England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CHANI 98/0443/3

Royal Courts of Justice

Strand, London WC2

Thursday, 4th February 1999

B e f o r e :

LORD JUSTICE NOURSE

LORD JUSTICE HENRY and

LORD JUSTICE ROBERT WALKER

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ABBEY NATIONAL PLC Plaintiff/Appellant

-v-

STEPHEN LEONARD FROST

(Formerly Practising as HAROLD WESTON FROST & CO)

Defendant

and

SOLICITORS' INDEMNITY FUND LIMITED

Intervenor/Respondent

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Handed Down Judgment

Smith Bernal Reporting Limited

180 Fleet Street London EC4A 2HG

Tel: 0171 421 4040 Fax: 0171 831 8838

(Official Shorthand Writers to the Court)

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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.

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J U D G M E N T

(As Approved by the Court)

Crown Copyright

Thursday, 4th January 1999

Lord Justice Nourse:

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 service out of the jurisdiction could be made, great hardship might be inflicted upon those who were subjects of and resident in this country and had claims against persons who were then alien enemies and, on the other hand, that account must be taken of the position of the alien enemy who was, "according to the fundamental principles of English law, entitled to effective notice of the proceedings against him", the court referred to previous authority and continued, at p. 888:

"In order that substituted service may be permitted, it must be clearly shown that the plaintiff is in fact unable to effect personal service and that the writ is likely to reach the defendant or to come to his knowledge if the method of substituted service which is asked for by the plaintiff is adopted."

At p. 889, the court gave general guidance on the question:

"The judge in chambers before whom the application is made for substituted service of a writ for service out of the jurisdiction or of a notice of such a writ ought to be careful before acceding to the application -

(a) to satisfy himself that there exists a practical impossibility of actual service, as otherwise . . . . a plaintiff will always seek to obtain an order for substituted service, with the serious risk that the defendant may never have notice of the proceedings and judgment in default of appearance may be given against him unjustly;

(b) to satisfy himself for the same reason that the method of substituted service asked for by the plaintiff is one which will in all reasonable probability, if not certainly, be effective to bring knowledge of the writ or the notice of the writ (as the case may be) to the defendant."

Mr Seymour relied on those passages as establishing a general rule that substituted service will not be ordered where the defendant's whereabouts are unknown and there is no likelihood that the writ will reach him or come to his knowledge. Mr Justice Carnwath held both that there was such a rule and that it applied in the circumstances of the present case. In addition to relying on Porter v. Freudenberg , he referred to the "implied requirement" in O.65, r.4(3), by which he meant a requirement that the order would be likely to bring the document to the notice of the person to be served.

In order to determine how far the views expressed by this court in Porter v. Freudenberg are decisive of the present case, it is necessary to start by referring to the material provisions of the Rules as they then stood, to which it appears that Mr Justice Carnwath was not referred. We are grateful to Mr Goodman, junior counsel for the plaintiff, for having taken us through them as they appeared in the Annual Practice for 1914. The material provisions were these. O.9 was headed "Service of writ of summons". R.2 provided:

"When service is required the writ shall, wherever it is practicable, be served in the manner in which personal service is now made, but if it be made to appear to the Court or a Judge that the plaintiff is from any cause unable to effect prompt personal service, the Court or Judge may make such order for substituted or other service, or for the substitution for service of notice, by advertisement or otherwise, as may seem just."

O.10 headed "Substituted service" provided:

"Every application to the Court or a Judge for an order for substituted or other service, or for the substitution of notice for service, shall be supported by an affidavit setting forth the grounds upon which the application is made."

O.67 was headed "Service of Orders, etc". R.6 provided:

"Where personal service of any writ, notice, pleading, summons, order, warrant or other document, proceeding or written communication is required by these rules or otherwise and it is made to appear to the court or a judge that prompt personal service cannot be effected, the court or judge may make such order for substituted or other service, or for the substitution of notice for service by letter, public advertisement, or otherwise, as may be just."

If and insofar as there was any difference in effect between O.9, r.2 and O.67, r.6 (it is difficult to detect one), it seems that the former of those provisions (being one concerned only with writs) would have prevailed.

Accordingly, while O.9, r.2 was broadly the equivalent of the present O.65, r.4(1) and O.10 was the equivalent of the present r.4(2), there was no equivalent of the present r.4(3). However, in the notes to O.10 (Annual Practice 1914, p. 71), there was a passage setting out the practice in the case of substituted service of writs within the jurisdiction. Under the heading "Principles usually followed as to 'substituted' or other Service - ( Settled by the Masters, KBD, May, 1908 )" appeared the following:

"Such service may be ordered only when the plaintiff is from any cause unable to effect prompt personal service. This inability is the essential consideration.

It is not essential to show that the defendant, at the time of the application, either knows of the writ or is evading service. If the writ is not likely to reach the defendant nor to come to his knowledge if service is substituted, then as a general rule substituted service should not be ordered. It is not, however, essential in all cases to show that it will do so, eg in actions by a landlord for recovery of land."

The position at the time that Porter v. Freudenberg was argued and decided can therefore be summarised as follows. An order for substituted service of a writ could only be made if the plaintiff was unable, from any cause, to effect prompt personal service. In that event the court had power to make such order for substituted service, by advertisement or otherwise, as might seem just. Such were the provisions of the Rules themselves, which, once the plaintiff's inability to effect prompt personal service had been established, appear to have given the court a wide discretion in the matter. But by way of supplement to the Rules the Kings Bench masters had settled and adopted a number of principles according to which their discretion would usually be exercised, one of them being that substituted service should not generally be ordered if the writ was not likely to reach the defendant or come to his knowledge. That principle was, however, qualified to the extent that it was not essential in all cases to show that it would do so, although the example given (actions by a landlord for recovery of land) was a special case of no present significance.

In Porter v. Freudenberg , at p. 890, this court gave leave to make substituted service on the two defendants who had agents in England and expressed the view, on the materials before it, that service should be effected in each case by service on the agent, with such further terms to be imposed in chambers on the plaintiff as might seem proper. The judgment continued:

"The Rule Committee may think it necessary now to consider whether further rules should be made to meet some of the present difficulties of service of notice of proceedings in our Courts against an alien enemy. It should, however, be borne in mind that there is little, if any, value in obtaining judgment in our Courts in default of appearance of the defendant resident in an enemy State, unless there is property in this country which can be reached in execution of the judgment. Where there is property in this country there is frequently some person upon whom an order for substituted service could be made supplemented by other provisions as to giving notice to the defendant of the proceedings to which we have already called attention."

It seems clear from that passage that each defendant had assets in this country in the hands or under the control of his agent. Indeed, as Mr Jackson submitted, there would have been no purpose in the plaintiffs' incurring the costs of bringing the actions unless that was the case. At the same time, it would have been unjust to allow those assets to be taken in execution unless the court could be satisfied that the writs were likely to reach the defendants or come to their knowledge. It was therefore natural for the court, in the two earlier passages cited, to express itself as it did and to do so in the form of a general rule. But general expressions of opinion, however eminent their source, must always be read in the light of the particular facts which occasion them. Despite their evident acceptance of the principles adopted by the Kings Bench masters, I cannot treat the views expressed by this court in Porter v. Freudenberg as having narrowed the discretion under what is now O.65, r.4(1) in relation to other facts, in particular where, as here, there is reason to suppose that the defendant has chosen to disappear and would be unlikely, if served, to contest the claim or to assist the SIF in doing so.

A further point must be made about Porter v. Freudenberg . It will have been observed that the general rule as stated in the first passage cited from the judgment at p. 888 ordains that the requirement that the writ is likely to reach the defendant or to come to his knowledge, equally with the requirement that the plaintiff should have been unable to effect prompt personal service, is a precondition of substituted service being permitted. Immediately following that passage appear these words:

"The Court may then make such order as may seem just: O.9, r.2. The terms of this rule are of very wide application, and give a very wide discretion which we are not inclined to limit."

That suggests that this court may have misread O.9, r.2. The rule itself imposed only one precondition, ie that the plaintiff should have been unable to effect prompt personal service. It was at that stage that the court's discretion arose. The second precondition derived only from a principle of discretion adopted by the Kings Bench masters. It would have been incorrect to treat it as incorporated in the rule itself.

We were not referred to the intervening provisions of the Rules. However, research has shown that the current O.65, r.4 was introduced by the 1962 Revision, in which, originally as O.67, r.4, it replaced the former O.9, r.2, O.10 and O.67, r.6. The wording of the current r.4(3) is identical to its wording when introduced in 1962. Broadly stated, its effect was to elevate the principle of discretion adopted by the Kings Bench masters into the rule itself. On that footing I am unable to agree with the judge that it carries an implied requirement that the order will be likely to bring the document to the notice of the person to be served. In my view r.4(3) cannot detract from the discretion of the court under r.4(1). Indeed, it is not expressed as a provision intended to have that effect. I think it is intended to provide for what will no doubt constitute the vast majority of orders for substituted service. Perhaps its effect can best be understood by reading in the words "(if any)" between "taking such steps" and "as the Court may direct".

What then is the impact of O.65, r.4 on the present case? In order to answer that question it is necessary to understand the constitution and purpose of the SIF. Section 37 of the Solicitors Act 1974, to which the marginal note is "Professional indemnity", provides, by subsection (1), that the Council of the Law Society, with the concurrence of the Master of the Rolls, may make rules concerning indemnity against loss arising from claims in respect of any description of civil liability incurred (inter alia) by a solicitor or former solicitor in connection with his practice. Subsection (2) provides, so far as material:

"For the purpose of providing such indemnity, indemnity rules -

(a) may authorise or require the Society to establish and maintain a fund or funds;

(b) may authorise or require the Society to take out and maintain insurance with authorised insurers . . ."

Between 1976 and 1987 the Law Society operated a master policy indemnity scheme pursuant to section 37(2)(b). Since 1st September 1987 it has operated a mutual indemnity fund pursuant to section 37(2)(a). The fund is administered by the SIF, a company limited by guarantee. Its operation is currently governed by the Solicitors' Indemnity Rules 1996, rule 2 of which authorised the Law Society to establish and maintain the fund and rule 3 of which stated the purpose of the fund to be to provide indemnity against loss as mentioned in section 37. It is compulsory for all practising solicitors to obtain first layer cover from the fund, the current limit of the indemnity being £1m.

In Swain v. The Law Society [1983] AC 598 the House of Lords considered a claim by two practising solicitors that the Law Society was not entitled to retain the commission received by it from insurance brokers under the master policy indemnity scheme then in force, but was accountable for it to the solicitors who had paid the premiums in respect of which it had been received. In rejecting the claim, Lord Brightman, with whose speech the other members of the House agreed, said at p. 618:

"My Lords, the insurance scheme is statutory. It flows from section 37 and the rules made thereunder of which the form of master policy and the form of insurance certificate are an integral part. In exercising its power under section 37 The Law Society is performing a public duty, a duty which is designed to benefit not only solicitor-principals and their staff but also solicitors' clients. The scheme is not only for the protection of the premium-paying solicitor against the financial consequences of his own mistakes, the mistakes of his partners and the mistakes of his staff, but also and far more importantly, to secure that the solicitor is financially able to compensate his client. Indeed, I think it is clear that the principal purpose of section 37 was to confer on The Law Society the power to safeguard the lay public and not professional practitioners, since the latter can look after themselves. This is underlined by the position of section 37, which is one of a group of three sections, the other two of which are plainly enacted in the interests of the lay public. So, there is no doubt at all in my mind that the power given to The Law Society by section 37 is a power to be exercised not only in the interests of the solicitors' profession but also, and more importantly, in the interests of those members of the public who resort to solicitors for legal advice."

Those observations are equally applicable to the mutual indemnity fund. They show that the fund was established primarily to safeguard the interests of those members of the public who resort to solicitors for legal advice. True it is that, being an indemnity fund, the client does not have a direct right of recourse against it. Moreover, there are significant exclusions from cover, including (by rule 14.1(f)) any indemnity against loss arising out of any claim in respect of any dishonest or fraudulent act or omission. On the other hand, rule 19.5 provides that the solicitor shall procure that the SIF shall be entitled at the fund's own expense to take over the conduct, in the name of the solicitor, of the defence or settlement of any claim. So it can fairly be said that the fund stands behind the solicitor and has a real interest in any admissible claim which is made against him.

In giving judgment, Master Moncaster expressed the view that it would be proper to make an order for substituted service on the SIF because of its public nature, which distinguished it from an ordinary insurance company. Having referred to section 37, to certain provisions of the 1996 Rules and to Lord Brightman's speech in Swain v. The Law Society , he continued:

"In my judgment given that the purpose of the Solicitors Indemnity Fund is to safeguard the lay public and to protect the interests of members of the public resorting to solicitors, it is perfectly proper in suitable cases for an order for substituted service to be made on the Solicitors Indemnity Fund. As I have already said, in the overwhelming majority of cases the plaintiff is looking to the fund for compensation for the breach of duty of his solicitor rather than to the solicitor himself."

I respectfully agree with that approach. The master, correctly, restricted himself to suitable cases. Being of the opinion, for the reasons stated, that the discretion under O.65, r.4(1) is not restricted by the views expressed in Porter v. Freudenberg or by r.4(3), I would hold that a case is not rendered unsuitable simply because the defendant solicitor's whereabouts are unknown and there is no likelihood that the writ will reach him or come to his knowledge.

It is still necessary that the discretion should be properly exercised on the facts of the particular case. Here there is no difficulty on that score. The judge considered the criticisms of the master's exercise of discretion made on behalf of the SIF, in particular that the plaintiff should have been required to do more to trace the defendant, for example by making enquiries of the British Embassy in Thailand. As to those criticisms, he said:

"The Master took the common sense view that in practice such steps were likely to be a waste of time, and in any event it was improbable that the solicitor, even if traced, would have any assets available to meet a judgment.

Furthermore, in two other very similar cases, brought by the same plaintiff against the same defendant, the SIF had not challenged the substituted service. [Counsel for the SIF] sought to distinguish this case from the others, in that the pleadings rely on an element of deliberate concealment by the solicitor in the context of the limitation issue. While this may affect the SIF's ultimate liability, it is difficult to see the relevance of that point to the manner in which service is to be effected.

If the question was simply one of discretion, I could not fault the Master's approach."

In effect the judge was saying that if he had taken a different view of Porter v. Freudenberg and r.4(3), he would have adopted the master's exercise of discretion as his own. The judge's exercise of discretion could not have been interfered with by this court.

For these reasons I am of the opinion that the master was right to uphold the district judge's order for substituted service. It is, however, necessary to deal with a number of further points which were raised in argument either here or in the courts below.

First and foremost, the plaintiff sought to draw an analogy between substituted service on the SIF and substituted service on the defendant's insurers or the Motor Insurers' Bureau ("the MIB") in personal injury actions arising out of road accidents. The authorities which bear on the latter subject are the decisions of this court in Gurtner v. Circuit [1968] 2 QB 586 and Clarke v. Vedel [1979] RTR 26. There is also a dictum of Goddard LJ in Murfin v. Ashbridge & Martin [1941] 1 All ER 231, 235. The effect of these authorities is unclear. In the latest of them, Clarke v. Vedel , the decision was based fairly and squarely on Porter v. Freudenberg , although without any examination of the rules and practice current at the time that it was decided. Yet Stephenson LJ acknowledged that there might be an exception from the general rule in some cases. Having referred at length to the judgments in Gurtner v. Circuit , he said [1979] RTR 36:

"For my part, I do find some difficulty in reconciling the general rule that substituted service should only be ordered where there is a probability that it will bring the document served to the notice of the defendant with, at any rate, some of the observations in Gurtner v. Circuit ; and I conclude that this court recognises that there may be cases where a defendant, who cannot be traced and, therefore, is unlikely to be reached by any form of substituted service, can nevertheless be ordered to be served at the address of insurers or the Bureau in a road accident case. The existence of insurers and of the Bureau and of these various agreements does create a special position which enables the plaintiff to avoid the strictness of the general rule and obtain such an order for substituted service in some cases."

A plaintiff's position vis-a-vis the defendant's insurers and the MIB and a plaintiff's position vis-a-vis the SIF being regulated by different provisions, statutory or otherwise, it is not in my view profitable to pursue the suggested analogy between the two. In the latter case the overriding consideration is that the mutual indemnity fund administered by the SIF was constituted for the primary purpose of safeguarding the interests of those members of the public who resort to solicitors for legal advice. It is a melancholy, though real, fact of life that solicitors who have exposed themselves to claims by their clients or former clients sometimes absent themselves from the jurisdiction or take other steps to ensure that they are not brought to account. If the hands of the court were tied as it is suggested they are by Porter v. Freudenberg , the fund's primary purpose would, to a substantial extent, be frustrated. I do not believe that its hands are thus tied.

The remaining points, which can be dealt with more briefly, were the following:

(1) Pursuant to a respondent's notice for which leave was given during the argument, Mr Seymour submitted that the defendant was, to the knowledge of the plaintiff, outside the jurisdiction when the writ was issued, so that it could not lawfully have been served on the defendant and, in consequence, that no order for substituted service can now be made; see Wilding v. Bean [1891] 1 QB 100. Leaving aside the objection that there is no hard evidence that the defendant was outside the jurisdiction when the writ was issued in February 1997 or at any other time, I agree with Mr Jackson that the short answer to this point is that, if he was outside the jurisdiction, he must be treated as having left it in order to evade service in respect of the various claims which his conduct had generated. That that is an exception to the rule established by Wilding v. Bean appears clearly from the judgments of Lord Esher MR and Lopes LJ at p. 102.

(2) As already stated, the plaintiff does not have a direct right of recourse against the mutual indemnity fund. Such a right can only arise under section 1 of the Third Parties (Rights Against Insurers) Act 1930, which provides that where under any contract of insurance a person is insured against liabilities to a third party, then, in the event of his becoming bankrupt his rights against the insurer shall be transferred to and vest in the third party. In The Mortgage Corporation v. SIF [1998] PNLR 73, 75, Sir John Vinelott, sitting as a deputy judge of the Chancery Division, recorded that although no bankruptcy petitions had yet been presented against the solicitors involved in that case, the SIF was willing that its liability under the 1930 Act should be determined on the footing that the solicitors were, or would be, made bankrupt and on the assumption that the SIF was an insurer within the meaning of the Act. That appears to have been a very proper stance, which the SIF could be expected to adopt in other cases such as the present. Indeed, it was accepted by the SIF, for the purposes of the appeal to Mr Justice Carnwath, that it was an insurer within the meaning of the Act. However, the question whether the same stance would or would not ultimately be adopted here, being one which does not require an answer at this stage, is something on which the validity of the order for substituted service cannot depend.

(3) In spite of what was said by the judge in the passage already quoted from his judgment, I do not read the statement of claim as alleging an element of deliberate concealment by the defendant in the context of the limitation issue. As already stated, 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. In any event, as the judge observed, it is difficult to see the relevance of this point to the manner in which service is to be effected. If necessary, the plaintiff could be asked to give an undertaking that it would not make or pursue any such claim in the action. The ground of distinction between this and the two earlier actions relied on by the SIF's solicitor (see above) appears to be illusory.

(4) Rule 19.1 of the 1996 Rules provides that the solicitor shall procure that notice in writing of any material claim shall be given to the SIF as soon as practicable. Although this point was not much canvassed in argument, it seems that it is unnecessary for notice to be given by the solicitor himself. I can see no reason why it should not be given by the client or someone acting on his behalf.

It is important to emphasise that substituted service on the SIF can only be ordered in what the master referred to as suitable cases. There will always be a discretion to refuse such an order on grounds so various that an attempt to enumerate them would be pointless. I would only add that nothing I have said is intended to diminish the importance of the "essential consideration" that substituted service can only be ordered where it is impracticable to serve the document in the manner prescribed.

I would allow this appeal.

Lord Justice Henry:

I agree.

Lord Justice Robert Walker:

I also agree.

Order: appeal allowed; Carnwath J's order discharged; order of the district judge restored; declaration made that service of the writ effected on the intervenor on 26.6.97 do stand as good service upon the defendant; plaintiff awarded costs of the appeal, costs of the intervenor's appeal to Carnwath J and costs of the intervenor's application to the master, to be taxed on the standard basis if not agreed; leave to appeal to the House of Lords refused.