but after I introduce that it seems to pick up every record less than 4.5 not already selected as well as every other record where the clearance field is blank.
See if this works for you:
Case ( Urgency = "U" ; "Flag Defect" ;
Urgency = "I" ; "Flag Defect" ;
Not IsEmpty ( Clearance ) and Clearance < 4.5 ; "Flag Defect"
Thankyou for your help this works perfect and makes full sense now.