Substituted service – Building society claiming negligence and breach of fiduciary duty – Whereabouts of defendant solicitor unknown – Whether appropriate to grant plaintiff leave to serve writ upon defendant’s insurers – Rules of Supreme Court Ord 65 r 4 – Judge discharging order granting plaintiff leave – Appeal allowed
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, 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 borrower defaulted in making payments under the mortgage and in October 1992 the plaintiff resold the flat for £70,500. The plaintiff issued proceedings claiming 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. It was also claimed that the defendant had received £160,000 from the plaintiff on an implied trust to apply it in accordance with the plaintiff’s instructions. The defendant was believed to be in Thailand but could not be found or contacted. On 24 June 1997, at a hearing before a master, the plaintiff was granted leave to serve the writ upon the defendant’s insurers, the Solicitors Indemnity Fund (SIF), by virtue of r 4 of Ord 65 of the Rules of the Supreme Court whereby “(1) If . . . it appears to the Court that it is impracticable for any reason to serve [a writ] in the manner prescribed, the Court may make an order for the substituted service of that document . . . (3) Substituted service of a document, . . . is effected by taking such steps as the Court may direct to bring the document to the notice of the person to be served.” SIF’s application to have the order for substituted service set aside was dismissed. SIF appealed.
The judge, relying on Porter v Freudenberg [1915] 1 KB 857, held that there was a general rule that substituted service would not be ordered where a defendant’s whereabouts were unknown and there was no likelihood that the writ would reach him or come to his knowledge. He found that if substituted service was ordered it was not likely that the writ would reach the defendant and, accordingly, he allowed the SIF’s appeal and discharged the order granting the plaintiff leave to serve the writ on the SIF. The plaintiff appealed.
Held: The appeal was allowed.
1. Ord 65 r 4(3) did not detract from the discretion of the court under r 4(1). It was intended to provide for what would constitute the vast majority of orders for substituted service and did not carry an implied requirement that the order would be likely to bring the document to the notice of the person to be served: Porter v Freudenberg considered.
2. However, substituted service on the SIF could only be ordered in suitable cases and there would always be a discretion to refuse such an order. The master had taken the common-sense view that, in practice, further steps to trace the defendant were likely to be a waste of time and that the defendant, even if traced, would probably not have any assets available to meet a judgment. He had also considered the fact that in similar cases the SIF had not challenged the substituted service. In the circumstances, therefore, it had been appropriate to order substituted service: Swain v Law Society [1983] AC 598, considered.
Rupert Jackson QC and Andrew Goodman (instructed by Curtis & Parkinson, of Nottingham) appeared for the plaintiff; Richard Seymour QC and Matthew Jackson (instructed by Wansbroughs Willey Hargrave) appeared for the intervenor, the SIF.
Thomas Elliott, barrister
