Australian Military Bank Ltd v Pike

Facts

1. On about 14 August 1989, Kevin applied to the plaintiff for membership, the plaintiff then being the Australian Defence Credit Union Limited. The application was made in the name of "Kevin Pike in trust for Nathan Pike". Nathan was 13 years old at the time and the application was signed by Kevin only.
2. A transaction account ("the Transaction Account") and a term deposit account were subsequently opened in the name of Nathan (the "7671 Account"), (together "the Accounts"). The 7671 Account is solely in Nathan's name.
3. On about 26 October 1990, Nathan signed, and the plaintiff received, an Authority to Operate Account form authorising Kevin to sign withdrawal forms and notices on the 7671 Account on Nathan's behalf. From time to time, Kevin instructed the plaintiff to re-invest the funds held on term deposit. Interest accruing on the term deposit account was deposited into the Transaction Account. Nathan alleges, and the other parties have not admitted, that from time to time he attended a branch of the plaintiff with Kevin to deposit moneys he had received from time to time from working odd jobs and as birthday gifts.
4. In the period from March 2013, funds were transferred between the Transaction Account and the 7671 Account and, on a number of occasions, the term deposit funds were reinvested. From time to time, funds were withdrawn from the Transaction Account. Kevin had access to mobile banking services for both the Accounts and, at least until September 2022, when Nathan was granted internet banking access to the Accounts, withdrawals from the Transaction Account were completed by mobile banking transactions.
5. There were, as at 22 March 2024, three accounts held by the plaintiff in the name of Nathan. One account (account number ending in 5208) is inactive and overdrawn by $30. Another account (account number ending in 4688) is also inactive and holds $43.29. The third account (Account 0095) contained $775,159.42. Interest in the sum of $19,905.67 was paid into Account 0095 on 2 July 2024. Mr Carey informed me that the amount presently standing to the credit of Account 0095 is $795,065.09.
6. On 17 December 2021, Kevin sent an email to Mark Ferguson, an employee of the plaintiff, to request the closure of Account 0095. He followed this up with a telephone call on 21 December 2021. The following day, Mr Ferguson called Kevin to discuss his request to close Account 0095, informing him that the plaintiff would not execute a maturity instruction involving the disbursement of funds without first identifying Nathan and obtaining his instructions. Until that disbursement request, the plaintiff had accepted instructions from Kevin as his instructions had been to renew the term deposit. Anti-money laundering legislation and a concern on the part of the plaintiff as to the correct ownership of the Accounts and the Funds caused the plaintiff to consider it appropriate to seek instructions from Nathan.
7. On 3 January 2022, Kevin complained to the plaintiff, asserting that the money in the account was his. On 18 January 2022, the plaintiff wrote to Kevin stating that he was a third party signatory to the account and was not authorised to do various things, including redeeming fixed term deposits. In order to close a term deposit account, the plaintiff required a closure form completed by Nathan.
8. Nathan contacted the plaintiff on 11 August 2022. According to the plaintiff's records available to Mr Coldwell, this appears to have been the first occasion on which Nathan contacted the plaintiff directly. Nathan disputed this, pointing out that the original authority signed by Nathan in October 1990 was such a communication and referring to his alleged visits to the plaintiff's branch with Kevin as described above, in respect of which there would not be any written record in any event.
9. After an exchange of communications establishing his identity, on 13 December 2022, Nathan issued an instruction to the plaintiff by telephone, later confirmed by email, revoking any authority for Kevin to operate Account 0095 and directing the plaintiff to reinvest the term deposit.
10. On 28 December 2022, Kevin again requested closure of all accounts opened and operated by him with the plaintiff. The plaintiff responded that it would require an account closure form completed by the account owner, i.e. Nathan, to redeem the term deposit.
11. On 5 January 2023, Kevin lodged a complaint with AFCA. On 11 May 2023, AFCA issued an interim decision in Kevin's complaint, to which Kevin objected on 13 June 2023. AFCA reviewed the decision and issued a final decision on 13 September 2023. AFCA's decision was that Kevin did not have standing to complain as he was not the account owner. The merits of his complaint were not addressed.
12. On about 30 June 2023, Nathan provided to the plaintiff a signed Alteration of Term Deposit Request Form by which he requested the plaintiff to transfer the balance of Account 0095 (both principal and interest) to a transaction account held by him with another financial institution. Within a week, the plaintiff contacted Nathan by telephone and notified him that, because of the pending AFCA complaint by Kevin relating to the Funds, the plaintiff could not redeem the deposit at that time.
13. On 14 July 2023, Nathan also lodged a complaint with AFCA concerning the Funds.
14. The plaintiff was bound to comply with the AFCA complaints process. Nevertheless, it considered that both Kevin and Nathan had asserted competing claims to the same funds and that the competing claims were most appropriately determined by way of an interpleader application to the Court, which the plaintiff was restrained from making while the AFCA complaints were on foot by operation of r A.7.1 of the Australian Financial Complaints Authority Complaint Resolution Scheme Rules (AFCA Rules). Significantly, the plaintiff believed that if AFCA determined that the plaintiff was to pay the Funds to one or other of the claimants, the other would not be bound and would be, nevertheless, unrestrained in bringing proceedings in respect of the Funds against the plaintiff. Accordingly, a payment pursuant to a determination by AFCA would not finally dispose of all of the claims to the Funds.
15. On 20 October 2023, AFCA issued a preliminary assessment of Nathan's complaint. Nathan's complaint was referred to an ombudsman of AFCA for determination on 7 December 2023. On 7 March 2024, AFCA issued a final determination of Nathan's complaint. Nathan accepted that determination on about 8 March 2024 and, as a result, the plaintiff became bound to comply with it. In light of my evidentiary ruling, there was no evidence before me to support the allegation that acceptance was on 7 March 2024, as had been contended by Nathan. The date of acceptance was ultimately not in issue before me and I make no factual findings in this regard.
16. The terms of the determination of 7 March 2024 were as follows: "1.3 Determination This determination is in favour of the complainant [Mr Nathan Pike]. If the complainant accepts this determination within 30 days: • $5,400 in non-financial loss compensation is payable to him within 14 days • The financial firm has 14 days to file an application for interpleader orders, noting the bank's undertaking to cover the complainant's legal costs. If after 14 days, no court proceedings have been filed, the financial firm should pay the principal and interest from the complainant's term deposit without charging a fee for breaking the term deposit early into his nominated account".
17. For the whole of the period between 5 January 2023 and 7 March 2024, there was either one or two current complaint processes at AFCA concerning the Funds. The current proceedings were commenced on 22 March 2024. Both complaints were on foot between 14 July 2023 and 13 September 2023.
18. The plaintiff contends that, subject to certain exceptions, the AFCA Rules prevented the plaintiff from beginning legal proceedings against a complainant, or anyone else joined as a party to a complaint or other affected party, about the subject matter of any complaint whilst it was being considered by AFCA. The plaintiff says that this is the reason it did not commence current proceedings earlier.
19. The plaintiff contends that the decisions of AFCA did not finally determine the question of which of Kevin or Nathan was entitled to the Funds.

Relevant principles for determining an interpleader application

1. Interpleader is a procedure by which a person who is liable for personal property over which they assert no beneficial interest, and who is faced with competing third party claims to the property, can apply to the court to determine the competing claims: Olsson v Dyson (1969) 120 CLR 365 (at 369-70).
2. The present proceedings are brought pursuant to r 43.2(1) of the Uniform Civil Procedure Rules 2005 (UCPR). Rule 43.2 provides: 43.2 Court may grant interpleader on application by stakeholder (cf SCR Part 56, rules 2, 3 and 4; Act No 9 1973, section 115; DCR Part 42, rule 2; Act No 11 1970, sections 65 and 67) (1) If, in relation to disputed property, a stakeholder is sued, or expects to be sued, in any court by two or more claimants, the court may, on application by the stakeholder, grant relief by way of interpleader. (2) Such an application is to be made - (a) if, in proceedings in the court, the stakeholder has been sued by a claimant in respect of the disputed property, by motion in the proceedings, or (b) in any other case, by separate proceedings in the court, joining each claimant as a defendant. (3) With the application must be filed an affidavit to the effect that the applicant - (a) claims no interest in the subject-matter in dispute other than for charges or costs, and (b) is not in collusion with any claimant, and (c) is willing to pay or transfer the subject-matter in dispute into court or, if the court so requires, to give security to the value of the subject-matter to the satisfaction of the court. (4) A stakeholder applying under subrule (2)(a) must serve notice of motion - (a) on each party to the proceedings who claims an interest in the disputed property, and (b) on each claimant who is not a party to the proceedings. (5) In relation to a claimant referred to in subrule (4)(b), the notice of motion must be served personally.
3. It is for the plaintiff to establish that it is a stakeholder of disputed property who expects to be sued by two or more claimants. An applicant for interpleader relief must demonstrate that there is "a real foundation for an expectation that they would be sued": Guerinoni v Dennis Castino trading as Castino & Co Chartered Accountants [2008] NSWSC 175 at [7]. A "bald assertion" of an entitlement will not be sufficient to demonstrate the existence of a claim. The competing claimants must each articulate a "cogent or arguable basis for the existence of a legal claim": Guerinoni at [15].
4. In Australian Customer Target Information Company Pty Ltd v Cabool Holdings Pty Ltd & Anor [2003] NSWSC 753, Campbell J identified the equitable underpinnings of the procedure: "9 The origins of the law of interpleader were in equity's concern for preventing multiplicity of proceedings; where there was a situation where a person who made no claim to be entitled to a particular item of property was likely to be sued by two different people concerning that property, the Equity Court would sometimes permit the property in dispute to be placed in the custody of the Court, and would allow the person who claimed no interest in that property to be freed of the litigation. 10 As the name suggests, part of the relief which was granted by the Court was requiring those parties who made claims to the property in dispute to plead amongst each other. Requiring them to 'inter-plead' in that fashion was itself part of the remedy, and was the means whereby the person who made no claim to the property could be freed from all the claims against him or her."
5. The plaintiff must also comply with r 43.9, which relevantly provides: 43.9 Neutrality of applicant (cf SCR Part 56, rule 11) (1) If a stakeholder applies for relief by way of interpleader, the court may dismiss the application or give judgment against the applicant unless the court is satisfied that the applicant - (a) claims no interest in the disputed property, except for charges or costs, and (b) is not in collusion with any claimant. …
6. Mr Oakes, for Nathan, took me to a number of authorities in support of the proposition that "collusion", in the sense used in rr 43.2(3)(b) and 43.9, has a specific meaning, unrelated to any pejorative connotation of moral turpitude. In the present context, it means that a party seeking interpleader relief: "must stand in and maintain a strictly neutral position between two rival claimants; that he must not have identified himself with the interests of either party; that he must not have assisted or be assisting one side against the other; that he must not work against the other; and that he must not have brought himself into the position which he occupies by his own voluntary act, or at the request of one of the parties, or by his officious or unnecessary intermeddling": Smith v Nixon (1885) 7 ALT 74 at 75.
7. Similarly, Rares J in Toll Holdings Ltd v Stewart (2016) 338 ALR 602 at [83]; [2016] FCA 256 stated: "[83] A person seeking to interplead must be in a real position of impartiality between the parties: Murietta v The South American Company Ltd (1893) 62 LJKB 396 at 397 per Wills J, 398 per Charles J. There Charles J said that 'collusion' in the sense of interpleader processes does not necessarily entail anything morally wrong. Their Lordships said that collusion involved playing 'the same game as one of the parties'. Similarly, in Smith v Nixon (1885) 7 ALT 74 at 384, Higinbotham J emphasised that the stakeholder seeking to interplead must have maintained a strictly neutral position between the parties."
8. Once the plaintiff establishes on evidence that it claims no interest in the subject matter in dispute, is not in collusion with any claimant and is willing to pay the subject matter in dispute into court, a discretion is enlivened as to whether or not the relief ought be granted.

Application

1. There is no dispute that the plaintiff is a stakeholder. "Stakeholder" is defined in r 43.1 UCPR as "a person (other than the Sheriff) who is under a liability in respect of a debt or other personal property". I am satisfied that the plaintiff, as a deposit-taking institution, falls within this definition.
2. On the evidence, I am also satisfied that the plaintiff acknowledges its debt for the Funds and that it asserts no interest in them other than in relation to its costs of this application. The debt is the relevant "disputed property" within the meaning of sub-r 43.2(1). It is a chose in action, the ownership of which is the subject of a dispute between Kevin and Nathan as demonstrated by their competing complaints to AFCA over the same funds.
3. The remain, however, three principal areas of contention: the likelihood of the plaintiff being sued by both Kevin and Nathan if the order were not made; whether the plaintiff had established that it was, in the relevant sense, neutral; and whether interpleader relief ought be granted in the exercise of my discretion.

Likelihood of being sued

1. The plaintiff submitted that the cogent and arguable bases of each defendant's respective claim were straightforward. Both claimed to be beneficially entitled to the Funds. Kevin claims that the moneys that were deposited were his and that they did not lose that character on deposit. Nathan claims that, as the account holder, he has legal title to the moneys. In any event, he relies on the presumption of advancement in support of his claim. Indeed, both defendants have sought to withdraw the Funds and close Account 0095, both complained to AFCA when the plaintiff declined to do so and neither has abandoned his claim to the Funds.
2. The present application is not concerned with which defendant's claim is superior or who is more likely to prevail in a contested hearing on the merits. The question before me is whether the requirements of r 43.2 UCPR have been met.
3. There are relevantly two elements that must be considered.
4. First, whether each defendant has a "cogent" and "arguable" basis for his claim to the Funds. I am satisfied that each defendant has such a claim. As indicated above, Kevin's claim is that he deposited the moneys, which included his superannuation, procured the transfer of some of them from other accounts which had been in the names of his other sons and had always intended that the Funds would be distributed to his three sons after his death. In the meantime, he contends, the Funds are his.
5. Nathan contends that the Funds are in an account in his name, he has the benefit of the presumption of advancement and the Funds were, in any event, gifted to him by Kevin.
6. In my view, on the material before me, both claims are sufficiently cogent and arguable to satisfy the test in r 43.2.
7. Secondly, the test in r 43.2 refers to the likelihood of being sued in a court, rather than the mere existence of an arguable claim. Nathan contends that the plaintiff is bound by the determination of 7 March 2024 to pay the Funds to him and that he is content to let the Funds remain where they presently sit. While proceedings between Kevin and Nathan are probably inevitable, Nathan does not need to participate in those proceedings as a moving party. He says that he can advance all of his contentions by way of defence and, if successful on conclusion of those proceedings, he expects that the plaintiff would comply with the determination of 7 March 2024 and pay the Funds over to him. Accordingly, he has no subjective intention to bring proceedings and there is no objective basis for the Court to find that such proceedings are likely. He did not, however, proffer an undertaking not to commence proceedings.
8. In response, the plaintiff and Kevin both submitted that Nathan's evidence of his subjective intention was neither relevant nor credible. Objectively, however, they submitted that it would be necessary - or at least strongly advisable - for Nathan to join the plaintiff in any proceedings in which he asserted a claim to the Funds in order to bind the plaintiff to the orders. In proceedings in which only Kevin advanced an affirmative claim to the Funds, it does not follow that any resolution would necessarily establish that Nathan's claim is made out in the event that Kevin's claim is not. Accordingly, it remains likely that Nathan would advance his own claim to the Funds by way of claim or cross-claim.
9. I was not asked to make any adverse credit findings against Nathan and it is unnecessary for me to do so. Nevertheless, I do not consider that his statement of his current intention carries any significant weight in determining this question. In my view, there is an objective logic to Nathan advancing a claim against Kevin to assert his claimed entitlement to the Funds, either by way of a cross-claim or in fresh proceedings brought by him. There is a similar objective logic to joinder of the plaintiff in any proceedings brought by, or claim advanced by, Nathan in order to bind the plaintiff to the orders and compel the payment of the Funds to him if he were to succeed. This is more so in light of the terms of the determination by AFCA on 7 March 2024.
10. I consider that, if interpleader relief were not granted, Nathan would be likely to bring proceedings against the plaintiff, seeking to enforce the determination of 7 March 2024. The plaintiff has made clear that it does not accept that it could disburse the Funds to Nathan without risking a breach of its contractual and/or equitable obligations to Kevin (much as it considered it could not disburse the Funds to Kevin without risking the breach of its obligations to Nathan). It is likely that the plaintiff would have required an order from a court to do so, in which proceedings the competing claims could be ventilated, which is of course what it seeks to achieve in these proceedings. Such proceedings, if initiated by Nathan, would be proceedings "in relation to" the Funds (using the language of r 43.2(1)).
11. Accordingly, in my view, this component of the test in r 43.2 is satisfied.

Neutrality

1. Nathan also contends that the plaintiff has not been not neutral and has collusively favoured Kevin over Nathan. As such, the plaintiff fails to satisfy the condition in subr 43.2(3) and r 43.9. The acts Nathan relies on to establish such "collusion" were the plaintiff taking a position adverse to Nathan in responding to his complaint to AFCA. That position was that the Funds were not Nathan's, but Kevin's. The affidavit evidence of Mr Coldwell, it was submitted, cannot outweigh the objective evidence of collusion in the plaintiff's conduct.
2. The evidence is clear that the plaintiff made submissions to AFCA in response to Nathan's complaint in which it contended that the funds were Kevin's. However, in my view, in the context of the whole of its responses, it is equally clear that the plaintiff did not seek to release the Funds to Kevin or to deal with them according to his direction. Although it had accepted, as a fact, that Kevin was the owner of the funds, it did not take any step to give effect to that acceptance by treating the moneys as his in any practical way. Throughout all of the plaintiff's interactions with AFCA, it adhered to the position that there was a genuine dispute between Kevin and Nathan, which ought be determined by a court. Its consistent submission was that the claims ought abide a court determination and that it wished to interplead so that it was not party to any proceedings to determine the respective rights of Kevin and Nathan to the Funds.
3. Considered in the context of all of the evidence, I am not satisfied that there was any collusion in the sense contemplated by rr 43.2 or 43.9 or in any other sense.
4. Accordingly, I accept that the requirements of rr 43.2 and 43.9 have been satisfied by the plaintiff.

Discretionary factors

1. As the mandatory requirements of r 43.2 have been satisfied, the question before me then becomes whether, in the exercise of my discretion, interpleader relief ought be granted.
2. For the plaintiff and Kevin, it was contended that the interests of the just, quick and cheap resolution of the real issues in dispute favour the grant of relief. The real dispute is between Kevin and Nathan, both of whom are parties to the present proceedings. If the relief is granted, programming orders can be made to prepare the dispute for trial within the framework of the present proceedings.
3. Nathan contends that the discretion ought not be exercised in favour of granting relief for two principal reasons: first, he says that the plaintiff has unreasonably delayed bringing the present proceedings. Secondly, he says that the plaintiff has not demonstrated any entitlement to the benefit of interpleader, given that, on its own case, it had misdescribed the name of the owner of some of the accounts and, in this sense, by its own conduct is an author of the dispute.
4. I am not satisfied that either basis is made out.
5. Under the AFCA Rules, the plaintiff could not have brought the present proceedings until there had been a determination. This did not occur, in Nathan's case, until 7 March 2024. Moreover, there had not been two claims (at least insofar as articulated in complaints to AFCA) until July 2023, by which time the plaintiff had already been precluded from bringing the current proceedings as Kevin's complaint had been on foot since January 2023. While it might have been possible to bring this application in 2022, I am not satisfied that, in the circumstances, the plaintiff's failure to do so was unreasonable or disentitling as a matter of discretion.
6. Similarly, I am not persuaded on the evidence before me that any error in the identification of the account holders was necessarily the plaintiff's fault. Even if it were, I would not consider that to be a sufficient basis not to exercise my discretion to make the orders.
7. Accordingly, I am satisfied that the interests of the just, quick and cheap resolution of the real issues in dispute favour the grant of relief, and I will grant the interpleader relief sought.

Orders and costs

1. The parties addressed on costs.
2. The plaintiff submitted that, if it was successful, it ought recover its costs on a solicitor/client basis out of the Funds.
3. Kevin submitted that Nathan's unsuccessful opposition to the relief sought was unreasonable and that as costs ought follow the event, Nathan ought be ordered to pay Kevin's costs and ultimately to reimburse the Funds for the payment of the plaintiff's costs.
4. For Nathan it was contended that the same matters relied upon with respect to discretion ought be considered on the question of costs and that ought be taken into account to deprive the plaintiff of its costs.
5. As I have found that relief ought be granted, and I am not satisfied that there has been any disentitling conduct on the part of the plaintiff, I consider it appropriate that the plaintiff have its costs of the proceedings on a solicitor/client basis out of the Funds.
6. As between the defendants, it seems appropriate to me that Nathan pay Kevin's costs of the application. Kevin was put to unnecessary expense in addressing the application - to which he consented - due to Nathan's opposition. As Nathan's opposition was unsuccessful, he should bear Kevin's costs. As to whether either defendant should be directed to reimburse the Funds for the payment of the plaintiff's costs, this is a matter which I reserve to be determined on the conclusion of the substantive hearing.
7. I, therefore, make the following orders: 1. Pursuant to r 43.2 of the Uniform Civil Procedure Rules 2005, within 14 days, the plaintiff pay into court the sum of $775,159.42, held by the plaintiff in a term deposit account in the name of the second defendant and with an account number ending in 0095, together with any further interest accrued to the account (the Funds). 2. Order the plaintiff's costs of the Summons be paid out of the Funds on a solicitor/client basis. 3. Order that the second defendant pay the first defendant's costs of the Summons on the ordinary basis, as agreed or assessed. 4. Reserve to the trial judge the question of whether either defendant is to reimburse the Fund in respect of the payment of the plaintiff's costs. I have also been asked, pursuant to r 43.7, to make further orders for the future conduct of these proceedings. I set out below the orders I propose to make in this respect: 1. Order that, on or before 6 September 2024, the plaintiff serve on the defendants: 1. Any documents in relation to: 1. The establishment of; or 2. The creation of any authority in respect of, the term deposit referred to in Order (1) herein or the sum deposited therein; and 1. Any document recording the contractual rights and obligations in relation to the term deposit referred to in Order (1) herein or the sum deposited therein. 1. Order that the matter proceed by way of pleadings. 2. Order that: 1. On or before 27 September 2024, the first defendant file and serve any cross-claims; and 2. On or before 18 October 2024, the second defendant file and serve any cross-claims. 1. Stand the proceedings over for directions on Monday, 21 October 2024 at 9.30am before the Judicial Registrar. 2. Grant the parties liberty to apply on 3 days' notice.
8. I will now give the parties an opportunity to be heard on the form of the orders, including as to whether programming orders ought be made for the assessment, agreement and payment of the plaintiff's costs before making them.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 August 2024