Abbey National Plc v Frost (Stephen Leonard), Solicitors' Indemnity Fund Ltd intervening
| Jurisdiction | England & Wales |
| Judge | Lord Justice Henry,Lord Justice Robert Walker,Lord Justice Nourse |
| Judgment Date | 04 February 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0204-10 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 February 1999 |
| Docket Number | CHANI 98/0443/3 |
[1999] EWCA Civ J0204-10
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Carnwath)
Royal Courts of Justice
Strand, London WC2
Lord Justice Nourse
Lord Justice Henry and
Lord Justice Robert Walker
CHANI 98/0443/3
and
Mr R Jackson QC and Mr A Goodman (instructed by Messrs Curtis & Parkinson, Nottingham) appeared on behalf of the Appellant Plaintiff.
Mr R Seymour QC and Mr M Jackson (Mr S Charlwood 4.2.99 only) (instructed by Messrs Wansbrough Willey Hargrave, London WC2) appeared on behalf of the Respondent Defendant.
Thursday, 4th January 1999
This appeal raises a question of some difficulty on RSC O.65, r.4 (substituted service), which, so far as material, provides:
"(1) If, in the case of any document which … is a document to which Order 10, rule 1, applies, it appears to the court that it is impracticable for any reason to serve that document in the manner prescribed, the Court may make an order for substituted service of that document.
(2) [Application may be made by affidavit.]
(3) Substituted service of a document, in relation to which an order is made under this rule, is effected by taking such steps as the Court may direct to bring the document to the notice of the person to be served."
O. 10, r.1 applies to writs and other originating processes. Shortly stated, the question is whether, in a solicitor's negligence action where the defendant's whereabouts are unknown and there is no likelihood that the writ will reach him or come to his knowledge, substituted service may be directed to be made by serving the writ on the Solicitors Indemnity Fund Ltd ("the SIF").
The defendant was a solicitor who acted for the plaintiff building society and its borrower in relation to a loan made by the plaintiff to the borrower in November 1990 and secured on a leasehold flat in London NW1. The amount of the loan was £160,000 and its avowed purpose was to assist the borrower in purchasing the flat at a price of £195,000. The essence of the plaintiff's claim is that the defendant, negligently and in breach of fiduciary duty, omitted to tell the plaintiff that the purchase was in truth a sub-purchase with the consideration of £195,000 being apportioned as to £132,500 to the vendor and £62,500 to the sub-vendor. There is a further claim to the effect that the defendant received the £160,000 from the plaintiff on a constructive (more accurately an implied) trust to apply it in accordance with the plaintiff's instructions and subject thereto to hold it in trust for the plaintiff. As Master Moncaster put it, the plaintiff claims that the transaction was "one of the commonplace mortgage frauds with a back to back sub-sale at a fictitious or artificially inflated price". In October 1992, the borrower having defaulted in making payment under the mortgage, the plaintiff resold the flat for no more than £70,500.
The writ in the action was issued on 28th February 1997, more than six years after the completion of the mortgage. The plaintiff relies on section 14A of the Limitation Act 1980, averring that the earliest date upon which it first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action was on or about 9th August 1996. The action having been brought within three years of that date, it would be open to the plaintiff to establish at trial that the claim in negligence, which is what the case is really all about, was not barred by limitation. I should add that although the writ, which is generally indorsed, includes a claim for damages for deceit, no such claim is made in the statement of claim. Accordingly, it appears that the action should be treated as one which does not include any claim in respect of any dishonest or fraudulent act or omission. For reasons which will appear, that may be a point of some importance.
The defendant was a sole practitioner. In March 1993 the Law Society intervened in his practice. On 7th April 1994 he was struck off the roll of solicitors for conduct unconnected with the transaction complained of in this action. In July 1995 a letter sent to what the Law Society believed was his last home address was returned with the words scribbled on it "left about two years ago". In August 1995 a financial investigation service reported to the plaintiff's solicitors that they had spoken to the solicitor responsible for the intervention in the defendant's practice, who had stated that to the best of his knowledge the defendant was in Thailand and that he could not assist in finding or contacting him. In June 1997 the investigation service repeated their belief that the defendant was in Thailand, but appeared to have no further sources of information. The solicitor acting for the SIF has said in an affidavit that he understands that the defendant is married to a Thai, but this information appears to derive from something said at the disciplinary proceedings in 1993 and its source is unknown. No further enquiries having been made, that is the sum of what is known about the defendant's current whereabouts.
The plaintiff has brought two other actions against the defendant in respect of transactions which took place in 1989, one by a writ issued on 31st May 1995 and the other by a writ issued on 29th August 1995. In each of those actions the plaintiff applied for and obtained an order for substituted service by serving the writ on the SIF. The SIF entered acknowledgments of service on behalf of the defendant and has continued to defend those actions. In an affidavit sworn in these proceedings its solicitor has said:
"Unlike this action the two earlier proceedings … do not contain allegations bordering on the fraudulent and dishonest, but negligence and breach of contract. Neither the Fund nor this firm have received instructions from the Defendant in these matters. As the Court will recognise given the serious nature of these allegations it is essential that instructions are taken from the Defendant. As I have said were a fraudulent or dishonest act or omission to be shown to have occurred the Defendant would not be entitled to cover from the Fund. A solicitor who thereafter was the subject of a Judgment which the Fund elected not to contest on the basis that no indemnity would be provided, might understandably feel aggrieved if the Fund had not itself taken significant steps to bring the attention of the Writ to that solicitor."
On 24th June 1997 a district judge in Nottingham made an order in this action in the following terms:
"The Plaintiff be granted leave to serve the Writ of Summons upon the Defendant's Insurers, the Solicitors Indemnity Fund."
That order was similar to those made in the two earlier actions. In this action the SIF did not enter an acknowledgment of service. Instead, it applied to intervene and have the order for substituted service set aside. The action having been transferred to London, the application came before Master Moncaster, who, in a reserved judgment delivered on 10th December 1997, dismissed it. The SIF appealed to the judge. Its appeal came before Mr Justice Carnwath who, in a reserved judgment delivered on 12th March 1998, allowed it. The judge discharged the orders of the master and the district judge. He gave the plaintiff leave to appeal to this court.
Although Mr Rupert Jackson QC, for the plaintiff, argued to the contrary, it is in my view plain that the evidence before the court, such as it is, compels us to proceed on the footing that, if the district judge's order for substituted service on the SIF were to be restored, there would be no likelihood that the writ would reach the defendant or come to his knowledge. On that footing, Mr Seymour QC, for the SIF, submitted that under O. 65, r.4 no order for substituted service, whether by service on the SIF or otherwise, could properly have been made.
Mr Seymour founded on Porter v. Freudenberg [1915] 1 KB 857, a decision of this court specially constituted and consisting of the Lord Chief Justice, the Master of the Rolls and all five Lords Justices of the time. The unanimous judgment of the court was delivered by Lord Reading CJ. Three separate cases were before the court, in which the main questions to be considered were stated to be, first, the capacity of alien enemies to sue in the English courts; secondly, their liability to be sued; thirdly, their capacity to appeal to the appellate courts, and, generally, their right to appear and be heard in the English courts; see pp. 866–867.
In two of the cases ( Porter v. Freudenberg itself and Kreglinger v. S Samuel & Rosenfeld) the defendants resided in Germany but carried on business in England through agents resident in this country. In each of those cases Scrutton J had given the plaintiff leave to issue a concurrent writ against the defendant and to serve notice of it on him in Germany. In each case the plaintiff complained that such service was practically impossible in time of war and asked this court to grant leave for substituted service of notice of the writ on the defendant's agent in England.
After holding that alien enemies were liable to be sued in the English courts, the judgment, at p. 886, turned to consider how effective notice of proceedings in those courts could be served on the alien enemy in the enemy country. Having observed that, unless an order for substituted service in this country of a notice of writ for...
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