Interactive Investor Trading Limited v City Index Limited [2011] EWCA Civ837
Interactive provides online services to clients through its website. Those services include financial tools and information, but not online trading. Interactive subcontracted online trading in contracts for differences and spread betting to City Index who operate a suitable trading platform. Interactive used a link from its website to direct its clients to City Index who entered into agreements with the clients. The service was marketed under brands of Interactive. There were separate agreements for contracts for differences and spread betting but they were essentially in the same terms. Commission was payable to Interactive on trades and there were non-compete clauses on both sides. The Agreements provided for six months notice of termination. Following termination, there was to be a winding down period during which City Index was to maintain the branded trading platform. There were provisions as to what was to happen following of expiration of the winding down period. Questions arose as to (i) whether City Index was liable to continue to pay Interactive commission during the winding down period, (ii) whether City Index could market its services to clients originally introduced by Interactive during and after the winding down period and (iii) whether the names etc of Interactive clients were confidential information within the meaning of the agreement.
The decision turns on the way in which the agreement was drafted but the manner of interpretation is instructive where there is a period following termination of an agreement in which the parties have to continue to co-operate with each other.
The Court of Appeal found for City Index as follows:
- Some of Interactive's arguments depended on the winding down period being part of the term of the agreement, i.e. "on termination of this agreement" referred to expiry of the winding down period. The Court found this difficult to accept since the expression was used in so many places where it clearly did not include the winding down period. The Court took the view that the agreement had been the subject of careful drafting and it should be presumed that language was used consistently.
- It followed that, as commission was expressed to be payable only on trades executed "during this agreement", no commission was payable during the winding down period. The Court did not consider such an arrangement implausible. During the winding down period, Interactive was at liberty to introduce clients to competitors of City Index and, whilst one might expect commission to be payable, it was by no means an absurd conclusion that the parties had agreed that this would not be so.
- Similarly, the obligation on City Index not to market to (Interactive) clients services other than in respect of branded trading during the term of the agreement did not extend to the winding up period. Interactive was under a similar obligation during the agreement not to introduce clients to anyone other than City Index. The Court held that it would be very surprising if these clauses were not mutual in extent.
- There was a restriction on City Index using information obtained under the agreement to offer other services to clients after the end of the winding up period, but again the Court did not think that it was absurd that they should have reached an agreement whereby City Index could market during the winding down period, but not before or after. That might have been part of the price of the deal for Interactive. If Interactive had wished to prohibit all marketing at all times, then it could have had a single clause to do so.
- The names and other details of Interactive clients was not Confidential Information within the meaning of the agreement. The definition of Confidential Information expressly specified that names etc of clients of City Index was Confidential Information where City Index was the disclosing party. That carried a clear inference that the equivalent information of Interactive was not to be regarded as Confidential Information. Then, the confidentiality clause required on termination the return of all Confidential Information and cessation of use of all Confidential Information. The Courts considered that the parties simply could not have contemplated that City Index would divest itself of all records of persons that had been its clients over the previous five or six years. It would need to retain sufficient records to comply regulatory requirements and was bound to have wanted to retain information for as long as it was at risk in relation to transactions undertaken.
There is no new law in this decision, but it does indicate how careful one has to be to ensure the provisions for a transition period after termination contain all the rights and obligations which the client is expecting to find.
Note also the finding on confidential information – make sure that all items expressly to be included as confidential are included in a way that applies to both parties. And if there are circumstances in which a party will need to use confidential information after termination, provide for these, making sure at the same time that this information is still categorised as confidential.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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