CHEN AR MEE AND ANOTHER v. LEE SAMMY SEAN

DCCJ 1068/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1068 OF 2004

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Decision

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1.  This is an application for costs.

2.  The legal suit itself deals with a claim in negligence against a solicitor who has ceased practice in Hong Kong since 1995.

3.  After taking out the writ to sue the defendant, the plaintiff faced quite some difficulty in effecting service of the writ on the defendant.

4.  On 17 November 2004 the plaintiff's solicitors took out an inter parte summons, returnable on 29 November 2004, praying for an order from the court for substituted service of the writ to be effected on the Hong Kong Solicitors Indemnity Fund Limited (hereinafter referred to as ‘HKSIFL' for short).

5.  The inter parte summons was not served on the defendant. Instead the plaintiff notified the HKSIFL of its intended application for substituted service on the HKSIFL.

6.  This court was not informed of the contents of the discussions between the solicitors representing the plaintiff and the HKSIFL.

7.  From the court record, the solicitors for the plaintiff and the solicitors for HKSIFL both appeared in court on 29 November 2004. By consent of both solicitors, a court order was obtained from the Master in the following terms:-

(i)    the Hong Kong Solicitors Indemnity Fund Limited do file and serve on the Plaintiffs its affidavit in opposition by 20^th December 2004;

(ii)   the Plaintiffs do file and serve their affidavit in reply, if any, within 14 days thereafter;

(iii)  No further affidavit be filed without leave of the court;

(iv)  The hearing of the plaintiff's summons dated 17^th November 2004 be adjourned to a date to be fixed with 3 hours reserved before a Judge in chambers;

(v)   Costs of today be costs in the cause.

8.  The summons for substituted service filed on 17 November 2004 has been fixed for argument in this hearing. At the commencement of the hearing solicitors on behalf of the plaintiff made application to withdraw their application for a substituted service order. As it transpired, after the exchange of affidavits, the plaintiff is satisfied the defendant is out of jurisdiction. A separation application has been made for service of the writ out of jurisdiction. As the writ has now been served on the defendant, a substituted service order is no longer required. Costs application in respect of the substituted service application against the defendant was adjourned pending service of the summons on the defendant.

9.  After the withdrawal of the application for the substituted service order, solicitors on behalf of HKSIFL made verbal application in court for an order for costs occasioned by HKSIFL in opposing the substituted service application to be awarded to HKSIFL. Mr. Lane, solicitor on behalf of HKSIF, submitted that HKSIFL ought to be given its costs as it had successfully opposed the granting of a substituted service order, that costs should normally follow the event; and that HKSIFL should therefore be entitled to be reimbursed the costs it spent in opposing the application.

10.  The application for costs by HKSIFL was resisted by the plaintiff's solicitors. According to the solicitors' submission, the plaintiff has taken reasonable steps to ascertain the whereabouts of the defendant for the purpose of effecting service. As the enquires failed to unveil the contact address of the defendant, the plaintiff is entitled to make application for substituted service on the defendant by leaving the writ at the registered office of HKSIFL. Similar practice has been adopted and accepted in the past. This court should make no order as to costs between the plaintiff and the HKSIFL.

Costs Application

11.  An order for costs should only be made against the parties or the intended parties in a proceeding to the legal suit. The intended parties to a proceeding include those who are not the immediate litigants to the proceeding, such as the garnishee bank in a garnishee proceeding, a third party to a disclosure application in a personal injury suit, an intended witness in a subpoena application…. etc.

12.  Substituted service is normally attended to by way of an ex parte application. Had the plaintiff sought to obtain an ex parte order for substituted service to be effected on HKSIFL without reference to HKSIFL, HKSIFL would not have any chance to make representation about the plaintiff's intended mode of service. Any irregularity of service could be attended to by the defendant or his agent representing him. Should HKSIFL choose to appear or attend to the summons of its own volition in an ex parte application, the incidence of costs of HKSIFL should not fall upon the plaintiff.

13.  However, the court order of 29 November 2004 clearly showed the plaintiff to have consented to HKSIFL joining as an intended party to the substituted service application. The consent order granted HKSIFL leave to file the affidavit in opposition to the plaintiff's application. The consent order also made provision for the costs for the 29^th November hearing to be costs in the cause of the application. Costs between the parties in respect of the 17 November 04 summons had not been disposed of. Thus the issue of costs has to be adjudicated in accordance with the usual costs principles.

14.  The issues to resolve on costs entitlement between the plaintiff and HKSIFL are: (i) Whether HKSIFL has been rightly joined as an intended party to the substituted service application. (ii) Should the plaintiff apply for substituted service on HKSIF?

Should HKSIFL be an intended party?

15.  According to the affidavit filed by Ms Forsyth on behalf of HKSIFL the fund has no obligation to satisfy the plaintiff's claim. The fund's only obligation is to indemnify the defendant in accordance with the terms and conditions set out in Solicitors (Professional Indemnity) Rules for claims which the defendant are held liable. Though the Fund may have an interest in the ultimate outcome of the present legal suit, unless and until the HKSIFL has taken over the defence of the defendant or has been granted a right to be heard by the court, HKSIFL is not a party to the substituted service application.

16.  HKSIF is not a necessary party to the substituted service application.  HKSIFL became an intended party to this substituted service application by consent of the plaintiff and HKSIFL rather than as a matter of necessity in circumstances such as where HKSIFL would be taking over the defence of the case.

Should the plaintiff apply for substituted service on HKSIFL?

17.  The plaintiff has attempted to effect service of the writ on the defendant by registered post on 5 different addresses of the defendant. All of the mails were returned in the post. The note on one of the envelopes stated the address in question was not the contact address of the defendant.

18.  The plaintiff further made enquiry with the agent and legal representative of the defendant by:-

i)    writing to Johnson Stokes & Master (the agent appointed to handle all outstanding matters concerning the legal practice of the defendant since the cessation of practice of the defendant on 1 April 1995) to ascertain if Johnson Stokes & Master has the current contact address of the defendant to enable the service of a writ on the defendant.

Johnson Stokes & Master gave the plaintiff no reply.

ii)   writing to Wilkinson & Grist (defendant's current defence solicitors in High Court action HCA-2625/2004) to enquire whether Wilkinson & Grist was “able to contact the defendant and take instructions as to whether you (Wilkinson & Grist) can accept service of process on behalf of the defendant”.

The reply from Wilkinson & Grist was “ we have no instructions to accept service on behalf of Mr. Li”.

Order 65 r.4 of the District Court Rules reads:

r.4(1)  If, in the case of any document which by virtue of any provision of these rules is required to be served personally or in the case of 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 on that person, the Court may make an order for substituted service of that document.

…….

r.4(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.

19.  In the local Court of Appeal decision of Chan Yeuk Mei [1999] 2 HKLRD 376 Rogers, J.A. (at page 380 of the report) said:-

“The court in granting an order for substituted service must then take into consideration the requirement of bringing the particular document to the notice of the person being served. It is, after all, not an order that service be dispensed with. The first consideration must be where the person is likely to be found. If the person to be served is likely to be found abroad, then obviously different considerations will apply…. Then consideration must be given as to what practical steps can be taken to bring the documents to be served to the attention of the relevant party.”

20.  Thus the 3 stages consideration in the granting of a substituted service order are:-

i) whether the person to be served is likely to be found abroad or within jurisdiction.

ii) what practical steps have been taken to bring the documents to the person's attention; and

iii) whether reasonable efforts have been made to ascertain the current address for service.

21.  In Abbey National plc v Frost (Solicitors' Indemnity Fund Ltd intervening) [1999] 2 All ER 206 the English Court of Appeal permitted substituted service to be effected on a solicitor by serving the writ on Frost Solicitors' Indemnity Fund Limited.  In the judgment Nourse L.J. was of the opinion that O.65 r.4 only imposed one precondition for the granting of substituted service, i.e. that the plaintiff have been unable to effect prompt personal service. O.9 r.2 of the English rules gave the English courts a wide discretion. The additional requirement that substituted service should not generally be ordered if the writ was not likely to reach the defendant or come to his knowledge was only a practice of the King's Bench masters. It could not be treated as incorporated in the rules.

22.  After considering the purpose of the Solicitors' Indemnity Fund in England, Lord Nourse came to the view that it might not be unsuitable to grant substituted service on the Indemnity Fund simply because the defendant's whereabout was not known and there was no likelihood that the writ would reach the defendant or came to his attention.

23.  There is no dispute between the plaintiff and HKSIFL that in appropriate cases the court does have a discretion to permit substituted service to be made on HKSIFL. 

24.  What HKSIFL seeks to dispute was the fact that the plaintiff has not made all relevant enquiries to ascertain the whereabouts of the defendant before proceeding to make application for substituted service on the defendant by leaving the writ with HKSIF; i.e. the plaintiff fails to satisfy this court that it is practically impossible to effect service on the defendant.

25.  The plaintiff made no enquiry with HKSIFL whether HKSIFL has any knowledge of the whereabouts of the defendant.

26.  The plaintiff did not consider the suitability of obtaining an order for substituted service on the defendant's agent Johnson Stokes and Masters, or on the defendant's current defence solicitor Wilkinson & Grist. Rather the defendant chose to make an application for substituted service on HKSIFL.

27.  In the affidavit in support of the substituted service application, the plaintiff did not depose to the reason for seeking substituted service on HKSIFL rather than serving the writ upon the defendant's agent or current solicitor. Had the application for substituted service not been withdrawn, the plaintiff would have failed on its application for substituted service to be effected on HKSIFL.

28.  The substituted service application is doomed for failure. The joining of HKSIFL as an intended party to the substituted service is superfluous. Costs have been thrown away unnecessarily by HKSIFL.

29.  The plaintiff should not have consented to having HKSIFL to be joined as an intended party to the substituted service application, as HKSIFL is not a necessary party to the substituted service application. Equally HKSIFL should not have sought to be joined as an intended party to the substituted service application.  Both parties were at fault.  I do grant the costs order nisi that “half of the costs of and occasioned by the HKSIFL to be borne by the plaintiff”.

30.  Though HKSIFL, in the affidavit of Ms. Forsyth, has briefly raised the issue about the appropriateness of seeking substituted service on HKSIFL when the defendant is out of jurisdiction; parties had nevertheless not presented any detailed legal argument in court on this aspect. Nor have the parties discussed about the criteria suggested in Wilding v Bean [1891] 1 QB 100.  I refrain from exploring this area.

Gross Sum Costs Order

31.  There is every attraction in the granting of a gross sum order. On the granting of a gross sum order, it is never the practice of the court to  tax a bill item for item, otherwise the matter should have been attended to by way of a formal taxation before the master. Of the costs incurred, the 2 hours and 50 minutes spent in obtaining instructions from the defendant to resist the substituted service application should not be allowed in principle. Had the defendant have the integrity to come forward to accept service through any of his agents in Hong Kong, the current substituted service application would have become totally unnecessary. I would assess a gross sum costs of HK$45,000, of which a sum of HK$10,400 represented the 2 hours of court attendance and 2 hours of preparation time before this hearing spent by Mr. Lane at the hourly charge of HK$2600. The rest of HK$34,600 would cover the costs of the drafting of the affidavits, other profit costs and disbursement items. As HKSIFL should be entitled to ½ of its costs. The gross sum costs order nisi I intend to award to HKSIFL is a sum of HK$22,500.

Addendum

32.  I heard the parties' argument on the incidence of costs between the plaintiff and HKSIFL on their undertaking to obtain a proper court order to reflect the parties' intention that HKSIF was to be accepted as an intended party to the substituted service application made by the plaintiff against the defendant at the call over hearing before Master Wong on 29 November 2004.  Parties have not been able to furnish this court with a copy of sealed order of the court to reflect their intention until 16 March 2006.  This decision has therefore been held in abeyance since 20 April 2005 until now.