McLennan Architects Ltd v Jones & Anor

Security for costs is discretionary. The court must balance the claimant’s ability to pursue a proper claim against the defendant’s risk of unrecovered costs, while considering the claim’s prospects and whether security would probably stifle it. Where claim and counterclaim substantially overlap, security should generally exclude costs incurred in pursuing the counterclaim. But security may be ordered for distinct factual issues raised only by the claim. Inspection of an electronic device under CPR Part 25.1 must be necessary and proportionate. The investigation should be confined to relevant material, protect privilege and unrelated confidentiality, respect affected individuals’ rights, and ordinarily avoid copying the entire hard drive of a non-dedicated computer.

McLennan Architects Ltd claimed £235,875.54 from Jeremy Jones and Helen Roberts for architectural, project administration and contracting work at their Oxford home. The defendants counterclaimed £325,544.33 for alleged contractual breaches, including overspending and defective work.

The court heard two interlocutory applications. The claimant sought supervised access to a computer, owned by a related company, to investigate four disputed emails and their metadata. The defendants sought security for costs. The issues were whether security should be ordered, how the overlapping claim and counterclaim should affect its amount, and whether the proposed electronic inspection was necessary and proportionate.

1. The defendants’ security for costs application succeeded. Applying the principles in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534, the court balanced the claimant’s position against the defendants’ risk of being unable to recover costs. There was no sufficient evidence that security would stifle the claim. The availability of funds from sources connected with the claimant was relevant.

2. The overlap between claim and counterclaim did not prevent security. Under the approach identified in Dumrul v Standard Chartered Bank [2010] EWHC 2625 (Comm), the court asked whether the claim raised substantial factual inquiries outside the counterclaim and whether the proceedings raised additional issues. The Oman invoicing issue and other factual defences were distinct from the counterclaim. Costs attributable solely to the counterclaim were nevertheless excluded.

3. The defendants’ proportionate costs of defending the claim were assessed at £150,000 after allowing £100,000 for counterclaim-related costs. Security of £80,000 was therefore ordered, payable in four instalments of £20,000. Only the claim proceedings would be stayed, and only to the extent of any non-compliance. The claimant was permitted to apply promptly to vary the amount or timing on appropriate evidence.

4. The IT expert application was substantially narrowed and granted in a proportionate form. Under M3 Property Ltd v Zedhomes Ltd [2012] EWHC 780 (TCC), and consistently with Patel v Unite [2012] EWHC 92 (QB), an inspection order must be necessary and proportionate. The permitted inspection was limited to four emails and related metadata, under supervision, with equal copies and confidentiality undertakings. A complete image or unrestricted search of a non-dedicated computer would ordinarily be inappropriate.

5. The claimant was ordered to pay the defendants’ costs of the security application, assessed at £9,480 including VAT, subject to the stated adjustment for the amount claimed.

First-instance interlocutory judgment. No appellate history is stated in the judgment.