Indicii Salus Ltd v Chandrasekaran & Ors

A search order requires a strong prima facie case, a risk of very serious damage, clear evidence of a real possibility that relevant material may be hidden or destroyed, and proportionality between the threatened harm and the remedy. The court need not finally resolve disputed facts or find that destruction would actually occur. It must consider whether a less intrusive order would suffice.

For an application made without notice, full and fair disclosure is required. Material non-disclosure does not automatically require discharge; the court retains a remedial discretion, guided by culpability, significance, prejudice and proportionality. A claimant in receivership may support its cross-undertaking by alternative security where adequate protection is established.

Indicii Salus Ltd, a company in receivership, obtained a search order against the first and second defendants in August 2005. The order permitted searches of their home for company computers, software and related material. The defendants later gave undertakings not to use the software, which disposed of the underlying infringement dispute, but continued their application to discharge the order and sought an enquiry on the claimant’s cross-undertaking in damages.

The defendants alleged that the order had not been justified because there was no intended use of the software, no real risk of destruction or concealment, insufficient likely damage, inadequate security and material non-disclosure. The central issues were whether the order should be discharged retrospectively and whether an enquiry on the cross-undertaking should follow.

1. The applications were dismissed. The search order was not discharged and no enquiry on the claimant’s cross-undertaking was ordered.
2. Under Civil Procedure Act 1997, section 7(1), the court may order measures securing the preservation of relevant evidence or property. The established safeguards require a very strong prima facie case, very serious potential or actual damage, clear evidence of a real possibility that relevant material may be destroyed or concealed, and proportionality. These requirements are distinct from a final trial of the facts.
3. The real possibility requirement is evidential. The court need not be satisfied that the defendant actually would destroy evidence. It must nevertheless consider whether a lesser order, such as delivery up, would adequately protect the claimant. Improper conduct alone does not automatically justify a search order.
4. The evidence showed a continuing real possibility that the defendants would use, conceal or remove ISL’s software and documentation. The defendants retained source code, executables, manuals, computers and other material, repeatedly denied possessing them, gave a fabricated explanation about a mirror image, hid a server during execution of the order and failed promptly to disclose CD-ROMs. The prima facie case supporting the order had not been rebutted.
5. The value of the intellectual property was substantial but uncertain. Its possible use by a competitor could materially reduce its value and destroy a realistic opportunity of sale. The risk of serious damage therefore satisfied the applicable test, and the evidence did not establish material non-disclosure concerning value or the supporting undertaking.
6. Full and fair disclosure is required on a without-notice application. The consequences of breach depend on materiality, culpability, prejudice, remedial measures and proportionality. An order may be continued or remade on terms despite non-disclosure.
7. Even if a full trial later showed that the defendants had not intended to use the material, the court would retain a discretion whether to order an enquiry on the cross-undertaking. The defendants’ conduct before and after the order, including their conduct during the search, could amount to special circumstances against an enquiry.

The judgment records that aspects of the earlier case-management directions went to the Court of Appeal. The restriction on cross-examination was varied and permission was given for Dr Waters to be called. The challenge based on abuse of process remained struck out. The present judgment determined the defendants’ substantive applications concerning discharge of the search order and the cross-undertaking.