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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Parkhouse & Anor v Sutcliffe & Ors [2025] EWHC 482 (Comm) (06 March 2025) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2025/482.html Cite as: [2025] EWHC 482 (Comm)

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IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN WALES
CIRCUIT COMMERCIAL COURT (KBD)

		Cardiff Civil Justice Centre 2 Park Street, Cardiff, CF10 1ET
		6 March 2025

This judgment was handed down remotely at 10am on 6 March 2025 by circulation to the parties or their representatives by email and by release to the National Archives. ............................. HIS HONOUR JUDGE KEYSER KC

Judge Keyser KC :

Introduction

1. By application notice dated 20 November 2024 the claimants applied for interim mandatory and prohibitory injunctions against the defendants in respect of certain IT systems. The application came before HHJ Jarman KC, sitting as a Judge of the High Court, on 29 November 2024, when all parties were represented. By consent, and upon undertakings given by all parties, the application was adjourned, with directions, for further hearing in January 2025. By paragraph 7 of the order, costs were reserved to the further hearing.
2. The further hearing was before me on 16 January 2025. By letter to the defendants' solicitors on 7 January 2025 the claimants' solicitors indicated that, in the period since the giving of the undertakings on 29 November 2024, necessary migration of the IT systems to the claimants had been successfully completed and that the interim relief sought in the application notice was no longer required, and that accordingly the purpose of the further hearing would be "to determine the outcome of [the claimants'] application for interim injunctive relief … to the extent necessary for awarding costs, and any required case management of the substantive claim." The claimants' skeleton argument for the hearing went further: "This [the migration] disposes of the need for the injunctive relief sought in both the Application and the underlying Claim. The only outstanding issue to be resolved in these proceedings is the question of who should pay the costs of these proceedings." The claim form makes no claim for monetary relief, and counsel confirmed to me at the hearing that the only outstanding issues on the claim concern costs. There has been no suggestion that any of the defendants intends to bring a counterclaim if the claim itself falls away.
3. It is, accordingly, clear that there will be no trial at which the costs of the application might be determined. In those circumstances, the only sensible course is to determine the incidence of those costs now, and the argument before me was directed to that issue. Those costs are by no means insignificant. The claimants' statement of costs amounts to £118,066. The first and second defendants' statement of costs amounts to £93,542. The third and fourth defendants' statement of costs amounts to £31,058; they claim VAT on their costs, but the claimants and the first and second defendants do not claim VAT.
4. At the end of the hearing I reserved judgment and, pending delivery of the judgment, imposed a stay on the proceedings.
5. This is my judgment on the costs of the application. I shall refer to the individual parties as follows: the first claimant is Mr Parkhouse; the second claimant is HNH; the first defendant is Mr Sutcliffe; the second defendant is HBL; the third defendant is VITS; the fourth defendant is Mr Bangher.
6. The remainder of the judgment will be structured as follows. First, I shall set out a regrettably lengthy statement of the facts (though by no means as lengthy or detailed as it could have been). Second, I shall refer to the main points of law relevant to the issue of costs. Third, I shall summarise the parties' arguments. Fourth, I shall set out my reasoning and conclusions.
7. I am grateful to counsel for their submissions: Miss Clarke for the claimants; Mr Calhaem for the first and second defendants; and Mr Couser for the third and fourth defendants.

The Facts

8. Mr Parkhouse and Mr Sutcliffe are businessmen and former business associates. HNH and HBL were originally companies in a group of companies founded by Mr Parkhouse and Mr Sutcliffe. Each company in the group shared the use of, and paid for, an IT System and a Vodafone Account. The IT System was provided by VITS, which is an information technology service provider. Until early 2023 VITS would invoice HBL for its services in respect of the IT System, and the costs of the IT System were then re-allocated among companies in the group by way of inter-company charges. From early 2023, by arrangement between HBL and VITS, VITS submitted separate invoices to the individual companies in the group and the individual companies paid VITS directly, though the provision of the IT services themselves was unchanged. There is an issue as to whether, on the one hand, there remained a single contract between VITS and HBL or, on the other, the new invoicing system reflected separate contracts between VITS and the different companies. According to the claimants, the Vodafone Account was originally in Mr Parkhouse's name, but the invoices were paid by HBL and the costs were then re-allocated among companies in the group by way of inter-company charges. However, by the time of the events giving rise to these proceedings the Vodafone Account was held by HBL.
9. Mr Bangher is a director and shareholder of VITS. In September 2024, after the events described in the next two paragraphs, he made a large loan to Mr Sutcliffe on terms that give him an option to acquire a substantial shareholding in HBL and in an associated company.
10. In August 2024 Mr Parkhouse and Mr Sutcliffe decided to part ways and divide the group of companies into two separate groups: the PP Group, controlled by Mr Parkhouse; and the WS Group, controlled by Mr Sutcliffe. HNH went into the PP Group. HBL went into the WS Group. The key terms of the "de-merger" were recorded in a document titled "Heads of Terms", which was signed by Mr Parkhouse and Mr Sutcliffe on 27 August 2024. Those terms did not include anything concerning separation of the IT System or the Vodafone Account, both of which continued to be used by the PP Group and by the WS Group. It is clear, both from the evidence and as a matter of common sense, that it was intended that the PP Group would in due course make its own arrangements for an IT system and telephone account and that material would be migrated to those new providers. In his second witness statement, Mr Sutcliffe states: "Since the demerger HBL have been asking HNH to set up their own IT and phones systems as part of the wider separation and agreement between the two formally intertwined entities. This was part of a transition period."
11. The de-merger was effected by transfers of shares on or around 2 September 2024.
12. On 10 October 2024 James McGrail, a director of HBL, sent to HNH a request for payment of charges said to be due in respect of services still hosted by HBL, which included charges on the Vodafone account. The email, which was generally eirenic in tone, said in part: "If these items cannot be settled or discussed with a sensible agreement reached, access will have to be restricted on the brickwork [HBL] servers with immediate effect[;] this will include access to all shared folders, Sage & Eque2 as all Homes D&B and Cobham design data is currently hosted by Brickwork." In his first witness statement, Mr Parkhouse explained: "Eque2 is a very important piece of software to HNH. It manages all of HNH's cost controls, budgeting, forecasting and payments to contractors."
13. By early October 2024 Mr Parkhouse had entered into discussions with another IT service provider, Orbit, with a view to the PP Group receiving IT services from that provider rather than from VITS. Mr Parkhouse also had discussions with Mr Bangher regarding the terms on which VITS might provide IT services to the PP Group under a separate contract. According to Mr Parkhouse, Mr Bangher told him, with apparent reference to Mr McGrail's email, that the PP Group was in effect leasing the use of the IT System from HBL and that, "if I don't pay my bills, that's what's going to happen". However, according to Mr Parkhouse, Mr Bangher also said that the PP Group would be subject to a 90-day notice period would be required to end the contract for IT services with VITS. (In his second witness statement, dated 10 December 2024, Mr Bangher does not seek to contradict that evidence.) Mr Parkhouse stated that Mr Bangher also told him that he had invested in HBL and would shortly be actively involved in two other companies in the WS Group.
14. On 16 October 2024 HNH gave notice to VITS that it wished to transfer its IT services to Orbit. This has been referred to as 90 days' notice, and there is reference to such a notice period in communications around that time, but the terms in which it was given are non-committal as to any requirement for notice or, indeed, as to the existence of a contract between HNH and VITS. In his second witness statement, given on behalf of VITS after the first hearing, Mr Bangher stated:

"I should make it clear that HBL is our client, while HNH is not. If HBL, or any of our clients, instruct us to do something lawful then we follow those instructions. It is not for VITS to question commercial decisions taken by our clients, and that is reflected in the undertakings which I gave to hold the ring pending this application being heard with a proper time estimate. Clause 1(a) of the undertakings [i.e. given on 29 November 2024] provides an exception to the main undertaking in circumstances where I or VITS was 'Lawfully instructed otherwise by HBL'. This confirms both that HBL is VITS' client and also that VITS will be following lawful instructions received from clients. I should also add that, as is also confirmed by the wording of the undertaking, I do not accept that I was bound to offer that or any undertaking at all. The real dispute is between HNH and HBL or, perhaps more pertinently, between Mr Parkhouse and Mr Sutcliffe."

15. I mention at this point an incident that occurred on 28 October 2024, because it has been raised in subsequent correspondence. Chris Pipe, the finance director of HNH, (inadvertently, as it appears) removed the WS Group companies from Sage. This led HBL to request VITS to remove all access for HNH. However, on investigation, VITS's IT Manager, Mustafa Alhatem, was told by Mr Pipe that the latter had removed the WS Group companies from his welcome screen, believing that this would affect only himself and not realising that it would remove access to Sage from all those companies. Mr Alhatem spoke to Mr McGrail about this explanation and advised that excluding the PP Group companies from access to Sage would be inappropriate; and they were not excluded.
16. In Mr Alhatem's witness statement and in correspondence from Carter Bells, VITS's solicitor, on 20 November 2024, it has been said that on 28 October it also came to light that Mr Pipe had (apparently on 15 October) "attempted to hack the internet line belonging to HBL", and that Mr Alhatem had explained to him "that it would be fraudulent for him to try and migrate the internet line as he does [not] work for HBL and does not have authority to do so" (quotes from Carter Bell's letter). I note that no incident report was made in respect of this and that it did not result in interruption of the claimants' access to the IT System. Mr Parkhouse gives an account and explanation of this incident in his fourth witness statement, which I do not need to set out here.
17. On Friday 8 November 2024 there was a telephone conversation between Mr McGrail and Mr Pipe. Mr McGrail says that he called to ask how matters were progressing in respect of the proposed transfer of services and that he suggested that the WS Group might like to transfer their telephones to a pay-as-you-go contract, so that HBL would not have to keep invoicing HNH. In the light of that conversation, Mr Pipe sent Mr Parkhouse an email that, although it said nothing about any threat to cut off HNH's telephones, began, "Brickwork have contacted me, they are wishing to deactivate the Homes phones very soon." Mr Parkhouse read this hastily; he took it to refer to a threat rather than (as the rest of the email would have made clear) an intimation of a desire for progress. He admits that he "panicked". That morning he had a conversation with Vodafone concerning the Vodafone Account. Mr Parkhouse says that he could not remember whether the account (which he says was originally in his name) had been put into the name of HBL (Mr Sutcliffe says that HBL had always been the account-holder) and that the Vodafone representative confirmed to him that the account was in his name and that Tina Rooney, an employee of HBL who had been running the account for several years, was the other nominated controller. Mr Parkhouse instructed Vodafone to remove Ms Rooney's authorisation, leaving him as the sole controller. He says that he did not attempt to suspend any of the lines on the account or do anything to prevent the normal running of the account. This was done.
18. At 10.55am on 8 November Ms Rooney asked Raj Chatha, the account manager at Vodafone, to block a particular number. He replied, "I have just looked into the account and it appears you have been removed as an authorised user. If you think this was done by mistake, can you please ask the authorised user to email me and I can add you back on." There followed a telephone conversation between Ms Rooney and Mr Chatha, after which she wrote:

"The account is in the name of Harlequin Brickwork Ltd.

Paul Parkhouse was removed as a director of Harlequin Brickwork on 31st August, we discussed this a month or so ago as they wanted to set up a new account under Harlequin D&B/ Homes.

… Can you please remove Paul from the account. Once this has been done I will give you the numbers to remove from the account. … Can you please update me asap and let me know when he has been removed."

That action was taken, and later that afternoon Ms Rooney sent a list of numbers to be blocked and Mr Chatha confirmed that all those lines had been suspended.

19. On the afternoon of 8 November 2024, HBL blocked access to the IT System and to the Vodafone Account by the claimants and the companies in the PP Group. In an email from Mr Pipe, Mr McGrail said:

"As a result of Paul's actions all the phones will now be frozen with immediate effect and all handsets need to be returned to Harlequin Brickwork.

…

We had no intention of cutting anyone off but Paul cannot ring up Vodafone remove Tina from the account and add himself that's Fraudulent (stated by Vodafone) and he is not involved in Harlequin Brickwork and cannot do that."

20. Mr McGrail dealt with the matter as follows in his witness statement:

"10. As a result of Mr Parkhouse's actions, the mobile phone and IT system access was suspended to preserve the security of our data and communications.

11. The reason for this suspension was that the phones are tied to the IT system as a requirement to enter our IT systems remotely is by an authenticator app downloaded onto the company mobiles. The loss of control of the mobile phones would prevent HBL from accessing our systems unencumbered which in turn would effect [sic] our ability to fulfil our weekly payments to our subcontractor labour force. The construction industry is a very fickle and failure to pay your subcontracted labour will quite simply mean they walk off site at which point the business would have serious issues."

21. The claimants, however, question the bona fides of HBL's reliance on a security risk, in the light of a text message that Mr McGrail sent on 11 November:

"As mentioned, today Paul is still trying to get numbers moved on Vodafone and telling Vodafone Tina has approved the changes, it's not true as you can see in the attached [screenshot of an email].

He can't ring up and do this[:] harlequin brickwork is not his company and that number belongs to the company not him personally.

Once he gets new contracts he can have the numbers transferred over to him, no issue with that.

We want to turn you back on asap but for that to happen we want our retentions £25,736.40 paid for brwk, scaff & contracting and then the £24,736.95 that is being chased by by [sic] stat demand for Kingsbury settled with Matt so Matt can repay us. The other funds he's chasing we can, as discussed sit down with Simon Burke and go through item by item and get them all dealt with and get it resolved.

If you can get this done we will turn the IT on this afternoon."

A further text message sent later that afternoon sought to "reiterate" that the primary reason for "turning off the IT" was concern about the security implications of Mr Parkhouse's intervention with Vodafone. The claimants say that this is to be viewed as a piece of backtracking after the true motive had been carelessly revealed. They draw support for that inference from the attendance note made by Capital Law of a conversation with Mr McGrail on 12 November 2024, which records him as saying, "We turned them off because he didn't pay bills, not as a pre-requisite."

22. The role of VITS in blocking HNH's access to the IT System was dealt with by Mr Bangher in his second witness statement:

"18. On 11^th Nov 2024 …I had a briefing with my IT manager, Mr Alhatem, about the security breach that took place on Friday 8^th Nov 2024. We reviewed the service desk request from Mr Sutcliffe on the 8/11/2024 at 3:46pm, and supporting evidence from the Vodafone email trail clearly stating that Mr Parkhouse had taken control and breached the mobile phone Application bundle account without consent from HBL. The Vodafone account belonged to HBL. Mr Alhatem acted on instructions from Mr Sutcliffe and the supporting evidence from Vodafone to mitigate the security risk.

19. VITS do not manage the mobile phone account this is managed directly by one of HBL's employees, Tina Rooney. VITS do not have access to this account.

20. VITS/Mr Alhatem acted in line with best security standards in line with Cyber Essentials and 13027001 security standards and adopted a zero-trust approach to the situation which was justified by the instructions that we received from our clients as to what had occurred.

21. The mobile phones potentially pose a huge security risk because they are used for accessing HBL's network remotely over VPN using MFA (multi-factor authentication), mobile banking, receiving OTP (one time passwords) for most cloud services including Sage Accounts. This resulted in temporarily revoking system access for HNH. However, the fact that it was VITS that metaphorically flicked the off switch does not mean that VITS was the party behind the decision to do so. As I have stressed repeatedly, if VITS receives instructions from a client to undertake some lawful action, then those instructions are actioned. There was nothing unlawful, in so far as VITS was concerned, in taking HNH off-line in the face of a security breach."

23. On Monday 11 November 2024 Mr Parkhouse spoke to Mr Chatha at Vodafone, who, he says, told him that the person he had spoken to on 8 November had "misunderstood the question of account ownership". (Mr Parkhouse says that he took this to mean that the account was in fact held by HBL, not by him.) At all events, Vodafone was unable to restore him or the companies in the PP Group to the Vodafone Account; it could only suggest that he ask Ms Rooney for access.
24. At 9.37am Mr Chatha sent an email to Ms Rooney: "I wanted to let you know, Paul is calling into the customer care asking access to the account and his number. I have advise[d] the customer care team to let Paul know he must contact yourself for any changes etc." At 10.24am Mr Chatha sent another email to Ms Rooney:

"I have just spoken with the care team agent and she said you have approved to unsuspend Paul's number …

Can you please authorise this by replying back to this email?

Paul has also asked if the other lines can be unsuspend and if we can tell him which numbers they are as I told him I could not give him this information. Paul is also arranged to set up a new account so we should soon be able to move these lines away."

Ms Rooney replied: "No I did not, I said he needs to set up his own Business account and once this is done, I will give authorisation to move the numbers across via the PAC code, he is not allowed access to any of these numbers." Mr Parkhouse observes that Vodafone did not assert or imply that he had claimed to be a director of HBL or that he had attempted to remove any telephone numbers of the WS Group from the Vodafone Account, and he denies that he did either of those things. He also suggests that the subsequent allegations that he had acted fraudulently have arisen from a misconstruction of the first line quoted above from Mr Chatha's email at 10.24am: because it it has (he suggests) been read as meaning that it was he who had told the customer care team that Ms Rooney had approved the removal of the suspension, though it does not say that.

25. On 12 November Mr Parkhouse instructed Capital Law to act in the matter. Capital Law wrote letters to Mr Sutcliffe and HBL and to VITS and Mr Bangher, requiring them to reinstate the claimants' access to the IT System immediately and threatening an application for an injunction if they did not.
26. On receipt of the letter to him, Mr Bangher emailed Mr Sutcliffe and HBL:

"I received this letter from Paul's solicitors. I want to add that there was security breach where PP fraudulently tried to take over the Vodafone account. This poses a major threat to the IT systems because the Duo MFA is required for VPN remote access to the IT systems or OTP which is setup on the mobile phone. Also, the MS365 email platform equally requires MFA/OTP via the mobile phone to function and be secure."

27. Also on 12 November Mr McGrail of HBL wrote to Capital Law after speaking to Carrie Jones, the solicitor there with conduct of the matter for the claimants:

"As detailed the reason the IT was cut off which does not appear to have been relayed to you by Mr Parkhouse.

As some background, post demerger (31/08/2024) it was expected that 'Paul' and the 'Homes Group' would setup their own phone contracts at which point the numbers would be transferred over to Paul and co. On Friday I asked Chris Pipe (The Group FD for Paul) how this was going as we do not want to continue recharging the costs indefinitely and we suggested that perhaps the phones are transferred to Pay as you go and then Paul and co can setup their contracts in their own time. This is neither unreasonable nor an attempt to cause issues.

However, in response, Paul took it upon himself to contact Vodafone and discuss our account with Vodafone knowing full well that he no longer has any capacity to do so, he is neither employed or a shareholder of the business. He chose to remove our office administrator as the contact and controller of the account and add himself, actions that Vodafone described as fraudulent.

I have attached emails from Vodafone showing he continued to act dishonestly again on Monday. Given that Paul is clearly not behaving well it was decided that access would be cut to the phones and IT for security reasons. The mobile phones of staff are tied to the IT access and the reason that we did this was it is felt that Paul was acting against our business and the fact that at present there are shared folders containing sensitive information that he had access to. So, we have taken measures to safeguard ourselves and our data.

We have the VITS company working through the security protocols and attempting to separate as many of the folders as possible to a point at which it safe to grant Paul access again. Attached is an email from VITS whereby they explain the security breach. [That is the email from Mr Bangher, already quoted.]

We have requested payment of bills but again that's not why Paul had his access removed. It appears that message wasn't relayed to you either and that Paul is painting a disingenuous picture to suit himself.

We are working to turn them on as quickly as possible once we feel we are secure."

28. On the late afternoon of 12 November Mr Sutcliffe replied to Capital Law:

"Having spoken with our IT company on this matter, 'of a security breach,' and due to the timings of your email.

It is totally, impractical to expect us to return IT services to your client when they have committed a fraudulent attempt to close down our telephone services.

In fact our telephone services have a direct link to our IT services. Our Contractors are paid through our IT system, so as I am sure you can understand we cannot risk wages being put under risk.

We are in discussions with VITS regarding the security breach and what can be done to protect our data from outside interference.

I do not expect this matter to be resolved quickly, but once VITS are happy that there can be no access of a direct or indirect nature, to our systems we will endeavour to reinstate the IT services to Homes by Harlequin. At this time I cannot give a definitive answer as to when this will happen. But I do have a duty of care as a Director of my business to protect my company which I am sure you will understand.

This will be of course subject to your client confirming in writing that no further fraudulent attempts will be made to access our systems.

Further I will need to take further direction from our company Lawyers with regard to their reply to your letter which is both provocative and has unrealistic time parameters. Our Lawyers will be in touch in due course, once we have concluded our meeting with them."

29. On 13 November 2024 VITS wrote to Mr Sutcliffe and HBL:

"After a very detailed security audit of all systems and services, VITS can conclude there are no further security breaches and with your written authorisation VITS are happy to turn on all IT services for Harlequin New Homes. Awaiting authorisation from the Managing Director of Harlequin Brickwork limited [sic] to turn IT systems back on again."

On the same day, Mr Sutcliffe forwarded that email to Capital Law and wrote:

"Please see the email below and the Incident Report by VITS. Can you obtain in writing from your client to confirm that he will adhere to the AUP [Acceptable Use Policy] for all IT systems and the phone/mobile system and will not attempt any further security breaches? Once I have this in writing I am happy to turn on all systems for Harlequin New Homes."

30. At 12.32pm on 14 November Capital Law replied to Mr Sutcliffe, copying in Mr Bangher. The email said that the AUP seemed a sensible policy but had not been drafted to deal with the situation of two separate groups of companies using the same systems. It said that separation was being delayed by VITS's insistence that it was entitled to a notice period, and it disputed the entitlement to notice on alternative grounds: first, that if (as Mr Bangher was alleged to have said to Mr Parkhouse) HNH was leasing the use of the IT System from HBL, there was no contract between the PP Group and VITS; second, that if there was such a contract, it had been breached by VITS. The email continued:

"Provided there is no notice period (or any penalty for 'early' termination), our client will be able to transfer its data and accounts over to a new IT provider within a short period of time. This will allow for the orderly separation of the systems between the two group companies. However, it will require the co-operation of both Vits and HBL.

Therefore, provided Vits do not attempt to delay the separation of the systems, our clients agree to abide by the AUP (insofar as they are able) for the period of transition to their new systems, and not act in a way which would compromise system and data confidentiality, integrity and availability. Whilst it remains our position that the policy would not be workable long-term, we do not envisage it causing any issues in the short time and provides the parties with an opportunity to transition the separation whilst their respective businesses continue to trade unhindered by a lack of IT provision. To be clear, our clients do not accept that they have intended to commit, or committed, any security breach, as alleged or otherwise.

We therefore ask that you provide the following by immediate return:

• Confirmation that HNH and its group companies will be reinstated with immediate access (by no later than 2:30pm today) to all their IT systems (including mobile phones) and all documents, data, accounts, telecoms or otherwise belonging to it, as previously enjoyed by them.

• Confirmation that Vits will not attempt to impose any form of notice period or penalty on our clients (or any group company belonging to our clients) for migrating its IT service requirements to an alternative provider.

• Confirmation that HBL and Vits will co-operate with HNH and its incoming IT provider and use all reasonable endeavours to ensure the smooth and timely transition of its data and accounts (including taking all necessary steps without delay).

• Confirmation that HBL will undertake all actions necessary to allow for the separation of telecoms.

• A copy of the IT Contract with Vits."

31. Mr McGrail confirmed by telephone that the letter had been passed to HBL's solicitors. In that telephone call he stated that confirmation via solicitors would not suffice and that a document signed by Mr Parkhouse was required. Having received no substantive reply to its letter, Capital Law sent another email at 7.32pm, requiring a response, including confirmation that HNH and its Group companies had had their access reinstated, by 10am on 15 November, "failing which our clients will be forced to consider alternative options to enable them to trade and stem their loss."
32. Mr Sutcliffe replied very early on the morning of Friday 15 November 2024:

"Our Lawyers are instructed and are reviewing the various documents and will reply today to you[r] various letters.

Once we are all in agreement that your client will not attempt any further potentially damaging acts to compromise our company systems then we will be in a position to reinstate services.

As stated previously we will require Mr Parkhouse to confirm that he will not try and commit any further fraudulent attempts to gain access to our systems.

As for notice periods between HNH and VITS you will need to discuss this directly with VITS."

33. At 12.48pm that day, Mr McGrail wrote to Capital Law to confirm that he was constantly chasing the lawyers for a response and that they had confirmed it would not be long. "In the meantime, as a gesture of goodwill and to show we want to draw this to a conclusion, I have instructed Vits to start releasing some IT access while we are waiting." Mr Parkhouse states: "Following this, the employees of the PP Companies started gaining access to their email accounts again, and some of the documents on the ShareFile. However, I did not have access to anything. I also understand that during one of the calls between Capital Law and Mr McGrail, Mr McGrail confirmed that Vits was happy to transfer the systems straight away to Orbits IT and not hold the PP Companies to any notice period."
34. On the afternoon of 15 November 2024 VITS confirmed that HNH's access to the IT System and Vodafone Account had been substantially restored. However, the email said: "As per the request of Harlequin Brickwork, we are unable to grant access to the RDS server (Sage and Eque2) as Harlequin Brickwork lawyers are still awaiting a response from Paul Parkhouse. … Also, Paul Parkhouse will remain locked out of the system until further notice." Mr Parkhouse states that he was "very confused" at this response, as Capital Law had already provided a written assurance on behalf of himself and HNH that they would not act in a way that would compromise data confidentiality, integrity and availability and that they would abide by the AUP, and because the Eque2 system was used only by HNH and did not contain any data of HBL's.
35. Having received no communication from the solicitors for Mr Sutcliffe and HBL, at 11.32am on Monday 18 November Capital Law wrote to those parties. After summarising previous communications, the letter said:

"6. As at the time of this letter, we are yet to receive the promised response from your lawyers, despite repeated assurances that we would receive it on Friday.

7. Further, HNH's employees have only been given access to their email accounts and some of HNH's server files and told that it was PP holding matters up, which we consider to have been a deliberate mistruth to create tension within HNH.

8. It remains unexplained why full access has not been granted, despite the confirmation given in our email of 12:32 on 14 November 2024.

9. This situation cannot continue. Our clients cannot sit back whilst you drip-feed access on a piecemeal basis. Without full access to the Systems, HNH cannot fully operate its business.

10. We require you to provide full access to the Systems by 12:30 today, failing which we will be instructed to apply immediately for an injunction, in respect of which Counsel has already been instructed.

11. Our clients cannot rely upon the assurances they have received from you to date, which have been demonstrably baseless.

12. We look forward to hearing from you as a matter of urgency."

36. That afternoon, VITS confirmed to Orbits IT that it aimed to complete the transfer to the new system by mid-December.
37. At 3.16pm that day (18 November), Mr Bangher sent an email to Capital Law, copying in Mr Sutcliffe, Mr McGrail and Healys Solicitors:

"James and William from HBL have reiterated on several occasions that once Paul signs an agreement to confirm that he will not interfere with the systems and will not create any further security breaches, HBL are willing to allow full access. At this point we have nothing in writing from your client.

Part access was provided on Friday around 1:30pm to show a willingness to resolve matters. The reason why access hasn't been provided to the RDP server (Sage and Eque2) is because on the 28^th October 2024 there was another incident that resulted in HNH deleting the sage accounts for the following companies:

- Harlequin Brickwork

- Harlequin Scaffolding

- Harlequin Contracting

- PPEKit

- ChefsKit

This resulted in VITS having to restore and reconfigure the sage server for access. NOTE: At this point HBL didn't remove access for HNH. James McGrail picked up the phone and engaged in dialogue with Chris Pipe the HNH Finance Director to ascertain what happened and it was resolved very quickly. Refer to incident report #20058.

Also, there was another attempted security breach by the employee John Louth even after you reassured us that all HNH will comply to the Acceptable Use Policy provided. Please refer to the incident report #20398.

Therefore, HBL are reluctant to authorise access to RDP server until PP signs an agreement giving assurance, he will not conduct further fraudulent activities or security breaches and this includes all employees of HNH.

Unfortunately, PP didn't make any effort to engage in any dialogue with several attempts made by me and HBL via Chris Pipe and other staff members at HNH which has prolonged the situation and PP has simply put his own business at risk. I believe all parties want to resolve this matter as quickly as possible and the only party dragging their feet is your client."

38. The incident report no. 20058 dated 28 October 2024 related to Mr Pipe's actions regarding the Sage programme (see paragraph 13 above). The claimants say, plausibly, that this was simple human error by Mr Pipe and that no data were lost or removed.
39. The incident report no. 20398 on 15 November 2024 recorded that on six occasions on 13, 14 and 15 November John Louth (also referred to as John Lough), an employee of one of the PP Companies, had attempted, without success, to circumvent HBL's security features by using bypass software. The claimants observe that the folder to which Mr Louth was attempting to gain access was said to be "Cobham Homes", which is not a part of the PP Group or of the WS Group; though if what is meant is Cobham Design Limited, that is a company in the PP Group. In his fourth witness statement, Mr Parkhouse accepts that "it was not appropriate for Mr Louth to attempt to gain access to the IT System in this way" but says that "it was a desperate attempt to regain access to HNH's system rather than a malicious attempt [to] compromise HBL's system."
40. At 6.45pm on Monday 18 November 2024, Healys LLP, solicitors acting for HBL, wrote to Capital Law:

"We are instructed that on or about 8^th November 2024, your client attempted to remove our client's Office Manager, Ms. Tina Rooney, as the administrator on their Vodafone account, seeking to install himself in this position without authorisation. We are advised that this account is owned and managed by Harlequin Brickwork Ltd (HBL) and is not associated with Harlequin New Homes Ltd (HNH).

This action represents a serious overreach and has resulted in significant disruption to our client's business operations. Furthermore, we are advised that your client's previous actions, including the alleged deletion of Sage accounts for several companies under the Harlequin Group and a series of unauthorised IT access attempts, demonstrate a repeated pattern of interference that has caused material disruption.

Our client has acted in line with recognised cybersecurity standards (ISO27001/Cyber Essentials) to secure its IT infrastructure and ensure the integrity of its operations. These measures were necessary following your client's actions, which posed significant risks to our client's business continuity.

Our client has made clear that access to critical IT systems and data will only be reinstated once your client provides written assurances that no further unauthorised or disruptive actions will be taken. Your client's failure to engage constructively or provide these assurances has unnecessarily prolonged the disruption.

We demand that your client immediately:

1. Cease and desist from any further unauthorised interference with our client's IT systems, telecommunications, or business operations.

2. Provide written assurances within seven 7 days of receipt of this letter confirming that:

• Your client will not interfere with the Vodafone account or IT systems;

• Your client and HNH employees will fully comply with the Acceptable Use Policy (AUP) provided by our client.

3. Engage in constructive dialogue to resolve the ongoing disputes and facilitate the orderly separation of IT systems between HBL and HNH."

41. Capital Law responded by letter sent by email at 4.25pm on 19 November:

"2. We are surprised at the content of your letter, given the assurances already provided on behalf of our clients in our email at 12:32 on 14 November … largely mirror the 'written assurances' demanded in your letter.

3. Our clients have been ready and willing to resolve matters from the outset, as demonstrated by the proposal set out in our email of 14 November 2024. Instead, your client has allowed a further 5 days to pass with our clients not having access to the IT systems, which systems you admit as being 'critical' to the running of their business.

4. For the avoidance of doubt, our clients vehemently deny that they acted fraudulently or that they intended in any way to cause disruption to the operation of the HBL Group as alleged, or at all. As such, our clients (including the directors, officers, employees and agents of HNH) have no issue in confirming that they will abide by the AUP insofar as they are able and will not act in a way that compromises system and data confidentiality, integrity and availability.

5. It is further denied that the 'alleged deletion of Sage accounts' and 'unauthorised IT access attempts' caused 'material disruption' to your client: …

…

8. Despite the limited access to the IT systems that our clients have been given since 15 November, their business operations remain effectively paralysed. Your client has been on notice of the ongoing daily loss suffered by our clients as a result, but they have chosen to hide behind spurious and unfounded allegations of fraud and exaggerated claims of interference with the IT Systems to delay matters.

9. In the circumstances, should our clients not have full access to the IT Systems (including access to the VPN, the use of their mobile phone numbers and their iPad sim cards) by 18:30 today, we will be instructed to immediately apply for a mandatory injunction against your client without further notice to you."

42. Healys responded that day:

"1. Written Assurances

You state that your clients' comments and assurances 'largely mirror the written assurances' requested by our client. If this is the case, we are left to question why your clients have not provided the requested clear, written confirmation that they will refrain from any unauthorised interference with our client's systems, including phones or networks.

Such a confirmation, requiring only a simple signature, would have resolved this matter before escalation. Our clients confirm that they have previously communicated this to your clients, yet your clients have failed to act, leaving our client no option but to take protective measures.

2. Cause of Disruption

While your clients have denied acting in bad faith, the evidence we have reviewed clearly demonstrates unauthorised actions, including but not limited to the attempt to assume control of the Vodafone account under false pretences and unauthorised attempts to access restricted IT resources. These actions raised legitimate security concerns, prompting the protective measures taken by our client.

As of now, your clients' limited access to the IT systems is directly attributable to their actions, which required a security lockdown to protect data integrity and system availability for all users, not just your clients.

The cause of the current disruption is entirely attributable to the actions of your client. By attempting to remove our client's administrator from their Vodafone account—an account that is solely under the control of Harlequin Brickwork Ltd—your client has created the conditions necessitating these security measures. Any damage caused to Harlequin New Homes (HNH) is therefore self-inflicted.

3. Breaches of System Security

We suggest that your clients revisit the email trail from Vodafone, which clearly evidences your client's intent to remove our clients' administrator from the account. Further, we have been advised that there have now been four separate attempts to breach our client's IT systems. These actions represent a sustained pattern of unauthorised and inappropriate behaviour.

Your clients have repeatedly failed to provide written assurances that such breaches will not occur in the future, as requested. We fail to understand why. We once again request immediate confirmation, in writing, that your clients will not interfere with our systems in any manner.

4. Alleged Lack of Material Disruption

Your letter disputes the severity of the incidents caused by your clients. However, the removal of Sage folders by your client and the attempted access by Mr. Lough are examples of behaviour that raised legitimate security concerns, requiring our client to act to protect their business.

Your clients' actions involved an attempt to bypass the local Administrator Windows password. This computer is joined to the Harlequin Brickwork Ltd domain, and their actions were flagged as a security breach by the Panda AD260 antivirus solution.

Your assertion that this was a benign attempt to access documents does not align with the facts and demonstrates a clear violation of the Acceptable Use Policy (AUP). These incidents collectively undermined our client's confidence in the system's integrity. The removal of Sage folders and the attempted access to restricted files are objectively disruptive and inappropriate actions, regardless of intent.

5. Protection of Payroll and Business Operations

Our client's payroll system, which processes payments for 260-300 operatives weekly, is directly tied to the integrity of their IT systems. Any compromise to this system would have significant operational and reputational consequences, including the potential loss of workforce due to delayed payments.

Your clients' actions created an unacceptable risk to this critical function, which our client cannot and will not tolerate. Your characterisation of our client's actions as 'spurious' is unfounded. Our client's steps to secure the systems were both proportionate and necessary in light of the incidents in question, which you have not denied occurred.

6. Confirmation of Terms

Our clients position has remained consistent from the outset: they are prepared to restore limited access to the IT systems subject to your clients providing clear, written confirmation that they will comply with the AUP and refrain from any further unauthorised actions.

We ask again: do your clients accept these terms or not? This is a straightforward and reasonable request, and compliance will allow this matter to be resolved swiftly.

…

Our client is prepared to provide interim access to the IT systems for your clients [that is, pending separation of the IT systems], subject to the following conditions:

Written confirmation and an undertakings from your clients that they will comply fully with the Acceptable Use Policy (AUP).

Agreement from your clients to limit their access strictly to the resourcesnecessary for their business operations.

Acknowledgment from your clients that any further unauthorised actions will result in the immediate suspension of access."

43. Capital Law replied at 10.16am on 20 November, enclosing a signed statement from Mr Parkhouse. The letter concluded: "Please confirm by 12:00pm today that the agreed access has been reinstated, failing which our clients' application for an injunction (which has been prepared) will be issued."
44. By email at 11.56am, Healys replied:

"The writer has been in a meeting this morning and we have been able to obtain limited instructions from our client in the short time frame presented.

From those instructions you should note that it is our clients intention to enable your client to be able to have access today but the details of that will be conveyed in our more detailed correspondence. We are confident that agreement can be reached between the parties by close of business today but we simply cannot revert to you substantially in the time frame presented.

Should any proceedings be commenced before close of business today we reserve the right to produce a copy of this letter to the court when determining the issue of costs."

45. Mr Parkhouse's witness statement in support of the application for the injunction was made at this point, as it refers to that email from Healys but not to the subsequent one they sent that afternoon.
46. Healys wrote further on the afternoon of 20 November; the email sending the letter is timed at 5.57pm. The letter said that HBL regarded Mr Parkhouse's signed statement as "a step in the right direction" but had concerns about some qualifications in the statement. The letter sought unequivocal responses on those points by midday on 21 November but said that, as a gesture of goodwill, access would be reinstated from 8am on 21 November "in anticipation of acceptance of these terms." In his first witness statement, Mr Sutcliffe states: "On 20 November 2024, having received the assurances from Mr Parkhouse in the afternoon, I contacted VITS Limited and instructed them to reinstate the IT Systems. The IT Systems were back up and working by 7.30am on 21 November 2024."
47. On the late afternoon of 20 November 2024, the claimants issued the claim and filed the application for an interim injunction. It appears from the evidence that the latest letter from Healys was received at about the same time as the claim and application were filed—just before 6pm—and that it had not been read before they were filed.
48. On 21 November 2024 access to the IT System and the Vodafone Account was fully reinstated. Healys wrote to Capital Law:

"Our clients have instructed us that as of 7.30am today your clients have access to all the systems including telephone services. We enclose evidence of the same, being a screenshot of telephone usage incoming call of Chris P Work. In light of the enclosed, we strongly suggest that you do not serve any purported injunctive proceedings on our clients. Should your client be ill-advised to do so, we will refer the court to this correspondence on the issues of conduct when seeking indemnity costs."

49. In his second witness statement, Mr Bangher states at paragraph 23:

"j. 20/11/2024 at 5:38pm: I received a call from Mr Sutcliffe that all systems can be switched back on including Mr Parkhouse tomorrow morning by 8am (21/11/2024).

k. 21/11/2024: VITS turned on the remainder access to RDS (Sage and Eque2) including emails for Mr Parkhouse at 7:30am (21/11/2024). All system back on before 8am.

l. 21/11/2024: VITS received confirmation around 7:45am from Chris Pipe that HNH had access to Sage and Eque2."

50. The reinstatement of services made mandatory injunctive relief for the reinstatement of access unnecessary, but the claimants took the view that a measure of protection was required against further interference. In his fourth witness statement, dated 19 December 2024, Mr Parkhouse stated: "the basis on which the Defendants started to reinstate our access to the IT System on 21 November 2024 did not provide us with any certainty that the Defendants wouldn't withdraw it at any stage, based on spurious reasons." Drawing on matters that arose in mid-December 2024, he stated: "Without the undertakings [given at the hearing on 29 November] being in place, I have no doubt that the defendants would have blocked our access to the IT System based on their allegations."
51. The claim form and the application were served on Mr Sutcliffe and HBL at about 4pm on 22 November 2024. The brief details of claim on the claim form were in the following terms:

"The Claimants seek:

a) Declarations as to the rights and entitlements of the Claimants and their associated companies, following the demerger of the Harlequin Group, to the IT Systems, electronic documents and records, mobile phone numbers and sim cards ('the IT Systems and Telecoms services') which are in the possession or under the control of the Defendants and relate to the business of the Second Claimant and associated companies.

b) Declarations that the various actions taken by Defendants to interrupt or restrict the Claimant's access to the IT Systems and Telecoms Service constitute breach of contract, breach of trust and/or fiduciary duty, unlawful interference with the Claimants goods or property, intimidation and/or unlawful means conspiracy.

c) Further non-monetary relief as necessary to enforce the said rights and entitlements and ensure the Claimants and the associated companies are able to access the IT Systems and Telecoms Services without interference from the Defendants, including, as necessary and without limitation, injunctive relief, specific performance, delivery up and/or proprietary restitution."

Under "Value", the claim form read: "As the Claimants are not yet able to ascertain the extent or quantify the damage caused by the Defendant's [sic] actions the claim is, at present, limited to non-monetary relief."

52. There followed negotiations with a view to disposing of the application by way of undertakings.
53. On 22 November Capital Law wrote to Healys. The letter accused HBL of having "repeatedly changed what it was demanding from [the claimants] for full access to be reinstated." It said that the caveats in the written confirmation given by Mr Parkhouse "were all entirely reasonable and would not compromise the security of [HBL's] systems". It said that no response had been received by 5.30pm on 20 November and the claimants had not received any further access. It did not make clear whether the claim and application were filed before receipt of Healys' letter of 5.58pm. It explained why no further assurances would be given by the claimants. It concluded:

"It remains open to your client to accept the confirmations provided by Mr Parkhouse on 20 November and to confirm that access to the IT systems and phone network will remain in place until the systems and accounts have been separated. Should such acceptance be forthcoming, the hearing of our clients' Application on 29 November 2024 at 11:30am at the Cardiff District Registry can instead just deal with the question of costs, which our clients will be seeking to recover from your client and the other Defendants."

54. On 26 November 2024 Capital Law wrote to Healys and to Carter Bells, who represented VITS and Mr Bangher, proposing that the forthcoming hearing be adjourned on certain undertakings from the defendants relating to the Vodafone Account and the IT System. Carter Bells replied:

"Our client cannot agree to the inclusion of A in the document as they do not have access or authority in respect of mobile phone accounts. Our client only offers IT services. This should be removed as it only appears to be relevant to HBL not our client.

Once this has been removed our client will further review the undertaking document."

Capital Law sent a revised text for undertakings by VITS and Mr Bangher, removing the reference to the telephones, and Carter Bells replied:

"My client is inclined to agree and sign the document provided but he does have some concerns, namely, if there is a third party security issue such a ransomware attack our client he would have to lock down all systems (contrary to the undertaking). Secondly, if there were any further security breaches from PP where HBL would then inclined and our client following standard working practices would have to lock down the system (we note the 4 security issues we have already identified in previous correspondence).

Subject to the above not occurring, my client has no issue in agreeing to the undertaking. However, he cannot sign an undertaking for blanket access should the above instances occur. Can you please review with your client and revert back. It may be the two above points require mentioning in the Undertaking form, as instances where action may be (although very unlikely) required, so my client can then sign."

After some further revisions, a text agreeable to VITS and Mr Bangher was produced that afternoon.

55. Healys, meanwhile, responded on 26 November 2024, complaining about service and listing of the application and agreeing to the principle of an adjournment with directions. However, the letter said: "In respect of your attempt to make any adjournment conditional on our clients providing undertakings, that approach is misguided. No undertakings will be provided. This state of affairs has arisen solely because the time estimate provided by your clients to the Court was clearly inadequate - the Hearing should never have been listed as it has been." Capital Law replied:

"Our clients would be willing to agree to your proposed timetable for an adjournment of the Application. However, unless your clients agree to provide our clients with the assurances that their access to the IT systems will not be removed pending the completion of the migration, they will need to seek that interim relief and further directions from the Court at the hearing listed on 29 November 2024. Given your clients' actions in removing complete access and the unsatisfactory piecemeal reinstatement of that access (and the ensuing impact on our clients' business operations), there is a real risk that your clients' pattern of behaviour on these issues will reoccur."

56. On 27 November 2024 Capital Law filed further evidence in support of the application, including the second witness statement of Mr Parkhouse and (after hours) his third witness statement.
57. On 28 November 2024 Healys wrote to Capital Law, offering undertakings pending a return date, on terms that the claimants give undertakings in return.
58. In the event, it did not prove possible to reach a concluded agreement until the morning of the hearing on 29 November 2024. HHJ Jarman KC made an order adjourning the application to a relisted hearing between 6 and 24 January 2025, upon undertakings by the parties, broadly as follows:

The claimants gave an undertaking in damages in respect of Mr Sutcliffe and HBL and all companies in the WS Group.

The claimants gave undertakings to use HBL's servers in accordance with HBL's AUP and to limit their access to the servers to the resources reasonably necessary for their business operations.

Mr Sutcliffe and HBL gave undertakings not to interfere with or interrupt the claimants' existing level of access to the IT System and the Vodafone Account.

VITS and Mr Bangher gave undertakings to take all possible and necessary steps to ensure that the claimants had full and uninterrupted access to the IT System in respect of the business of the claimants and the companies in the PP Group.

(The undertakings given by the claimants, Mr Sutcliffe and HBL at the hearing on 29 November 2024 were substantially similar to those proposed by Healys on 28 November 2024.)

59. Acknowledgments of service were filed on 29 November 2024. Particulars of claim were filed on 20 December 2024 (32 pages long, including appendices, notwithstanding para C1.2 of the Circuit Commercial Court Guide). I have read the particulars of claim, though I was not taken to them at the hearing. The parties agreed to extend the time for filing defences until 7 February 2025. No defences have been filed, because at the hearing on 16 January 2025 I imposed a stay pending resolution of the application.
60. The mutual antagonism and mistrust between the claimants and the first and second defendants—not to mention their capacity for making mountains out of molehills—are shown by matters that occurred in mid-December 2024 and were referred to by Mr Parkhouse (see above). The AUP required that user passwords be changed "on a recurring basis"; VITS applied this by requiring a change of password every 90 days. On 13 December, when the migration was expected within a few days, Andrew Johnson, HNH's Financial Controller, sent an email to VITS: "A few staff—myself included—are being prompted to change their system password. Please remove this requirement from all HNH users—we can then discuss this with Orbits once next week is behind us." Mr Alhatem replied that changing passwords was a requirement of the AUP and of HBL's policy. Mr Johnson replied: "I appreciate the below position but as we are moving away from Vits early next week please ensure that no password changes are 'forced on' any HNH users in the next 5 days. We will then make our own arrangements with the new IT service provider going forward. THIS IS VERY IMPORTANT—so please don't enforce the HBAUP on password changes." Mr Alhatem replied that "the policy is in place to protect everyone" and that removal of the policy would "[increase] the risk of another security breach." He offered assistance with changing passwords. Mr Johnson replied: "You are not expositing anyone to the risk of 'another security breach'. Please stop being a 'red tape warrior' and do the sensible thing." Mr Alhatem referred this exchange to Mr Bangher, Mr Sutcliffe and Mr McGrail, saying that Mr Johnson was "being very adamant and aggressive and trying to get [him] to make changes to the Harlequin Brickwork Limited IT Systems." This led to a letter from Healys to Capital Law on the same day, 13 December:

"We are instructed that today at 08:03, your clients employee Andrew Johnson has breached your clients undertakings provided to the Court under order dated 11 December 2024 at paragraph 3(b) i and ii. The paragraph states:

'i. Comply with the Second Defendants' Acceptable Use Policy insofar as it applies to their use of the Second Defendants domain and servers;

ii. Not act in a way that compromises the system and data confidentiality, integrity and availability of the electronic accounts, electronically held documents and IT systems relating to the Second Defendant or any of the companies listed in Schedule B (including but not limited to all Sage accounts and payroll software); and'

Contrary to the above undertaking, we are instructed that Mr Johnson emailed the 4^th Defendant seeking to remove the requirement that all passwords on the 2^nd Defendants IT Systems have to be changed every three months. Enclosed with this letter is the email chain with the 4^th Defendant and your client.

Despite Mr Johnson being informed that this action was in breach of the Acceptable Use Policy in correspondence at 08:58, Mr Johnson continued to attempt to force the 4^th Defendant to remove the requirement for passwords to be changed."

The letter described this as "an unequivocal breach of the undertakings" and as "the second time your client has acted maliciously towards the integrity of our clients IT systems." Capital Law replied:

"a. Mr Johnson emailed Vits asking that the password change prompt be removed from the HNH accounts for 5 days.

b. Vits responded to Mr Johnson, stating that the password change prompt would not be removed.

c. The password change prompt therefore remains in place in respect of the IT systems.

d. Making a request for a discrete part of the AUP to be applied differently to HNH for a period of 5 days is neither (a) non-compliant with the AUP or [sic] (b) acting in a way that compromises the system and data confidentiality, integrity and availability of the electronic accounts, electronically held documents and IT systems relating to the Second Defendant or its related companies."

In a subsequent letter, written after taking further instructions, Capital Law wrote: "The reaction to Mr Johnson's request is disproportionate and gives a misleading impression of Mr Johnson's actions."

61. The separation and migration of the IT System occurred during the week of 16 December 2024. Checks to ensure that the separation process had been completed were concluded by 7 January 2025. The transfer of telephone numbers from the Vodafone Account had also been completed.
62. On 7 January 2025 Capital Law wrote to the defendants' respective solicitors, saying that in the circumstances the further hearing would now be for the purpose of determining the application "to the extent necessary for awarding costs" and for "any required case management of the substantive claim." The letter asked the defendants to agree to pay the claimants' costs of the application, in order to avoid the need for the hearing.
63. On 7 January 2025, Healys for Mr Sutcliffe and HBL rejected the claimants' proposal and asked the claimants to withdraw the application and pay their costs. On 10 January 2025, Carter Bells for VITS and Mr Bangher made a similar proposal to the claimants.
64. On 10 January 2025, Capital Law repeated to Healys the claimants' earlier proposal. In a second letter on that day, they also enquired as to any transcript of the recording of Mr Parkhouse's conversation with Vodafone on 8 November 2024, as the facts and circumstances surrounding that conversation were in issue.
65. On 15 January 2025, Capital Law responded to and rejected Carter Bells' proposal.

Costs: the Law

66. The critical starting point is the general discretion of the court in matters of costs. CPR r. 44.2 provides in part:

"(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.

…

(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended its case or a particular allegation or issue;

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim; …

(6) The orders which the court may make under this rule include an order that a party must pay –

(a) a proportion of another party's costs;

(b) a stated amount in respect of another party's costs;

(c) costs from or until a certain date only;

(d) costs incurred before proceedings have begun; …"

67. The Practice Direction to Part 44 includes the following text:

"Court's discretion as to costs: rule 44.2

4.1 The court may make an order about costs at any stage in a case.

4.2 There are certain costs orders which the court will commonly make in proceedings before trial. The following table sets out the general effect of these orders. The table is not an exhaustive list of the orders which the court may make."

The table sets out a range of possible orders, including costs in the case, costs in any event, costs reserved, and costs in the application.

68. Although it has, in my view, no direct bearing on the issue before me, I mention also CPR r. 38.6, which provides in part:

"(1) Unless the court orders otherwise, a claimant who discontinues [a claim] is liable for the costs which a defendant against whom the claimant discontinues incurred on or before the date on which notice of discontinuance was served on the defendant."

69. The "general rule" in r. 44.2(2)(a) applies, on the whole, not only to claims but to applications. However, the application of that provision is rather nuanced when the court grants, or refuses to grant, interim injunctions. In Desquenne et Giral UK Ltd v Richardson [2001] FSR 1, the claimant obtained, on a without notice application, an interim injunction against a former employee to restrain breach of a non-competition clause in the contract of employment. On the return date, on notice to the defendant, the judge continued the injunction on the basis of the balance of convenience. The judge ordered the defendant to pay the costs of the application, and the defendant appealed against the costs order. The Court of Appeal allowed the appeal and substituted an order reserving the costs. Morritt LJ, with whom Morison J agreed, said at 6-7 (I substitute the current numbering of the Rules for the numbering as it was at the time of the judgment):

"I accept of course that the issue was one for the judge's discretion. In my view, this is one of those cases where this Court is entitled and indeed bound to interfere with that exercise. I say so for basically three reasons: the first one is that the decision seems to me to be inherently unjust. It is quite plain from the passage in the judge's judgment from which I quoted that he granted or continued the [in]junction on the basis of the balance of convenience in order to hold the ring until the dispute between the parties could be properly decided at a trial. It is inconsistent with an order such as that, that there should be successful or unsuccessful parties for the purposes of the rules either new or old.

Second, it seems to me that the judge was wrong, therefore, in determining, for the purposes of rule [44.2(2)(a)], that either Mr Richardson was the unsuccessful party, or, alternatively, that the employer was the successful party. He was right to consider within the terms of that rule whether to make an order about costs. That was what he did. But the order that he made was, going back to rule [44.2(1)(a)], whether the costs should be made payable by one party to another. That seems to me to have been wrong; there were no successful or unsuccessful parties at that stage and the proper orders to be considered were those under the terms of the practice direction to which I have referred."

(The terms of the applicable practice direction to which Morritt LJ was referring were materially the same as those which I have set out above from the current Practice Direction to Part 44.) I take the case to establish that, where an interim injunction is granted or continued on the basis of the balance of convenience, the normal order for costs will be that costs be reserved.

70. The point was further considered in Picnic at Ascot v Derigs [2000] EWHC 1568 (Ch), [2001] FSR 2. At the first hearing of the claimants' application for an interim injunction the defendants stated that they would oppose the application; therefore, upon certain undertakings by the defendants in the meantime, the application was adjourned, with directions, to a further hearing. Shortly before the further hearing, the defendants confirmed that they would not resist the application and would continue their undertakings until trial. The further hearing dealt only with costs. Neuberger J made an order reserving the costs of the application, because the defendants had conceded it on the basis of the balance of convenience, except that he ordered the defendants to pay the costs of the further hearing in any event, because the defendants (who had been in possession of all the evidence for a considerable period but had only conceded the application at a very late stage) had unreasonably delayed in agreeing to the interlocutory relief. He obtained the following guidance from a number of cases, including Desquenne et Giral UK Ltd v Richardson; I refer to it at some length because it highlights some of the problems and considerations that arise:

"(1) In a case without any other special factors, where a claimant obtains an interlocutory injunction on the basis of the balance of convenience, the court normally reserves the costs. While one can see an argument, particularly under the new regime, for saying that an order more favourable to the claimant should be made on the basis that the claimant has won the issue in respect of which the costs have been directly incurred—namely, whether an interlocutory injunction should be granted or not—it seems to me that the reasoning of the Court of Appeal in the so far unreported case of Desquenne et Giral U.K. Ltd v. Richardson, November 23, 1999 indicates that an order reserving the costs is appropriate. …

(2) As this present issue concerns the question of costs, it would plainly be wrong to treat Richardson, even bearing in mind that it is a recent decision of the Court of Appeal, as authority which ties the court's hands when it comes to the question of costs in a case such as this. However, in my view, it is plainly undesirable that there should be inconsistency of approach to questions of costs between different courts. …

(3) A defendant who accedes to the grant of an interlocutory injunction before the hearing should not, for that reason alone, normally be the subject of a more disadvantageous order for costs than if he had fought and lost. …

(4) There will obviously be circumstances where it is right to depart from the general approach. Thus there may be cases where the balance of convenience is so clear, and the outcome of the hearing of the application for the interlocutory injunction should be so plain to the parties, that the court should conclude that an order should be made against the defendant for wasting time and money in fighting the issue (whether or not the defendant eventually concedes).

(5) It is also important to bear in mind that an order for costs reserved or an order for costs in the case may not turn out to be as sensible and fair as it seems at the time it is made. In Kickers International S.A. v. Paul Kettle Agencies Ltd [1990] FSR 436, at 438, Hoffmann J pointed out that very often there is no trial. If there is no trial then the order for costs, whether it is reserved or in the case, effectively might as well not have been made. In some circumstances, that is a point which has less force than might appear, because, if the case does not go to trial, it may settle and, if it settles, the parties are perfectly able to take into account the potential order for costs, which costs reserved or costs in the case involves. However, the court should bear in mind that the case may not go to trial and may not settle, and that it is undesirable to encourage parties to go to trial or to discourage them from settling by having the uncertainty of an order for costs—such as costs reserved or even costs in cause—hanging over them. So far as the apparently preferred order of costs reserved is concerned, there is the additional problem identified by Mr Justice Hoffmann, which he describes at 438, as: 'the difficulty of reconstructing for the trial judge how things looked at the time of the interlocutory application, particularly when it involved questions of balance of convenience which were irrelevant at the trial'.

(6) In this context it seems to me that the court should adopt a realistic attitude where it is fair and possible to do so as to whether the case is likely to go to trial or not. At one extreme, one has Richardson, where the interlocutory injunction was granted or, more accurately, continued when the judge also ordered a preliminary issue, which was fixed to come on for hearing less than five weeks later. In that case, one can well understand the Court of Appeal thinking the judge should have anticipated that, not only would the main issue in the trial be determined, and determined very shortly, but also that the issues and arguments at the interlocutory stage would be very much in everyone's mind. At the other extreme, there are the facts of Direct Line Group Ltd v. Direct Line Estate Agency Ltd [1997] FSR 374, where Laddie J. formed a very clear view as to the merits: while he was only granting an interlocutory injunction, he not only made a favourable order for costs to the claimant but ordered those costs to be assessed and paid forthwith. In that case, it seems to me the tone of his judgment indicates that, not merely did he think that the substantive merits were very plain, but that, particularly in light of his judgment, he did not expect the case to go any further.

(7) On the other hand, where the court takes the substantive merits into account at the interlocutory stage, it must be careful, before also taking them into account on the question of costs. If, as in Direct Line, the court's view on the merits is based on incontrovertible facts or the construction of a document which is accepted by the parties as governing their relationship, then that is something which the court can, to my mind, properly take into account as pointing towards a more favourable order for costs from the claimant's point of view than costs reserved. On the other hand, if the court is faced with disputed facts, and believes the claimant's version of the facts is more likely to be accepted, it may be dangerous to take that into account in the claimant's favour when deciding what to do about costs. It is obviously conceivable that at trial the court's preliminary, even its strongly held, view as to the likely outcome of the dispute on fact may turn out to be wrong. It would be adding insult to injury if an unfavourable order for costs is made against the defendant, in addition to the injunction being granted at the interlocutory stage, on the basis of a wrong (as it turned out) view of the facts by the court.

(8) … While unnecessary for me to rule on the point, it may be that, at least in some cases, a claimant who brings an unsuccessful application for an interlocutory injunction is more at risk on costs than a defendant who unsuccessfully resists an application for an interlocutory injunction. In the one case, it is the claimant's choice to come to court. In the other case, the defendant is effectively forced to come to court. Perhaps one should not make too much of that distinction, because, in many cases where a claimant comes to court to seek an interlocutory injunction, it transpires, either at the hearing of the interlocutory application or at the final hearing, that the defendant has brought the proceedings on himself and has left the claimant with no alternative but to bring the proceedings. …"

The Arguments

71. All parties agreed that an order reserving the costs would be unhelpful and inappropriate and invited me to determine the costs of the application. I shall summarise the arguments advanced on their behalf.

Claimants

72. Miss Clarke's argument on behalf of the claimants may be summarised as follows. Whatever may have been the precise contractual position, the Vodafone Account and the IT System were being used by the claimants, and their basic entitlement to use them could not sensibly be disputed. The withdrawal of the claimants' access was never justified on security grounds, as indicated by Mr McGrail's text message on 11 November 2024 offering full reinstatement of access that afternoon (before the security audit had been completed) if HNH paid the moneys claimed. But even if there had been security concerns, they were dispelled by VITS's confirmation on 13 November 2024 that it was safe to restore access to all systems. Despite this, partial access was not restored until 15 November 2024. The proposed justification for not restoring full access, and for not restoring any access to Mr Parkhouse at that time, was purely specious, in circumstances where the claimants had given satisfactory assurances by their solicitors on 14 November, where Healys had not written until 18 November even though they had been copied in to Mr Sutcliffe's email early on the morning (6.37am) on 15 November, and where HBL sought to place reliance on incidents (those relating to Mr Pipe and Mr Louth) that did not involve Mr Parkhouse, did involve individuals whose access had been restored, and were resolved without adverse effect on HBL. Importantly, the balance of convenience clearly favoured granting an injunction, because access to the Vodafone Account and the IT System was vital for the claimants and there was no proper reason for supposing that it presented any genuine risk to HBL. If any such risk did exist, the claimants' undertaking in damages was adequate to address it. HBL had repeatedly failed to reinstate full access, despite the assurance given by Capital Law on 14 November and repeated by Mr Parkhouse personally on 20 November, and had been dilatory in responding to correspondence in a situation of urgency. The hearing on 29 November could have been avoided if HBL had engaged with the proposals put forward by Capital Law on 26 November, which involved undertakings similar to those included in the subsequent order. As for VITS and Mr Bangher, the commercial relationship outlined in paragraph 9 above indicates that it is unrealistic to regard them as merely IT service providers with no say as to actions controlled by HBL.
73. Miss Clarke referred to the decision of the Court of Appeal in Fox Gregory Ltd v Spinks and another [2006] EWCA Civ 1544. The first defendant left the claimant's employ and immediately went to work for Hamptons, the second defendant, a direct competitor. The claimant believed that she had taken its confidential information and had conveyed or intended to convey it to the second defendant. The claimant's solicitors wrote to the defendants and required of the second defendant a written undertaking not to assist or support the first defendant in any breach of her obligations to the claimant. The second defendant replied that it would investigate the allegations, but it gave no undertaking. The claimant commenced proceedings and applied for an injunction on short notice. At the hearing the second defendant gave undertakings to deliver up or destroy documents and to serve evidence. In compliance with the undertakings, the second defendant delivered up to the claimant a number of documents and provided an affidavit confirming that no other documents had been received. On the evening before the return date, the claimant informed the second defendant that it would not pursue its application for an injunction. The claim was dismissed by consent. The judge ordered the first defendant to pay the claimant's costs. But he did not order the second defendant to pay costs, because he said that the application against it was premature, there was no evidence against the second defendant, the second defendant had said in its response to the letter before claim that it was investigating the matter, and in substance it was the claimant who had lost the proceedings in view of their dismissal. The Court of Appeal allowed the appeal and ordered the second defendant to pay the claimant's costs of the case. Arden LJ, with whom Tuckey LJ agreed, said:

"23. When the court is examining the adequacy in response to a letter before action, in my judgment the court must bear in mind the perspective of the person who receives that response. As Fox Gregory had made clear to Hamptons, they were of the opinion that Mrs Spinks had removed confidential information. They had also had a telephone conversation with Mr Knowles in which he had made it clear that Hamptons effectively thought that there was no need for them to take any action. They had also had, it seems to me, at best a non-committal response of 21 November that Hamptons were investigating the matter, and of course this is in some senses a promising reply, but it gave no credit to the matter being urgent and made no attempt at giving the assurance which had been sought.

24. Hamptons had had the letter of 15 November, which specified a considerable amount of information which Mrs Spinks was alleged to have taken. Hamptons should, in my judgment, have seen that if Mrs Spinks gave them any of that information, they would have to hand it over to Fox Gregory as, in due course, they did give some limited information. We are told that on 25 November counsel for Hamptons told counsel for Fox Gregory that they had only got this amount of information, which was later handed over, and that it would be handed over, but one has to remember that by 25 November proceedings had been started and indeed undertakings had been given.

25. On the receipt of the letter of 21 November 2005, Fox Gregory had, as Mr Choudhury accepted in his argument, to make a judgment as to what to do next. In my judgment, their response was to write back to Hamptons and state that, in the light of their reply, they would issue a proceedings and to go on, in due course, to issue those proceedings was a reasonable step to take. Moreover, in my judgment, the interim relief which they sought in their application was reasonable and there was nothing untoward in the form of that interim relief, which took it totally out of the order of the relief which they had indicated they would be seeking. Every day counted so far as Fox Gregory was concerned. It is well known that it is difficult and costly to prove misuse of confidential information and loss arising from that matter once those matters actually occur. Accordingly, in my judgment the respondent's submission that their response to the letter before action was adequate does not succeed.

…

28. The next question is whether it would be possible to say who was the winner and who was the loser. The only issue, in my judgment, was whether interim relief in the form of the undertakings would have been given if the undertakings had not been given. That, as I see it, is the substance of the issue before the court on 29 November. As I have explained, no significant costs were incurred on the other matters. In my judgment, if one looks at that issue then it is clear that the winner was Fox Gregory, rather than Hamptons, because Hamptons had to give those undertakings, and for this reason I would take the view that the judge was wrong in principle to say that Hamptons was substantially the winner.

29. The return date on the 2 December was simply a follow on from the application on the 25 November. The position is that one of the undertakings included the giving of an undertaking and all the matters were adjourned until after that affidavit was given. That affidavit was served, we are told, about 4.00 pm on 30 November. It was not until after 6.00pm on the following day, 1 December, that Fox Gregory indicated they would not be proceeding for the application for relief. In my judgment it was reasonable for Fox Gregory to take a little time to consider the evidence and that they should not be penalised in costs because they had not come back, as Mr Choudhury submitted they should have done, at the start of business on 1 December.

30. I turn back to the undertakings of 25 November. It cannot, in my judgment, be correct to say, as the respondent would argue, that these undertakings were but a minor matter. The fact is that the costs of applying to the court for a hearing on that date would have been avoided if there had been a more positive and promising response to the letter before action. The obtaining of the undertakings was, in my judgment, a significant success and thus, as I have explained, the judge's exercise of discretion amounted to an error of principle when it took no account of this substantial success."

Picking up references to considerations in that case, Miss Clarke submits that the communications from the defendants have to be looked at from the claimants' perspective, when they were attempting to run their business without proper access to the telephone and IT systems. From their point of view the matter was one of urgency, and they were not receiving unequivocal responses that could easily have been given. They were justified in commencing proceedings, which the defendants could have avoided, and they obtained undertakings that effectively resolved the situation.

First and Second Defendants

74. Mr Calhaem's argument for the first and second defendants was to the following effect. The claim was both unnecessary and grossly disproportionate. The claimants were responsible for six security incidents in 2024: 15 October, 28 October, 8 November, 11 November, 15 November, and 13 December. HBL was justified in denying and then limiting access to the IT System until the security audit showed that it was safe to restore it and a satisfactory and signed agreement to be bound by the AUP had been received. Such an agreement was not received until the morning of 20 November, and prompt confirmation was given that instructions had been given to reinstate access. This was completed by 7.30am on 21 November. The application was otiose before it was issued, because access had been restored, and has achieved nothing. (Although the application was filed after 6pm on 20 November, it could not be and was not issued until the court business recommenced on the following day.) In no respect have the claimants been the successful party. As a result, the application has been discontinued; and whether by direct or analogous operation of r. 38.6(1), the result should be that the claimants pay the costs of the application. That this is the correct result is confirmed by the facts that the application was redundant and fruitless, that the defendants told the claimants that it was unnecessary, that the entire situation was brought about by the conduct of the claimants, and that the claimants have breached the undertakings given on 29 November 2024. It is relevant, further, that the claim was overblown and grossly disproportionate: HNH's accounts show that it has only one employee; the claimants had only four mobile phones on the Vodafone Account—one for Mr Parkhouse, one for Mr Pipes and two for other persons (it is suggested that these might be family members, but I wonder if they are not HNH's other two directors, John Sherbourne and Simon Taphouse)—and six iPad SIMS, which could easily have been replaced.
75. As for Fox Gregory Ltd v Spinks and another, Mr Calhaem submitted that it was of no assistance as the facts were far different from those of the present case: Hamptons' pre-action response was a mere block, and the undertakings it gave at the first hearing amounted to the relief to which the claimant was entitled and, importantly, which Hamptons was bound to concede.

Third and Fourth Defendants

76. For VITS and Mr Bangher, Mr Couser drew particular attention to the difficulty in attempting to form a view of the substantive merits of the claim, in circumstances where the only statement of case is the particulars of claim and no defences have been filed, and where there are issues as to the underlying facts that cannot be resolved on the papers. However, he submitted that the application against VITS and Mr Bangher fell at the first hurdle, because there was no serious issue to be tried. Mr Couser likened their position to people dragged into the crossfire of an acrimonious divorce. VITS was in the position of a service provider, as was Vodafone, and the reason why VITS had been treated differently from Vodafone appeared to be simply that Mr Bangher has made a loan to Mr Sutcliffe and taken an option to acquire a significant shareholding in HBL. Even if he had taken up such a shareholding, however, Mr Bangher is not a director of HBL and is not responsible for its actions. VITS was in a contractual relationship with HBL and, like Vodafone, was bound to follow a lawful instruction regarding the account under which the services were provided. As for the adequacy of damages and the balance of convenience, it was to be noted that the claimants had never attempted to quantify, even in general terms, their actual or potential losses and that they now confirmed that they had no financial claim. There was no basis for saying that they required non-monetary relief. More generally, the application itself was premature and unnecessary. The most important date is 20 November 2024: at 10.16am, in a letter by email not sent to Carter Bells, Capital Law set an unreasonable deadline of 12pm; at 11.56am Healys sent a reasonable response; at 5.37pm Healys sent a response saying that access would be reinstated from 8am on the following day; shortly afterwards, Capital Law filed the application. It was unnecessary to file the application out of hours, and the court could have been asked to hold fire.
77. Mr Couser submitted that the claimants' conduct had the appearance of an attempt to extract the maximum costs in order to inflict the maximum damage on the defendants. He pointed in this regard to the evidence in Mr Bangher's second witness statement, where he said that on 11 November 2024 Mr Shelbourne and Mr Louth of HNH attended at VITS's offices: "They intimidated us and made threats of violence and John Louth said that 'Paul will be issuing an injunction against VITS and a claim for damages which will result in your tin can business being shut down'. Myself and Mr Alhatem were left frightened." The attendance of Mr Shelbourne and Mr Louth, but not of course what was said, is confirmed by a still photograph from a security camera.

Discussion and Conclusions

78. All parties are agreed that the costs of the injunction application ought to be dealt with now. There is no further need for non-monetary relief. The claimants do not intend to seek monetary relief. The defendants have not intimated any intention of making any counterclaims. Procedurally, the only things that have happened, other than directly concerning the application, are the filing of acknowledgments of service by the defendants and particulars of claim by the claimants. There appears to be no likelihood of the case proceeding to trial; it clearly will not proceed to trial just so that there can be determination of any outstanding costs. As it seems to me, if there are any costs other than those arising from the application, then either the parties can agree them or the claimants can discontinue the case but seek an order "otherwise" under CPR r. 38.6(1).
79. The law relating to the award of costs has been summarised above. There are no hard and fast rules, and in the end I must make a practical judgment as to what is fair and just, having regard to all the circumstances, including the particular matters mentioned in r. 44.2. Insofar as the substantive merits are concerned, I bear in mind that there are as yet no defences and that there has been no opportunity to test evidence on contested issues of fact. I also bear in mind that other cases on costs might provide useful guidance but, as Neuberger J observed in the Picnic at Ascot case, can hardly do more than that.
80. I take, first, the position as between the claimants on the one hand and the first and second defendants on the other. Mr Couser, appearing for the third and fourth defendants, suggested (perhaps slightly mischievously) that it would be tempting to say, "A plague on both your houses". It is indeed. But I shall try to say more.
81. Mr Sutcliffe and HBL had been advised on 13 November 2024 that it was safe to restore access to all systems. Despite knowing, as they clearly did, both that access was necessary for the proper functioning of the claimants' business and that this included access to Sage and Eque2, they did not restore access until 15 November and then did not restore it to Mr Parkhouse and continued to restrict access otherwise to Sage and Eque2. It is further to be noted that, for whatever reason, the solicitors instructed by the first and second defendants did not engage with communications with any of the sense of urgency that might have appeared appropriate. By 20 November full access had not been restored, despite the assurance given by Capital Law on 14 November. I consider that the assurance ought to have been sufficient, as it came through the claimants' solicitors and in a context where, for all the defendants' complaints, there is no evidence that attempts had been made to gain access to their own information or that their security had in fact been violated. Insistence on a document personally signed by Mr Parkhouse seems to me to have been petty, obstructive and unnecessary in the circumstances. That this is a fair characterisation of the conduct of the first and second defendants is, in my view, confirmed by two things. The first is the clear evidence that, despite their protestations, the defendants were less concerned about genuine security risks than they were annoyed at Mr Parkhouse's conduct and at the failure of the PP Group to pay moneys said to be owing. The second is their exaggerated response to the six security incidents relied on by Mr Calhaem. I comment on them as follows.

(i) 15 October: An explanation of this incident has been given by Mr Parkhouse. However, it suffices to note that VITS did not make an incident report and that no one treated it as involving anything that required protective action or any other consequence. It appears to be relied on by the defendants simply as a forensic tool.

(ii) 28 October: This did give rise to an incident report, but at the time a realistic view of it was taken. It was not treated as anything like a hostile act, but rather as a failure by Mr Pipe to realise that what he was doing affected the use of the Sage system by others.

(iii) 8 November: There is a genuine issue as to the nature of this incident. Did Mr Parkhouse really not know that the Vodafone Account was held by HBL? Did Vodafone really tell him that the account was in his name? I cannot resolve these issues. Two things, however, can be said. First, even if Mr Parkhouse acted in good faith, his conduct was thoughtless and hard to justify, because the communication he received from Mr Pipe did not give reasonable grounds for supposing that HBL was making a threat of disconnection. Second, on the other hand, it appears that the extent of what happened was an attempt to secure control of the account in order to prevent HBL denying HNH the use of the account, not to deprive HBL of the use of the account. That does not excuse Mr Parkhouse's conduct—I regard his behaviour as unjustified even on the most favourable view—but it does tend to deflate exaggerated claims about security breaches.

(iv) 11 November: There is an issue as to the nature of this incident also. The defendants have characterised it as involving impersonation of Ms Rooney, but it is not at all clear whether this characterisation is correct. Another possibility is that somebody told Vodafone that Ms Rooney had authorised the unblocking of access; another is that someone at Vodafone got the wrong end of the stick. I cannot resolve the issue. But, similarly, the defendants' characterisation of the incident as one of fraud and impersonation seems to me to go beyond the inferences that could properly be drawn; though I accept that, after the incident the previous week, they were liable to be suspicious. It is, further, worth noting that the incident did not involve an attempt to interfere with HBL's use of the account; it was rather an attempt to restore HNH's access to the account. This is material when one considers the notion that it presented a genuine security risk.

(v) 15 November: This was improper conduct by Mr Louth and an attempt to bypass the security system. It should, however, be remembered that it began and (so far as I can tell) continued at times (13 to 15 November) when HNH and the PP Companies did not have any access at all to the IT System and that Mr Louth was attempting to gain access to files of the PP Group, not those of the WS Group. The evidence does not persuade me that the defendants were being exposed to a genuine security risk. The defendants' response to this incident strikes me as overblown. I accept that the last attempts to bypass the security system, on 15 November, came after Capital Law had confirmed on the previous day the claimants' willingness to abide by the AUP. Even so, it is not clear why this matter should have been relevant to a decision not to restore full access to the PP Companies and to Mr Parkhouse personally.

(vi) 13 December: Mr Calhaem calls this incident "a clear and unequivocal breach of the undertaking", which is how the first and second defendants have treated it. I do not regard it as such. The AUP did not require passwords to be changed every 90 days. VITS's practice of applying the requirement for change "on a recurring basis" by requiring a change every 90 days seems very sensible, but it is also possible to see Mr Johnson's request for a flexible application of the requirement of the AUP (and disapplication of the 90-day interpretation) as also sensible in the circumstances. Mr Alhatem was understandably put out by Mr Johnson's rather strong tone, and Mr Calhaem may well be right to say that the latter's emails reflect badly on the claimants' attitude in the circumstances; but to treat those emails as a breach of undertaking seems to me to be incorrect, and I think that Capital Law were right to say that the reaction to Mr Johnson's emails was disproportionate and gave a misleading impression of their nature.

82. As at 20 November 2024, therefore, the claimants' own conduct, and especially that of Mr Parkhouse, had greatly contributed to the situation, but the first and second defendants were unreasonably continuing to restrict access to the IT System. It seems to me to have been reasonable for the claimants, at that stage, to have prepared the application for an injunction.
83. However, the claimants' conduct thereafter seems to me to have been unnecessary and disproportionate. I am afraid that I cannot see the sense in filing the application at about 6pm on 20 November, when that could achieve nothing that could not be achieved by filing on the following day (when the application was issued) and when both Capital Law and Healys were clearly regarding close of business as being later than 5pm so far as they were concerned. By the time the application was issued by the court, full access had been restored. Miss Clarke submitted that the application was still necessary, because Healys' correspondence was saying that access was being restored as a gesture of goodwill and in anticipation of acceptance of terms that could not be accepted. She said that, although a mandatory injunction had become unnecessary, a prohibitory injunction was required to prevent further interruptions to access. I am afraid that I regard this as the sort of approach that is almost bound to rack up costs without good reason. I make the following observations. First, the parties were anticipating a prompt migration of the IT services to another provider. Second, the issue about acceptance of terms was not a good reason for needing to proceed with an injunction application, in circumstances where access was being reinstated. The only substantial point, so far as I can see, was that the defendants were requiring full and unconditional compliance with HBL's AUP, whereas Capital Law said that the AUP was not apt in all particulars to deal with the position when the users were in different corporate groups. Miss Clarke did not explain to my satisfaction what practical issue arose in this regard and I do not see that it should have been a sticking point for either side. Third, if, having restored access on the morning of 21 November, HBL then removed it again, an application for an injunction could have been made then. Fourth, it is not to be forgotten that substantial, though incomplete, access to the IT System had already been restored several days previously. Fifth, for all that I accept the need for access by the claimants to all parts of the IT System, including in particular Eque2, there is reason to believe that the claimants have exaggerated the problems caused by the restriction of access. In his witness statement dated 20 November 2024, at paragraphs 65ff, Mr Parkhouse said that the effect of the suspension of the PP Companies from the IT System had been "catastrophic". Nevertheless, no claim for monetary relief has ever been advanced, nor has any loss been identified.
84. The result of all of this has been the expenditure by the claimants and the first and second defendants of more than £200,000 in total, on what seems to me to have been an application of no practical utility for which both sides have a substantial measure of blame.
85. Weighing up these various matters, I come to the following conclusions, which I believe achieve practical justice as between to more or less equally undeserving sides:

1) The first and second defendants should pay the claimants' costs up to and including 20 November 2024. These are, in broad terms, the costs of obtaining full access to the IT System, including the preparation of the injunction application.

2) The claimants and the first and second defendants should bear their own costs up to and including the date of the hearing on 29 November 2024.

3) The costs incurred thereafter should be paid by the claimants to the first and second defendants. The proceedings had been overtaken by events as soon as they were issued, and after 29 November the undertakings then given, in the light of the migration of the IT services, made the further conduct of the case nothing more than an exercise in the pointless incurring of costs.

These conclusions take into account matters of conduct, although the conduct in question is not necessarily reflected entirely in the corresponding stages of the award (in particular, the first stage). The costs should be assessed on the standard basis. If the parties cannot agree the figures, they can request a summary assessment, which I shall conduct on the papers.

86. The position of VITS and Mr Bangher is different from that of Mr Sutcliffe and HBL. I agree with Mr Couser that they have been caught in the crossfire between Mr Parkhouse and the PP Companies on one side and Mr Sutcliffe and the WS Companies on the other.
87. It is not entirely clear whether there was any contract at all between HNH and VITS. The claimants' case is set out in detail in the particulars of claim, especially at paragraphs 19 to 27 and 40. The main reasons for thinking that there might have been a contract were, first, that VITS was directly invoicing HNH and, second, that VITS initially demanded a 90-day notice period when HNH said that it was going to move its IT to another service provider. I cannot resolve the issue, though I am doubtful whether there was truly any contract: the invoicing arrangement may have been an arrangement of convenience, and the demand for 90 days' notice may have been opportunism. However, even if there was latterly some contract between HNH and VITS, the position seems to have been that HNH was making use of a single IT System initially provided by VITS to HBL for the use of all companies in the pre-de-merger group. HNH did not have a separate IT System. The claimants contend that VITS's compliance with HBL's instructions to remove access to the IT System was a breach of contract vis-à-vis HNH. This shows, however, that the muddled position resulting from the Heads of Terms, which failed to address IT provision, created an impossible position for VITS, if indeed it had a separate contract with HNH, because it would have potentially conflicting obligations to companies that had formerly been, but were not now, in common ownership within the same group. I am very doubtful whether VITS could properly refuse an instruction from HBL to remove or restrict access to the IT System by HNH in the event of conduct by HNH that constituted or threatened a risk to HBL's IT security. However, even if it could be said that there was a serious issue to be tried as between HNH and VITS regarding the existence of a contract and breach of contract, further matters would have militated strongly against the grant of an injunction against VITS. First, no injunction will ever be granted unless there is a real risk that, without it, the mischief in question will occur or be continued. There is, in my view, no good reason to suppose that VITS was threatening or intending to take any action adverse to HNH's interests other than upon instruction from HBL. It is doubtless correct that HNH's decisions were liable to be influenced by advice it received from VITS concerning actual or potential security breaches; that, however, is as it should be, and VITS could hardly be prevented from giving such advice. However, if an injunction were required at all, an injunction against HBL would have sufficed; there was no need to drag VITS into the matter.
88. The position of Mr Bangher seems clearer still. He is a director of VITS but he is not a director of HBL and, so far as I know, he is not even a member of HBL. The particulars of claim allege that he was part of an unlawful means conspiracy to harm the claimants and other companies in the PP Group. The unlawful means said to have been used by Mr Bangher was intimidation, consisting of Mr Bangher's remark in October 2024 (see paragraph 13 above) to the effect that, "If you don't pay your bills, that [threatened removal of access to the IT System in Mr McGrail's email of 10 October] is what is going to happen": particulars of claim, paragraphs 86 and 107-113. I do not consider that the claimants have shown any serious issue to be tried against Mr Bangher and I consider that the other reasons why an injunction would have been refused against VITS also apply in Mr Bangher's case.
89. Accordingly, I shall order that the claimants pay the costs of VITS and Mr Bangher of the application. These should be assessed on the standard basis. If the parties cannot agree the amount of the costs, I shall summarily assess them on the papers.