Interpleader
Nature
Interpleader is a process initiated by a person who faces conflicting claims to property, money, or assets in his possession, to which he claims no interest but is nevertheless liable to one or more claimants. This process allows the concerned party to require the claimants to litigate their entitlements at their own expense, thereby providing certainty and protecting the party from risks and liabilities.
When the applicant meets the relevant conditions and both potential claimants have viable claims, the court generally favours granting an application for interpleader. However, the relief is ultimately discretionary due to its equitable nature. Relief may be granted even if claimants’ rights are equitable, where claimants might be estopped from denying a claimant’s rights, or when only partial relief is available.
Stakeholder Interpleader
A stakeholder, or person holding the asset, may make an application to the court in accordance with court rules. A stakeholder is defined as a person who is liable to be sued by one or more persons in relation to debts, money, or goods held. The applicant may call upon the claimants to litigate their entitlements and may deposit the funds or assets with the court.
Stakeholder interpleader requires the disputed item—whether debt, goods, or money be transferrable. In this context, “goods and chattels” refers broadly to items not otherwise classified as goods in other areas of law. However, the claim might concern a cause of action, shares, or deeds. It does not, however, include unliquidated claims for damages.
The applicant must possess the disputed item and be willing to transfer it to the court or as directed by the court. The stakeholder must anticipate being sued by two or more parties. It is not necessary that actual proceedings have begun. If the claims are known to be groundless, the application will fail.
Sheriff Interpleader
Another form of interpleader relates to sheriffs and court officers executing orders under court authority. This can be used when a claim is made by a third party, other than the one against whom execution is directed.
Interpleader is available where goods seized by the sheriff are claimed by a third party. This interpleader claim addresses the dispute between the judgment creditor and the alleged owner, and evidence and presumptions apply accordingly.
The execution creditor typically establishes his right to possession, though if the claimant possessed the goods at seizure, the presumption may reverse in line with personal property law. Generally, a stakeholder acting appropriately is entitled to interpleader costs, covered by the subject matter of the dispute.
In cases where the applicant is the sheriff, the claimant may be ordered to pay an amount into court equivalent to the goods’ value or provide security. To prevent the sale, the claimant must pay the sheriff’s possession fees from the date of the order until court payment.
Third-Party Claims
In the case of a sheriff’s interpleader, the third-party claim must be substantial, involving either the goods in question or their value or proceeds. Claims by a third party to payment of the debt for which execution is sought, or a set-off against another judgment debt, do not qualify.
The third-party claim to the goods must be evidenced in writing, though it need not be signed. Notice of the claim must be provided in writing. The sheriff must notify the judgment execution creditor using a prescribed form in straightforward cases.
The execution creditor must, within four days of receiving this notice, respond to either admit or dispute the claim. If the claimant fails to respond, the sheriff may withdraw from possession of the goods and apply for an order protecting him from legal action.
When the execution creditor neither admits nor disputes the claimant’s claim, and the claimant has not withdrawn, the sheriff may seek an interpleader summons. This summons may be served on the claimant.
If the claimant withdraws or the execution creditor admits the title of the claimant before the summons judgment, the court may make an order regarding fees, costs, and expenses as is just and reasonable. The sheriff should exercise this right within a reasonable time, typically before the execution creditor must respond to the claim.
An application will not be granted if complications arise from the sheriff’s own misconduct. If he knowingly seizes goods that do not belong to the execution debtor, relief will not be given. If he has been negligent, relief may be granted only on terms requiring him to remain liable for any resulting loss.
Although the sheriff may seek relief by interpleader, he is not obligated to do so even if the execution creditor disputes the claim. Should the sheriff proceed with possession after a claim is raised, he is not liable to the execution creditor for any losses incurred.
Application
The summons order directs the parties to agree on the issues or refer them to the master or registrar. The matter should then be addressed comprehensively. Applications must be made in accordance with relevant court procedures. In the High Court, a summons is issued requiring claimants to appear and state their claims or relinquish them. The claimant’s statement should be verified by affidavit.
The applicant for interpleader relief must convince the court that he has no interest in the subject of the dispute other than for charges or costs. The applicant must confirm he is willing to transfer the subject matter to the court or as directed, with the court likely to grant relief upon recognising all relevant parties.
If a claimant, after being served with an interpleader summons, fails to appear or comply with orders, the court may issue an order barring that person or those claiming under him from making claims against the applicant. This order does not affect claimants’ rights between themselves.
If neither the claimant nor the execution creditor appears, the sheriff may abandon the execution and refrain from further actions against the third party.
If a claimant asserts a security interest in the goods subject to execution, the court may order the sale of the goods or a portion thereof, directing application of the proceeds accordingly. A sale may be ordered if reasonable, although it is discretionary. Where the security is deemed sufficient, the sale will likely be ordered; otherwise, the sheriff may be directed to withdraw.
If the claimant’s case presents a reasonable basis, an order for trial may be issued. In other cases, a summary decision may be rendered, with options for arbitration or referral on a special legal point.
A summary decision may be issued if both claimants consent, or if one requests it and it is deemed desirable given the subject matter. If the matter is not resolved summarily or referred for arbitration, it may proceed to trial.
Charges and Costs
The stakeholder may also claim charges for storage or direct costs.
Absent misconduct, the sheriff is entitled to his costs from initiating the interpleader action to its conclusion. Against an unsuccessful claimant, the costs, along with possession money, must be paid. In the case of an unsuccessful execution creditor, or where they abandon the claim, the sheriff is similarly entitled to costs.
Where the claimant fails, the sheriff is entitled to insist that the order includes his costs, recoverable from the execution creditor. The creditor may recover these costs from the claimant if awarded by the court.
If an execution creditor admits the claim within four days of receiving notice and informs the sheriff, he is liable only for sheriff’s fees incurred before this notification. Should the execution creditor admit the claim before the return date, the court may make orders for costs as deemed fair and reasonable.