Sindicato Pesquero Del Peru S.A. and Others v. Eurco Elf Co. Ltd.
Read the full judgment text of HCCL 99/1998 on BabelCite. This HCCL judgment was delivered on 11 January 1999.
1. There are presently before the Court three substantive applications on the part of the 4th, 5th and 6th Plaintiffs herein. For reasons which will be apparent from this judgment, the issues raised are interrelated, albeit it is probably fair to say that such interrelationship began to be more fully appreciated, certainly as far as the Court was concerned, as the adjourned argument progressed. For the purposes of introduction, however, I set out below the applications in chronological order :-
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HCCL000099/1998 HCCL99/98 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL LIST NO.99 OF 1998 (formerly HCA No.A3575 of 1989) ---------------
--------------- Coram: The Hon Mr Justice Stone in Chambers Dates of Hearing: 17, 19 June and 13, 19 (p.m.) and 20 (p.m.) November 1998 Date of Handing Down Judgment: 11 January 1999 _______________________ J U D G M E N T _______________________ THE APPLICATIONS 1. There are presently before the Court three substantive applications on the part of the 4th, 5th and 6th Plaintiffs herein. For reasons which will be apparent from this judgment, the issues raised are interrelated, albeit it is probably fair to say that such interrelationship began to be more fully appreciated, certainly as far as the Court was concerned, as the adjourned argument progressed. For the purposes of introduction, however, I set out below the applications in chronological order :-
THE BACKGROUND 2. These applications have generated a good deal of heat. They have also generated an inordinate amount of paper. Perhaps in part this is because what was no more than a slightly unusual cargo claim has been permitted to descend into a bizarre and somewhat bad-tempered procedural muddle. Neither the current state of this action, nor the argument upon the trio of applications now for decision, can begin to be understood without brief reference to the factual background. 3. This action (which in the procedural melée has been all but forgotten) first saw the light of day in 1989 in HCA No.A3575, and arises out of a fire in a cargo of 2,000 metric tonnes of bagged anti-oxidant treated Peruvian fishmeal carried on a vessel named the 'Hobbit' from Huacho, Peru to Far Eastern ports in or about June 1988. It is therefore clear that the case itself is hopelessly stale. 4. Be that as it may. The make-up of the six Plaintiffs in the action as originally constituted is a little complex, owing to the particular sale contract arrangements which had been entered into with regard to this particular cargo of fishmeal. Suffice to say that the cargo in question was part of a consignment of 5,000 metric tonnes originally sold by the 3rd Plaintiff, General Feeds Inc., to Taiwanese buyers. However, this sale did not go through, and General Feeds Inc. took back the cargo, applying it instead to pre-existing sale contracts with the 2nd Plaintiff herein, Luckmate Investment Ltd. In turn, Luckmate applied the entire cargo to contracts with the 4th Plaintiff, Quan Wa Cheong, for delivery at Huangpu, China, and Quan Wa Cheong then on-sold the cargo to the 5th and 6th Plaintiffs. Accordingly, the claim as originally brought was by all six of the Plaintiffs against the Defendant owners of the 'Hobbit', Eurco Elf Co. Ltd., and was for the sum of US$373,601.52 in respect of cargo damage due to the fire, and associated survey expenses. 5. Given this broad sequence of events, Mr Sussex was probably correct when he suggested that this particular claim was not in conventional cargo claim form, and that in this instance there were additional complications regarding, for example, possible problems in terms of title to sue. Which brings us back to the constitution of this particular action, and the discrete disputes with which the Court is presently concerned. 6. It is, I think, entirely common ground that the PICC, a mainland Chinese underwriter, has exercised insurer's rights of subrogation, albeit not with regard to the 2nd and 3rd Plaintiffs, Luckmate and General Feeds, who were C & F sellers and as far as I am aware had no insurance. What appears to have happened is that at the time that PICC and the 4th, 5th and 6th Plaintiffs came into the picture and instructed Messrs Holman, Fenwick & Willan with regard to the 'Hobbit', the latter firm were already acting for Luckmate and General Feeds, who themselves were concerned about the events on board the 'Hobbit' in respect of loss and damage to the cargo. Accordingly the writ in this action, as settled by Holman, Fenwick & Willan, named all six Plaintiffs, and it appears that PICC either approved or (at the least) raised no objection to this course, although I note that in evidence filed on its behalf PICC maintains that it has only ever instructed Holman, Fenwick & Willan on behalf of the 4th, 5th and 6th Plaintiffs. 7. In any event, I am told by Mr Sussex that his lay clients, initially the 1st, 2nd and 3rd Plaintiffs, never had any desire to pursue the cargo recovery claim in their own right, and had agreed to co-operate with PICC and to lend their names to this action solely in order to ensure that no problems would be encountered in terms of title to sue. Mr Sussex further submitted that it had been agreed, expressly or by necessarily implication, that in the circumstances PICC in turn would indemnify these three Plaintiffs in respect of their costs. 8. What appears to have happened, however, is that relations between PICC and Holman, Fenwick & Willan began to deteriorate. The allegations levelled each against the other are various. Whether such deterioration was primarily because PICC had become disillusioned with the way the case was being handled, or with the advice it was receiving, or whether relations were souring because of non-payment by PICC of costs incurred, are not matters which are presently required for decision. Suffice to say that in July 1997 PICC withdrew instructions from Holman, Fenwick & Willan to act on behalf of the 4th, 5th and 6th Plaintiffs, and instructed as solicitors in their place Messrs Hill Taylor Dickinson, which firm on 28th August 1997 succeeded in filing at the Registry a Notice of Change of Solicitors acting on behalf of the 4th, 5th and 6th Plaintiffs. 9. It is not clear why the new solicitors thought that this was appropriate procedure, given that Holman, Fenwick & Willan clearly remained on the record for the 1st, 2nd and 3rd Plaintiffs, but there it is. Perhaps more surprising in the circumstances was that the Registry saw fit to accept such Notice, the effect of which was to bring about the curious situation wherein two different firms of solicitors are on record as acting for what amounts to two tranches of Plaintiffs. 10. Whilst these matters were occurring, there were other developments in the action itself, most significant, perhaps, being an application by Messrs Ince & Co., the Defendant shipowners' former solicitors, to come off the record on behalf of their client, an Order to this effect being made on 1st May 1998. This in turn stimulated interest in the case on behalf of the Defendant owners' P & I Club, the North of England Protection and Indemnity Association Limited, represented by Clyde & Co., whose application to intervene in this action was granted on 4th September 1998. Although the Defendant, a Maltese company, appears to be no longer interested in this case, or indeed in pursuing the Counterclaim filed on its behalf (there is evidence before the Court that the Defendant was dissolved under Maltese law on 31st August 1989, that it has since been in a process akin to liquidation, and that in all probability the 'Hobbit' has now been scrapped), nevertheless I am told that there is in place a Club Letter of Undertaking which was issued as the result of the events the subject of this action; hence the Club's present interest in participating in this action in order to protect its interests. 11. The only other matters of background worthy of note are first, that Holman, Fenwick & Willan no longer act for the 1st Plaintiff, a Peruvian company, having obtained an Order permitting that firm to come off the record on 27th August 1998, and second, that the 4th, 5th and 6th Plaintiffs are now formally represented by Messrs Dibb Lupton Alsop and not Messrs Hill, Taylor Dickinson, a Notice of Change of Solicitors in this regard having been filed on 15th October 1998. 12. With this short introduction, I now turn to the three particular applications presently before the Court for decision. (1) The reconstitution summons dated 26 January 1998 13. Despite the widespread disagreements that this case has engendered, one area at least which attracts no dissent is the clear necessity to unravel the existing procedural muddle, and to enable the action itself to proceed in proper form. 14. It is trite law that co-plaintiffs must be represented by the same solicitors and counsel : see Supreme Court Practice 1999, Volume 1, MN62/B/127; Lewis v. Daily Telegraph Ltd. (No.2), [1964] 2 QB 601. 15. Logically it makes good sense in the circumstances, as Mr Barlow suggested, for the 4th, 5th and 6th Plaintiffs to remain as Plaintiffs and for the 1st, 2nd and 3rd Plaintiffs to become Defendants. Other considerations apart, the 4th, 5th and 6th Plaintiffs have made it plain that they remain interested in pursuing their cargo claim against the Defendant, presumably because the Letter of Undertaking which is in place offers some prospect of recovery where otherwise there would be none, given the present status of the Defendant. In addition, however, leave is now sought to amend the pleadings to permit the 4th Plaintiff also to commence proceedings against its former co-plaintiffs, the 2nd and 3rd Plaintiffs, in terms of the draft pleading annexed to the amendment summons; once again, therefore, in these circumstances it would be logical for them to remain dominus litis. 16. To a reconstitution in this manner Mr Sussex had no objection in principle. He candidly told the Court that his lay clients (who, since the commencement of these interlocutory debate, have been reduced to two, namely, the 2nd and 3rd Plaintiffs) had and have no interest in pursuing a case against Defendant owners, to which they initially permitted themselves to be added as nominal Plaintiffs only. The situation now, as Mr Sussex so described it, is that his clients seek "peace with honour", and that as soon as was possible consistent with the protection of their interests they intended to drop out of the picture completely. 17. However, Mr Sussex sought to impose terms upon such a reconstitution; first, he wished to avoid his clients in any way being rendered "sitting ducks" and to preclude any claim being brought against the 2nd and 3rd Plaintiffs in their new capacity (an issue considered later in this judgment), and second, with regard to costs. 18. In this latter regard, he submitted that any reconstitution order, whereby his clients are now to be Defendants, should be made only upon the basis that the 4th, 5th and 6th Plaintiffs do provide security for his clients' costs. He put the argument thus. There is no doubt, he said, whether as a matter of express agreement to be gleaned from the earlier correspondence between PICC and Holman, Fenwick & Willan, or at any rate by a process of necessary implication consequent upon PICC exercising rights of subrogation, that PICC must be responsible for the costs of his clients, who for all practical purposes are in the circumstances nominal Plaintiffs only. Instead, what had happened in this action is that PICC "decamped" with the 4th, 5th and 6th Plaintiffs to Hill Taylor Dickinson, leaving the 1st, 2nd and 3rd Plaintiffs in the lurch and unprotected. Accordingly, the "substantial justice" of the situation, argued Mr Sussex, would undoubtedly be met if, upon the necessary revamping of the instant proceedings, the 4th, 5th and 6th Plaintiffs were now to provide the security for the undoubted costs liability hitherto rejected by PICC. 19. I reject this contention, persuasively though it was advanced, and I decline to exercise what Mr Sussex was constrained to call "a hands-on approach to the injustice of the case", based upon PICC "repudiating its responsibility" to bear the costs of the 1st, 2nd and 3rd Plaintiffs. Even if I had jurisdiction so to do (and I am inclined to think that I have, despite Mr Barlow's argument to the contrary) in the exercise of my discretion I decline to encumber what should be a straightforward reconstitution issue with what are evidently hotly-disputed costs considerations. In this context, I note that in his skeleton argument Mr Sussex confined his submissions to the provision of security against contingent liability for the Defendant shipowner's costs (at the end of August 1997 estimated to be in the region of US$115,000), although in affidavit evidence filed by Mr Dunlop of Holman, Fenwick and Willan, security for costs is sought not only in such contingent terms in the event that the claim pursued against the Defendant shipowners proves unsuccessful, but also in terms of "the First to Third Plaintiffs' own costs liability incurred as Plaintiffs to this firm as their solicitors (no part of which has been paid by PICC to date) ...". 20. It has been starkly apparent throughout the hearings of these applications that the question of unpaid costs is a significant point of dissension between PICC and Holman, Fenwick & Willan, and I do not overlook the fact that such costs are the subject of separate proceedings issued (but not, I think, yet served) by Holman, Fenwick & Willan in HCA No.A1441 of 1998 against PICC and all six of the Plaintiffs in the present action, whilst the costs issue again rears its head in this action by means of a fourth summons dated 1st April 1998 issued on behalf of the 1st, 2nd and 3rd Plaintiffs, whereby Orders are sought for the joinder of PICC as 2nd Defendant herein and for service upon PICC out of the jurisdiction, the point of such joinder being the pursuit of PICC for costs. This fourth summons presently stands adjourned sine die with liberty to restore, and I assume that the intention is that it will be so restored once it is ascertained whether the Court has been minded to impose the terms as to costs now sought upon this reconstitution summons. 21. However, as already indicated, I am not minded to impose such terms, nor to permit what is no more than a logical (albeit forced) procedural adjustment to be fettered with what is likely to be a highly contentious collateral issue. In effecting such necessary adjustment to the parties in this action, and in naming the 1st, 2nd and 3rd Plaintiffs as Defendants, it seems to me that these parties are in no worse position than they currently are, whilst the action itself is effectively removed from its current paralysis and once again is able to proceed. In my judgment, any costs question should be confronted and considered directly, and ought not to be resolved by what amounts to a side-wind, via the imposition of terms; indeed, in my view Mr Barlow was near the mark when he suggested that there was "no justification on a reconstitution summons to invite the Court to address the whole history of the marriage". 22. It follows from the foregoing, therefore, that my Order on the reconstitution summons is that the 1st, 2nd and 3rd Plaintiffs are to be deleted as Plaintiffs from the writ of summons herein and that henceforth they be added as the 2nd, 3rd and 4th Defendants respectively. In due course I will hear Counsel on the precise form of this Order. 23. I now turn to consider the considerably more vexed issue of amendment. (2) The amendment summons dated 17th November 1998 24. This application for leave to amend is chronologically the last in the sequence of summonses, and is framed in the alternative wherein there are exhibited to the relevant summons alternative drafts, the applicability of each depending upon the decision of the Court in the reconstitution summons. That decision now having been made, it follows that the precise application for consideration is whether the 4th, 5th and 6th Plaintiffs, whom I have ordered shall remain as Plaintiffs in this action, should be granted leave to amend their pleading in terms of the draft Amended Points of Claim. 25. It is common ground, and the starting point for this particular argument, that the causes of action now sought to be pursued by the 4th Plaintiff against the 2nd and 3rd Plaintiffs are time-barred, and it was with this particularly in mind that Mr Sussex was disinclined to accept a situation whereby his clients, if recast as Defendants, thus became susceptible to prosecution of an otherwise time-barred action. In the course of argument in opposition to the proposed amendments, he drew the Court's attention to the provisions and effect of Section 35 of the Limitation Ordinance, Cap.347, in particular Sections 35(2), (3), (5) and (6), and to the provisions of Order 15 rule 6, in particular Order 15 rule 6(6), in support of his submission that such amendments did not fall within the terms of these provisions and accordingly should not be permitted. 26. Mr Sussex further pointed out that the draft amended Points of Claim as framed against the 2nd and 3rd Plaintiffs were posited upon the assumption that that cargo claim against Defendant owners is lost; in other words, if PICC (through the 4th, 5th and 6th Plaintiffs) should succeed against the original Defendant, nothing remained that would be 'live' against the 2nd and 3rd Plaintiffs, a proposition from which Mr Barlow did not dissent when specifically accepting that the claims now sought to be mounted against the 2nd and 3rd Plaintiffs were in the alternative and contingent upon failure of his clients' action against the existing Defendant. Moreover, submitted Mr Sussex, the very act of a permitted joinder (or for that matter of amendment under Order 20 rule 5) effectively disposed of any ability on the part of his clients to plead a time bar defence by virtue of the statutory relation back in Section 35(1)(b), Cap.347 unless (which was not the case in the revised draft pleading) the vehicle for the new claim was a third party proceeding which, pursuant to Section 35(1)(a), Cap.347, was deemed to have commenced at the date of such third party proceedings. 27. Mr Sussex concluded that joinder under Order 15 rule 6 was not possible given that the statutory scheme provided in Order 15 rules 5 and 6 was not met, and that what was involved here was the joinder of "a new party". The proposed amendments, said Mr Sussex, would create a lis between the 4th Plaintiff on the one hand and the 2nd and 3rd Plaintiffs on the other where none had existed before, and as such would constitute the addition of new parties. In support of this contention, he relied upon a English Court of Appeal judgment in Reed Publishing Holdings Limited & Others v. King's Reach Investments [1983] (unreported, CA transcript), a decision upon an interlocutory appeal against an Order of Judge William Stabb, sitting as an Official Referee, whereby leave was given for the Statement of Claim in that action to be amended so as to enable the 2nd Plaintiff, Reed Properties Limited, to claim against the 1st Defendant in contract. 28. The factual background of this case is far removed from that presently before the Court. In Reed, the Writ was issued on 8th June 1981 and the 1st Plaintiff alone sued the 1st Defendant for damages for breach of a building agreement in respect of defective windows, and the 1st, 2nd and 3rd Plaintiffs sued the 2nd, 3rd and 4th Defendants in negligence for damages in connection with the design, supply and fixing of the glass panels. So at that stage there were, as the judgment of Dunn LJ makes clear, two quite separate claims, the only claim in contract being a claim by the 1st Plaintiff against the 1st Defendant. Further and Better Particulars of the damages were requested, and given, and thereafter an amendment, the subject to the appeal in Reed, was formulated to the Statement of Claim, paragraph 7 thereof pleading an assignment dated 4th October 1977 of the residue of the term of the building lease (which contained full repairing covenants) from the 1st and 2nd Plaintiffs. The proposed amendment then continued with the plea that at all material times the 1st Plaintiff intended to assign the benefit of the building contract dated 20th September 1972, and that the benefit of that agreement was assigned to the 2nd Plaintiff in equity at the date of the assignment of the lease. The judgment of Dunn LJ in Reed continued as follows :-
29. Mr Sussex submitted that on the basis of the reasoning of the Court in Reed, the amendments now proffered clearly served to add new parties in the absence of a pre-existing lis, and this could be effected only in the circumstances laid down in Order 15 rule 6(5) and (6), none of which applied, so that in the circumstances the Court was left with the blanket prohibition within Section 35(3), Limitation Ordinance, Cap.347, none of the exceptions thereto applying either. 30. Mr Barlow attacked this submission as contrived and illogical. He pointed out with some force that the decision in Reed had gone forward by concession of counsel, and suggested that, as a result, it was not altogether easy to understand the reasoning underlying that decision. The 2nd and 3rd Plaintiffs had always been 'parties' in the strict sense, and so far as Section 35, Cap.347 was concerned, he further suggested that once rules of court had been made pursuant thereto, this statutory provision was, to use his term, 'spent', and that "section 35 does not apply in the present context". 31. This latter contention is, I suppose, either right or wrong, and for my own part I think that it is wrong. With respect, I am unable to grasp how the enactment of rules of court pursuant to primary legislation could have the effect of effectively negating the primacy of the legislative provisions underpinning their existence. So whilst I can see why Mr Barlow seeks to make this argument, in my judgment the point fails. 32. I have more instinctive sympathy with the suggestion that the use of the term 'party' in Order 15 rule 6 must mean "party to the proceedings", and that if this be correct, Order 15 rule 6 has nothing to do with the present application to amend, and that argument should be centered squarely and solely upon the application of the provision of Order 20 rule 5(5), an issue which I shall shortly address. Order 15 rules 6(5) and (6) do not 'bite', says Mr Barlow, because the present application is to add new claims to existing parties to the proceedings. 33. This argument has its attractions, not least in terms of the literal meaning of the term 'party', and by reason of the happenstance that the claim now sought to be brought involves former co-plaintiffs. I am, however, unable to persuade myself that this is correct either. The existing rules on joinder anticipate the addition (or substitution) of a new party in situations wherein, absent such joinder (whether above or below the line), the existing claim cannot properly be determined, and is therefore considered 'necessary' in the circumstances, notwithstanding the expiry of the limitation period. It is not, in my view, correct to assert, as I think in this context Mr Barlow so asserted, that because the intended targets of the amendment are already in the action qua Plaintiffs that therefore this enabled new alternative claims to be made against the 2nd and 3rd Plaintiffs upon the reconstitution of the action to change their status to Defendants, and this in circumstances in which there had been no pre-existing lis between these two groups of Plaintiffs. 34. In my judgment it cannot be right, and it is not right, to permit the extraordinary procedural events in this case, whereby two sets of solicitors came to be on record representing two sets of Plaintiffs, to be the fortuitous vehicle for the 4th Plaintiff to be permitted to sidestep the strictures present within Section 35, Cap.347 and Order 15 rule 6(5) and (6), provisions which are specifically designed to safeguard the joinder of parties outside the relevant limitation period. Had there been an attempt to join the 2nd and 3rd Plaintiffs as Defendants to this new claim at this stage without these entities having already been part of this action, the application would never have got off the ground; as Mr Barlow accepted, if his clients were forced to issue new proceedings, "the limitation period would be insurmountable". In my view, therefore, this case is in an a fortiori position to Reed Publishing, wherein the 2nd Plaintiff and the 1st Defendant were already on different sides of the line, so to speak, but where there had hitherto been no lis between them, the introduction of such a lis effectively being considered by the English Court of Appeal (albeit via a concession) to constitute the addition of a new party. 35. Accordingly, on the issue of Section 35(3), Cap.347 and Order 15 rule 6(5) and (6), I agree with Mr Sussex, and reject Mr Barlow's arguments in terms of their non-applicability. 36. That in itself is sufficient to decide the amendment argument. However, if I be wrong in this conclusion, I move now to consider the argument centering upon Order 20 rule 5(5), which rule Mr Barlow maintains is the only applicable provision in the circumstances. In a nutshell, he says that the amendments proposed fall squarely within the terms of Order 20 rule 5(5) in that the present application is one arising out of the same or substantially the same facts as the cause of action in respect of which the 4th, 5th and 6th Plaintiffs are already claiming in the action against Defendant owners. 37. To this contention, Mr Sussex again joins issue. If he is wrong on the joinder argument, he says, and, contrary to his submissions, Order 20 rule 5(5) does come into consideration, his primary point is that there is a significant difference between the facts relied upon as against the Defendant owners and those facts relied upon as constituting the alleged new cause of action against the 2nd and 3rd Plaintiffs. Against the Defendant shipowner, the key is the contract of carriage evidenced by the bills of lading, with causes of action in contract, bailment and tort, whereas the draft claim against the 2nd and 3rd Plaintiffs arises out of a sales contract, to whit, that goods shipped under that sales contract did not conform to contractual specification. Moreover, all that is sought to be pleaded against the 2nd and 3rd Plaintiffs cannot be pleaded against Defendant owners, for the very good reason that this would defeat the causes of action extant against them. In the event, therefore, what was being proposed constituted alternative claims only, with the substratum of relevant fact needed to sustain these contingent claims being substantially at variance with the factual matrix, including the fire on board the 'Hobbit', sufficient to run the case against Defendant owners. 38. Further, if he be wrong on this analysis, Mr Sussex went on to submit that in any event there is a discretion vested in the Court, and that the Court is entitled to take into account the issue of prejudice occasioned by such amendments, in this connection citing the well-known passages from the judgment of Staughton LJ in Hancock Shipping v. Kawasaki Heavy Industries Limited, [1992] 1 WLR 1025, at 1028-1032 (CA). Moreover, if prejudice came into the equation at all, the Ninth Affidavit of Mr Dunlop of Holman, Fenwick & Willan clearly set out the difficulties and problems that would undoubtedly arise if the proposed amendments were to be permitted. 39. In response, Mr Barlow argued that there was no relevant prejudice, and that allegations of prejudice are and were 'misconceived'; and that if the Court was against him on this submission, any such prejudice was "prejudice for which both parties to the application are to blame", in that "they jointly should bear responsibility for that done or not done by their joint agent, their common solicitor". 40. The latter is an interesting approach, and I reject it. Were amendments in the terms proposed to be permitted, the case is manifestly old and stale (as Mr Barlow accepts), and in my view it is clear that relevant prejudice would arise. Nor, in my judgment, is it a satisfactory answer to this particular point to inveigh about the responsibility of Holman, Fenwick & Willan for the situation which is said to have come about. The clear and obvious remedy available to the 4th, 5th and 6th Plaintiffs and/or PICC is to bring a claim in negligence against Holman, Fenwick & Willan, as appears to have been repeatedly threatened albeit (as Mr Sussex argued in the context of his submission that the present claim is, in his words, "trumped up" to support the injunction summons) such a course thus far has pointedly not materialised, notwithstanding that, on the evidence, PICC had threatened Holman, Fenwick & Willan with a negligence suit as long ago as 15th July 1997, on which date they wrote, inter alia, as follows :-
41. Whilst in similar vein PICC's then new solicitors, Hill Taylor Dickinson, subsequently wrote an extensive and detailed letter of complaint to Holman, Fenwick & Willan dated 5th August 1997 in, inter alia, the terms set out below :-
42. Viewed against this background, therefore, I find it difficult to accept, and I reject, Mr Barlow's closing submission that judicial discretion should now be exercised "to permit matters which should have been addressed now to be litigated" and that there is and was no reason to exercise such discretion "to further disadvantage the 4th, 5th and 6th Plaintiffs". Nor do I accept his forceful submission that reconstitution absent leave to amend in the terms desired would be 'illusory' given that the "onset of the present paralysis" resulted from his client's "desire to raise their alternative claim". I can identify no such 'illusion'. I have earlier dealt with the history of the procedural 'paralysis' of this case, whilst it seems to me to be abundantly clear that a negligence remedy against Holman, Fenwick & Willan has throughout squarely been in the sights of PICC and, for that matter, their new legal advisers, Hill Taylor Dickinson. Thus, when Mr Barlow posed the rhetorical question "the Court will have to ask itself, is the consideration [of a negligence writ against Holman, Fenwick & Willan] sufficient to weigh in the balance in the exercise of its discretion?", this seems to me clearly to permit of an affirmative response. For similar reasons I do not consider it correct, as Mr Barlow further submitted, that if reconstitution is permitted absent leave to amend that this would be "wholly unjust" because the effect would be that the 2nd and 3rd Plaintiffs "would enjoy the advantage of the unsatisfactory way that Holman Fenwick & Willan have 'served' all the Plaintiffs from 1989 to 1997". 43. In summary, therefore, I am also against Mr Barlow in his argument that the proposed amendments fall within the terms of Order 20 rule 5(5), and that, if I be wrong in that conclusion, I further decline to exercise my discretion to permit these amendments in light of all the circumstances of this case and, in particular, the evidence of resultant prejudice. 44. Lastly under this head, and for the avoidance of doubt, in arriving at my conclusion upon the amendment issue I have not placed any weight upon Mr Sussex's further contention that such amendments proposed in any event should not be permitted because there had effectively been a settlement of the alternative contractual claim, or what is termed within the affidavits a "commercial arrangement", and that in this regard PICC could not be in a better position than its assured, the 4th Plaintiff, whose contractual rights had effectively been subject to accord and satisfaction. In this context I tend to agree with Mr Barlow. The affidavit evidence regarding a settlement between the 2nd and the 4th Plaintiff is not entirely satisfactory, this is not a strike-out point in the sense of being plainly or obviously bad, and this is not an argument which is conclusive and which in itself would justify the refusal of leave to amend; had such amendments in fact been permitted, the 'settlement' point could have been pleaded in defence thereto, and the issue thereafter debated at trial. 45. It follows from the foregoing that leave to amend in the draft terms before the Court is refused, and that the amendment summons is dismissed. 46. This brings me, finally, to the injunction summons. (3) The injunction summons dated 21st May 1998 47. Somewhat curiously, the application seeking to enjoin Holman, Fenwick & Willan from further acting for any party in this action, which clearly started life as the main item upon the PICC agenda and which was the first of the applications to be argued, has now come to be recognised (I think) as an issue which can properly be dealt with only upon the determination of the two other applications. These latter matters having been resolved, I consider now the issue which has been primarily responsible for a distinct sense of animus pervading this case; indeed, in his closing submissions Mr Barlow described the "true position" as being a "standoff between Holman, Fenwick & Willan and the indemnifiers of the 4th to 6th Plaintiffs", a turn of phrase which in my view aptly mirrored the reality of the situation. 48. Be that as it may. By the injunction summons, the 4th, 5th and 6th Plaintiffs seek the following specific orders :-
49. So far as this application is concerned, Mr Sussex does not stand on ceremony. He contends that the application is misconceived and represents a serious abuse of process which, he says, has been brought solely "as a weapon to discomfort" his clients. To the contrary, Mr Barlow asserts that such injunctive relief is both highly necessary and appropriate in the circumstances which have arisen. Clearly, therefore, there is little scope for any meeting of minds upon the substance of this issue, although happily there was a considerable measure of agreement between Counsel as to applicable legal principles. 50. Although the Court has been treated to an interesting (and educational) survey of the law in this area, by the time of conclusion of argument I think it fair to say that both Counsel accepted that the relevant legal principles to be applied in terms of enjoining solicitors from acting were as laid down by the English Court of Appeal in In Re A Firm of Solicitors, [1992] 1 QB 959, in which it was held that the Court would intervene if a risk of a breach of the duty not to communicate confidential information could reasonably be anticipated, a test which had its origin in the judgment of Buckley LJ in the landmark case of Rakusen v. Ellis, Munday and Clarke, [1912] 1 Ch.831, and which led Parker LJ in In Re A Firm of Solicitors to observe (op.cit. at 969) :-
51. At the conclusion of argument, however, Mr Barlow was good enough to inform the Court that he understood that the written judgment of the House of Lords in the case of Prince Jefri Bolkiah v. KPMG (a Firm) was shortly to be expected, a judgment which he considered was likely to be of great relevance if it became available prior to the decision on this application. Through the industry of those instructing him, I have now been sent a hard copy of that judgment of the House of Lords as published on the Internet on 18th December 1998, oral judgment in this case having been delivered earlier by their Lordships on 18th November 1998. As Counsel anticipated, I have been very considerably assisted by the published report, in which Lord Browne-Wilkinson, Lord Hope, Lord Clyde and Lord Hutton unanimously agreed with the principal speech of Lord Millett. 52. In Prince Jefri, the factual matrix was that the Prince ultimately was successful in enjoining KPMG, the large and well-known firm of chartered accountants, from acting for a Finance Task Force appointed by the Government of Brunei to conduct an investigation into the activities of the Brunei Investment Agency (of which Prince Jefri was for many years Chairman) against a background whereby KPMG had undertaken a prior major assignment ("Project Lucy") and a number of other personal assignments for Prince Jefri, in the course of which the firm had been entrusted with, or had acquired, extensive confidential information concerning Prince Jefri's assets and financial affairs. 53. In allowing Prince Jefri's appeal, and in reinstating the injunction granted by Pumfrey J. at first instance, Lord Millett noted that the issues raised in these proceedings had not previously been considered by the House of Lords, and confirmed, in a situation in which a solicitor was in possession of information confidential to the former client wherein such information was or might be relevant to the matter upon which he was sought to be instructed by a second client, that :-
54. Lord Millett then went on to observe :-
55. Lord Millett specifically noted, and accepted as "well-founded", criticisms of the test "supposed to have been laid down in Rakusen's case", namely, "that the Court will not intervene unless it is satisfied that there is a 'reasonable probability of real mischief'", observing that, if this were to be the test :
56. Lord Millett also took the opportunity to reject the "many different tests" that appear in the authorities, such as "an appreciable risk" or "an acceptable risk", further observing :
57. It is clear that the strict test as now formulated, wherein any question of a "balancing exercise" is firmly rejected, puts the case as high as that of a "no risk basis" (always assuming the existence of confidential information) and places a "heavy burden" (such as Lord Millett said was faced by KPMG in this case) upon the solicitor acting or seeking to act for the new client to establish the absence of any risk that confidential information obtained in the course of a former client relationship may unwittingly or inadvertently come to the attention of the new client. 58. Since Prince Jefri is now the leading authority in this area, I propose to follow the approach therein laid down, notwithstanding that it has not been the subject of submissions by Counsel. In this regard it seems highly probable that the strictness of the test propounded by Lord Millett could not but be welcomed by the Applicants for the relief presently sought, whilst so far as the Respondents are concerned suffice to say that in any event I would have arrived at the same conclusion on the basis of the agreed test in In Re A Firm of Solicitors (op.cit.), which test has hitherto received the approval of the Hong Kong Court of Appeal. How, therefore, should the recent formulation by the House of Lords in Prince Jefri v. KPMG be applied to the facts of the instant case? 59. At the outset of such consideration it seems to me that there is a primary factual distinction to be drawn between the type of situation such as occurred in Prince Jefri and that in the present proceedings. The latter do not involve Holman Fenwick & Willan in choosing to act in a matter for a new client or clients with claim(s) or interest(s) adverse to those of the previous client. To the contrary. The departure of PICC with the 4th, 5th and 6th Plaintiffs to what was then Messrs Hill Taylor Dickinson (now Dibb Lupton Alsop) had simply left Holman, Fenwick & Willan to continue to attend to the interests of the 1st, 2nd and 3rd Plaintiffs, who were, as earlier noted, pre-existing clients before PICC and the 4th, 5th and 6th Plaintiffs also began to be represented by that firm in circumstances in which, Mr Sussex strongly asserted, there existed no conflict, be it then or now, between these two sets of Plaintiffs. Which situation, it seems to me, squarely raises the preliminary issue as to the existence of confidentiality and privilege between co-plaintiffs. 60. In Prince Jefri, op.cit., the case at hand was, of course, about the duties of accountants, but Lord Millett made it plain that "the case for a strict approach is unanswerable" where the information in question is not only confidential but also privileged (whether in terms of litigation privilege or solicitor-client privilege). However, whilst recognizing the importance of solicitor-client confidentiality, a constant within Mr Sussex's submissions in opposing the injunctive relief claimed was that there is and can be no confidentiality as between co-plaintiffs, for which proposition he relied upon Re Konigsberg (A Bankrupt) [1989] 1 WLR 1257 at 1265, per Peter Gibson J. :-
61. The same point is put, in a somewhat different context, by Rix J. in "The Sagheera" [1977] 1 Ll LR 160, at 165 :-
62. Accordingly, if the principle as to the absence of confidentiality between co-plaintiffs is correct, as I accept it to be, on this basis alone this would appear to render unsustainable the relief sought in the instant summons. The stringency of applicable principle laid down in Prince Jefri v. KPMG was predicated upon the established existence of confidential information, and, as Lord Millett commented, in normal circumstances of a client's previous solicitor acting for a new client in a new and adverse matter, this is something which "may readily be inferred". However, the present case is not such a "new client" situation, and in the particular circumstance of former co-plaintiffs it is not easy to see how there is to be established the presence of such confidential information requiring the invocation, at the behest of such co-plaintiffs, of the Court's protection against the risk, however slight, of disclosure to the retained client. Possibly this may be the very reason justifying Mr Barlow's categorisation of this case as "a very unusual situation which has not been before the Courts in any reported decision". 63. Be that as it may. Mr Barlow argued forcefully in favour of the relief now sought. A fundamental premise of his argument was that solicitors working for multiple plaintiffs have a duty from the outset to identify any areas of potential conflict of interest between their clients qua co-plaintiffs. In the present case, he said, notwithstanding Mr Sussex's firm disclaimer as to the existence of any conflict of interest, there were indeed "fairly obvious" conflicts between the interests of the two groups of Plaintiffs represented by Holman Fenwick & Willan, conflicts which had become "unmistakable" by the time of the filing of the Defence and Counterclaim in the action in early 1990, and that "without ever advising the 4th to 6th Plaintiffs of these matters Holman Fenwick & Willan continued in the role of the Plaintiffs' solicitors until the 4th to 6th Plaintiffs served notice of dismissal and notice of their intention to claim against Holman Fenwick & Willan for negligence and breach of duty". He further suggested that since that time, Holman Fenwick & Willan have adopted procedures which place it in hostile litigation not only against the camp of the 4th to 6th Plaintiffs "but in fact against all the Plaintiffs", a stance exemplified by the application to joint PICC as a party, whom Holman Fenwick & Willan knew, by virtue of confidential information acquired through acting for the 4th to 6th Plaintiffs, " to be driving the 4th to 6th Plaintiffs' involvement in this litigation pursuant to rights of subrogation". 64. It was "surely nonsense", said Mr Barlow, to suggest, as in evidence Messrs Dunlop and Hardaker had done, that a firm who represented his clients for almost ten years retained no confidential information, given the conversations and meetings with clients, and in particular the "sidestepping" by Holman Fenwick & Willan of the very issue of possible conflict raised by PICC in 1991 and 1992. In short, whatever protestations were made in this regard, there had to be in existence a pool of confidential information, not least because Holman Fenwick & Willan appeared to have corresponded separately with their respective clients (an issue not addressed at all by the deponents on the firm's behalf); moreover, whilst a co-plaintiff's confidential information may not be privileged as such, it may still be confidential, at least to the extent that it had not been communicated to the other plaintiff(s). And that if the "shared agent" was so remiss as not to recognise obvious conflicts of interest, that agent could not thereafter rely upon such dereliction of duty to permit the use of confidential information against a former client. Looked at overall, therefore, Mr Barlow suggested that it remained "difficult to comprehend" how in the circumstances Holman Fenwick & Willan could feel able to resist the present application. 65. I bear well in mind that argument in support of this injunction summons was predicated upon the 4th Plaintiff being permitted, in the context of a reconstituted action, to advance the alternative claim in contract against the 2nd and 3rd Plaintiffs, albeit it was not until relatively late in the day that this draft claim was formulated in terms. Equally, even on the basis of the pre-Prince Jefri position Mr Barlow may well have been justified in taking the position (as I think it may fairly be said that broadly he did) to the effect that he should not be required to identify with particularity what confidential information would be misused should Holman, Fenwick & Willan continue to act, and that it was precisely the risk of unwitting or inadvertent disclosure that posed the problem. Nor, of course, at the time when the matter was debated, had Counsel had the opportunity of reading Lord Millett's speech in Prince Jefri v. KPMG, op.cit. 66. Nevertheless, given the view that I have taken on the issue of confidentiality between co-plaintiffs, and, perhaps more important in the present context, in light of my further decision, for the reasons earlier set out, to refuse leave to amend in the terms now sought on behalf of the 4th to 6th Plaintiffs, in my view the Applicant's argument on the injunction summons is doomed to fail. Assuming for purposes of argument that I be wrong on the confidentiality point, the refusal of leave to allow the 4th Defendant now to proceed against its erstwhile co-plaintiffs means that any residuum of confidential information assumes no relevance absent any such adverse claim. And, as earlier outlined, Mr Sussex has made it plain that it is the clear intention of the 2nd and 3rd Plaintiffs that Holman Fenwick & Willan should remain their solicitors of record with "the very limited objective" of obtaining the dismissal of the Defendant shipowners' counterclaim (the latter having patently lost interest in the action and Messrs Clyde & Co. having intervened solely to protect the residual interest of the Defendant's P & I Club), and thereafter to obtain leave to withdraw from the action. 67. In the circumstances, therefore, if and in so far as the principles adumbrated by the House of Lords in Prince Jefri are in fact applicable in the very particular circumstances of this case, it is clear that in the situation in which (as is now the position) the 4th, 5th and 6th Plaintiffs and PICC, as subrogated insurers, have been left to their remedy, if any, in negligence against their former solicitors, Messrs Holman Fenwick & Willan, no sufficient basis has been established for the Court to exercise its jurisdiction to remove these solicitors from continuing to act on behalf of the 2nd and 3rd Plaintiffs. It follows, therefore, that this injunction application must also be dismissed. 68. I do not wish to conclude this final element of this judgment without commenting upon the type of procedure which has been adopted in this application. At the beginning of this debate, which due to diary exigencies regrettably took place some six months' ago, Mr Sussex made the general point that the injunction summons of 21st May 1998 was addressed not only to the 1st to 3rd Plaintiffs, but also to Holman Fenwick & Willan, their solicitors, a fact which buttressed his contention that the procedure adopted was inappropriate and incorrect, and that the injunction application should have been brought in Miscellaneous Proceedings by way of originating summons by PICC against Holman Fenwick & Willan. This, he said, was not simply a technical point, because what had happened was that the procedure adopted in terms of a summons issued in the present action in the name of the 4th to 6th Plaintiffs in effect had enabled PICC, as subrogated underwriter and quite obviously the "moving genius" behind these proceedings, effectively to snipe from the sidelines without incurring any liability for costs occasioned by the application which it had clearly instituted and, perhaps more to the point, without risk of being subject to a cross-application by Holman Fenwick & Willan for security for the costs of any such originating summons or motion. 69. There is force in this submission, which seems to me to gain additional impetus from what I understand to be the refusal of Messrs Hill Taylor and Dickinson to accept service of proceedings on behalf of PICC, notwithstanding that PICC were clearly clients rendering instructions in terms of the three applications the subject of this judgment. Such procedure, albeit arising in the highly unusual circumstance in which two tranches of plaintiffs were concurrently represented by two firms of solicitors, in my judgment should not have been adopted in the context of what is rightly regarded by our system as the serious and important step of applying to prevent a solicitor from acting, or from continuing to act, for his clients. SUMMARY 70. In terms of the three applications before the Court the substantive orders thereon are, therefore, as follows :-
71. I will hear Counsel in due course as to the precise form of the Orders in each instance, and with regard, also, to such consequential directions as may be necessary. 72. Absent agreement thereon, I will also hear the parties as to costs in respect of each summons. 73. I thank Counsel for their considerable assistance.
Representation: Mr Charles Sussex, inst'd by M/s Holman, Fenwick & Willan on their own behalf and for the 1st, 2nd and 3rd Plaintiffs and (as from 27th August 1998) for the 2nd and 3rd Plaintiffs only Mr Barrie Barlow, inst'd by M/s Hill Taylor Dickinson and (as from 15th October 1998) inst'd by M/s Dibb Lupton Alsop, for the 4th, 5th and 6th Plaintiffs |