Franchisor granted injunction to prevent use of confidential data

A letting boards management franchisor has been granted an injunction to prevent a former franchisee from using confidential data.

Mark Aspin Head of Dispute Resolution reports on this recent case.

However, it was unable to prevent the former franchisee from setting up a competing business in the area. 

The case involved Countrywide Signs Ltd, whose business was the erection, maintenance and management of sales and lettings boards used by estate agents.

This involved using a proprietary board management system (BMS), that belonged to Countrywide.

Blueprometheus Ltd had purchased the franchise for a particular territory from the previous franchisee in 2014 and entered into a franchise agreement with Countrywide for an initial five-year period.

No agreement was reached after the end of the period and in 2021 Blueprometheus gave notice to terminate.

Countrywide claimed Blueprometheus was continuing to trade in the territory in breach of post-termination restrictions in the franchise agreement and using its confidential information. 

It applied for an injunction to prevent Blueprometheus breaching the restrictions and for the return of its confidential information.

Blueprometheus argued that there should be no injunction because the restrictions were not enforceable because they had either expired or were unreasonable.

It also argued that Countrywide was withholding sums due to it, and that damages were an adequate remedy for Countrywide if a court ruled in its favour at a full hearing.

The High Court ruled partly in favour of each party.

It held that the non-compete and non-solicit covenants were not reasonable as they applied to the territories of Countrywide’s other franchisees.

Furthermore, Countrywide’s evidence failed to show to the necessary standard that the 12-month period was needed to protect its goodwill and give it time to recruit another franchisee.

In the circumstances the court could not conclude that the 12-month period was reasonable and enforceable.

However, the court was satisfied that injunctive relief could properly be granted to protect Countrywide’s confidential information.

The grant of the injunction was conditional on Countrywide paying the sums due to Blueprometheus.

If you would like more information about the issues raised in this article or any aspect of contract law, please contact Mark on 01228 516666 or click here to send him an email.