Council fails in application for security of costs as ex-recruitment contractor brings ‘poaching’ claim

Walsall Metropolitan Borough Council has failed in a security of costs application to the High Court over a dispute with a former recruitment contractor.

The council applied to HHJ Worster, sitting as a judge of the High Court, for security for costs against Starting Point Recruitment.

This firm had for 20 years provided Walsall with temporary workers under framework agreements which included terms for the confidentiality of certain information, non-solicitation and - on Starting Point’s case - that the parties would act in good faith with each other.

In spring 2023 Walsall decided not to renew the agreement when it expired in September 2023 and to instead use provider Opus People Solutions, with Starting Point invited to become a second tier supplier to Opus.

Walsall asked Starting Point for a detailed spreadsheet with information about the agency workers it had placed.

Starting Point claimed this was provided and included confidential information which Walsall then used to try to poach its workers, who would continue to provide services to the council but via Opus.

Walsall disputed that it received or used the spreadsheet and said that even if it had the information was not confidential.

In September 2023 Starting Point applied for an interim injunction to prevent Walsall using its confidential information for recruitment and HHJ Williams made orders without notice to this effect.

HHJ Worster said in his judgment: “The merits of the claim can be relevant to the consideration of an application for security if they are clear, but the court is discouraged from undertaking a detailed review.

“This is not a case where I can properly take account of the strength or otherwise of the claim.”

Walsall argued there were reasons to believe Starting Point would be unable to pay its costs because it could not at present meet these or pay its own costs and there was no certainty its financial position would improve over the next 12 months

Evidence from a Mr Naish, Starting Point’s chief financial officer, was that Walsall’s breaches have had a serious impact on its finances, with a loss of £7.6m in revenue.

HHJ Worster said Walsall ”drew my attention to the general principle underlying the grant of security for costs.

“It is that the interests of justice are ordinarily best served if successful litigants recoup the costs of their litigation, or the bulk of those costs, and unsuccessful litigants pay them; there being a real difference between the position of claimants, for whom issuing proceedings is always a voluntary act, and defendants for whom being sued is not.”

He continued: “The fact that there is reason to believe that [Starting Point] will be unable to meet such an order for costs is, if [its] case is right, at least in part due to [Walsall’s] conduct.”

This was “a material factor and weighs in the balance against the grant of an order [and] having regard to the circumstances of this case, it would not be just to make an order for security”, the judge said.

Mark Smulian