Phaestos Ltd & Anor v Ho & Ors

Strike out and summary judgment are exceptional remedies. The court should not conduct a mini-trial where the pleaded allegations require disclosure, witness evidence or credibility findings. In complex cases, the overriding objective and the need for a fair trial are central.

A settlement with one alleged tortfeasor does not automatically release another. The settlement must be construed in context, including whether it represented the full measure of loss or waived rights against others. Abuse of process requires a broad, merits-based assessment. Security for costs may be ordered where the threshold financial risk is established, but the amount should reflect the extent to which the claim and counterclaim overlap.

The claimants brought consolidated proceedings against former employees arising from alleged contractual breaches, misuse of confidential information and related matters. The defendants advanced counterclaims, including claims concerning alleged covert surveillance, harassment, misuse of private information and breach of privacy.

The claimants applied for summary judgment or strike out of the surveillance counterclaims. They argued that an earlier settlement with one alleged participant in the surveillance released them or satisfied the relevant loss, and that the counterclaims were abusive or insufficiently pleaded. The defendants sought security for costs. The central issues were whether the surveillance allegations required a trial and whether security should be ordered, and if so in what amount.

1. Strike out and summary judgment. The court applied CPR rules 3.4 and 24.2. The distinction between a realistic and fanciful prospect of success was material, but the court should not resolve complex factual disputes by conducting a mini-trial. The overriding objective required the allegations to proceed where disclosure, witness evidence and credibility findings were necessary.
2. Earlier settlement. The settlement with the individual defendant did not, at this stage, release the claim against the corporate claimants or establish that the defendants’ full loss had been satisfied. The settlement was made with the individual personally and did not waive rights against the claimants. Whether the individual was acting personally or corporately, and whether the parties were joint or several tortfeasors, required factual and legal investigation. The approach in Heaton v Axa Equity and Law Assurance PLC was particularly relevant.
3. Abuse of process. The court applied a broad, merits-based assessment. The fact that matters could have been raised earlier did not automatically make later proceedings abusive. The different identities of the defendants in the two proceedings, the absence of a defended or reasoned determination in the earlier proceedings, and the admitted surveillance were significant. The Merts claims were not abusive.
4. Surveillance allegations. Read in context, the allegations concerning covert friendship, possible access to homes and computers, following, filming, alarms and possible email interference were reasonably arguable. The claimants’ admissions that surveillance had been authorised, together with the surrounding pleaded facts, meant that the allegations could not properly be struck out. Privacy may arise in a public place, and harassment may be established if the pleaded course of conduct and the statutory defences were proved. The court expressly kept an open mind on the facts and justification.
5. Pleading loss. The defendants were permitted temporarily to plead financial loss without particulars because the relevant information was substantially within the claimants’ knowledge. They would have to particularise any loss after disclosure.
6. Security for costs. The threshold under CPR rule 25.13 was satisfied. Phaestos, Mindimaxnox and CIF had not shown that the proposed payment undertakings or available assets would meet a substantial costs order. The court exercised its discretion having regard to the overlap between claim and counterclaim. Security was reduced to reflect approximately 30 per cent overlap and was ordered in the sum of £2.5 million, with provision for payment in tranches and permission to apply.
7. The claimants’ applications for strike out and summary judgment were dismissed. By agreement, judgment was entered for the claimants on the abandoned equity-share counterclaim. The claimants were ordered to provide security for costs of £2.5 million.

First-instance decision. The judgment records earlier procedural orders in the consolidated proceedings but no appeal from the decision under consideration.