Phaestos Ltd & Anor v Ho

An intrusive forensic search of a party’s computers requires necessity and proportionality. Preservation and imaging of evidence may be justified, but that does not itself create a right to inspect the images in full. The court should respect the staged procedures for disclosure and delivery up, and should not use an interim order to police those procedures prematurely.

Where the pleaded case concerns delivery up, retention or copying, a search aimed at discovering unpleaded commercial misuse is a fishing expedition unless the evidence and pleadings provide a proper foundation. The court may preserve and inspect relevant property under its procedural powers or inherent jurisdiction, but the order must be necessary for the fair disposal of the pleaded issues and compatible with privacy rights.

The claimants sought interim orders concerning documents, confidential information and software retained by former employees. Most of the proposed relief, including listing, preservation, delivery up and computer imaging, was either agreed or granted during the proceedings.

The contested issue was whether an independent expert should be permitted to search the preserved computer images for confidential code, documentation, metadata, deleted material and evidence of transfers or misuse. The claimants relied on disclosure, inspection of relevant property and the court’s inherent jurisdiction. The defendants argued that the application was premature, disproportionate and unsupported by the pleaded causes of action.

1. Disposition. The court held that the claimants were entitled to orders requiring lists, delivery up and preservation by imaging the relevant computer discs. No further order permitting the claimants’ independent expert to search the images was justified at that stage. The court made no order on the contested part of the application, leaving a fresh application possible in the court where the proceedings then proceeded.
2. Disclosure and delivery up. Imaging for preservation did not amount to disclosure of the contents of the images or confer an immediate right of inspection. The claimants could not use the imaging order to pre-empt the established procedures for electronic disclosure under CPR 31. Any complaint about incomplete delivery up or disclosure should ordinarily await completion of those processes and be raised by a fresh application.
3. Relevant property and inherent jurisdiction. The court accepted that CPR 25.1(i) and (ii), and if necessary the inherent jurisdiction reinforced by section 7(1) of the Civil Procedure Act 1997, could support preservation and inspection of relevant evidence. The controlling question was whether the proposed search was necessary and proportionate having regard to the pleaded causes of action, the relief claimed, the overriding objective and Article 8(2) of the ECHR.
4. Application to the pleaded case. The evidence raised legitimate concerns about retention, copying and purported deletion of confidential software. Nevertheless, the pleaded case principally sought delivery up, and contained no claim for commercial misuse of the software or evidence that it had been disclosed to third parties or used in the defendants’ competing business. Searching for such evidence, or for support for an unpleaded claim, was therefore an unjustified fishing expedition.
5. Other matters. The clean-hands issue did not require final determination. In principle, surveillance unrelated to the relief sought would not defeat the application. Delay would not independently have barred relief had a properly pleaded cause of action justified it.