England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd March 2012

Mr Justice Akenhead:

1. There are primarily two applications before the Court, the first being that of the Claimants to strike out those parts of the Defendants' Counterclaim which relate to what has been called the "surveillance claim". The other application is that of the Defendants for security for costs.

The Background

2. The facts as set out in this and the following parts of the judgment are based on the evidence and information put before the Court and are not intended to bind the trial judge.
3. Elena Ambrosiadou ("EA") and Martin Coward ("MC") met at Cambridge University and in time married. Together they were instrumental in setting up one or more hedge funds, which came to be known as "IKOS", albeit this was and now is also operated and owned through a variety of companies and trusts. Peter Ho, who has a doctorate, in or about 1994 came to work for IKOS; Sam Gover who also had a doctorate (in digital signal processing) also came to work for IKOS at about this time. Initially, Dr Gover was retained as a programmer but was later promoted to being Portfolio Manager. Dr Ho was initially retained as a trading systems strategist which required him to write computer codes for trading programmes as well as doing mathematical research and data analysis; he later became head of research which is said to have included responsibility for analysing, developing and conducting diagnostic work on the existing mathematical models used in relation to equities portfolios.
4. IKOS was established in about 1991 and is essentially a hedge fund business. It has developed what is called "quantitative investment management" and in its 20 or more years has attracted numerous investors. The funds managed by what I will call the "IKOS Group" are invested in financial instruments such as equities and futures. It uses sophisticated mathematical models and complex computer systems to forecast market moves. Investment decisions are not, at least generally, made by human portfolio managers pursuing traditional trading strategies. Instead they are made by computers (albeit under human supervision and monitoring) which use statistical analysis techniques and complex computer programmes to make decisions about what to buy and sell and when. Those decisions are or can then be executed automatically using special high speed trading software, which interacts directly with the financial exchanges around the world. This type of investment management is sometimes referred to as "black box" trading.
5. The software is and has been referred to as the "Code" and it comprises trading analysis software which makes the investment calculations and execution software which carries out the trades. This software is said to be a closely guarded trade secret and the very foundation of the IKOS Group's business. It is common ground that both Dr Gover and Dr Ho played a material part in the development and indeed writing of parts of the Code and at least part of their employment obligations extended to dealing with the Code on a regular and possibly frequent basis.
6. Phaestos Ltd ("Phaestos") is an English Company and was originally called IKOS (UK) Ltd. Dr Ho was until April 2008 employed by Phaestos. Dr Gover was also employed by Phaestos at least for 12 or 13 years. Phaestos was the main partner in IKOS Partners an SFA-regulated partnership providing fund investment and investment management services. Phaestos is said to have provided technical research and other services to the IKOS Group. It is common ground that Dr Ho's employment was transferred to a limited liability partnership known since as Mindimaxnox LLP ("Mindi") in April 2008. Mindi was formerly known as IKOS Research (London) LLP; there remains some doubt as to whether Mindi is technically part of the IKOS Group. There is an issue as to whether Dr Gover's employment was effectively transferred to IKOS CIF Ltd ("CIF"), a Cypriot company between July 2006 and April 2007. CIF is said to be "the sub-investment manager of the funds equity strategy of the IKOS Group". From about 2005, the IKOS Group transferred all or at least much of its operation to Cyprus.
7. Phaestos is said to be owned or substantially controlled by EA. It is not readily apparent who the partners in Mindi are but the following appear to have some material involvement: Michael Constantinides (a Cypriot national), Wellently Ltd (a Cypriot company), Panglobe Nominees Ltd (which is or provides one or more directors to Wellently Ltd) and Panglobe Group Ltd (another Cypriot company). CIF has apparently a much more complex ownership structure which comprises Cypriot, British Virgin Islands and Cayman Islands companies.
8. At some stage in the period leading up to the end of 2008, the marital relationship between EA and MC broke down and it is not contentious that they are now involved in various proceedings around Europe against each other either personally or via various corporate or similar entities. There is no doubt that EA has a major involvement in all the many companies, trusts and other vehicles which make up the IKOS Group. More than that, it is not possible to form any view at this stage as to precisely what she owns or controls within that Group.
9. On 23 December 2008, Dr Gover's employment was terminated on the grounds of alleged misconduct whilst Dr Ho's employment was terminated on the grounds of redundancy on the same date.
10. On 23 December 2008, CIF and a company called Felix Holdings Ltd issued proceedings against Dr Gover in Cyprus and these were served on 19 January 2009. The Cypriot court dismissed these proceedings in May 2010 for lack of jurisdiction. On 20 March 2009, Dr Gover and Dr Ho issued proceedings in England before the Employment Tribunal against Phaestos, Mindi and IKOS Partners. Further proceedings in the Employment Tribunal were issued by them on 8 May 2009 in relation to alleged unpaid contractual bonuses. These proceedings have all been stayed since 7 December 2010 pending the outcome of the High Court proceedings.
11. On 24 November 2009, Phaestos and Mindi commenced proceedings against Dr Ho which have since become consolidated with proceedings commenced against Dr Gover by the same two Claimants and CIF on 7 April 2011.These two sets of proceedings were consolidated on 19 April 2011 whilst the proceedings were still in the Queen's Bench Division, general list. Consolidated Particulars of Claim, a Consolidated Defence and Counterclaim and a Consolidated Reply and Defence to Counterclaim have been exchanged.
12. It is unnecessary to review all the procedural twists and turns which these proceedings have taken. Suffice it to say that there have been a number of judgements including one handed down by Mr Justice Eady (on 8 April 2011) ordering that certain allegations regarding "without prejudice" communications be struck out of Dr Ho's pleadings. Another judgement, that of Mr Justice Ramsey, in December 2011 ordered the transfer of the consolidated proceedings to the TCC. A further judgement is awaited from Mr Justice King following hearings concluded in September 2011 on issues as to whether or how the Defendants should provide computerised information said to belong to one or more of the Claimants. The trial in the consolidated proceedings has been fixed to commence in January 2013 for eight weeks, although, arguably surprisingly, this is the subject matter of an application to the Court of Appeal for permission to appeal.
13. The Claimants in these proceedings issued on 20 January 2012 an application for summary judgment alternatively for striking out in relation essentially to two sets of allegations raised in the Consolidated Defence and Counterclaim. The first related to an alleged 12% equity interest and profit share in the IKOS Group to which Drs Ho and Gover claimed entitlement and the second relates to what have come to be called the "surveillance" allegations. On or by 3 February 2012, the Defendants had served a Notice of Discontinuance and a draft Amended Consolidated Defence and Counterclaim by which they abandoned the 12% equity interest and profit share claims and it is now accepted that there can be judgement in favour of the Claimants and a declaration that the Defendants have no legal or beneficial interest in the Claimant organisations or any of the IKOS Group companies or in any associated company or holding company. The Claimants pursue their application in relation to the "surveillance" allegations.
14. The Defendants issued on 20 January 2012 also two applications, one to amend the Consolidated Defence and Counterclaim and the other is seeking security for costs. The actual draft amendments, supplemented by a redrafted Counterclaim handed in by Leading Counsel for the Defendants, are not controversial, save for two amendments. I will deal separately with these applications.

THE SUMMARY JUDGMENT AND STRIKING OUT APPLICATIONS

15. This arises out of the "surveillance" complaints. Mr Tozzi QC for the Defendants described the history to which these complaints relates as like something "out of a thriller" and indeed this type of background does not frequently arise in straight construction cases. They are raised in the Counterclaim and, perhaps surprisingly, the Claimants expressly do not plead to some of the paragraphs in the Counterclaim which set out these allegations on the basis that it was an abuse of process on the part of the Defendants to plead them.
16. In November 2008, Dr and Mrs Gover (Laura Carminati) were living in a flat in Limassol; they had one child and a second was expected. Relations between Dr Gover and his employers were strained; for instance there had been financial issues as well as unrequited demands by EA or others within the IKOS Group that he and Dr Ho sign confidentiality agreements. A woman calling herself "Laura Maria Van Egmond" moved into a flat in the same block and went out of her way to befriend the Govers making various representations as to who she was, what she did and why she was in Cyprus and in the flat in question. For instance she told them that she was wealthy and did not need to work and she was associated with the Red Cross. She said that she had no computer skills or business acumen and that she had met EA at a Red Cross dinner in early 2008 but had had no contact with her since. She and the pregnant Mrs Gover became close friends but "Laura" asked her about Dr Gover's dispute with EA and the IKOS Group and his plans with Dr Ho as to what they intended to do in terms of business. So well did "Laura" ingratiate herself with Mrs Gover that she joined the Govers for Christmas and New Year. She visited the Govers' flat on many occasions and had unsupervised access, being allowed to babysit their child. After a short holiday, the Govers returned to the UK to live in their home in London. By 18 April 2009, "Laura" had contacted them and visited on at least 6 occasions and again was on occasion left alone with the child. She had access to their computers. After the birth of the Govers' second child on 19 July 2009, "Laura" made no contact, save to send a congratulations card, until October 2009. On 23 October, 2009, she made contact via Facebook and said that she was considering moving to Monaco, which was where MC was based. On about 2 November 2009, she asked Dr Gover for a meeting as she had some wealthy friends who might welcome his advice. She sent an email shortly thereafter which possibly by mistake gave the name "Laura Merts".
17. Dr Gover now became suspicious and, on checking various websites, ascertained that Laura Merts was the "Laura Maria Van Egmond" they knew and Ms Merts was a trained surveillance operative and computer literate in a wide range of software applications. Her website profile indicated that she had been in "covert close protection/undercover investigation in the near East/Europe" from October 2008 to July 2009.
18. "Laura" contacted Dr Gover later in November 2009 asking the Govers to meet her in Monaco for discussions with the "wealthy friends". On 1 December 2009, Dr Gover and Dr Ho did visit MC in Monaco. It has come to light that EA in conjunction with Inkerman (Group) Ltd, a security business, had instituted a large scale surveillance operation on MC on 23 November 2009 to gather evidence against him in connection with litigation involving MC. "Laura" was in Monaco at this time.
19. During the time of her involvement with the Govers, "Laura" had had access to private and confidential information, including information about the various pieces of litigation with which Dr Gover was getting involved.
20. On 24 December 2010, Dr Gover's then solicitors, Fox, wrote to solicitors believed to act for EA, Beachcroft LLP, saying that they had been instructed to consider proceedings against EA under the Protection from Harassment Act 1997 ("PHA") and asked whether she or others had been involved in accessing Dr Gover's email accounts, telephones, homes, communications, movements and other activities. This was not answered in any detail by Beachcroft other than on 29 December 2009 simply saying that there was no basis for a claim under the PHA.
21. This led to a letter sent by Fox to Beachcroft on 6 January 2010 saying that the refusal to engage "was disappointing" but claims would be brought against EA personally. A 10 page letter before claim followed on 12 March 2010, which asked Beachcroft to confirm that they acted for EA, failing which personal service would follow. They referred to the fact that EA "ultimately controls the IKOS Group" and that she was CEO of CIF. The letter set out in great detail the activities of Ms Merts. It was said that "Laura" was "engaged by EA through IKOS". This letter was served on EA personally at an address in Cyprus on 23 March 2010, Beachcroft having said on 22 March 2010 that they were without instruction from EA. EA instructed Cypriot advocates who wrote on 21 April 2010 on her behalf:

"…Your letter gives an inaccurate view of events…your record of events fails to take your client's conduct into account and results in a distorted view of events.

Any action taken by our client has been taken with regard to protecting her legitimate business interests. It most certainly did not amount to harassment and was reasonable in the circumstances. In any event, the activities referred to in your letter will not be pursued further (though, I cannot stress enough, our client and we deny that the steps taken amounted to "harassment" in either the legal or any other sense of the word).

Finally, please note, your letter contains various inaccuracies throughout, including in relation to the corporate structure of IKOS. As the structure of IKOS is wholly irrelevant to your claims, we do not propose to waste time disputing those issues with you in correspondence…"

22. Perhaps unsurprisingly this was taken as an admission that the engagement of Laura and her activities had happened or at least these were not substantively denied, that action had been taken by EA and that IKOS was irrelevant. Dr and Mrs Gover's High Court proceedings when they were issued on 20 May 2010 were issued against EA personally and against Laura Merts. The Particulars of Claim repeat the events partly summarised in this judgment, albeit much amplified. The case against EA was put on the basis that she engaged Laura Merts through the offices of Inkerman to do what she did. The claim was put on the basis of breach of confidence, unjustified infringement of a right of respect to private and family life and misuse of private information and on the basis of harassment contrary to Section 1 of the PHA. Un-quantified damages were claimed as well as damages for distress and anxiety. The prayer sought the "return of all confidential information obtained from the Claimants", "damages to be assessed" and an injunction to stop EA from "further harassment and/or spying on the Claimants".
23. These proceedings seem to have been served validly at least on EA but, for unexplained reasons, no Acknowledgement of Service was ever served by EA. Consequently, on 23 July 2010, the Govers applied for judgment in default against EA seeking the Order which they did effectively obtain. By an Order dated 26 July 2010, it was ordered that EA "must pay [the Govers] an amount which the Court will decide, and costs"; directions were to be sought for the assessment of quantum. It seems that, by about November 2010 and possibly before, EA had instructed English solicitors, Peachey & Co. Fox had written another letter dated 3 November 2010 about a further incident at a coffee shop several days earlier when Drs Ho and Gover had been filmed or photographed in a coffee shop close to the latter's office and asking that EA confirm that no-one engaged for or on her behalf was filming or photographing Dr Gover or his family and that no instructions had been given to follow them or keep them under surveillance. Peachey replied on 10 November 2010 saying that they were preparing an application to set aside the judgment in default. They did not answer the questions about the surveillance but said perhaps with care or cryptically that EA "has not personally retained any organisation to keep your clients under surveillance".
24. No application to set aside the judgment having been issued, the relevant partner at Peachey submitted a statement on her behalf on 11 January 2011. This statement appears to have been filed to explain why no damages were due albeit that it reads more like an explanation as to why EA was not personally liable at all. He said in terms that her position was "that she is not personally liable for any of the matters alleged…and these proceedings should not have been brought against her personally in any event and is [sic] wholly misconceived in any event". He said that she was the chief executive officer of CIF. By reason of there being "legitimate and serious concerns about the safety of IKOS confidential information…the IKOS Group acting by [CIF] retained…Inkerman Group to assist it in information gathering for the purposes of assessing and minimising the identified risks". He went on to say that at all times EA "acted in her capacity as chief executive officer of CIF and that accordingly she instructed the Inkerman Group, as chief executive officer of [CIF], to carry out surveillance operations in relation to" Dr Gover because there was a "reasonable suspicion that he and…other IKOS employees including [MC] were conspiring or acting in concert to injure the business of [CIF] and the IKOS Group as a whole". The conspiracy was said to centre around MC involving 10 or more ex-IKOS employees including Dr Gover by creating amongst other things a hostile hedge fund. He was assured by the Inkerman Group that Laura Merts' "activities were passive at all material times in her contact with" the Govers. He must therefore have had access to Inkerman. He suggested that only nominal damages were due.
25. Notwithstanding this, with no explanation for the volte-face, Peachey wrote to Fox on 26 January 2011 making a Part 36 Offer to settle:

"The First Defendant will pay £35,000 to [Dr Gover] and £40,000 to [Mrs Gover] in settlement of the proceedings…"

On 2 February 2012, Dr and Mrs Gover accepted the Part 36 offer.

26. The Claimants issued their proceedings against Dr Gover on 7 April 2011 and Particulars of Claim were served on 20 April 2011. The Consolidated Counterclaim, as most lately sought to be amended, contains the allegations which the Claimants argue should be struck out:

"187. Further, on dates unknown to [the Defendants] the Claimants have authorised or undertaken covert surveillance on them and may continue to do so.

188. Pending disclosure the full extent of the surveillance is unknown, but [the Defendants] rely on the following;

189. In November 2009 Mr Gover discovered that he and his wife had been subjected to an undercover spying operation procured by the Claimants through a surveillance company called the Inkerman Group. These spying activities appear to have taken place from November 2008. The surveillance which Mr Gover knows about involved an individual calling herself Laura Maria Van Egmond, whose real name is Laura Merts, who is a security consultant involved in covert close protection and undercover operations, computer literate in a wide range of software applications, and recommended as being "extremely good in counter-surveillance and investigation".

190. In November 2008, Ms Merts befriended Mr Gover's wife under false pretences at a time when his wife was pregnant. Between November 2008 and April 2009 Ms Merts visited Mr Gover's flat in Cyprus on many occasions. Such was the perceived close, supportive and personal relationship that she cultivated with Mr Gover's wife that Mr Gover was happy to leave Ms Merts alone in the flat on occasions, which meant, amongst other things, that she had access to Mr Gover's personal computer. Mr Gover believes it is likely that Ms Merts accessed confidential information and/or privileged communications when she had access to Mr Gover's personal computer. She may also have planted bugging devices around the flat.

191. Throughout this period Ms Merts frequently asked Mr Gover's wife about his plans and sought information about what he was doing, and Mr Gover's wife was happy to confide in her as she thought she was a close friend.

192. After Mr Gover and his wife had returned to London Ms Merts visited them on a number of further occasions in April, May and June 2009.

193. Further details of these events are set out in the proceedings which Mr Gover brought against Ms Merts and [EA] claiming, amongst other things, damages for harassment.

194. Although [EA] claimed to be acting on behalf of the Claimants and/or the IKOS Group she did not defend those proceedings as a result of which judgment in default was entered against her for damages to be assessed. The claim for damages was subsequently settled for £75,000, but Mr Gover has not seen or been told what information was passed to the Claimants by Ms Merts and/or Inkerman.

195. In addition to the activities of Ms Merts, in mid-April 2009, another employee of the Claimants, or person instructed or authorised by the Claimants believed to have been Ioannis Vosikas obtained unlawful access to Mr Gover's flat when he and his wife were out. Whilst he was there he removed a Cisco router and another box (probably an ADSL modem). The Claimants have failed to say what Mr Vosikas or whoever else the intruder was did whilst he was in the flat.

196. On 15 May 2009 between 11.30 and 13.30, Mr Ho was followed by two men in a dark blue Nissan car registration number NH07 YGR. Mr Ho was frightened and stopped to speak to a policeman and his colleague. The car drove off when the occupants saw Mr Ho speaking to the officer. Mr Ho was subsequently told by the police that someone in his neighbourhood had reported seeing suspicious people in that car on the previous two days waiting near his house.

197. On 1 November 2010 Mr Gover and Mr Ho met a friend, Simon Jones, for a coffee in a local café near their office. They noticed a man sitting at a nearby table who appeared to be photographing or filming them on his iphone. Mr Gover's then solicitors complained to [EA's] solicitors…about this incident and asked them to confirm if [EA] or anyone on her or the Claimants, behalf was involved. [They] replied stating that [EA] had not personally retained any organisation to keep Mr Gover under surveillance, but that they could not give any confirmation with regard to any activities undertaken by IKOS.

198. On 31 December 2010 Mr Ho's house alarm was triggered several times in the early hours whilst he was away. Mr Ho had the system checked and there was nothing wrong with it, which suggests that there had been some kind of unlawful entry although nothing was stolen.

199. On 4 January 2011, Mr Gover was away from London staying with his parents. His house alarm went off at 08:29, 08:43, 08:53, 09:09, 09:37 signalling a movement on the upstairs landing. Mr Gover drove back to London and checked the alarm. It seemed to be in working order which indicated that there had been an unlawful entry into his home although

nothing was stolen.

200. Mr Ho and Mr Gover will invite the Court to infer that this was likely to have been an entry or attempted entry into their respective homes on 31 December 2010 and 4 January 2011 by agents employed by the Inkerman Group, Kroll Associates or some other surveillance expert instructed by or on behalf of the Claimants, [EA] and/or the IKOS Group. Mr Ho and Mr Gover will rely on the matters set out above and below, and on the separate surveillance activities conducted by Kroll Associates on Mr Coward as described in High Court proceedings brought by Mr Coward against [EA] and Kroll Associates, action number HQ11X01625.

201. On 25 May 2011, Mr Ho received a message from Yahoo! stating "You have been disconnected from chat because you have signed into Yahoo! Messenger from another computer or device. " Mr Ho had not attempted to log into his email or chat from another browser, computer or device. Mr Ho believes that the Claimants or persons authorized by them had been trying to hack into his email account. In support of this belief Mr Ho and Mr Gover will adduce evidence that:

a. [EA] had authorised the unlawful hacking into Lucien Gover's personal and private Gmail account from which she had instructed an IKOS employee to download information, including legally privileged information in relation to Mr Lucien Gover's dispute with IKOS; and

b. In or about February 2006, Mr Gover discovered that [EA] was reading emails on his email account. When Mr Gover confronted [EA] about this she admitted doing so.

202. In directing or procuring such acts of surveillance the Claimants have pursued, with no lawful justification, a course of conduct which amounted to harassment of Mr Gover and Mr Ho contrary to section 1 of the Protection from Harassment Act 1997.

203. Further, in directing or procuring such acts of surveillance, the Claimants Phaestos and Mindimaxnox processed data of which [the Defendants] are, respectively, the data subjects and in relation to which Phaestos and Mindimaxnox are data controllers as persons who determined the manner and/or purpose for which the personal data were processed), as those terms are defined in the Data Protection Act 1998 ("the DPA 1998")…

205. Further, in directing or procuring such acts of surveillance the Claimants were in breach of Mr Ho's and Mr Gover's rights to personal confidence and privacy and thereby interfered with Mr Ho's and Mr Gover's right to respect for their respective private and family life as guaranteed by Article 8 of the European Convention on Human Rights in a way which was neither necessary nor proportionate and/or misused their private information.

206. By reason of the surveillance Mr Ho and Mr Gover, and their respective families, have suffered damage distress and anxiety. Mr Ho and Mr Gover are unable to provide particulars of the damage suffered by them until the Claimants disclose the full nature and extent of the surveillance activities which they have undertaken."

207. Further, unless restrained by injunction, the Claimants will continue to harass Mr Ho and Mr Gover, contravene the requirements of the DPA 1998, interfere unjustifiably with Mr Ho and Mr Gover's Article 8 rights and/or misuse their private information.

AND THE DEFENDANTS COUNTERCLAIM

(1) An account to be taken…

(5) An injunction to restrain the Claimants from further harassing Mr Ho and Mr Gover, contravening the requirements of the DPA 1998, interfering with Mr Ho and Mr Gover's Article 8 rights and/or misusing their private information.

(6) Delivery up of any and all information, reports or data of any kind, howsoever recorded, obtained by the Claimants as a result of the conduct complained of or any other similar conduct which is revealed on disclosure…

(7) Damages for anxiety and distress for harassment, breach of statutory duty, breach of personal confidence and privacy, unjustified interference with Article 8 rights and/or misuse of private information…"

The complaints are referred to as the "Merts claims" (Paragraphs 187 to 194), the "Cyprus flat entry complaint" (Paragraph 195), the "Car and Cafe complaints (" Paragraphs 196-7), the "House Alarms complaints" (Paragraph 198-200) and the "Yahoo complaint" (Paragraph 201).

27. The Claimants assert that the Merts claim should be struck out pursuant to CPR rule 3.4(2)(a) and/or (b) on the grounds that (i) settlement of the Gover proceedings released Cs as joint tortfeasors, (ii) settlement of the Gover proceedings satisfied Gover's damage claim, (iii) it is an abuse of process to seek to re-litigate the Merts claim. Each of these grounds will be considered in turn. For this purpose, the facts contained in Ds' pleaded case are assumed to be true. In relation to the Cyprus flat entry, the Car and Cafe, the House Alarms and the Yahoo complaints, the grounds for striking out relied upon are that in essence even if proved they do not give rise to any inferences that the Claimants were involved, and that there is insufficient pleaded to justify a complaint and that no complaints effectively arise under the PHA. Additionally there are some individual points made against each complaint which I will address when dealing with them.

The Law

28. The basis upon which striking out and summary judgement applications may be granted are well established.
29. CPR Rule 3.4(2) provides:

"The court may strike out a statement of case if it appears to the court-

(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;

(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings."

CPR 24.2 states:

"The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –

(a) it considers that –

(i) that claimant has no real prospect of succeeding on the claim or issue; or

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling reason why the case or issue should be disposed of at a trial."

In suitable cases (such as this) it is entirely appropriate to make an application under CPR Rule 3.4 and under Rule 24.2. Also, the Court retains its inherent jurisdiction to strike out. The overriding objective needs to be deployed in the interpretation of the rules and may well be germane for instance in determining whether there is a compelling reason (see CPR Part 24) why, irrespective of other arguments deployed, the matter should proceed to trial.

30. Lord Woolf in Swain v Hillman [2001] 1 All ER 91 stated (at page 92):

"The words 'no real prospect of succeeding' do not need any amplification, they speak for themselves. The word 'real' distinguishes fanciful prospects of success or, as Mr Bidder QC submits, they direct the court to the need to see whether there is a 'realistic' as opposed to a 'fanciful' prospect of success."

Lord Justice Potter in ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472 said at paragraph 8:

"I regard the distinction between a realistic and fanciful prospect of success as appropriately reflecting the observation in the Saudi Eagle that the defence sought to be argued must carry some degree of conviction. Both approaches require the defendant to have a case which is better than merely arguable, as was formerly the case under R.S.C. Order 14".

31. It is uncontroversial that the Court has a power in cases of doubt to make a conditional order and, in the context of this case, the Claimants argue, that can include a costs condition so that, say, a counterclaiming defendant can be required as a condition of making its counterclaim to provide some security for the costs of pursuing a possibly offending allegation.
32. Some further assistance is provided by Lord Hope in the case of Three Rivers v Bank of England (No 3) [2003] AC 1. Although this case involved the tort of misfeasance in public office, his comments on summary judgement and the Court's discretion are of general relevance and applicability:

"49. In my judgement a balance must be struck between the need for fair notice to be given on the one hand [of what case is being made] and excessive demands for detail on the other…

51…it is clear that as a general rule, the more serious the allegation of misconduct, the greater is the need for the particulars to be given which explain the basis for the allegation…

55. As the facts referred to might have inferred dishonesty but were consistent with innocence, it was not to be presumed that the defendant been dishonest. Of course, the allegation of fraud, dishonesty or bad faith must be supported by particulars. The other party is entitled to notice of the particulars on which the allegation is based. If they are not capable of supporting the allegation, the allegation itself may be struck out. But it is not a proper ground for striking out the allegation that the particulars may be found, after trial, to amount not to fraud, dishonesty or bad faith but to negligence.

92. The overriding objective of the CPR is to enable the courts to deal with cases justly: rule 1.1. To adopt the language of article 6.1 of the European Convention to the Protection of Human Rights and Fundamental Freedoms with which this aim is consistent, the court must ensure that there is a fair trial. It must seek to give effect to the overriding objective when it exercises any power given to it by the Rules or interprets any rule: rule 1.2. While the difference between the two tests [striking out and summary judgement] is elusive, in many cases the practical effect will be the same. In more difficult and complex cases such as this one, attention to the overriding objective of dealing with the case justly is likely to be more important than a search for the precise meaning of the rule…"

95…The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts are matters that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be take that view and resort to what is properly called summary judgement. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."

Although the particular case involved complex facts, at Paragraph 107, Lord Hope expressed himself to be reluctant "to divide the history up and strike out other parts of it".

33. It is necessary to consider the law relating to joint or several tortfeasors in the context of the extent to which a claimant's judgement against or settlement with one such tortfeasor may amount in effect to an "accord and satisfaction" such that the claimant can not renew substantially the same claim against either the same tortfeasor or another tortfeasor in relation to the same subject matter.
34. It is necessary to bear in mind the Court of Appeal's helpful guidance in the case of Aldi Stores Ltd v WSP Group plc and others [2007] EWCA Civ 1260 in which the appeal related to the application of principles set out in Johnson v Gore Wood "to an attempt to strike out a claim for abuse of process on the basis that the claim could and should have been brought in previous litigation" (paragraph 1). Lord Justice Thomas found it helpful to refer to the judgement of Lord Justice Clarke (as he then was) in Dexter v Vlieland-Boddy [2003] EWCA Civ 14:

"49. i) Where A has brought an action against B, a later action against B or C may be struck out where the second action is an abuse of process.

ii) A later action against B is much more likely to be held to be an abuse of process than a later action against C.

iii) The burden of establishing abuse of process is on B or C or as the case may be.

iv) It is wrong to hold that because the matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.

v) The question in every case is whether, applying a broad merit based approach, A's conduct is in all the circumstances an abuse of process.

vi) The court will rarely find that the later action is an abuse of process unless the later action involves unjust harassment or oppression of B or C.

50. Proposition ii) above seems to me to be of importance because it is one thing to say that A should bring all his claims against B in one action, whereas it is quite another thing to say that he should bring all its claims against B and C (let alone against B, C, D, E, F and G) in one action. There may be many entirely legitimate reasons for a claimant deciding to bring an action against the first and, only later (and if necessary) against others."

35. Lord Justice Thomas preferred the "broad merits-based judgement" and an approach which was not formulaic (Paragraph 10) and the fact that the defendants in the original action and a later action are different "is a powerful factor in the application of the broad merits-based judgement". He went on to say in Paragraph 11 that it was clear "that no distinction should be drawn as a matter of law between cases where the original action concludes by settlement and where it concludes by judgement" and that the "course of the original action and whether it resulted in a settlement or a trial are but part of the facts to be considered alongside all the other facts." The other two judges gave shorter judgement is agreeing with Lord Justice Thomas.
36. In Halbury's Laws Volume 97 (2010), the editors refer at paragraphs 447 to what types of party might properly be considered as "joint tortfeasors". This is mainly of importance in the context of contributions between tortfeasors. Three of the six categories are principal and agent where the principal is liable for the tort of the agent, a person who instigates another to commit a tort and the person who then commits the tort and persons who take concerted action to a common end and in the course of executing that joint action commit a tort. In my judgement, a key factor is the determination of whether either is an actual tortfeasor at all. If for instance the first party sued is not actually a tortfeasor, either as established by way of a judgement or otherwise, generally (at least) the previous proceedings and their resolution matter not in relation to the second action against the remaining actual tortfeasor. Logic suggests that simply, because the claimant in the first proceedings wrongly thought that the defendant being sued was a tortfeasor, that should not in itself amount to bar that claimant proceeding against a second defendant who is (or until judgement establishes otherwise) arguably the only real tortfeasor.
37. I attach considerable importance to the House of Lords decision in Heaton v Axa Equity and Law Assurance PLC [2002] UKHL 15. Lord Bingham provided illuminating examples and guidance:

"3. A brings an action against B claiming damages for negligence in tort. The claim goes to trial, and judgment is given for A for £x. There is no appeal and the judgment sum is paid by B to A. £x will thereafter be taken, in the ordinary way, to represent the full value of A's claim against B. A cannot thereafter maintain an action for damages for negligence in tort against C as a concurrent tortfeasor liable in respect of the same damage for two reasons: first, such a claim will amount to a collateral attack on the judgment already given; and secondly, A will be unable to allege or prove any damage, and damage is a necessary ingredient for a cause of action based on tortious negligence. A cannot maintain an action against C in contract either, in respect of the same damage, for the first reason which bars his tortious claim. There is however no reason of principle, in either case, on the assumptions made in this example, why B should not recover a contribution from C under the Civil Liability (Contribution) Act 1978 as a party liable with him for the same damage suffered by A.

 4. In a second example the facts are varied. A brings an action against B claiming damages for negligence in tort. The action does not proceed to judgment because B compromises A's claim by an agreement providing that he will pay A damages of £x, which he duly does. If £x is agreed or taken to represent the full value of A's claim against B, A cannot thereafter maintain an action against C in tort in respect of the same damage for the second reason given in the last paragraph, and although he is not precluded from pursuing a claim against C in contract in respect of the same damage he cannot claim or recover more than nominal damages. There is again, in the ordinary way, no reason of principle in either case, on the assumptions made in this example, why B should not recover a contribution from C under the 1978 Act as a party liable with him for the damage suffered by A.

 5. There is, however, an obvious difference between the action which culminates in judgment and the action which culminates in compromise: that whereas, save in an exceptional case (such as Crawford v Springfield Steel Co Ltd, unreported, 18 July 1958, Lord Cameron), a judgment will conclusively decide the full measure of damage for which B is liable to A, a sum agreed to be paid under a compromise may or may not represent the full measure of B's liability to A. Where a sum is agreed which makes a discount for the risk of failure or for a possible finding of contributory negligence or for any other hazard of litigation, the compromise sum may nevertheless be regarded as the full measure of B's liability. But A may agree to settle with B for £x not because either party regards that sum as the full measure of A's loss but for many other reasons: it may be known that B is uninsured and £x represents the limit of his ability to pay; or A may wish to pocket a small sum in order to finance litigation against other parties; or it may be that A is old and ill and prefers to accept a small sum now rather than a larger sum years later; or it may be that there is a contractual or other limitation on B's liability to A. While it is just that A should be precluded from recovering substantial damages against C in a case where he has accepted a sum representing the full measure of his estimated loss, it is unjust that A should be so precluded where he has not.

 6. The majority decision of the House in Jameson v Central Electricity Generating Board [2000] 1 AC 455 appears to have been understood by some as laying down a rule of law that A, having accepted and received a sum from B in full and final settlement of his claims against B in tort, is thereafter precluded from pursuing against C any claim which formed part of his claim against B. I do not think that my noble and learned friend Lord Hope of Craighead, in giving the opinion of the majority of the House, is to be so understood.

 7. Mr Jameson (A) had contracted lung cancer as a result of exposure to asbestos dust during his employment by B. He brought an action in negligence against B claiming damages. Very shortly before his death the claim was settled for £80,000, which was paid just after his death. It was appreciated that his claim on a full valuation was worth £130,000 but also that the outcome of the litigation was uncertain. About a year after his death, a claim on behalf of his widow was brought under the Fatal Accidents Act 1976 for damages for her loss of dependency. This second action was brought against C, in whose premises A had worked during some of the time when he had been exposed to asbestos dust during his employment by B. Section 4 of the 1976 Act, as substituted by section 3(1) of the Administration of Justice Act 1982, had the effect that the widow did not have, in estimating the value of her dependency, to give credit for the damages of £80,000 which she had inherited from A on his death. Thus, if the claim was maintainable, C would be potentially liable to the widow for a substantial sum and could look to B for contribution under the 1978 Act, and B would be potentially liable to contribute without any requirement that credit should be given for the £80,000 it had already paid. The widow could only maintain her claim against C if A, had he lived, would have been able to do so and it was held that A could not have done so because, by accepting £80,000 from B in full and final settlement of his claim, he had extinguished it and so had no claim which he could have pursued against C.

8. This conclusion was reached by a number of steps which included the following:

(1)  Proof of damage is an essential step in establishing a claim in tortious negligence ([2000] 1 AC 455, 472A-C).

(2)  Such a claim is a claim for unliquidated damages (473D, 474A).

(3)  Such a claim is liquidated when either judgment is given for a specific sum or a specific sum is accepted in a compromise agreement (473D, 474B, 474E).

(4)  A judgment on such a claim will ordinarily be taken to fix the full measure of a claimant's loss (473E, 474B).

(5)  A sum accepted in settlement of such a claim may also fix the full measure of a claimant's loss (473E, 474E-F): whether it does so or not depends on the proper construction of the compromise agreement in its context (473B, 476E, 474H).

(6)  On the facts of A's case, the sum accepted from B in settlement was to be taken as representing the full measure of A's loss: it followed that A's claim in tortious negligence was extinguished and he had no claim which could be pursued against C (476E).

I do not think the first four of these steps are controversial. The fifth proposition may perhaps have been stated a little too absolutely in Jameson, but as expressed above I do not think it can be challenged. There was clearly room for more than one view, as the division of judicial opinion in Jameson showed, whether the sum accepted in settlement by A was to be taken as representing the full measure of his loss, but if it did the conclusion followed: A could not have proved damage, an essential ingredient, in his action against C, and that was fatal to the widow's Fatal Accidents Act claim against C.

 9. In considering whether a sum accepted under a compromise agreement should be taken to fix the full measure of A's loss, so as to preclude action against C in tort in respect of the same damage, and so as to restrict any action against C in contract in respect of the same damage to a claim for nominal damages, the terms of the settlement agreement between A and B must be the primary focus of attention, and the agreement must be construed in its appropriate factual context. In construing it various significant points must in my opinion be borne clearly in mind:

(1)  The release of one concurrent tortfeasor does not have the effect in law of releasing another concurrent tortfeasor and the release of one contract-breaker does not have the effect in law of releasing a successive contract-breaker.

(2)  An agreement made between A and B will not affect A's rights against C unless either (a) A agrees to forgo or waive rights which he would otherwise enjoy against C, in which case his agreement is enforceable by B, or (b) the agreement falls within that limited class of contracts which either at common law or by virtue of the Contracts (Rights of Third Parties) Act 1999 is enforceable by C as a third party.

(3)  The use of clear and comprehensive language to preclude the pursuit of claims and cross-claims as between A and B has little bearing on the question whether the agreement represents the full measure of A's loss. The more inadequate the compensation agreed to be paid by B, the greater the need for B to protect himself against any possibility of further action by A to obtain a full measure of redress.

(4)  While an express reservation by A of his right to sue C will fortify the inference that A is not treating the sum recovered from B as representing the full measure of his loss, the absence of such a reservation is of lesser and perhaps of no significance, since there is no need for A to reserve a right to do that which A is in the ordinary way fully entitled to do without any such reservation.

(5)  If B, on compromising A's claim, wishes to protect himself against any claim against him by C claiming contribution, he may achieve that end either (a) by obtaining an enforceable undertaking by A not to pursue any claim against C relating to the subject matter of the compromise, or (b) by obtaining an indemnity from A against any liability to which B may become subject relating to the subject matter of the compromise…"

38. It is unnecessary to refer to the case of Jameson further in the sense that whatever it decided the House of Lords explained it in the Heaton decision. I attach considerable importance to Paragraphs 5, 6 and 9 in the context of the current case. One observation specifically on the Jameson case is that it was concerned with "whether the liability of concurrent tortfeasors for the same harm is discharged via settlement which is being entered into with one of them" ([2000] 1 AC 455, 470 D-E, per Lord Hope with whom at least two of the other law lords agreed).
39. Mr Goulding QC for the Claimants helpfully and non-controversially put forward some propositions, supported by authority, principally the House of Lords decision in Johnson v Gore Wood & Co [2002] 2 AC 1, particularly per Lord Bingham. I set them out below:

(a) There is a public interest in the finality of litigation, which is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole: Johnson v Gore-Wood, per Lord Bingham (with whom Lords Goff, Cooke and Hutton agreed) at 31A-B.

(b) The bringing of a claim in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim should have been raised in the earlier proceedings if it was to be raised at all: Johnson, per Lord Bingham at 31B; Greenhalgh v Mallard [1947] 2 All ER 255, per Somervell LJ at 257 (cited with approval by Lord Bingham in Johnson at 23B-F).

(c) There should be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before: Johnson, per Lord Bingham at 31D.

(d) A second action is not the less harassing because the defendant has been driven or thought it prudent to settle the first; often, indeed, that outcome would make a second action the more harassing: Johnson, per Lord Bingham at 32H-33A.

(e) It may be an abuse of the process of the court to bring a second action on issues related to issues that have already been raised in a prior action even where the defendant in the second action is not the same as the defendant in the first action: MCC Proceeds Inc v Lehman Brothers International (Europe) [1998] 4 All ER 675, per Mummery LJ (with whom Pill LJ agreed) at 695a-695c; Morris v Wentworth-Stanley [1999] QB 1004, per Potter LJ at [38]-[42]; Time Group Ltd v Computer 2000 Distribution Ltd & IBM UK Ltd [2002] EWHC 126 (TCC), per HH Judge Bowsher QC at [77]-[79].

(f) Parties should not keep future claims secret but should put their cards on the table so that no-one is taken by surprise: Stuart v Goldberg Linde (a firm) [2008] 1 WLR 823, per Sir Anthony Clarke MR at [96], [101], per Lloyd LJ at [70], per Sedley LJ at [77]; Johnson, per Lord Millett at 61B-C.

(g) The categories of abuse are not closed. When abuse is revealed, the court has a duty, not a discretion, to dismiss the action: Hunter v Chief Constable of Midlands Police [1982] AC 529, per Lord Diplock at 536D."

The only gloss, if such it be, which I would put on these observations is that, the Court should have regard to the overriding objective in the CPR in deciding what should be done on any given application albeit that the need to be just and fair pursuant to that objective does involve the Court in applying the law.

Discussion on the Striking out and Summary Judgment Applications

40. It is necessary in reviewing these applications to have regard not only to what is pleaded by the Defendants in those parts of the Counterclaim which the Claimants seek to have struck out or to have judgment upon but also, at least so far as the Merts claims are concerned, to the fact that there is clear acceptance by the Claimants and EA that one or more of the Claimants retained Inkerman to carry out undercover surveillance on Mr Gover, albeit that this acceptance is qualified by an assertion that in some way this was lawful or otherwise justified. Mr Goulding QC has asked, properly, the Court to proceed on his clients' applications on the assumed basis that the facts pleaded by the Defendants are correct, albeit that he still seeks to argue that some of the facts are manifestly incapable of proof or, even if proved, do not give rise to any inference of wrongdoing. In respect of the Merts claims, the allegations are not pleaded to in terms of the facts in the Reply and Defence to Counterclaim. No evidence has been filed by the Claimants that the facts pleaded in relation to the Merts claims are untrue.
41. One needs to couple these observations with the facts pleaded by Dr Coward in his English proceedings against EA and Kroll Associates, referred to in Paragraph 200 of the Counterclaim (set out above). In the Particulars of Claim in those proceedings, Dr Coward refers to extensive "bugging" (video and audio cameras and recorders) of his home (said to be jointly owned with EA) by Kroll Associates as well as extensive surveillance by car and otherwise, he presumes, by the same firm. He asserts that his car was fitted with a tracker system. The assertion is that EA procured this surveillance. Causes of action include invasion of privacy and harassment.
42. Although there is little detail put forward to justify the surveillance activities, the justification for the surveillance at least of Mr Gover is said by the Claimants to be the possibility or likelihood that he may have both kept and wrongfully used confidential information and intellectual property which was owned by one or more of the Claimants or possibly other members of the IKOS Group. It is not for the Court at this stage to decide whether this justification is factually or legally available to the Claimants. Suffice it to say, irrespective of whether the Court strikes out all or part of the Counterclaim in relation to the surveillance claims as a whole, it is almost inevitable both that either any material results of or observations made during the surveillance, such as it was, will be sought to be relied upon by the Claimants and that to the extent that there are no such material results or observations will be relied upon by the Defendants to undermine the credibility or credit of key witnesses for the Claimants, not least EA. There are some very serious charges made against each of the Defendants not only of professional or technical negligence but also of wrongful use of confidential information, all of which, at least on the pleadings are hotly contested. Without analysing each and every one of those allegations, it is inevitable that either the allegations or the defences to them will raise issues of credit and credibility not only of the Defendant but also of primary witnesses likely to be called by the Claimants.
43. As a matter of practical reality, it is a fair assumption, at this stage, for the Court to make that, unless the surveillance was poor or amateurish, it is likely that Dr Ho and Dr Gover would not have noticed or have not yet discovered much of it. It is a fair inference on the pleaded facts in the Counterclaim that Ms Merts operated in a highly successful way for about a year in fooling the Govers that she was anything other than a decent, concerned and charitable person. Of course, this assumption and inference may turn out, at any trial, to be unjustified.
44. Also, in practice, although it has been a perfectly legitimate forensic exercise for Mr Goulding QC to seek to analyse each and every allegation on its own, it is unrealistic not to look at each and every allegation in the context of the allegations made overall. In one sense, if and to the extent some of the allegations are obviously true, they will underpin and support some of the other allegations, the truth or accuracy of which is less immediately obvious. This is of particular relevance when one comes to consider the complaints other than the Merts claims, although the facts supporting such claims may support the others. I also bear in mind the admission by the Claimants' in Paragraph 110.2 of the Reply and Defence to Counterclaim that all three of them authorised surveillance which involved observing Dr Ho and Dr Gover, albeit that they assert that it was lawful to protect their legitimate business interests and the like.
45. I now turn to considering the twin grounds of striking out relating to the arguments that the Merts claims should be struck out on the grounds that the settlement of the Gover proceedings either released the Claimants as joint tortfeasors or that it satisfied Dr Gover's damage claim against another tortfeasor.
46. Although the letter from Dr Gover's solicitors dated 12 March 2010 suggested that Ms Merts was engaged by EA "through IKOS", there is no doubt, and indeed Mr Goulding QC rightly accepts, that his proceedings were against EA personally; although there is reference to IKOS Group organisations, there is no express or implied assertion that EA was acting for anyone other than herself in a personal capacity. There is no explanation as to why she or her solicitors omitted to file an Acknowledgement of Service but there was, undoubtedly a decision taken by EA with her personal solicitors not to apply to have the subsequent judgement in default set aside; such solicitors expressly talked about the likelihood of taking this step but then, again for unexplained reasons, they did nothing about that, presumably on the instructions of their client.
47. The partner in charge, to support her position on the damages assessment, made it unequivocally clear in his witness statement that (presumably in her and his view) she was not personally liable at all and that she had acted in effect in her capacity as an officer of CIF or possibly another IKOS Group organisation. The witness statement was followed without any explanation 15 days later by a Part 36 Offer to Dr and Mrs Gover to settle the case for £75,000 plus costs. That was accepted a week later by them. The earlier statement was making it clear that EA was not accepting that she was in any way personally liable. Her Part 36 Offer was on that basis simply a commercial way for her to "get shot" of the bother, embarrassment or nuisance of the continuing litigation against her (in terms of the damages assessment). The Part 36 Offer was not in any way qualified by her or her solicitors. She undoubtedly could have instructed her solicitors to make it clear that the offer was being made to settle not only the claim against her but also a possible claim against one or more IKOS companies; she did not do that.
48. It is right to bear in mind that the judgement was entered in default, that is as an administrative act by the Court, albeit at the prompting of the Govers' solicitors. There was no reasoned decision or judgement from the Court. The settlement which followed occurred through the Court Part 36 procedure which does not require any negotiation other than the submission of a valid Part 36 offer, which is then accepted. It is difficult to see therefore that EA in her capacity as an important and probably controlling officer and owner of IKOS would have thought that she was settling anything other than the risk of her being personally liable. I do not see however, contrary to what Mr Tozzi QC argued, that in some way Dr and Mrs Gover by implication reserved as such Dr Gover's right to pursue CIF or any other IKOS organisation; it was a simple acceptance of a simple Part 36 Offer which was offering to pay some money to settle specific claims against EA personally and there seems to be no room for any of the usual bases for arguing for the implication of some term. In this context there was substantial reliance by both parties on, mostly, House of Lords or Supreme Court decisions on the implication of terms which was, as always, illuminating and interesting, but which does not materially assist on a fairly obvious point.
49. A major point which is of concern involves an issue which this Court can not and can not be expected to resolve at this stage. The point is whether or not EA in her personal capacity was in fact and in law a tortfeasor at all, whether of the joint or several variety. If, as her then solicitor so emphatically argued in his witness statement of January 2011, EA had only acted in her capacity as an officer of one or more of the IKOS organisations, it must remain arguable as to whether she would have a personal responsibility at least for acts or omissions of the types complained of in the Counterclaim. One may at trial have to consider Cypriot corporate law and practice; this can not be done at this stage. If she did act only in her personal capacity, then the Claimants would probably not be liable at all. If Ms Merts or the Inkerman Group was contractually employed by an IKOS organisation, that would be a strong, if not conclusive, pointer to their engagement being simply a corporate act as opposed to an act of EA in a personal capacity. It is a telling point that the Claimants admitted in Paragraph 110.2 of the Reply and Defence to Counterclaim that they "have authorised lawful surveillance, including of Mr Coward, in consequence of which Mr Ho and Mr Gover were observed". This admission is in one sense oblique because it admits surveillance which involved observing Mr Ho and Mr Gover, the inference being that in their case the surveillance was tangential. The cases relied upon by the Claimants are predicated upon the Defendant in the first (EA) and the Claimants (and Defendants to Counterclaim) in the successive actions either being the same or each being liable in tort. There is no problem if a defendant is the same in both actions: issue estoppel will usually bite to stop the claimant seeking a "second bite of the cherry" or, if it is nominally a new claim, issues may arise as to whether it should have been raised in the first proceedings.
50. Mr Goulding QC sought to overcome these hurdles by saying that the Defendants were pleading that EA and the Claimants were joint tortfeasors. On any proper analysis of the Defence and Counterclaim, that is simply not right. He then argues that in effect Dr Gover should be treated as if he had asserted that the Claimants and EA were joint tortfeasors, because he had pleaded against EA in the earlier proceedings effectively that she was a tortfeasor and now in the current proceedings he is pleading by way of Counterclaim that the Claimants were tortfeasors. I do not see that that necessarily follows. As a matter of inference, when he accepted the Part 36 Offer, it was in the context that EA was saying (through her personal solicitor) that it could not be she who was liable because she had always acted, not in a personal but, in a corporate capacity and that inferentially the offer was being made with a denial of liability.
51. It follows from this that, whilst there remains continuing factual and legal doubt as to whether EA was in fact and law liable in her personal capacity and therefore whether she was a tortfeasor, the first two grounds of challenge put forward by the Claimants in relation to the Merts claims must fail at this stage. The Court simply can not determine at this procedural stage and in the absence of substantive evidence both from witnesses and documents (neither of which are yet available) whether or not EA acted at all in engaging surveillance firms or operatives, in her corporate capacity simply representing one or more of the companies or organisations within the IKOS Group or in her personal capacity. Another factual possibility is that some of the surveillance, perhaps to do with her and Mr Coward's unfortunate matrimonial difficulties, was ordered by her personally and some by one or other of the Claimants or other members of the IKOS Group. It is only when that factual investigation is complete that the Court can determine the basic issues as to whether EA and any company or organisation for which she acted were tortfeasors at all or of the joint or several type; at that stage the court can address and rule finally upon the defences to the continuation of the Merts claims.
52. If it had been necessary or possible without the full factual investigation to reach a final conclusion on these first two issues, on the arguments, pleadings and evidence as presented, I would have had specific regard to the case of Heaton, and in particular Paragraph 9 of Lord Bingham's judgment to the effect that an agreement made between Dr Gover and EA would not affect Dr Gover's rights against the Claimants because Dr Gover did not agree either with EA, the Claimants or anyone else to forego or waive rights which he may otherwise enjoy against the Claimants. Whilst it may be argued that the £35,000 which Dr Gover received pursuant to his settlement with EA personally is sufficient from a pecuniary standpoint, what he did not recover from EA was the return of the confidential "information, reports or data of any kind, howsoever recorded, obtained by [the Claimants] as a result of the conduct complained of or any other similar conduct which is revealed on disclosure" (see the prayer to the Counterclaim); it appears now, at any rate, that the Claimants hold information which might arguably be classifiable as confidential. It can properly be argued that the sum accepted by Dr Gover obviously did not fix the full measure of his loss let alone the relief to which he might ultimately establish an entitlement to. To use Lord Bingham's words, there would have been no need for Dr Gover to reserve the right to proceed against the Claimants which he was in the ordinary way fully entitled to exercise without reservation.
53. The third ground relied upon by the Claimants in relation to the Merts claims is that it is an abuse of process to "re-litigate" them. There is reliance upon the seven propositions set out at Paragraph 39 above. There was much reliance by Mr Golding QC on the suggested failure on the part of Dr Gover to "put his cards on the table" by not telling EA in her personal capacity, her solicitors or possibly IKOS organisations directly, before entering judgement in default and then accepting EA's Part 36 offer, that he might go against the IKOS companies in respect of the surveillance. In my view, this is a wholly unrealistic basis upon which to found an abuse of process argument in this case. EA, in her personal capacity, through her solicitor, was actually telling Dr Gover that she had no personal liability and, that if anyone was liable at all, it would be one or more of the IKOS organisations, over which she exercises some or possibly total control. Whilst in many instances it is important to differentiate between someone acting in his or her personal and in their public, employee or corporate capacities, EA can be taken to have informed herself in her latter capacities that she had authorised or instructed the surveillance operation.
54. One must bear in mind that judgment in default of Acknowledgement of Service is also and can be a sensible and cost-effective step for a clamant to take where a defendant shows no obvious sign of wanting to defend the proceedings. The settlement followed relatively shortly after the unequivocal assertion by EA's solicitors that she had no personal liability. There was no negotiation apart from the dispatching of the Part 36 Offer and its acceptance; there was no pleaded defence, let alone any discussion of or investigation into the underlying facts. It cannot have been unclear to EA in both capacities what the consequences of an acceptance by Dr and Mrs Gover of her Part 36 Offer would or at least could be in the circumstances. The cases which talk about parties needing to put "cards on the table" would not begin to impact on a case such as the present.
55. Whilst it is true that the separate earlier proceedings by Dr and Mrs Gover cover the same ground as the Counterclaim in relation to the Merts claims, there is one key difference, which is the assertion by Dr Gover that it was the Claimants which initiated what he argues was unlawful surveillance. It was not argued effectively if at all that the £35,000 received by Dr Gover pursuant to the early 2011 settlement necessarily represents the maximum which could conceivably be recovered by him as a matter of quantum. No cases were cited to the Court which would determine what the maximum recoverable would be and it is not possible at this stage for the Court to predict what the damages would be in this developing area of the law. In my judgment, the acceptance by Dr Gover of the Part 36 Offer simply settled his claim against her personally.
56. There was substantial argument as to the impact of Section 3 of the Civil Liability (Contribution) Act 1978:

"Judgment recovered against any person liable in respect of any debt or damage shall not be a bar to an action, or to the continuance of an action, against any other person who is (apart from such bar) jointly liable with him in respect of the same debt or damage."

Mr Tozzi QC says that this is a complete answer to the points made by the Claimants and would enable his clients to go on. He points to observations in Foskett on the Law and Practice of Compromise (7^th Ed 2010) at Paragraph 6-41 to 6-44 which suggests that the so-called "rule" in relation to settlements by joint tortfeasors is "in retreat". Mr Goulding QC however points to a number of authorities which suggest strongly that Section 3 is not an answer or certainly not a complete answer in circumstances where there can be said to be an accord and satisfaction or otherwise there would be an abuse of the process of the Court.

57. Both Counsel referred to the Court of Appeal decision in Watts v Lord Aldington (1993) L&TR 578 where the Court of Appeal upheld the view that "section 3 is in terms limited to preserving a cause of action against the other tortfeasor and does not sever a joint judgement" (see Neill LJ at page 591) whilst Steyn LJ described the "rule that the release of one of two joint and several tortfeasors operates as a release of the other" as absurd (see page 594). Both of these judgements address the exceptions to the rule. It is clear that one of those exceptions arises where the first set of proceedings is settled and the party who wishes to pursue someone else in respect of the same damage, debt or loss makes an appropriate reservation expressly or by implication. This was considered in the Court of Appeal decision in Morris v Wentworth-Stanley [1999] QB 1004 which related to whether there was some implied reservation, albeit in the context of a partnership debt case.
58. It is said on behalf of the Claimants that to permit Dr Gover to pursue the Merts claim would amount to harassment of EA and the Claimants. This is a difficult proposition for the Claimants to support because they have put no evidence before the court from or on behalf of themselves or EA to that effect. The Court should be slow to find that there has been any such harassment or that it is somehow unfair when the persons said to be suffering do not suggest that they are (suffering). So far as EA is concerned, she, or solicitors on her behalf deliberately or by oversight did not bother to defend the proceedings brought by Dr and Mrs Gover; there has been no factual or judicial investigation in those proceedings and so she is not facing a repeated judicial investigation into what she or the Claimants may or may not have done. The Court is not prepared to find that there is harassment in any legal sense, let alone in any personal sense against either EA or the Claimants.
59. It is also telling in this context that the "accord and satisfaction" point is not expressly taken by the Claimants in their pleadings and that the first two grounds of seeking to strike out obtaining judgement on the Merts claims were not identified in the application issued by the Claimants. So far as the latter point is concerned, this was raised later by the Claimants' solicitors.
60. If one is to, as one must, have regard to the "broad merits-based approach" favoured by Lord Bingham in the Johnson v Gore Wood & Co case, what one has here is admitted surveillance of Dr Gover and Dr Ho and, unless that is established as lawful (and one can not begin to tell at this stage whether it was or was not lawful) or in some other way justified, prima facie such behaviour might well be regarded, without more, as wholly un-meritorious and against the public as well as private interests; in those circumstances, there might well be causes of action established against the Claimants.
61. I am not satisfied that there has been any abuse of process here by Dr Gover and in this regard the Claimants' application is dismissed. Certainly, in addition to the point set out above, I decline to strike out the Merts claims because it is inevitable that they will have to be investigated as a matter of fact, credit and credibility both of Dr Gover and possibly Dr Ho as well as EA and the Claimants. In that context I have regard to the Court's discretion as well as this being a "compelling reason" within the meaning of CPR Part 24.
62. I now move on to the other surveillance claims which I can take together. The gravamen of Mr Goulding's submission is that each of them, taken on their own, or even together, does not set up anything near sufficient to mount a claim for breach of privacy or harassment under the PHA. Thus, he says that the possible unlawful entry to Dr Gover's flat in Cyprus by someone instructed or authorised by the Claimants to remove the router and modem can not begin to have been demonstrated to have been unlawful, let alone that the Claimants played any part; he says that it is denied emphatically by the two named possible people (Messrs Vosikas and Mr Sotiriou) and that the simpler explanation is that the provider of the modem (PrimeTel) took it, if anyone. As to any possible unlawful entries into the houses of Dr Ho and Dr Gover, they are not by necessary implication or at all likely to have happened: he relies on the evidence of a house alarm expert that 95% of all alarms triggered are essentially false alarms and there is no reason to think that the activation of the house alarms signifies anything. The following of Dr Ho in his car means nothing, he argues, because Dr Ho could have been mistaken and, even if he was not, it was not necessarily any surveillance operative retained by or on behalf of the Claimants. The filmed observation of Dr Gover and Dr Ho falls into a comparable category and, in any event, he argues there is no offence, let alone civil liability, relating to people being photographed in a cafe, said to be a public place. As for Dr Ho's belief that his e-mail had been hacked into, there are, he argues, perfectly innocent explanations for why Yahoo told him he had been disconnected. All these points are challenged by Mr Tozzi.
63. In my judgment, it would be wholly wrong to strike out these allegations. My reasons are as follows:

(a) One must look at these pleaded claims and assertions by the Defendants in the context not only of the Merts claims which are not specifically challenged by the Claimants or indeed by EA in the earlier proceedings against her personally by Dr Gover but also at the unequivocal admission by the Claimants in their Reply that they had authorised surveillance involving observing Dr Ho and Dr Gover. There is also an admission that in 2006 two employees of CIF unlawfully accessed a personal e-mail account of Dr Gover's brother (Paragraph 117.2), albeit it is said that this was not authorised by CIF. One needs also to have regard to the facts pleaded against EA by MC in his proceedings against her, not because they are proved, but because they demonstrate close and invasive surveillance of MC which may not be dissimilar to what has been deployed against Dr Gover and Dr Ho.

(b) Apart from the alleged unlawful entry into Dr Gover's flat in Cyprus, which is denied firmly by the two named individuals, it is worthy of note that there is a dearth of evidence from the Claimants in relation to the other. Thus, it would have been relatively easy for the Claimants to say for instance that the surveillance operatives who were deployed did not include those who followed Dr Ho or who photographed Dr Gover or Dr Ho in the café.

(c) So far as the possible break-in to Dr Gover's house is concerned, of course one explanation may be that the five times that the house alarm was triggered over 66 minutes were all just 5 false alarms, but one needs to bear in mind that this was a house apparently to which Ms Merts had ready access earlier in 2009. Similarly, the triggering of the burglar alarm in Dr Ho's house several times is not inconsistent with a break-in in relation to surveillance or to the attempted recovery of information. The same can be said of possible interference with Dr Ho's e-mail; again, there are of course wholly innocent explanations, but there is no suggestion that e-mails on Yahoo accounts can not be hacked into. It may be going beyond the need to take judicial notice but the Leveson enquiry appears at least to have highlighted the relative ease of hacking.

(d) There have been arguments as to the extent to which there can be a breach of privacy in a public space, with the Claimants arguing that the car following and the cafe incidents were in public, thereby giving rise to no breach of privacy. There are authorities either way in this developing area of the law and it would be wrong at this stage to say that those claims could not succeed, particularly if the complaints factually are established along with all the others. I need only refer to Clerk & Lindsell on Torts (20^th Ed):

"27-42 It is possible to have a reasonable expectation of privacy in a public place…Even a public person in a public place may have a reasonable expectation of privacy. In Campbell v MGN Ltd the fact that the photograph of the celebrity claimant attending a meeting for her drug addiction was taken in a public place did not alter its intrusiveness. Publicising the content of the photograph was offensive especially as it was taken deliberately, in secret and with a view to publishing it in conjunction with the article about details of the treatment. However as Von Hannover shows, that protection in public spaces is not limited to humiliating or embarrassing publications. Nor, it would seem, is harassment a necessary ingredient….In Murray v Express Newspapers Plc the defendant took a covert photograph of the claimant, the 19 month old son of a well-known children's author JK Rowling, being pushed in a buggy by his parents in an Edinburgh street on a family outing to a local café…Though the mere fact of being photographed in public would not be actionable per se as an invasion of privacy – there being no right to one's image - "the real issue is whether publicising the content of the photographs would be offensive"…"

(e) There are other arguments deployed by Mr Goulding QC. He points to the PHA:

"1) A person must not pursue a course of conduct—

(a) which amounts to harassment of another, and

(b) which he knows or ought to know amounts to harassment of the other.

(2) For the purposes of this section, the person whose course of conduct is in question ought to know that it amounts to harassment of another if a reasonable person in possession of the same information would think the course of conduct amounted to harassment of the other.

(3)Subsection (1) does not apply to a course of conduct if the person who pursued it shows—

(a) that it was pursued for the purpose of preventing or detecting crime,

(b) that it was pursued under any enactment or rule of law or to comply with any condition or requirement imposed by any person under any enactment, or

(c) that in the particular circumstances the pursuit of the course of conduct was reasonable."

Section 3 provides a civil remedy for breach of Section 1 and Section 7 provides that a "course of conduct" involves at least two occasions against a single person or, if the course of conduct relates to two people there must be conduct on at least one occasion in relation to each of the persons. Sections 1 to 3 extend to England and Wales only (and not for instance to Cyprus). However, in relation to the cause of action founded in harassment, there are more than two occasions of what is arguably harassment (on the pleadings) against each of Dr Gover and Dr Ho with such occasions taking place in England.

(f) There are reasonably arguable cases by Dr Gover and Dr Ho in relation to invasion of privacy, looking at the pleaded case in context. If it is established that Dr Ho and Dr Gover were distressed by being closely followed, having their London houses broken into, by one of them having their e-mail hacked and by the other having his and his wife's London house entered by an undercover surveillance operative (Ms Merts) who had deceived them into thinking she was an innocent friend, it may well be that the civil charge of harassment is made out unless the statutory defences are established.

(g) These surveillance claims are necessarily ones which can only be resolved by a trial which, following disclosure and the provision of witness evidence, will enable the court to establish one way or the other whether there has been an actionable invasion of privacy or actionable harassment.

I must make it clear that it would be totally inappropriate and indeed impossible for the Court at this stage to second-guess what the final factual investigation will reveal at the trial. It may be that such surveillance as there has been was more limited than the Defendants envisage; it may be even more extensive; it may reveal substantial justification and lawful excuse for what was done by way of surveillance; it may reveal just the opposite; it may prove or disprove any actionable misbehaviour on the part of the Claimants. Certainly, the Court will keep an open mind and there is no assumption one way or the other that the Claimants or the Defendants are in the right.

64. There are two final challenges by the Claimants the first being the additional financial claim in Paragraph 206 of the Counterclaim. The Defendants wish to add a claim for specific monetary loss over and above general damages but add the words: "Mr Ho and Mr Gover are unable to provide particulars of the damage suffered by them until the Claimants disclose the full nature and extent of the surveillance activities which they have undertaken." This is said to be unacceptable for the simple reason that there are no particulars of loss proffered. In my judgment, given the seriousness of the surveillance complaints and the fact that the information surrounding and emanating from the surveillance is totally within the knowledge of the Claimants, this un-particularised plea is a legitimate one. The Claimants admit that they or people on their behalf carried out a surveillance operation on the Defendants but they have provided not one hint of the extent or scope of that operation. It is of course possible that disclosure will reveal nothing which supports a claim for specific monetary loss, in which case the Claimants have nothing to fear.
65. The second challenge, pressed less firmly, is to Paragraph 205 in which the proposed amendment is: "Further, in directing or procuring such acts of surveillance the Claimants were in breach of Mr Ho's and Mr Gover's rights to personal confidence and privacy". It is said that permission to amend should not be granted unless and until full particulars are provided. This is not a sound objection because, as must be obvious, on the pleaded case it is only the Claimants who can know what the surveillance was and most importantly what it actually comprised. Following disclosure by the Claimants of documents and electronic traffic to and from the persons or agencies involved by the Claimants' in the surveillance, the Defendants may then legitimately be expected to set out with greater particularity what their detailed case is.
66. However, the Defendants, following their dismissal, were engaged in setting up a new hedge fund business on their own, called Altiq; this, I was told, commenced business in April 2011. There is evidence that, during the involvement of Ms Merts, the Defendants were involved in discussions between themselves and with others about this enterprise; the process appears to have continued into 2010 and 2011. During this period, there may well have been surveillance of the Defendants. It is accepted that there are no restrictive covenants which prevent the Defendants setting up a new business, even one which might compete with the Claimants, albeit that the Claimants point out that it would be actionably wrong for the Defendants to have used confidential information or intellectual property owned by the Claimants in or in setting up this new business. If there was close surveillance of the Defendants, it is more than feasible that at least some legitimate confidential information relating to the new business was secured. It becomes material then to determine what if anything the Claimants did with such information so that one can determine what if anything is the measure of loss. An example might be that the Defendants are taped talking about a possible new investor client for their new business; if the Claimants heard about this and approached (and secured) that new client, the Defendants could argue that they had lost that client and the income derivable therefrom. Mr Goulding QC deployed some arguments against this saying, for instance, that the loss would then be that of Altiq and not that of the Defendants. That may or may not prove to be the case but until there has been disclosure the Defendants are deprived of knowing what their loss might be.
67. I therefore propose to allow the amendment in this un-particularised form, having regard to the overriding objective. It will be necessary however for the Defendants, sooner rather than later following proper disclosure by the Claimants, to particularise what if anything the actual pecuniary loss is.
68. It follows from the above that the Claimants' applications to strike out and for summary judgement are dismissed.

SECURITY FOR COSTS

69. The Defendants seek security for costs in the sum of £4 million from the Claimant on the basis that there is reason to believe that the Claimant would be unable to pay the costs if ultimately there is a costs order against them at the conclusion of the trial in this case. Essentially, the Claimants assert that, although Phaestos and Mindi on the basis of their current financial position could not pay such costs, "guarantees" had been provided to Phaestos by EA and to Mindi by a company called Wellently Ltd which provide security to them such that there can no longer be any reason to believe that they would be unable to pay the costs. In relation to CIF, there are no published accounts and from the limited information available there is no reason to believe that CIF would be unable to honour any costs award made against the Claimant. If the Claimant are wrong about that, they argue that the Claim and Counterclaim are so interlinked that it would be inappropriate to order any security for costs or at worst anything approaching £4 million.
70. The criteria for the award of security are set out in CPR Parts 25.13(1) and 25.13(2)(c), which provide that the Court may make an order for security for costs if it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order and the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant's costs if ordered to do so.
71. Again, as before I can adopt and repeat some of the legal principles which are applicable as set out, in this case, by Mr Scorey for the Claimants, albeit somewhat changed by me:

(a) As a threshold requirement, the Defendants must establish that there is reason to believe that the Claimants will be unable to meet any costs order: see CPR Part 25.13(2)(c). Thus, it is not enough for the Defendants to show that the Claimants might not be able to repay. More must be done, namely justification for a reason to believe that the Claimants will not be able to pay. In that regard:

(i). The Defendants do not need to demonstrate on a balance of probabilities that the Claimants will not be able to satisfy any costs order: see Jirehouse v Beller [2009] 1 WLR 751 at [26]. However, there must be evidence that the company "will be unable to pay", which is more than mere doubt or concern about the future ability to pay: see Re Unisoft Group Limited [1993] BCLC 532 per Sir Donald Nicholls VC at 534e-i, as followed by Jirehouse at [24]. As stated by Sir Donald Nicholls VC in Unisoft, the test is not "watered down" by the presence of the wording "reason to believe".

(ii) Similarly, in Texuna International Limited v Cairn Energy plc [2004] EWHC 1102 Gross J stated at [10]: "I emphasise that the inquiry is whether the Claimant "will be unable? to pay the Defendant's costs if ordered to do so – not whether it might be unable to pay them."

(iii)The burden is upon the Defendants. It is not incumbent upon the Claimants to prove that they have the means to pay: see Golden Grove Estates v Chancerygate Asset Management [2007] EWHC 968 per Lindsay J at [35].

(iv) However, if legitimate concerns about the Claimants financial position are raised, if the Claimants choose to provide no or incomplete information in response, that in itself can lead to a court reaching the belief that the Claimants are unable to pay. In Mbasago v Logo Limited [2006] EWCA Civ 608, Lord Justice Auld stated (at paragraph12) that "where it arises as a result of the party against whom the order is sought either providing unsatisfactory financial information as to his or its affairs, or as in this case none at all, it is not a big step for the court to take to conclude that there is reason for such belief".

(b) Even if the threshold requirement in CPR Part 25.13(2)(c) is satisfied, the Court's power to award security for costs is discretionary: see Hutchinson Telephone (UK) Limited v Ultimate Response Limited [1993] BCLC 307 at 317 per Bingham J. That discretion will be exercised following a detailed assessment of all the relevant circumstances of the case: see CPR 25.13(1)(a). In short, the Court is to have regard to what is fair and just in all the circumstances: see Jones v Environcom Limited [2010] Lloyd?s Rep. IR. 190 at [12] per Gloster J.

72. One of a number of different factors to be taken into account by the Court when considering a defendant's application for security is the existence and nature of any counterclaim. This was considered in BJ Crabtree (Insulation) Ltd v GPT Communications Systems (1980) 59 BLR 43 in which Bingham LJ said:

"…the question whether any orders should be made is a discretionary question…and it is a discretion to be exercised in the interests of justice having regard to the peculiar features of the case before the court. It cannot be too firmly emphasised that there can be no rule of thumb as to the grant or refusal of an order for security in these circumstances (page 49)

It is however necessary… to consider what the effect of an order for security in this case would be if security were not given. It would have the effect, as the defendants acknowledge, of preventing the plaintiffs pursuing their claim. It would, however, leave the defendants free to pursue their counterclaim. The plaintiffs could then defend themselves against the counterclaim although their own claim was stayed. It seems quite clear and, indeed, was not I think in controversy - that in the course of defending the counterclaim all the same matters would be canvassed as would be canvassed if the plaintiff's were to pursue their claim, but on that basis they would defend the claim and advance their own in a somewhat hobbled manner, and would be conducting the litigation (to change the metaphor) with one hand tied behind their back. I have to say that that does not appeal to me on the facts of this case as a just or attractive way to apply the party to conduct this litigation. (Page 52)

One comes back, I think, at the end of the day, to the reflection that this is a rule intended to give a measure of protection to a defendant who is put to the cost of defending himself against the claim made by an impecunious corporate plaintiff. It may in some cases be fair and just to make such an order even though the defendant is himself counterclaiming... " (pages 52-3)

73. This approach or principle has been described as a "general rule" by Hamblen J in Dumrul v Standard Chartered Bank [2010] EWHC 2625 (Comm) who put it at [5] as follows:

"…the Court will not exercise its discretion under CPR Part 25 to make an order for security because of a claim if the same issues arise on the claim and counterclaim and the costs incurred in defending that claim would also be incurred in prosecuting the counterclaim."

This was described as "a fair summary of the position" by Lord JusticeMoore-Bick at [18] of his judgement in Anglo Irish Asset Finance v Brendan Flood [2011] EWCA Civ 799.

74. I would take this one stage further by saying that the Court in its discretion may feel that it is appropriate to order security for costs in cases where there is some but not a complete overlap between the issues raised on the Counterclaim and those contained in the Particulars of Claim. Thus, the Court may exercise its discretion to order security to the extent that there is no complete overlap between the claims or issues raised by the claimant with those raised by the defendant in its counterclaim. Both Counsel accepted that, save where the non-overlap is peripheral or insignificant, the exercise by the Court can legitimately involve an apportionment of the security for costs amount to the extent that there is no overlap. The Court may have to make a broad brush assessment of the extent to which there is no overlap in terms of the amount of security to be ordered.
75. Moving on to the threshold question, Counsel for the Claimant properly accepted that Phaestos and Mindi "are not trading and therefore are unable themselves to generate funds to pay any costs award" (Paragraph 18 of his skeleton).
76. After the Defendants issued their application for security for costs, EA and Wellently provided to Phaestos and Mindi respectively what was called a "Payment Undertaking" in the following terms:

"I am aware that you…are a party to litigation [this litigation] and that it is possible that, in connection with the Litigation, an order for costs may be made against you.

As the sole shareholder in Phaestos [ a member of Mindi], I confirm that:

1. I know and acknowledge that the Litigation is ongoing and that there is a risk that an adverse costs order might be made against you pursuant to the Litigation (a "Costs Order").

2. For the foreseeable future, I undertake to ensure that Phaestos [Mindi] will have adequate resources available to it to meet any Costs Order that might be ordered against it in the Litigation.

3. Until the Litigation has been finally and fully resolved by the English Courts or the Litigation has otherwise been unconditionally and irrevocably settled by the parties thereto, I will not dispose of my interest in Phaestos [Mindi] without giving you 30 days' prior written notice.

4. This letter is intended to create binding legal relations between us.

5. This letter and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by, and construed in accordance with, the laws of Cyprus and the courts of Cyprus shall have exclusive jurisdiction to hear any such dispute or claim in respect of this letter."

77. There has been much argument whether these letters have any value, at least in the context of this security for costs application. I do not consider that they begin to displace the belief that otherwise the Court holds that these two companies could not pay any costs award against them. My reasons are as follows:

(a) As for Wellently, there is absolutely no evidence that this company has any assets at all. It is a Cypriot company apparently with nominee directors. No accounts or financial information about it have been provided. All that seems to be known is that it plays some part within the IKOS Group. Indeed, Mr Scorey rightly had to accept that there was no evidence about its work or value. The very fact that Wellently is put forward in the circumstances as offering anything of value is surprising to say the least, given this lack of evidence.

(b) As for EA, there seems no doubt that she has access to very substantial amounts of money. However, not one jot of evidence has been provided to identify what her readily available financial or other assets actually are. It is clear that the IKOS operation was moved to Cyprus for tax reasons and that a number of companies or organisations based in tax havens around the world form part of the Group. Realistically, EA could reasonably be expected so to have arranged her affairs that it may be difficult to find out what if any her available personal assets are, where they are held, in whose names they are held and whether action can be taken to enforce any judgement against her in the courts of Cyprus. There is no evidence that she has any assets in Cyprus itself.

(c) Although these "payment undertakings" have been referred to as guarantees, they are not guarantees in the sense that they are legally understood under English law.

(d) Although the Claimants' solicitors, apparently with authority from EA and Wellently to say so, have agreed to some rewording of these documents for instance the deletion of the wording "for the foreseeable future", these "undertakings" may be contractual in effect (subject to what I say about the law of Cyprus). They are provided not to the Defendants in these proceedings by way of security but to Phaestos and Mindi. It is a fair inference that by agreement between each of these two companies respectively on the one hand and EA and Wellently on the other they could be varied again without the Court or the Defendants ever knowing about it. The result could be therefore that there will be no effective undertaking left by the end of this case.

(e) There has been no evidence of the law of Cyprus. Anecdotal observations that there may be some tradition of English law remaining do not assist to determine whether either of these "undertakings" are enforceable under the law of Cyprus, whether the parties to them can withdraw from them at any time with impunity or what the practice might be if the two companies are insolvent and are liquidated. The insistence that the law of Cyprus is the proper law and that the Cyprus courts and exclusive jurisdiction renders these undertakings of no demonstrableand certainly unclear and un-established value.

78. One must then turn one's attention to CIF. It is registered in Cyprus, which is well known as a tax haven. There is little or no publicly available financial information about companies in Cyprus. The ownership structure behind CIF is complex even by the standards of offshore hedge funds. It is difficult to form any precise view about CIF's current role in the IKOS Group and hence its likely asset position. However, some evidence is provided by CIF's disclosure to the US Securities and Exchange Commission, which suggests that CIF is paid a fixed lump sum payment, plus a fee per investor, for its services to the IKOS fund. It can be inferred that CIF's income is limited to the cost of its overheads and expenditure and that it is not receiving any of the profits generated by management of the IKOS fund. In other words it is treated by the IKOS Group as a service provider, not a profit generating entity. That would mean that it would not have or need to have assets or sufficient income over its outgoings to pay a substantial costs award.
79. One can couple with this evidence the facts that the IKOS group for whatever reason has been prepared to allow Phaestos and Mindi to be reduced in terms of its financial worth and income to a state in which they could not begin to pay any costs order made against them in this case. As Mr Scorey accepts, all that CIF does is to perform the function, delegated to it by IKOS Asset Management Ltd (said to be the fund investment manager for IKOS), of being the "day to day investment management of funds", CIF being the "regulated sub investment manager" (see Paragraph 9 of his written skeleton). There is no obvious reason for it to be the holder of any significant assets or even, as a service provider, an organisation which itself generates profits in its own right.
80. Surprisingly, CIF does not produce any evidence that it has any significant worth; thus, there is no hint or suggestion that it owns any property or has any funds in any bank. CIF essentially relies upon putting the Defendants to proof that it is other than good for any costs order. However, and unhelpfully, it does rely on evidence that it is regulated by the Cyprus Securities and Exchange Commission, which has "capital adequacy" requirements. However, it has chosen not to inform the Court what its registered "capital adequacy" is or how even that it has been assessed. The Defendants in their evidence point to the fact that some hedge funds in Cyprus do identify openly what "capital adequacy" they are providing or indicating; thus, for instance, a fund called Marfin identifies its total capital ("Pillar 3") requirements at €65,495. The Claimant's evidence challenges the relevance of Marfin because "the low capital set aside for operational risk at Marfin is due to its low income and profits and its lack of trading history". However it does not go on then to say what its own income, profits trading history or set aside capital are.
81. Taking into account all of the above matters, it is abundantly clear that there is at the very least reason to believe that CIF would be unable to pay out on a costs order ultimately made against it. Mr Scorey suggests that CIF has paid out all its own side's costs to date but there is no evidence about that; and even if, so to speak, a cheque came from CIF to its solicitors, there is no evidence that the money emanated from within CIF. He says that the Defendants do not really believe that CIF has no value because they are counterclaiming millions of pounds themselves against CIF; with respect, that is a facile point because the Defendants are defending claims against themselves which they can not avoid doing irrespective of the worth of CIF (subject to securing some security for costs). There was the simplest of steps for CIF to take which was to give some evidence, possibly even on a confidential basis, as to what it is worth and this they have consciously declined to do.
82. Although I do not base my decision on this, a legitimate approach for the Court faced with multiple and interconnected claimants, all bar one of which could not pay the defendants' costs, would be to say that the onus then shifts to the one remaining claimant to show why there is not reason to believe that it could not pay those costs. On this basis, CIF would not have begun to discharge that onus. The Claimants say that the reason why they have not disclosed financial information about CIF is that they have concerns about confidentiality in this regard generally but particularly because the Defendants are trading in competition with them. However, if those concerns are real then some protection at the very least could be provided by confidentiality club arrangements which would prevent the Defendants learning about any such confidential information. Finally, the Claimants say that there is every reason to believe that, even if CIF is itself worth little, the IKOS Group would "bail out" CIF or the other Claimants because it would be inconceivable that they would let them go to the wall and not honour a court judgement against them. In the absence of real security in advance at this stage however, one can not predict that this would happen, particularly if the IKOS organisation was aggrieved by the substance of any judgement.
83. Thus, I am satisfied that the threshold for the granting of security has been well and truly passed.
84. I must then turn to the exercise of the discretion. The only, albeit an important, point taken by the Claimants is that there is a complete or at the very least a substantial overlap between their claims and those of the Defendants; indeed they go further and say that the "centre of gravity in the litigation is to be found in the Defendants' Counterclaim" (Paragraph 31 of the Counsel's skeleton). Both parties have sought to analyse the pleadings to demonstrate that they are right in this context and that the other side is wrong. It is common ground however that the surveillance claims are essentially freestanding and that credit must be given in any amount fixed for security to discount the costs relating thereto.
85. It is unnecessary to set out any very detailed analysis of the Particulars of Claim and the Defence and Counterclaim. It is possible to form a view as to whether it was an accident of timing that the Claimants are claimants as opposed to the Defendants. CIF was certainly "first off the mark" by issuing proceedings against Dr Gover in Cyprus on 23 December 2008, the date when Dr Gover was dismissed. The Employment Appeal Tribunal proceedings followed in March 2009 but, I apprehend, the time constraints for such proceedings were such that they had to be issued in that timescale. The next material step was the issue in England of proceedings by the other two Claimants against Dr Ho in November 2009. Following the stay or discontinuance of their proceedings in Cyprus, the next material step was the issue of the current English proceedings by the Claimants against Dr Gover in April 2011. Given this chronology, I do not consider that it is simply a matter of chance that the Claimants are claimants; they were always keen to be in the claimant driving seat.
86. There are essentially in the Consolidated Particulars of Claim different sets of claims against the Defendants:

(a) Claims against Dr Gover and Dr Ho for technical breaches of contract (Paragraphs 25 and 27) to the effect in the broadest terms that they did not do their jobs properly, variously between 2005 and 2008 (Dr Ho) and between 2003 and 2008 (Dr Gover), albeit that some of the allegations appear on their face to run from as early as 1994. I do not use the word "technical" in the sense that they are formal or immaterial breaches. These breaches are said to have led to problems and underperformance and other problems in the black box trading activities and capabilities of IKOS. They are alleged to have led to the negative performance of the IKOS Equities Strategy, direct losses of management and performance fees, losses of fees in subsequent years due to investor redemptions and continued loss of investor confidence (see Paragraph 26.10 in relation to Dr Ho) and to a significant loss in respect of the trading of Interest Rates and Bond Futures asset classes, losses and increased volatility in the trading of futures contracts, uncorrected distortion in the pricing of securities and the reduction in the performance and increased volatility of the securities portfolio (see Paragraphs 28.4 to 28.7 in relation to Dr Gover). Their breaches are said to have caused crashes to the computer system on four occasions in 2007 and 2008 and the failure of the dealer averaging process to work properly (see Paragraph 29).

(b) There are breaches pleaded against Dr Ho and Dr Gover with regard to wrongful use, retention and disclosure of confidential information. Little was pleaded until very recently about the loss and damage caused by all these breaches. Paragraph 34 simply pleaded under the rubric "Loss and Damage": "By consequence of the above, the Claimants have suffered loss and damage, to be assessed." Further Information provided after the argument on these applications simply says in answer to a request that full and proper particulars of any loss or damage of alleged to be given:

"The total assets under management fell from USD 3,391,800,000 on 1 July 2007 to USD 1,569,700,000 on 31 December 2008. Damages caused by drawdowns and the Defendants' errors and omissions will be assessed."

This tells the reader almost nothing but Counsel has since confirmed on another procedural outing that the claim is not the difference between these two figures but still a very substantial figure.

(c) Paragraphs 36 to 53 seek in anticipation of a cross claim by the Defendants for bonuses in 2007 and 2008 to argue with that there was no obligation to pay any such bonuses and some cross-referencing is made to Dr Ho's and Dr Gover's alleged poor performance in 2007 and 2008 (see Paragraphs 42.2, 43.2, 47.2 and 48.2). There seems to be no complaints here at least of poor performance at an earlier time.

(d) At Paragraphs 54 to 61, the Claimants claim the return of the £3 million bonuses paid to each of Dr Ho and Dr Gover both in 2005 and 2006.

87. The Defence and Counterclaim addresses these claims, broadly in the order in which they are made. Relatively detailed responses are given, certainly in some parts of the Defence. The Counterclaim, apart from the surveillance claims which fall in to their own particular category, proceeds now (following the abandonment of a claim for an equity share of 12%) on two grounds the first being that there was agreement that Dr Ho and Dr Gover were each entitled to a share of the profits made by the IKOS Group, so far as material of either 5% or 10% from 1 January 2005 (plus any additional discretionary bonus). These claims are based on agreements primarily if not exclusively said to have been entered into between each individual and MC at various times. In quantum terms, these claims amount to some £20 million net each (10%) or some £6.7 million (5%).
88. I have formed the view considering the pleadings and such evidence as has been put before the court at this stage that, whilst there is some significant overlap between claim and counterclaim, there are significant areas of the claim which do not overlap with the counterclaim. The claims for what I have called the "technical" breaches of contract can not all relate to the justification for not paying bonuses in 2007 and 2008 and, indeed, are not pleaded to do so. There is a very substantial loss which is claimed as a consequence of these technical breaches and there will have to be very wide ranging disclosure, witness evidence and importantly expert evidence to establish these breaches and in any event the losses said to have been caused by such breaches. The claim for the abuse of confidential information in reality has little to do with the bonus counterclaim and will require a substantial factual investigation into what, if anything material, the Defendants did with any such information and a potentially complex and costly expert investigation into damages. The claim for the repayment of the 2005 and 2006 bonuses has nothing directly to do with the Defendants' Counterclaim for bonuses for 2007 and 2008 or indeed in respect of the Counterclaim for a 5 or 10% share of the profits. It is undoubtedly true that a part of the pleaded Claim is a challenge to the anticipated 2007 and 2008 bonus counterclaim but that could just as well have been made in any Reply.
89. In terms of scope, the Court has to do the best that it can in determining for how much in broad quantitative terms there is no overlap. This involves the exercise of some judgement as to how much time, cost and effort overall is likely to be spent on parts of the Claim which do not overlap with the Counterclaim. I have formed the view that there is an overlap of about 30%. I have formed this view taking into account the contents of the previous paragraph and the following points:

(a) The cost, time and effort of dealing with the allegations of the technical breaches made by the Claimants which do not impact on the bonus counterclaim (relating to 2007 and 2008) will be substantial and the as yet un-particularised separate quantum set to flow from all those breaches will be substantial. Similar considerations apply to the breaches or other unlawful behaviour relating to confidential information and the cost or loss consequences flowing therefrom.

(b) The cost, time and effort of dealing with the profit share counterclaim (whether of 5% or 10%) will be relatively minor in the sense that it is primarily dependent, liability-wise, on whether agreements were reached about such profit share and the quantum is relatively easily determined once the Claimants provide disclosure of what if any the profits were for the IKOS Group between 2005 and 2008 inclusive.

(c) The cost, time and effort of dealing with the bonus counterclaim relating to 2007 and 2008 is by no means likely to be insignificant but one is looking at some breaches over a two year period primarily, some legal arguments and arguments about how factually a discretion to award bonuses should have been exercised.

90. It therefore is right that this Court should take into account the overlap in fixing the amount of security. This is not a case in which a security should be refused where there is a substantial imbalance between the cost, time and effort likely to be extended by the Defendants in dealing with those parts of the Claim which do not overlap with their cross claims.
91. As for the quantum of costs, the Defendants have identified their costs estimate as £4.37 million plus VAT. From that figure there has already been deducted the total sum of £235,000 relating to what were said to be allowances originally included in the estimate for the surveillance claims and for the now discontinued claims for a share of the equity and the claim for 12% profit share. I do not understand that the basic figures are challenged as an unreasonable estimate of the overall costs, although some doubt has been raised as to whether sufficient allowance has been made for the surveillance, equity and 12% profit share claims. That doubt is not wholly misplaced in my view and a net figure of £4.3 million plus VAT would be a more appropriate starting point, that is £5.16 million. From this, there should be deducted 30% to relate to the costs attributable to the Counterclaim which overlaps with Defence issues, other than the surveillance claim which is already accounted for. That produces a gross cost figure of £3.612 million from which one needs to deduct an amount which will reflect a costs assessment on a standard basis, say 30%, which produces a net figure of £2.528 million, which I round down to £2.5 million.
92. Accordingly, the Claimant should provide security in the sum of £2.5 million. I would anticipate that the parties will agree how this is to be provided and I have already indicated in argument that would not all have to be provided immediately but it could be provided in tranches. There will be permission to apply if circumstances change.

Decision

93. It follows from the above that the Claimants' applications to strike out and for summary judgement are dismissed, although by agreement there will be judgment in their favour in relation to the equity share counterclaim. The Claimants are to provide security for costs in the sum of £2.5 million.