive, databases which, by reason of the selection or arrangement of their contents, constitute the author’s own intellectual creation shall be protected as such by copyright. No other criteria shall be applied to determine their eligibility for that protection.

2.

The copyright protection of databases provided for by this Directive shall not extend to their contents and shall be without prejudice to any rights subsisting in those contents themselves…

CHAPTER III

SUI GENERIS RIGHT

Article 7

Object of protection

1.

Member States shall provide for a right for the maker of a database which shows that there has been qualitatively and/or quantitatively a substantial investment in either the obtaining, verification or presentation of the contents to prevent extraction and/or re-utilization of the whole or of a substantial part, evaluated qualitatively and/or quantitatively, of the contents of that database.

2.

For the purposes of this Chapter:

(a)

‘extraction’ shall mean the permanent or temporary transfer of all or a substantial part of the contents of a database to another medium by any means or in any form;

(b)

‘re-utilization’ shall mean any form of making available to the public all or a substantial part of the contents of a database by the distribution of copies, by renting, by on-line or other forms of transmission. The first sale of a copy of a database within the Community by the rightholder or with his consent shall exhaust the right to control resale of that copy within the Community;

Public lending is not an act of extraction or re-utilization.

3.

The right referred to in paragraph 1 may be transferred, assigned or granted under contractual licence.

4.

The right provided for in paragraph 1 shall apply irrespective of the eligibility of that database for protection by copyright or by other rights. Moreover, it shall apply irrespective of eligibility of the contents of that database for protection by copyright or by other rights. Protection of databases under the right provided for in paragraph 1 shall be without prejudice to rights existing in respect of their contents.

5.

The repeated and systematic extraction and/or re-utilization of insubstantial parts of the contents of the database implying acts which conflict with a normal exploitation of that database or which unreasonably prejudice the legitimate interests of the maker of the database shall not be permitted.”

The CDPA was amended pursuant to s.2(2) of the European Communities Act 1972 Act by the Copyright and Rights in Databases Regulations 1997, SI 1997/3032 (“the 1997 Regulations”), to implement the Database Directive.

Chapter III of the Database Directive was implemented by Part III of the 1997 Regulations. This material parts of the 1997 Regulations are:

Some databases will also qualify for copyright protection in addition to the sui generis database right (see discussion in Forensic Telecommunications Services Ltd -v- Chief Constable of West Yorkshire Police [2012] FSR 15 [83]-[90] per Arnold J). TPN does not maintain any claim that it owned a copyright in the TPN Database. Its claim is that it owns the sui generis database right that has been infringed by HCML.

Under Article 7(1) of the Database Directive, the database right will subsist where, qualitatively and/or quantitatively there has been substantial investment in either the obtaining, verification or presentation of the contents. That investment covers “any investment, whether of financial, human or technical resources” (Regulation 12(1)). Whether the investment has been “substantial” (as defined) is a matter of fact to be determined by the Court. In British Horseracing Board -v- William Hill Organisation Limited [2005] RPC 13, the CJEU concluded that the relevant investment is that used to seek out pre-existing information and collating them into a database:

Mr Silcock on behalf of HCML has raised several preliminary points:

He has advanced the following further arguments:

Mr Spackman has submitted that this is a series of technical objections that, on analysis, has no substance. The issue, he submits is straightforward. There is no doubt what the database is and what it included (see paragraph 26 above). It is clear on the evidence that Mr Naylor originally created the database. It is immaterial whether there was any formal assignment of the database right that he would have owned as, with his permission, TPN has taken over the maintenance of the database including adding, updating and verifying the information contained in it. It is unnecessary to identify the actual person who carried out this updating work as it is plain that it was done by employees of TPN which itself was a qualifying company under Regulation 18. As to the creation date, this was also immaterial given the “rolling” nature of the creation and subsistence of the right. In this respect, he referred me to Beechwood House Publishing Ltd (t/a Brinleys) -v- Guardian Products Ltd [2010] EWPCC 12 in which HHJ Birss QC (as he then was) dealt with subsistence and ownership of a database right, including the “rolling” nature of the right.

I accept Mr Spackman’s submissions. Despite the battery of points made by HCML, I consider that this issue is quite straightforward. Although TPN have not put forward the sort of detailed evidence as to the costs of keeping the database up-to-date that was relied upon in the Beechwood House case, I am quite satisfied on the evidence that, in February 2012, the maintenance of the TPN Database was sufficient, qualitatively and/or quantitatively, to represent a substantial investment and to create a database right. The clearest evidence of quantity comes from Ms Abbs’ email of 8 February 2012 when, responding to a request from Mr Olsen for information from 2011, she told him that she would have to breakdown the data by month to “as the database is so large” (see paragraph 28 above). As to the quality of the information, I am satisfied that the TPN contained a wealth of very detailed usage data relating to the clinics in the TPN network. Necessarily, that data had to be (and was) updated month by month. The value of the information in the TPN Database to HCML is obvious. For example, it allowed the creation, by Mr Olsen, of a detailed spreadsheet showing TPN clinic usage by geographic region (see paragraphs 34-35 above). That data was extremely valuable, and it was extracted from the TPN database.

I am quite satisfied that a database right subsisted in the TPN Database in February 2012 and that it was owned by TPN. I reject the argument that the database right might have been owned by a different corporate entity. That appears to me to be entirely speculative, highly unlikely and not supported by any evidence.

Regulation 16(1) of the 1997 Regulations set out what amounts to infringement of the database right: extraction or re-utilisation. The CJEU held in Directmedia Publishing GmbH -v- Albert-Ludwigs-Universität Freiburg (Case C-304/07) [2009] Bus LR 908; [2009] RPC 283 that extraction was to be given a wide meaning.

The act of infringement alleged must represent undue use of the investment that gave rise to the database right protection. It must have extracted or re-utilised pre-existing works, data or materials the obtaining of which, verification or presentation had been the subject of the requisite investment by the maker of the database: British Horseracing Board -v- William Hill Organisation Limited [60] and Football Dataco Ltd -v- Sportradar GmbH [2013] FSR 30 [67].

On the issue of infringement, HCML’s position is:

I have set out my findings about the provision of data from the TPN Database to Mr Olsen and his use of data in paragraph 61(ii) above. I am satisfied that this each represented extraction of a data from the TPN Database that represented on each occasion a substantial part of the contents of the TPN Database. Considering Mr Olsen’s evidence at trial, the suggestion that there had been no extraction from the TPN Database is unsustainable.

I reject the contention that TPN consented to any acts of extraction by HCML. I have found above that the purported explanation for the request for the data given by Mr Olsen to Ms Abbs was not true (see paragraph 32 above). Mr Olsen had sought this data to assist HCML in setting up of the Innotrex network. Had he told TPN that was why he wanted the information, TPN would never have provided it. Purported consent to the use of data obtained as a result of deception is no consent.

I am therefore satisfied therefore that HCML has infringed TPN’s database right.

The starting point is the proper interpretation of clause 14.1 of the Services Agreement. TPN no longer relies upon the CNDA. The first thing to note is that the clause restricts disclosure of the confidential information; it does not purport to restrict use (see Force India Formula One Team Limited -v- 1 Malaysia Racing Team SDN BHD [2012] RPC 29 [228]). Perhaps foreseeing this difficulty, Mr Spackman in his closing submissions submitted:

“… if HCML has provided the information supplied by Ms Abbs to Mr Olsen to others (for example Mr Bingham or other employees) for the purposes of setting up Innotrex, then that would constitute a breach of clause 14.1.”

Mr Kinnier QC has not made submissions on this particular point, but I am not persuaded by TPN’s submission. TPN’s pleaded case in relation to HCML’s alleged breach of clause 14.1 is that HCML “used confidential information belonging to [TPN] namely its database, to assist in its breaches of clause 3.1” (Paragraph 51(d) Amended Defence & Counterclaim). There was no pleaded case alleging disclosure to third parties (identifying what was alleged to have been disclosed or to whom). The evidence during the trial does show that there was some disclosure of information from the TPN Database to Mr Bingham (the spreadsheet emailed to Mr Bingham on 21 March 2012 (paragraph 34 above) and the Update Spreadsheet (paragraph 38 above). However, it is unrealistic to suggest that this disclosure to Mr Bingham is anything other than technical. The real complaint – as is plain from the pleaded case – is that HCML used information from the TPN Database to assist in setting up Innotrex. In my judgment, that was not actually a breach of clause 14.1. I deal below with whether this use was a breach of clause 3.1.

In light of this, I do not need to resolve the issue of whether the information in the TPN Database was confidential. In case I were wrong in my interpretation of clause 14.1, I should state briefly my conclusions about the issue of confidentiality. Mr Spackman submitted that the ‘classic test’ of whether material is confidential in a case like the present was stated by Sir Robert Megarry VC in Thomas Marshall (Exports) Limited -v- Guinle [1979] Ch 227, 248:

“It is far from easy to state in general terms what is confidential information or a trade secret. Certain authorities were cited, but they did not carry matters very far. Plainly "something which is public property and public knowledge" is not confidential: see Saltman Engineering Co. Ltd. -v- Campbell Engineering Co Ltd (1948) 65 RPC 203, 215 per Lord Greene MR. On the other hand, "something that has been constructed solely from materials in the public domain may possess the necessary quality of confidentiality: for something new and confidential may have been brought into being by the application of the skill and ingenuity of the human brain. Novelty depends on the thing itself, and not upon the quality of its constituent parts": Coco -v- A. N. Clark (Engineers) Ltd [1969] RPC 41, 47, a case that was not cited, but in part draws on the Saltman case, which was. Costs and prices which are not generally known may well constitute trade secrets or confidential information: see Herbert Morris Ltd -v- Saxelby [1916] 1 AC 688, 705, referring to prices.

If one turns from the authorities and looks at the matter as a question of principle, I think (and I say this very tentatively, because the principle has not been argued out) that four elements may be discerned which may be of some assistance in identifying confidential information or trade secrets which the court will protect. I speak of such information or secrets only in an industrial or trade setting. First, I think that the information must be information the release of which the owner believes would be injurious to him or of advantage to his rivals or others. Second, I think the owner must believe that the information is confidential or secret, i.e., that it is not already in the public domain. It may be that some or all of his rivals already have the information: but as long as the owner believes it to be confidential I think he is entitled to try and protect it. Third, I think that the owner's belief under the two previous heads must be reasonable. Fourth, I think that the information must be judged in the light of the usage and practices of the particular industry or trade concerned. It may be that information which does not satisfy all these requirements may be entitled to protection as confidential information or trade secrets: but I think that any information which does satisfy them must be of a type which is entitled to protection.”

Further, he submits that it does not matter that some or all of the information is publicly available. For this proposition he relied upon Crowson Fabrics Ltd -v- Rider & Ors [2008] FSR 17. This was a claim brought against two former employees. They had set up a new company in competition with the claimant company and it was alleged that they had taken with them confidential information from the claimant’s database, namely (i) names, addresses, contact names, telephone numbers or email addresses of its customers; (ii) sales figures for its customers; (iii) profit margins for its customers; (iv) details of goods ordered by its customers or prices paid by said customers; (v) names, addresses and contact details of its suppliers; (vi) its suppliers', agents' names, addresses and contact details; (vii) its suppliers' carriage costs, lead times, types of products available, trade shows visited, or the cost negotiated with such suppliers. The defendants' case was that what they had done was not actionable. They asserted that none of the material that they had created or used or retained at the end of their employment contained any confidential information. All of the material was, they said, available in the public domain. They also contended that all of the material was part of their own gathered knowledge acquired over the course of their employment which they were free to use after termination and that the claimant could not prevent an ex-employee, in the absence of a restrictive covenant, from using that knowledge and experience.

Peter Smith J found for the claimant company but on the basis of (i) breaches of the defendants’ duty of fidelity and of their fiduciary duty; and (ii) infringement of the claimant’s database right. He rejected the claim for breach of confidence. After considering Seager -v- Copydex Ltd (No.1) [1967] RPC 349, the Judge concluded:

The Judge did go on, nevertheless, and held that the use of the information was a breach of the defendant’s implied obligation of good faith and fidelity. The case of Robb -v- Green [1895] 2 QB 1 stands as authority that it is no defence to a breach of this duty to say that the information was publicly available. In Roger Bullivant Ltd -v- Ellis [1987] FSR 172, 181 Nourse LJ restated the principle as follows:

“The value of the card index to the [defendants] was that it contained a ready and finite compilation of the names and addresses of those who had brought or might bring business to the plaintiffs and who might bring business to them. Most of the cards carried the name or names of particular individuals to be contacted. While I recognise that it would have been possible for the [first defendant] to contact some, perhaps many, of the people concerned without using the card index, I am far from convinced that he would have been able to contact anywhere near all of those whom he did contact between February and April 1985. Having made deliberate and unlawful use of the plaintiffs' property, he cannot complain if he finds that the eye of the law is unable to distinguish between those whom, had he so chosen, he could have contacted lawfully and those whom he could not. In my judgment it is of the highest importance that the principle of Robb -v- Green… which, let it be said, is one of no more than fair and honourable dealing, should be steadfastly maintained.”

Applying these authorities, in my judgment, the list of clinics in the TPN Database would not have had the necessary quality of confidence to maintain TPN’s claim for breach of clause 14.1. However, I am satisfied that the data relating to the number of referrals made to each clinic would have had the necessary quality of confidence. I am not able to determine the extent to which HCML’s formation of the Innotrex network utilised the latter rather than the former. Mr Spackman’s submissions have much greater resonance – by analogy with Crowson Fabrics and the other cases set out above – in relation to the alleged breach by HCML of clause 3.1. It is to this issue that I now turn.

Clause 3.1 is in very simple terms: HCML was required to “act in good faith towards TPN at all times”.

Mr Spackman and Mr Kinnier QC are largely agreed as to the law to be applied:

Relying upon Manifest Shipping Co. -v- Uni-Polaris Shipping Co. [2003] 1 AC 469 [111] (quoted and relied upon in CPC Group Ltd [239]), Mr Kinnier submitted that unless a party has acted in bad faith, he cannot be in breach of the duty of good faith, utmost or otherwise. As long as “bad faith” in this context is not being used as a synonym for “dishonesty”, I would accept that submission. Dishonesty might be a sufficient basis on which to find “bad faith” but I do not accept that it is necessary. That would be inconsistent with the authorities above. It is possible to act in bad faith without being dishonest.

On behalf of TPN, Mr Spackman submits that HCML has acted in bad faith towards TPN and has therefore breached clause 3.1. In summary, whilst taking the benefit of the Services Agreement, it acted covertly to set up Innotrex and, worse, in doing so it misused information belonging to TPN that it only had by dint of the commercial relationship under the Services Agreement. Once established, Innotrex would represent a network of clinics that would rival TPN’s network of clinics. TPN submits that HCML wrongly used TPN’s data as a “springboard” to launch the Innotrex Network. TPN would never have allowed HCML to use the data if HCML had been honest about its intention to set up Innotrex. Indeed, HCML first kept the existence of Innotrex (and subsequently what HCML intended for its commercial activities) secret from TPN. In so doing, TPN submits, HCML has clearly departed from commercial standards of fair dealing, playing fair and acting in the common and justified expectations of the parties.

Mr Spackman invites the Court to find that HCML was not acting in good faith towards TPN in the performance of the Services Agreement and was therefore in breach of clause 3.1 based on the following:

For HCML, Mr Kinnier QC submits that the obligation to act in good faith imposed by clause 3.1 must be interpreted according to the contractual context:

He accepts that, even within this context, clause 3.1 required HCML to adhere to the spirit of the contract; to observe reasonable commercial standards of fair dealing and to be faithful to the agreed common purpose and to act consistently with the justified expectations of the parties.

HCML places reliance on the evidence of Mr Bushnell that in the first meeting he had with Mr Naylor he had explained to him that it was the long-term intention of HCML to build its own network of clinics. So, it is submitted, HCML had openly declared its intentions. Mr Kinnier QC submits that this fact presents an insurmountable obstacle for TPN: HCML was candid about its intention to establish its own network and the parties’ contractual arrangements neither prohibited nor restricted HCML’s discretion to obtain services from other providers. In short, he says, there is no reliable evidence of an intention to deceive TPN or any evidence of dishonesty on the part of HCML.

In his evidence, Mr Naylor denied that Mr Bushnell had made any such statement of HCML’s long-term intentions when they first met. Mr Kinnier submits that I should accept the evidence of Mr Bushnell, largely based on an assessment of Mr Naylor’s evidence as a whole and particularly the fact that Mr Bushnell was able to give a reasonably detailed account of the circumstances when he told Mr Naylor about this plan whereas Mr Naylor’s evidence was simply a bare denial.

More broadly, HCML rely upon how Innotrex was set up. In 2011, HCML had started the groundwork to set up Innotrex and, in January 2012, Mr Olsen was appointed to assist the creation of Innotrex and the recruitment of clinics. Mr Kinnier QC relies upon Mr Olsen’s evidence as to the process by which Innotrex was established and submits two broad points emerge clearly from the entirety of the evidence:

HCML contends that it discharged its obligations under clause 3.1:

As to the evidence of use of information from TPN’s Database elicited from Mr Olsen in cross-examination, and the suggestion that this was used as a “springboard” to set up Innotrex, Mr Kinnier submits that HCML’s investment of £300,000 would have been wholly unnecessary, the engagement of Mr Bingham would have served no purpose and the substantial research work carried out by HCML would have been a complete waste of time if the creation of Innotrex was simply a matter of ‘lifting’ the information from the TPN Database.

Further, and in any event, Mr Olsen’s used of TPN’s data was entirely legitimate in building the HCML Database for the purposes of the Services Agreement. HCML’s case-handlers used the HCML Database as part of HCML’s telephone triage process upon first receiving a patient referral from Aviva, to identify and advise the patient as to the clinic that was closest to the patient’s preferred home or office address. This system, Mr Kinnier submits, also had the effect of reducing TPN’s administrative burden. The HCML Database was used by HCML for these legitimate purposes.

Nevertheless, and importantly, HCML accepts that there “may have been indirect use of the geographic analyses derived from use of the [HCML Database]” by HCML’s employees and/or contractors between February 2012 and early 2014 to identify geographic areas in which to locate Innotrex clinics. However, Mr Kinnier submits that this use did not infringe any of TPN’s rights.

Based upon these contentions, HCML submits that “viewed within the particular context of the Services Agreement, there is no evidence, or at least no reliable evidence, that HCML has acted in any way dishonestly in its use of TPN’s data”. Further, there is no evidence that HCML’s acts have interfered (whether unreasonably or otherwise) with the enjoyment of a benefit conferred on TPN under the Services Agreement. Finally, there is no evidence that HCML has failed to adhere to the spirit of the contract, to observe reasonable commercial standards of fair dealing and to be faithful to the agreed common purpose and to act consistently with the justified expectations of the parties.

I do not consider, on the evidence, that HCML has established that Mr Bushnell told Mr Naylor at their first meeting of HCML’s intention to set up a network of clinics. In the context of the discussions, that would have been perhaps an unusual thing to have discussed and I am doubtful that Mr Bushnell would have retained such a clear recollection of it. That is not to say that I think that Mr Bushnell in his evidence was not telling the truth. I accept that he does recall a general discussion of this nature. Nevertheless, I consider that his memory of these discussions is not reliable and is likely to have been affected by subsequent events. The most reliable indication of this – and upon which I place some weight – is the fact that when Mr Naylor complained about the setting up of Innotrex, the obvious retort was: “What are you talking about, I told you we wanted to set up our own network”. Nothing like that was said by Mr Bushnell.

In my judgment and in any event, even had there been some general discussion of HCML’s long-term objectives and plans at this initial meeting, it was certainly not anything more than general chat. No significance would have been intended by it by Mr Bushnell or attached to it by Mr Naylor. I am satisfied that any such general chat has no bearing on whether subsequently HCML failed to act in good faith under the Services Agreement. It is one thing to talk, in the abstract, about long-range plans. It is another to convert those plans into a definite intention (and subsequent implementation) that would have a direct impact on a TPN.

I have already found that Mr Olsen’s request for data from TPN was not for the reason he gave to Ms Abbs, but to assist HCML in the formation of Innotrex (see paragraphs 27-32 and 61(i) above). I have rejected Mr Olsen’s evidence that the data was requested from Ms Abbs to carry out some geographical pricing model. I am satisfied that, right at the start of the project to create Innotrex, HCML (a) requested TPN’s data; and (b) gave a dishonest reason why it was being requested. It may well be that the data was also later used by HCML to create the Clinic Locator, but that is irrelevant.

Thereafter, I have found that HCML used TPN’s data to set up Innotrex (see paragraph 61(ii) above). HCML did not tell TPN that it was forming its own network of clinics or that it was using TPN’s data in part to assist in doing so.

From February 2012, when HCML began actively setting up Innotrex, HCML:

As to paragraph 126(i), insofar as it was suggested by HCML that Aviva Health’s decision to refer work to Nuffield Health rather than HCML (see paragraphs 51-53 above) was the cause of the downturn in referrals to TPN:

On the basis of these findings, and in the respects I have identified, I am satisfied that HCML has failed to act in good faith towards TPN and is therefore in breach of clause 3.1. HCML failed to adhere to the spirit of the contract, to observe reasonable commercial standards of fair dealing and to be faithful to the agreed common purpose and to act consistently with the justified expectations of the parties. Although I have found that clause 2.3 of the Services Agreement did not impose an obligation on HCML to make any particular number of (or indeed any) referrals, that rather heightens the importance of the good faith provision in the contract. TPN was a commercial partner of HCML. There was no contractual obligation to make referrals, but there was an expectation by both parties that HCML would do so; that was the shared commercial objective. The nature of the arrangement, particularly HCML’s dependency itself upon Aviva Health for the stream of work, meant that no firmer commitment could be provided.

The covert use of TPN’s data in setting up Innotrex is probably sufficient itself to amount to a breach of clause 3.1. But the breach goes further than that. True it is that TPN had not sought to protect its position by including an exclusivity or non-competition clause in the Services Agreement. But that does not diminish the importance of clause 3.1 (and arguably enhances it). Setting up the rival network Innotrex (hidden from TPN, but making use of its data) when HCML knew and intended that, once established, TPN would be cut out of the picture; whilst, at the same time, continuing to benefit from a commercial relationship that (in all probability) would have been terminated had TPN known HCML’s true intentions was opportunistic, underhand and exploitative. It is conduct that I am quite satisfied was a breach of clause 3.1.

TPN has also advanced a claim for passing off on the basis that HCML has used the FCA score (see paragraph 5) in the course of its business on forms used by Innotrex clinics. There is a rather vague claim for “breach of intellectual property rights of [TPN]” advanced in pleading. The only cause of action that is disclosed in TPN’s counterclaim is passing off. I do not think that Mr Spackman was submitting otherwise, but for the avoidance of any doubt it is clear in my judgment that TPN’s claim discloses no other cause of action for breach of any other intellectual property right.

Given the length of this judgment already, I can happily deal with this claim very shortly.

The parties are agreed that there are three elements to the tort of passing off which must be proved:

I do not consider that TPN has, on the evidence, demonstrated any of these elements, but the clearest failure is that TPN has produced no evidence of deception or confusion.

Mr Spackman has relied upon the fact that the use of the FCA score by HCML was brought to the attention of TPN by clinics themselves and that they were “obviously confused as to the correct position”. The evidence to support this is two separate email chains from August/September 2013 and another from February 2015. On analysis these provide no evidence of confusion on the part of the clinics, only evidence of use of the FCA score. On that basis alone, any claim for passing off inevitably fails and so this claim must be dismissed.

For the reasons (and to the extent) set out in this judgment: