1. This preliminary objection raises a two-fold point of jurisdiction, viz,, (1) whether in this case the whole cause of action arose out of the jurisdiction and therefore this Court has no power to hear the third party notice at all; (2) if part of the cause of action arose within the jurisdiction, then whether express leave was not necessary under Clause 12 of the Letters Patent before the third party notice could be served.
2. I am now on the third party notice, and have, as between plaintiffs and defendant, already given a decree in favour of the plaintiff's. The present issue, viz., No. 1, is an issue between the defendant and the third party.
3. On the first point, the substance of the suit relates to certain cotton contracts on which as I have said, I have found the defendant is liable to the plaintiff's. As between the defendant and the third party the defendant's case depends on a right of indemnity and substantially it is based on an express agreement of the 21st May 1916, Exh. No. 4. The effect of that agreement was that the third party was to take over the cotton contracts then outstanding between the plaintiffs and the defendant, and that the defendant was to carry out certain instructions of the third party in relation thereto, and that the third party thenceforth was to be responsible pecuniarily on these contracts. The third party says that the true relation was not that of principal and agent but that of vendor and purchaser or assignor and assignee. Even assuming in his favour without deciding the point that that is the true view, still it is clear that the contract, Ex. 4, contemplated the defendant carrying out its terms by performing certain acts in Bombay. In other words, if he came to sue the third party on this contract as he has now done, he would have to prove certain acts of his which either took place in Bombay, or which by means of telegrams resulted in acts in Bombay. What I refer to are the cotton transactions which the plaintiffs carried out in Bombay as the result of instructions given by the defendant. It seems to me that on that ground alone, a part of the cause of action has arisen in Bombay, because to sue on the contract, it would be necessary for the defendant to prove certain operations carried out in Bombay by his instructions.
4. Mr. Setalvad for the defendant has taken another point, and that also seems to me, as at present advised, to be well founded. He says as far as the third party notice is concerned, a part of the cause of action is this very suit in Bombay, because the validity of a third party notice depends on two things, viz., first, a hostile suit in Court, and secondly, a right to indemnity. The hostile suit he relies on is this very suit filed in Bombay. It seems to me, therefore, that the third party's objection on the ground that the subject-matter of this third party notice arose wholly out of jurisdiction, is unfounded.
5. Now, I come to the second point, which has given me rather more trouble, and that is, whether assuming that part of the cause of action arose out of the jurisdiction, then whether leave to serve this third party notice ought not to have been obtained under Clause 12 of the Letters Patent. In considering that, one may compare three classes of proceedings, viz., (1) an ordinary suit, where you add a defendant, (2) a suit, where there is a counter-claim bringing in a new party, and (3) a third party notice. Now, as regards class No. 1 it seems clear that under the Bombay High Court practice you must obtain leave under Clause 12 of the Letters Patent to sue the new defendant, although you may have obtained leave under Clause 12 to bring the suit against the original defendant. Authority for that proposition will be found is Rampartab Samrathrai v. Foolibai I.L.R(1890). 20 Bom. 767. Similarly, as regards class 2, if you bring a counter-claim against the plaintiff and bring in as a defendant to that counter-claim a new party, there again you must get leave under Clause 12 of the Letters Patent, because as has very properly been admitted by Mr. Setalvad, under our Bombay Rules (Rule 118), a counter-claim has the same effect as a cross suit. Therefore, if leave would be necessary for an original suit, so also is it for a cross-suit. I am assuming of course cases where part of the cause of action is outside the jurisdiction and where the defendants live out of the jurisdiction.
6. Now, I come to the question of the third party notice, class 3. This is in some respects a combination of class 1 and class 2 and for this reason. The usual order provides that the third party shall be at liberty to appear at the trial of the action and take such part therein as he may be advised, and that the third party notice is to be tried at the same time as the original suit but after it. Now, what is the effect of this order The third party can appear at the trial and subject to the Judge's directions he can dispute the plaintiff's claim. This he could not do if it was merely the case of a cross-suit, because in that event, ho would have no locus standi oft the hearing of the original suit. The third party therefore resembles to some degree an added defendant, although the plaintiff obtains no decree against him directly.
7. Then, when the third party notice is tried, it is in the nature of a cross-claim, namely, a claim brought by the defendant against the third party. Perhaps to be quite accurate, a cross suit should involve a claim against the plaintiff as well, but the analogy is near enough for my purpose. Therefore, on principle, one would expect to find that it is as necessary to obtain leave for a third party notice as it would be if the third party was added as a defendant, or if a counter-claim was brought against him as a new party.
8. Counsel have been unable to find any Indian authority on the point and they tell me that the third party procedure 'was introduced into this Court by Sir Lawrence Jenkins and that other Indian High Courts have not yet adopted it. This may account for that lack of Indian authority.
9. As far as the English practice is concerned, it is quite clear from the decision of the Court of Appeal in McCheane v. Gyles (1902) 1 Ch. 287 that under the English practice the leave of the Court is necessary to serve third party notices out of the jurisdiction. Mr. Setalvad says this decision depends on the wording of the English Supreme Court Rules, one of which requires third party notices to be served like writs (as in our Rule 127), and another of which requires leave for service of writs out of the jurisdiction. The latter rule, he says, is not to be found in our practice, for Clause 12 of the Letters Patent requires leave for certain suits and not for service of writs. I do not, however, propose to discuss the differences-for there are differences-between the English rules as to pleadings and service out of the jurisdiction on the one hand and the Indian rules as to pleadings and leave under Clause 12 on the other hand. Nor do I propose to rely on McCheane v. Gyles as governing our practice. It is only useful by analogy. But I may just notice that our Bombay Rules have so faithfully copied the English Third Party Rules as to retain in Rule 127 a reference to a statement of claim-a pleading unknown in our Court. In fact in England the writ precedes the statement of claim. In India the plaint precedes the writ.
10. The real point here is, I think, whether these third party proceedings come within the description 'suits of every description' in Clause 12 of the Letters Patent. Now as to that, our third party rules will be found in Chap. VIII, Rules 127 to 133. It is to be observed that under Rule 128, if the third party does not appear on the third party notice, he is to be deemed to admit the validity of the decree obtained against the defendant, and his own liability to contribute or indemnify to the extent claimed in the third party notice. Then under Rule 129.
Where a third party makes default in entering an appearance in the suit in case the suit is tried and results in favour of the plaintiff, the Judge who tries the suit may, at or after the trial, pass such decree as the nature of the case may require, for the defendant giving the notice against the third party.
11. Therefore, although we do not find in the Third Party Rules express words like those in Rule 118 treating counter-claims as cross suits, and although we have not got the same express provision in any of the Indian Statutes, as is contained in the English Judicature Act, 1873, Section 24 (iii), which expressly provides for third parties, still we have under the Bombay High Court Rules a form of procedure which is in substance a 'suit' against the third party within the Letters Patent. Before the third party notice has been served on him, he is a free man and no Court can pass a decree against him. As a result of that third party notice he is in peril, and may, unless he takes certain steps, have a decree passed against him. It seems to me therefore that substantially the case falls within Clause 12 of the Letters Patent, just as the case of an added defendant or of a counter-claim against a new party does, and that leave under Clause 12 is necessary.
12. This brings me to the next question whether leave was in point of fact obtained. Leave in the ordinary way was not obtained, that is to say, there is not the usual express endorsement: 'Leave under Clause 12 of the Letters Patent'. But the Judge's order of the 9th August 1917 giving leave to issue the third party notice was in the following form:-'I do order that the defendant be and he is hereby authorised to issue a third party notice against the said Karim Elahi Sheth notwithstanding the time to file his written statement having expired and to serve the same upon him by sending it by registered post to the address of the said Karim Elahi Sheth at Mohulla Dhalan, Peshawar City'.
13. Here you get an express statement in the Judge's own order that the defendant is to be at liberty to serve this third party notice by sending it by registered post outside the jurisdiction.
14. It is accordingly argued that there was implied leave under Clause 12. But as I have already intimated there are differences between Clause 12 and the English Rules as to service out of the jurisdiction, and to treat the two as the same may be misleading. Further my attention has been drawn to the judgment of Mr. Justice Candy in Rampartab Samrathrai v. Foolibai I.L.R(1896) 20 Bom. 767 where there had been an order made by Farran J. to add a party as a defendant. That party was out of the jurisdiction. Subsequently at the trial, the point that no leave had been obtained, was raised, and it was answered by saying that as the Judge gave leave to add this party, it must be inferred that he gave leave also under Clause 12. Candy J. overruled that answer and said at p. 774:-
It cannot be inferred that leave was then allowed or granted. In Jairam Narayan v. Atmaram I. L. R. 4 Bom. 482, Mr. Justice West was asked to draw a similar inference, because leave had been granted to the plaintiff to sue as a pauper ; 'but such leave' (he said) 'does not by any means necessarily imply that this particular question was judicially considered.'
15. I may add that the order of Mr. Justice Farran will be found in Foolibai v. Rampartab Samratrai I.L.R(1893) 17 Bom. , and that the point as to jurisdiction does not appear to have been raised before him, but that on appeal it was evidently present to the mind of Sir Charles Sargent, having regard to what that learned Judge said on p. 468.
16. No doubt there is a distinction on the facts of the present case, because Mr. Justice Kajiji's order expressly mentions service out of the jurisdiction. In the view, however, which I take, it is unnecessary to decide this point. I will leave it open for future decision if necessary. I will only add that in my opinion solicitors should be careful to get leave under Clause 12 in express terms. If that had been done here, of course the point would have been unarguable.
16. Assuming then for the purposes of this case (but without deciding the point) that the Judge's order of 9th August 1917 did not give the necessary leave under Clause 12, it still remains to be seen what was done on that third party notice. The order, as I have said, was made on the 9th of August, and on the 7th of September the usual summons for directions was taken out. In answer to that summons the third party filed an affidavit of the 21st September 1917 and in para 1 of that he said :-'I appear on this third party notice under protest and submit that this Honourable Court has no jurisdiction to try the question between the defendant and myself as raised by the defendant in his written statement and in his affidavit of 23rd July last' and he went on to say 'I submit the whole of the cause of action between the defendant and myself arose in Peshawar.' That point I have already dealt with. It is the first objection. This affidavit did not raise the second objection, namely, that if part of the cause of action arose in Bombay, leave under Clause 12 of the Letters Patent had not been applied for. That affidavit was answered by the defendant, and the third party put in a further affidavit of the 4th October 1917. Then on the hearing of the summons, the Judge made his order of the 5th October 1917 in which he ordered the summons for directions to be made absolute; that the third party do file his written statement within four weeks ; and make and file his affidavit of documents, and be at liberty to appear at the trial of this action and take such part therein as he may be advised and be bound by the result of the trial and that the question of the liability of the third party to indemnify the defendant be tried at the trial of this action but subsequent thereto, and he ordered the costs to be costs in the cause. That was the usual form of order.
17. There is not a word said there about reserving the right of the third party to raise this point of jurisdiction at the trial. I must, I think, on the facts and on this order, assume that the learned judge decided the point of jurisdiction against the third party. There has been no appeal from that order and it was made as long ago as October 1917. If I was now to decide that this Court has no jurisdiction to hear the third party notice, I should in effect be hearing an appeal, and reversing, on appeal, the decision of Mr. Justice Kajiji which of course I have no jurisdiction to do. Further when it comes to the further point of embarrassment, which also was raised before Mr. Justice Kajiji, and to the argument that in the exercise of my discretion I should decline to hear this third party notice and leave the defendant to a fresh suit, I think there again I really cannot enter into questions of that sort, in view of the deliberate decision of the Chamber Judge made so long ago as October 1917. It will be noticed that in McGheane v. Gyles (1902) 1 Ch. 287 the third party moved to set aside the notice and order, and when the motion was refused, an appeal was presented (see pp. 289, 290).
18. I therefore think that in substance this question of jurisdiction is res judicata, having regard to the order of the Chamber Judge of the 5th October 1917, and that accordingly the point of jurisdiction which has been raised at the trial fails.
19. I accordingly answer issue No. 1, viz., whether the Court has jurisdiction to try this suit between the defendant and the third party, in the affirmative, and direct the trial of the other issues on the third party notice to proceed.
20. THE claim of the defendant against the third party was then tried on its merits, and it was found that the effect of the agreement of 21st May 1916 was that as between the third party and the defendant the third party took over the transactions in question. His Lordship passed a decree against the third party.
21. The question of costs to be awarded to the defendant was then argued. His Lordship delivered the following judgment on this point on 21st June 1919.
22. The last point argued in this case is whether the costs of the defendant as against the third party ought as to any and if so what extent to be paid as between solicitor and client.
23. Mr. Setalvad at the outset disclaimed any intention to ask for costs between solicitor and client. In case this judgment comes before any Judge who is unfamiliar with the Bombay practice as opposed to the practice in England, I would say that that observation has reference to what I believe to be a peculiarity in these Courts of drawing a distinction between 'costs as between solicitor and client' and 'costs between solicitor and client', the former being more in the nature of what in England are costs on a higher scale, and the latter being the fullest possible indemnity and which I rather gather in this Court admit of very little, if any, real taxation. I need not dwell on that, because, as I have said, Mr. Setalvad confines his case to costs as between solicitor and client.
24. As regards the order to be made, Mr. Setalvad asks me to follow the form which was adopted by Mr. Justice Romer, as he then was, in Trafalgar Go Ltd. v. Francis Seton, 7th Edn., p. 2072 which will be found in Seton, 6th Edn., Vol. III, p. 2142, Form No. 12 and similarly at p. 2072 in the 7th Edition. It will be noticed that at the bottom of that form is a note to this effect. 'A motion to vary the minutes of this order as regards solicitor and client costs given against the third party was refused.' The precise form of the order was 'And as to the question of indemnity, Declare that the defendant is entitled to be indemnified by the said A.B. against all amounts payable by him under this judgment; And let the defendant recover against the said A. B. any amounts so paid by him, and his own costs of this action and of the third party proceedings to be taxed etc., those of the action as between solicitor and client, but having regard to the fact that they are payable by the third party.'
25. It will be seen there that the defendant's costs of the action are directed to be taxed as between solicitor and client and his costs of the third party proceedings as between party and party. That form of order has been followed in Ireland by Vice Chancellor Chatterton in Wiley v. Smith (1894) 1 Ir.R. 153. It will also be found that in Hartas v. Scarborough (1889) 33 Solicitors Journal 661, Mr. Justice Wills made a somewhat similar order, that is to say, he gave what corresponds to the defendant here, his costs of the action as between solicitor and client. Another instance of solicitor and client costs being given is a decision of Mr. Justice Farwell in Hooper v Bromet(1903) 89 L.T. 37, which was reversed on another point in Hooper v. Bromet (1904) 90 L.T. 234; and also in the Great Western Railway v. Fisher (1905) 1 Ch. 316, a decision of Mr. Justice Buckley; and in Born v. Turner (1900) 2 Ch. 211, 217, a decision of Mr. Justice Byrne. I do not say that all these cases are cases of third parties, but they are cases where persons who in effect were entitled to an indemnity wore given solicitor and client costs by the Court.
26. Now the decision on the other side is a decision in the King's Bench Division of Mr. Justice Kennedy, as he then was, in Maxwell v. British Thomson Houston Company 2 K.B. 342, . That was the case of an indemnity against proceedings for negligence and there Mr. Justice Kennedy said:-
It seems to me, in the absence of authority to the contrary, that a person who is indemnifying another against the costs of an action cannot, unless there are some special circumstances, be called upon to pay them as between solicitor and client. He must pay them as between party and party ; but I do not think that he is bound to pay more.
27. The reporter's note, however, at the foot of his judgment refers one to the above form in Seton and adds 'The attention of the Judge was not called to this at the time, but His Lordship has since brought it to the notice of the reporter.'
28. Now this case of Mr. Justice Kennedy is perhaps on the facts rather different to the class of indemnity case one has to deal with here. But however that may be, it is to my mind most material that the learned Judge's attention was not drawn to Lord Justice Romer's order nor to the Form in Seton. As to this I must emphasise the fact that Seton is rather more than a mere ordinary text book in the Chancery Division in England. It is a book that is in constant use there by Judges and counsel and also by the Registrars whose duty it is to draw up the orders of the Court. Therefore it is likely that any error will very soon be brought to the notice of the Court. It aeems to mo, with great respect to Mr. Justice Kennedy, that as far as the authorities go, the balance of authority is in favour of giving costs, in a case like this, as between solicitor and client.
29. Then if we turn and consider the matter from the point of view of discretion, I think that this balance of authority agrees with common fairness. Take the present case. To my mind it is clear that the. liability on these cotton contracts as between the defendant and third party as from the 21st May was on the third party and not on the defendant, and that the third party was to find all moneys necessary for financing these transactions. Why then if the defendant acting in effect under the directions of the third party and in effect as his agent, incurs personal liability for the benefit of the third party, why should he be left out of pocket, because the third party omits to carry out what he had promised to do, namely, to keep the defendant in funds. The result is that the defendant is sued and has to pay the costs of the action brought by the plaintiffs. If I said that the defendant can only recover his party and party costs of that action, it would leave him with the difference between party and party costs and solicitor and client costs, which he would have to pay to his own solicitor. In other words, the third party would gain to this extent, that if he himself had been sued directly, he would have to pay his own solicitor and client costs, but that as the defendant is sued, he can escape with party and party costs. What he is asking me to do is this, that because he used a cat's paw he should only pay party and party costs and be allowed to make the cat's paw, viz., the defendant, pay the difference. I do not see any fairness in that. The costs of the third party notice itself seem to me to stand on a different footing. Treating the notice as a separate suit the costs will follow the ordinary rule that a litigant even though successful only recovers party and party costs. That no doubt is the reason for the distinction drawn in Seton between the costs of the original action and the costs of the third party notice.
30. The right order in my opinion on this question of costs is to follow the above form in Seton, and I accordingly make my order in the term of that form.
31. As I have already said, the decree must be shown to me before it is passed and entered.