In Phaestos Ltd and another v Ho1, the claimants alleged that their former employees, Mr Ho and Mr Gover (the defendants), had unlawfully copied and misused the claimants’ confidential information, in direct competition to the claimants. The claimants applied for various interim orders against the defendants on the basis that use of the information might grant the defendants an unlawful advantage.

A substantial proportion of the claimants’ application was agreed by the defendants, including the listing, preservation and delivery up of certain documents, and the provision of witness statements. However, the defendants resisted the claimants’ request that they:  

“Permit an independent computer expert nominated by the claimants to make disc images of the defendants’ computers and electronic storage devices and to search for any ‘Relevant code’ or evidence of the use or copy or transfer or deletion thereof, and to produce a report on his searches and the results”.

At an earlier hearing in July 2011, Mr Justice King made an order for the imaging of any relevant computer by an independent computer expert appointed by the defendants in order to preserve the evidence – this was complied with. The issue which subsequently came before the court was the manner in which those images might be inspected.  

Decision

By the later hearing, counsel for the claimants had refined the argument concerning the application for an order relating to a search for evidence, such that it was not “an application for any kind of search order”, but instead an application under one of various CPR provisions for:

  • the preservation (which had now occurred) and inspection of “relevant property” under CPR 25.1(i) and (ii);
  • specific disclosure and inspection of the computer discs (as documents) under CPR 31.12;
  • inspection of documents mentioned in witness statements under CPR 31.14; or
  • an order pursuant to the court’s inherent jurisdiction under CPR 1.1.  

Ultimately, the judge considered the claimants were entitled to the orders for service of lists of relevant documents; delivery up of the claimants’ property and confidential information and the imaging of the relevant discs. All of this had been achieved by his order following the July 2011 hearing. He dismissed the application for a search of the discs by an independent expert:

  1. The claimants’ intention in applying for the search order was to ensure that the defendants had fully complied with their delivery up obligations and had disclosed all relevant material. The judge found that to allow for the “policing” of these obligations would be to pre-empt the procedures for e-disclosure and delivery up, which had not yet taken place. The claimants would be able to make a fresh application for such an order after e-disclosure and the delivery up process had been concluded.
  2. Insofar as the application was made under CPR 31.12, for specific disclosure and inspection, this was misplaced or premature as the defendants had not yet given disclosure in its entirety.
  3. The application could not be shoe-horned into CPR 31.14 retrospectively. It had not originally been made on this ground – moreover the witness statements which referred to the documents which the claimants sought had not even been served at the time the application was made.
  4. In any case, even if CPR 31.12 and/or CPR 31.14 did apply, the court would still have to be satisfied on the grounds of necessity and proportionality that the breadth of the inspection being sought was “currently justified”. The judge did not consider that the application for a search order was justified in relation to the pleaded case.
  5. The pleaded causes of action were limited. The principal claim was for delivery up and there was no express claim for damages for misuse of the claimants’ property.
  6. The judge concluded that the claimants had hoped to obtain evidence of the unauthorised disclosure of their confidential information and software to third parties, and use of that information in the defendants’ new competing business. Alternatively, the claimants were attempting to support an as yet unpleaded claim, relating to the alleged misuse of the claimants’ property. As such, the judge held that the application was nothing more than “an unjustified fishing expedition”.

Comment

This decision suggests that parties should carefully consider the appropriateness of interim relief with regard to documents, and the manner in which it is sought:

  • Is the timing right? The court is not likely to grant an application for specific disclosure until disclosure or other procedures, such as delivery up, are complete.
  • Is the application founded on the correct basis in law? The application here was not issued on the basis of CPR 31.14, and the attempt to bring it within that provision relied on a later interpretation of served documents.
  • Is the application justified in relation to the pleaded case? If the application relates to an unpleaded issue, it is likely to be considered a “fishing expedition”.