A man accused of plotting a terrorist attack on the streets of the UK may have been targeting Tony Blair and his wife, Cherie Booth, among others, the Old Bailey heard on Tuesday .

Erol Incedal was preparing to mount an attack that could have been against a small group of people or a single prominent person, the jury was told. Alternatively, he may have been planning an indiscriminate attack on a hotel, such as that mounted in Mumbai, India, in 2008.

Significant parts of the evidence are being heard in secret, in what the prosecution has described as an exceptional case.

The former prime minister’s home address was discovered in September last year after Incedal’s black Mercedes car was pulled over for a road traffic matter and searched, said Richard Whittam QC, prosecuting. It was written on a piece of paper found inside the defendant’s white Versace glasses case.

A listening device was placed in the car after the search, and Incedal was subsequently recorded talking about the need to find an “illegal house”, to avoid moving material around. He was also heard to tell his wife that he hated white people, and that he was “effed” if something had been found in his car.

Incedal, 26, a British citizen from south London, was arrested the following month when three police vehicles surrounded his Mercedes near Tower Bridge in London and armed officers shot out the tyres. His passenger, Mounir Rarmoul-Bouhadjar, also 26 and from south London, was arrested at the same time.

Both men had SD memory cards wrapped in masking tape inside the cases of their Apple iPhones, Whittam said. On the cards were three files about bomb making.

The jury heard that Rarmoul-Bouhadjar had admitted possession of the documents. He will be sentenced after Incedal’s trial.

Incedal denies two terrorism charges. The first, brought under section 5(1) of the Terrorism Act 2006, states that between 1 February 2012 and 14 October 2013 he intended to commit acts of terrorism or assist another to commit them.

The second charge, under the Terrorism Act 2000, states that he is accused of possessing a document, on or before 13 October last year, that is “likely to be useful to a person committing or preparing an act of terrorism”.

Whittam said that at the same time as the Blairs’ address was found, police discovered a notebook containing the handwritten note: “Oh you the believers, fight those of the infidel who are near to you. Why do you not fight in Allah’s cause for those oppressed men, women and children who cry out: ‘Rescue us from this town’.”

Indecal’s laptop had been in the boot of the Mercedes and was later recovered from one of his two homes. A subsequent examination of the computer showed that a user profile, “tom13”, had been used to create a Skype account in a woman’s name, Fatima Hamoodi, and that a Yahoo email account in that name had been used to communicate by email and Skype with accounts set up in the name “Zaynab Alawi”.

The Hamoodi account received a number of emails that the prosecution alleged were coded suggestions. The word “straps” was alleged to refer to firearms, while “k 1122aaa shhh etc” was alleged to refer to Kalashnikovs, and “mo88m 55bayy style” to a Mumbai-style attack.

Following Incedal’s arrest, police also recovered his Turkish resident’s permit and a photograph of a synagogue, taken in August last year. Whittam told the jury: “You will hear that he was actively engaged with another or others who were abroad. The prosecution case is that such engagement was for an act, or acts of terrorism, either against a limited number of individuals, an individual of significance, or a more wideranging and indiscriminate attack such as the one in Mumbai in 2008, an attack on members if the public in general, particularly in a hotel.”

Facebook Twitter Pinterest Former prime minister Tony Blair and his wife, Cherie Booth, who may have been the targets of a terrorist plot by a British man. Photograph: Stefan Rousseau/PA

He said the first charge faced by Incedal did not suggest he had decided upon a specific target, but said of the Blairs’ address: “You may think that this address does have some significance.”

The trial is being heard in three parts. Some will be held in open court and others in secret. Following a legal challenge by media organisations to plans to hold the entire trial in secret, the court of appeal has ruled parts of it can be attended by 10 journalists but they will not, at this stage, be permitted to report evidence they hear.

Whittam told the jury that it was an exceptional case. The case continues.