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[2021] ACTSC 295
Supreme Court of the ACT
2021-11-18
McWilliam AJ
Original judgment source is linked above.
Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: Nova Builders Pty Ltd v Beno Excavations Pty Ltd
Citation: [2021] ACTSC 295
Hearing Date: 19 July 2021
Decision Date: 18 November 2021
Before: McWilliam AJ
Decision: See [65]
Catchwords: PRACTICE AND PROCEDURE – INTERPLEADER – where interpleader relief granted and moneys paid into court – whether interpleader relief appropriate in the circumstances – where applicant for interpleader relief was then sued in respect of the sum paid into court and foreshadowed counter-claim sought relief by way of restitution – where the question giving rise to the disputed moneys has not properly been brought before the court on the existing pleadings – applications dismissed and procedural directions made
Legislation Cited: Common Law Procedure Act 1860 (UK) s 12 Court Procedures Rules 2006 (ACT) rr 2600, 2622 Court Procedures Act 2004 (ACT) s 5A Supreme Court of Judicature Act 1873 (UK) Supreme Court Rules 1947 (SA) O 16B Supreme Court Rules 2000 (Tas) r 218
Cases Cited: Abel Equipment Pty Ltd (in liq) v National Capital Development Commission (Supreme Court of the ACT, Blackburn CJ, 25 August 1982) Australian Customer Target Information Company Pty Ltd v Cabool Holdings Pty Ltd & Anor [2003] NSWSC 753 Crawford v Fisher (1842) 1 Hare 436; 66 ER 1103 Crawshay v Thornton (1837) 2 My & Cr 1; 40 ER 541 De La Rue v Hernu, Peron & Stockwell Ltd [1936] 2 KB 164 Eastern Holdings Establishment of Vaduz v Singer & Friedlander Ltd [1967] 2 All ER 1192 Guerinoni v Dennis Castino t/as Castino & Co Chartered Accountants [2008] NSWSC 175 Kennett v Charlton [2007] NSWSC 190 L. J. Hooker Ltd v Dominion Factors Pty Ltd [1962] NSWR 573 LJ Hooker Ltd v W J Adams Estates Pty Ltd (1977) 138 CLR 52 Olsson v Dyson (1969) 120 CLR 365 Re McPherson, Thom & Co.; Sandhurst and Northern District Trustees, Etc., Co. Ltd. v Coombie Pastoral Co. Pty. Ltd. [1929] VLR 295 Riabkoff v Abenergy Properties Pty Ltd [2012] NSWSC 724 St George Bank v Meredith; Ghabrial v Meredith [2017] NSWSC 961 Ulrich v Baillieu Bowring Marsh & McLennan Pty Ltd (Supreme Court of Queensland, Shepherdson J, 10 July 1985) Vertical Australia Pty Ltd v Air Company Vertical-T LLC [2012] NSWSC 719 Watson v Park Royal (Caterers) Ltd [1961] 2 All ER 346 Wells v Glasscock (1893) 19 VLR 116
Texts Cited: William Francis Finlason, ESQ, The Common Law Procedure Acts of 1852, 1854, and 1860 (V. & R. Stevens & Sons, 1860) Lewis Carroll, Alice’s Adventures in Wonderland (Macmillan and Co, 1867)
Parties: Nova Builders Pty Ltd (Plaintiff) Beno Excavations Pty Ltd (First Defendant) Civil & Civic Corporation Pty Ltd (Second Defendant) Representation: Counsel R Arthur (Plaintiff) C McKeown (First Defendant) K Pattenden (Second Defendant) Solicitors Lexicon Lawyers (Plaintiff) Joseph Tallarita (First Defendant) Chamberlains (Second Defendant) File Number: SC 276 of 2020
McWilliam AJ
Nova Builders Pty Ltd (Nova Builders) is the owner of a development site located at Block 4, Section 28 Greenway (the Site). Earthworks have been conducted on the Site by each of the defendants to this proceeding, Beno Excavations Pty Ltd, formerly trading as “Benex” (Benex), and Civil & Civic Corporation Pty Ltd (Civil and Civic).
A dispute has emerged as to which of the two defendants in this proceeding is entitled to a sum of money, initially $438,078.93 but increased to $462,003.93 during the hearing (the disputed sum). The disputed sum has been paid into Court.
By way of a general summary of the parties’ respective positions, Civil and Civic claims an entitlement to the disputed sum because the moneys in dispute relate to invoices that it had issued for completing the work. On the other hand, Benex claims to be entitled to the disputed sum because of what it says was an earlier incorrect receipt of $550,000 by Civil and Civic, the details of which are set out below.
Nova Builders makes no initial claim to the disputed sum. It acknowledges the sum is due and payable in respect of the works carried out on the Site. However, Nova Builders does not know which of the two defendants should be paid. At the time Nova Builders commenced this proceeding on 7 August 2020, the grounds of its application were that it had received separate claims of entitlement to payment for works performed under contract. Since then, both defendants have filed a statement of claim – debt or liquidated demand (statement of claim) against Nova Builders, which I directed to be filed in the same proceeding.
Nova Builders sought interpleader relief pursuant to r 2600 of the Court Procedures Rules 2006 (ACT) (Rules). On 17 September 2020, the Court granted that relief, and orders were made for $438,078.93 to be paid into court. At that time, the first defendant consented to the order being made. The second defendant was on notice of the application and hearing date but did not appear.
Each defendant subsequently filed a competing application in proceeding, which effectively requires the Court to decide what should happen next. The applications were heard on 19 July 2021. During the substantive hearing of the applications, Nova Builders informed the Court that it had been issued a further invoice by Civil and Civic for an additional sum of $23,925. Nova Builders sought to pay those additional moneys into court on the same basis. This time, Civil and Civic opposed that course, on the basis that the matter was in fact not appropriate for the grant of interpleader relief. I ordered that the additional sum be paid into court on the basis that the argument put by Civil and Civic would be preserved and ultimately resolved by the delivery of this judgment.
The application brought by Benex
The application filed by Benex on 6 May 2021 claims payment of the disputed sum. The statement of claim filed by Benex on 9 October 2020 claims payment in the amount of $772,767.84, for works conducted at the Site over the period from 8 November 2019 to 3 March 2020.
Benex’s claim is that it had contracted with Nova Builders to perform work, which it then proceeded to do (albeit not to completion), and that it has not been paid for any of that work. Relying on affidavit material filed by Nova Builders as well as affidavits of a director of Benex and a solicitor with carriage of the matter, it asserts:
(a) In November 2019, Nova Builders engaged Benex to carry out substantial excavation works on the Site for the agreed sum of $350,000 (plus GST).
(b) In January 2020, additional works were agreed including civil and hydraulic works at a sum of $500,000 (plus GST), and removal of topsoil at a sum of $20,000 (plus GST).
(c) In January 2020 and February 2020, the general manager of Benex issued invoices to Nova Builders for $275,000 each (inclusive of GST). However, the invoices were not in the name of Benex; they were issued in the name of Civil and Civic. With specific reference to the project Site, those invoices included the words “Joint Venture” followed by “Benex Pipelines”, among others. Whether or not that was correct at the time, Nova Builders paid those invoices (a total of $550,000) to Civil and Civic.
(d) On 3 March 2020, the general manager for Benex resigned and commenced working for Civil and Civic. Benex was unable to complete the works for Nova Builders. Civil and Civic then commenced work on the Site from that date.
(e) Civil and Civic has since issued invoices for work done on the Site after 3 March 2020. Nova Builders has not paid those invoices, and the disputed sum equates to the value of those unpaid invoices. (f) Civil and Civic, having already received funds that it was not entitled to receive, should not be paid more funds from Nova Builders. The moneys Civil and Civic has already improperly received ($550,000) are more than what Civil and Civic is currently owed.
Benex therefore asserts that Civil and Civic has been wrongfully paid, and that Nova Builders should pay the disputed sum to Benex in partial reduction of the outstanding debt that is owed to it for work done up to 3 March 2020.
Accordingly, Benex seeks orders that the moneys paid by Nova Builders into court be released to it in partial satisfaction of the debt owed by Nova Builders, and for costs to be awarded against Civil and Civic.
The application brought by Civil and Civic
(a) It contracted to complete the works on the Site for Nova Builders from 3 March 2020. That was not ultimately in dispute at the hearing.
(b) The disputed sum is referable to invoices that Civil and Civic has issued since 3 March 2020 totalling $438,078.93, and a further invoice issued on 30 April 2020 for $23,925.
(c) As there is no dispute that such work was done, Civil and Civic is entitled to be paid and the moneys paid into court should be released to it.
Civil and Civic submitted that the claims made by each defendant relate to separate contracts, for works performed at different times. The plaintiff may be liable to both defendants. Accordingly, the dispute is not appropriately dealt with by way of interpleader proceedings, because the subject matter of the respective claims is not the same.
Civil and Civic seeks the following orders:
(a) That the order made by McWilliam AsJ on 17 September 2020 granting the plaintiff leave to interplead, pursuant to r 2600 of the Rules, be set aside;
(b) That summary judgment be entered for Civil and Civic against Nova Builders, pursuant to r 1147 of the Rules;
(c) In the alternative to (b), that the plaintiff’s originating application be struck out, pursuant to r 425(1)(a) of the Rules;
(d) That the disputed sum be released to the second defendant; and
(e) That the plaintiff pay the second defendant’s costs of the proceeding on an indemnity basis, or alternatively, on a party and party basis.
The Court’s power to grant interpleader relief
2600 Interpleader—application by stakeholder (1) This rule applies if – (a) a person other than an enforcement officer (the stakeholder) is under a liability in relation to a debt or personal property (the disputed property); and (b) the stakeholder is, or expects to be, sued by 2 or more people (each of whom is a claimant) making adverse claims to the disputed property. (2) If the stakeholder is sued by a claimant in a proceeding in the court in relation to the disputed property, the stakeholder may apply to the court in that proceeding for interpleader relief.
The rule makes it clear that the procedure is available to a person who is faced with 2 or more claims about the same debt or personal property. It enables competing claimants to litigate their difference while the stakeholder abides by the result.
Rule 2622 of the Rules is also relevant to the present dispute. It provides:
2622 Interpleader – adverse claims The applicant is not disentitled to relief only because the titles of the claimants do not have a common origin, but are adverse to and independent of one another.
General legal principles
… the interpleader summons … is a proceeding the object of which is to extricate the … defendant from the embarrassment of being sued, or being likely to be sued, by more than one party in respect of the same subject-matter, and also having as its object to put the claimants in a position in which, if they are going to insist upon their claims, they should do so in this action.
Interpleader concerns one liability
In Ulrich v Baillieu Bowring Marsh & McLennan Pty Ltd (Supreme Court of Queensland, Shepherdson J, 10 July 1985) (Ulrich v Baillieu), Shepherdson J cited the passage extracted from Eastern Holdings above. His Honour then referred to L. J. Hooker Ltd v Dominion Factors Pty Ltd [1962] NSWR 1031 (LJ Hooker v Dominion Factors) at 1032-3, where Richardson J made the point that interpleader relief is not available where a party might be liable to both claimants.
In doing so, Richardson J cited the following passage in Crawford v Fisher (1842) 1 Hare 436; 66 ER 1103 at 441:
The office of an interpleading suit is not to protect a party against a double liability, but against double vexation in respect of one liability. If the circumstances of a case show that the Plaintiff is liable to both claimants, that is no case for interpleader.
Notwithstanding that Richardson J attributed the above to Vice-Chancellor Sir Lancelot Shadwell, this passage was part of the judgment that was delivered by Vice- Chancellor Sir James Wigram.
Subsequently, in LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52, Barwick CJ referred to LJ Hooker v Dominion Factors, stating at 61:
[LJ Hooker v Dominion Factors] was a case as to interpleader. It really decided no more than that the two agents were not claiming from the vendor the identical sum of money as itself a matter in suit. Each was attempting to obtain payment in respect of a separate and different contract and in respect of different activities, though each claimed the same amount of money. Both on authority and on principle the interpleader was an inappropriate procedure in such circumstances.
Interpleader, as I understand it, applies to cases where one debt or one thing is claimed by different people … It was, however, never intended to apply … to different claims and different debts.
As to the position where the stakeholder “expects” to be sued, it is sufficient to show that there is “a real foundation for the expectation that they would be sued”: Watson v Park Royal (Caterers) Ltd [1961] 2 All ER 346 at 352, cited by Barrett J in Guerinoni v Dennis Castino t/as Castino & Co Chartered Accountants [2008] NSWSC 175 (Guerinoni) at [7].
Thus, interpleader relief has been refused in circumstances where, although there were likely to be competing claims to a sum of money, it had not been established that a particular sum of money in a specific fund was claimed by two parties: see Guerinoni at [12]-[15].
The stakeholder must make no claim to the property
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.
Understanding r 2622 of the Rules
The operation of r 2622 and what it means is not self-evident. Benex submitted the rule was introduced to support the Court’s role in ensuring matters proceed in a cost efficient and timely way. It appears that the only jurisdiction in Australia which has maintained an equivalent rule is Tasmania, where r 218 of the Supreme Court Rules 2000 (Tas) is in relevantly similar terms.
In Olsson v Dyson (1969) 120 CLR 365, Barwick CJ considered order 16B of the Supreme Court Rules 1947 (SA), which has since been repealed. The rule at the time appears to have been in terms similar to r 2622. The Chief Justice stated at 369:
No doubt the interpleader process in general treats the debt as itself the property to the ownership of which there are adverse claims: it is also available, it seems to me, in a case where the real question is to which of the claimants has the debtor promised to pay the money in question.
XII. Interpleader Proceedings. Where an action has been commenced in respect of a common law claim for the recovery of money or goods, or where goods or chattels have been taken or are intended to be taken in execution under process issued from any one of the superior courts… and the defendant in such action… has applied for relief under the provisions of an Act to enable courts of law to give relief against adverse claims made upon persons having no interest in the subject of such claims, it shall be lawful for the court or a judge to whom such application is made to exercise all the powers and authorities given to them by this Act and hereinbefore mentioned Act, though the titles of the claimants to the money goods, or chattels in question, or to the proceeds or value thereof have not a common origin but are adverse to and independent of one another.
Although more appropriate to a contest to physical property, this rule would seem to cover the case of claimants to be paid money under different promises and not merely the case of conflicting claims to the benefit of the one promise.
Further elucidation may perhaps be drawn from The Common Law Procedure Acts of 1852, 1854, and 1860 by William Francis Finlason, where, at page 228 footnote (f), there is an explanation that the above rule in the United Kingdom was enacted specifically to enable the Court to exercise the equitable jurisdiction by way of interpleader, even in cases where the question of title between the two claimants was not the sole question. The author goes on to state that the rule overcame the decision in Crawshay v Thornton (1837) 2 My & Cr 1; 40 ER 541 (and a number of other cases cited), where it was held that the right to call for an interpleader does not exist in circumstances where the applicant owed an additional liability to one of the claimants, independent of the disputed property between them.
The procedural rule in question, and the mischief it was said to address, were at a time before the Supreme Court of Judicature Act 1873 (UK) and subsequent Judicature Acts were passed. That is, the rule was introduced at a time when common law and equity were split jurisdictions, before the creation of the High Court of Justice of England and Wales, which resulted in law and equity being administered in the one court. Given that it appears the rule is now historical in nature, although it serves to confirm a court’s procedural jurisdiction, that may be the reason why many of the other jurisdictions in Australia have not found it necessary to retain.
However, while the claims over “disputed property” may permissibly originate from separate contracts, promises or legal rights, r 2622 does not overcome or alter the underlying basis for the interpleader procedure, which is that the property or debt in dispute between two or more parties is the same.
Was interpleader relief appropriate here?
The fact that [one of the claimants] has now established its claim to the funds (and that [the other possible claimant] did not attempt in these proceedings to do so) does not preclude the possibility of a finding that [the applicant for interpleader relief] was at the relevant time in the position where there were two parties who each claimed an entitlement to the disputed funds and where it was being threatened with claims for damages if it paid the funds to the wrong party. It is precisely those situations that interpleader proceedings provide a mechanism for a party … to protect itself by making payment of the funds into Court.
That appeared to be the case when Nova Builders initially commenced the proceeding. However, having not appeared to dispute the grant of interpleader relief when the order was initially made, Civil and Civic now argues that such relief was inappropriate. That question has a significant bearing on the outcome of each application, particularly given how the proceedings have developed since relief was granted. I have therefore dealt with it as a preliminary point.
I accept that these proceedings were in fact not appropriate for interpleader relief for any and each of the following reasons:
(a) The debt to which the disputed sum attaches is not the same.
(b) The circumstances of the case indicate that Nova Builders may be liable to both defendants.
(c) Nova Builders has been unable to extricate itself from the proceedings due to an earlier payment made to Civil and Civic.
As to the first of those matters, if the amount that had been paid into court was the $550,000 that was the subject of the two invoices issued by Civil and Civic before 3 March 2020, there would clearly have been an appropriate case for granting interpleader, as it would be plain that the defendants’ competing claims were in relation to the same debt or property.
However, the $550,000 amount has already been paid by Nova Builders to Civil and Civic. It forms no part of the disputed sum that is the subject of consideration and adjudication in the applications before the Court. What has been paid into court is an amount that reflects payment for work done after 3 March 2020, which Benex admits (a) it did not do, and (b) are moneys to which it does not otherwise have a contractual entitlement, given that its contract with Nova Builders was terminated on 3 March 2020.
If Benex’s case for the disputed sum rests on damages for conversion (which appears to be the allegation stated in its claim), that may entitle it to a sum of money, but not necessarily the particular moneys presently in court. Even if Benex sought relief by way of return in specie, that does not capture the disputed sum.
As to the second of the matters stated above, If Nova Builders was contractually obliged to pay Benex for the work that was done before 3 March 2020, because it has has paid nothing to Benex, even if the non-payment was mistaken, Nova Builders may be liable to Benex. Nova Builders is also liable to Civil and Civic for the work that it accepts was done after 3 March 2020.
As to the third reason, the circumstances are such that Nova Builders is unlikely to be able to extricate itself from further litigation. The real issue that requires clarification is how to account for the $550,000 payment that Nova Builders has already made. Both Nova Builders and Benex impressed upon the Court that the payment could and should be taken into account when determining the two applications. However, I have formed the view that on the present pleadings, that cannot be done in a way that sees Nova Builders free of the litigation, nor absent a properly contested factual hearing.
The $550,000 payment may have been improperly received by Civil and Civic, so that it should either be repaid to Nova Builders or taken into account as a full credit for the subsequent work done against the debt owed by Nova Builders to Civil and Civic that has led to the disputed sum being paid into court.
Alternatively, the earlier payment of $550,000 may have been quite properly payable to Civil and Civic for any number of reasons. It may have been a sub-contractor with a lawful basis to bill Nova Builders directly rather than issue its invoice to Benex. There was also some suggestion in the evidence (rejected by Benex) that Civil and Civic was a joint-venturer. Alternatively, the sum may have been found payable on a quantum meruit basis, or there may be some other reason not apparent on the pleadings and evidence that justifies the receipt of the earlier payment by an entity other than Benex as the named contracting party. The circumstances may be that Benex’s claim for $772,767.84 should take account of, or recognise, the payment of $550,000 for work done on its behalf, notwithstanding that it did not directly receive such payment.
On the cases stated and the evidence before the Court, it is far from clear how the earlier receipt of the $550,000 should be viewed or characterised. In the meantime, if the Court determined that the disputed sum ought to be paid out to Civil and Civic, Nova Builders is likely to face a claim by Benex for $772,767.84 for work done at an earlier point in time. If the disputed sum is paid out to Benex, Nova Builders will face Civil and Civic’s claim for unpaid invoices.
The inability of Nova Builders to extricate itself from the litigation is confirmed by the documents that the parties have filed. First, rather than joining issue with the case stated against each other, each defendant has sought relief solely from Nova Builders. Despite the interpleader procedure being directed to extracting the “stakeholder” from litigation and requiring the two claimants to state the nature of their claim for the disputed payment by pleading against each other (as to which see Cabool Holdings at [10], set out above), each has filed a claim against the stakeholder, and neither seeks any relief against the other in that claim.
Second, at the date of hearing, Nova Builders had only prepared draft defences, but its proposed defence to the claim of Civil and Civic was to counter-claim against that company, seeking relief in the form of $550,000 by way of restitution.
There are also further difficulties arising from the documents and submissions that each party has put before the Court. Nova Builders submitted (as I understood the argument) that any right it might have had to reclaim the $550,000 from Civil and Civic could be dealt with by Benex exercising a subrogated right, giving it an entitlement to the disputed sum. The difficulty with that submission was that the facts giving rise to subrogation, even if by operation of law, were not specifically pleaded or traversed by any party. That may have been because of the interpleader procedure adopted, but the fact remains that Benex did not itself assert any right of subrogation that it had exercised in stating its case for the disputed sum. Even if the right arose by operation of law out of the facts pleaded by Benex, it is something that, in my view, was critical for Benex to set out in support of the right asserted. That is because the claim was for payment of the disputed sum, as opposed to damages which might then be set off against the disputed sum.
Benex’s submissions focused instead on unjust enrichment. Again, however, there was a difficulty with that argument because the submission did not match the statement of claim that was filed as the document stating Benex’s case on interpleader. That document was silent as to unjust enrichment. Moreover, although Benex alleged the improper receipt of $550,000 by Civil and Civic from Nova Builders, it did not seek any relief against Civil and Civic at all.
As a result, when Benex submitted during the hearing that Civil and Civic had not disputed the allegation that its earlier receipt of $550,000 was a diversion or conversion of “funds properly payable to Benex” – a sum which exceeded any debt payable under the invoices Civil and Civic later issued after 3 March 2020 – Civil and Civic’s response was that it did not plead to Benex’s allegations because no claim was brought by Benex against it.
The position then, is that although the interpleader procedure was adopted without contest, now that the parties have developed their arguments, the interpleader procedure is plainly inapt to deal with the circumstances of the case. The issues have not been properly articulated or joined, so that the Court cannot make the factual findings necessary to then decide the legal consequences for each party, and ultimately to determine what should happen to the disputed sum.
In Abel Equipment Pty Ltd (in liq) v National Capital Development Commission (Supreme Court of the ACT, Blackburn CJ, 25 August 1982) (Abel Equipment) at 4, when faced with a combination of procedural irregularities and missteps on an interpleader summons that had failed to bring the real issue between the parties for determination, Blackburn CJ said this:
These proceedings are a procedural Mad Hatter’s Tea Party. The order I make on the summons must have as its primary purpose the clarification of the real issues relevant to the proper destination of the fund now in court. That need is so great that other principles of normal interpleader proceedings may have to take second place.
The reference to the famed scene of confusion from Lewis Carroll’s Alice’s Adventures in Wonderland might not quite accord with the interlocutory applications for determination here, which are more of an incomplete puzzle, with key pieces yet to be placed, or even loosely arranged, in a manner that would allow the Court to discern the full picture. The real point of force is the approach the Court must now take, which is to deal with the matter from the perspective of setting the parties on a path that will best clarify the real issues in dispute (consistently with s 5A of the Court Procedures Act 2004 (ACT)).
In St George Bank v Meredith; Ghabrial v Meredith [2017] NSWSC 961 (St George Bank v Meredith) at [43], Parker J set out the equitable origins of interpleader proceedings. His Honour did so by reference to De La Rue v Hernu, Peron & Stockwell Ltd [1936] 2 KB 164, and the useful discussion of interpleader proceedings by Lord Justice Greene at 170-3, the material parts of which are extracted as follows (emphasis and formatting added):
Interpleader proceedings originated in Courts of equity, and the appropriate procedure where a person found himself harassed by claims made on behalf of two or more persons was by way of a Bill of Interpleader. It is interesting to observe what the nature of that proceeding was. I read a passage from the Fourth Edition of Daniell’s Chancery Practice, vol. ii., p 1418, published in 1867, because it is from this practice in equity that the whole modern law of interpleader is ultimately derived. The learned author says this: “Where two or more persons claim the same thing, by different or separate interests, and another person, not knowing to which of the claimants he ought of right to render a debt or duty, or to deliver property in his custody, fears he may be hurt by some of them, he may exhibit a Bill of Interpleader against them.” Then he says on p. 1419: “the sole ground on which the jurisdiction of the Court, in this case, is supported, is the danger of injury to the plaintiff” - that is the person who exhibits the bill - “from the doubtful title of the defendants.” Now, it is to be observed that under the old equitable procedure, the person desiring to interplead exhibits a Bill of Interpleader, to which he makes both claimants defendants; and the way the matter then proceeded under the old equitable procedure, is set out on p. 1422 in these words: “If, at the hearing, the question between the defendants is ripe for decision, the Court will make a decree. If that is not the case, proper inquiries, or trials of questions of fact, either before the Court itself or a Court of common law, will be directed, in order to bring the matter to a determination.” …In substance, when an interpleader issue is tried, two actions against the person interpleading are being dealt with. Interpleader proceedings are the method of compelling the parties — either one, or both, or neither of whom may have actually issued a writ — to prosecute their claims. As it is the essence of interpleader proceedings that the person who has interpleaded has no title himself he naturally drops out of the suit. But in effect the entire matter is tried out in the presence of all the parties concerned, and the real claimants are compelled to put forward their claims and have them adjudicated upon. The reason for that is not their own benefit, it is for the relief of the person interpleading.
Drawing together the comments of Blackburn CJ and the emphasised words of the discussion adopted by Parker J in St George Bank v Meredith, a proper hearing on questions of fact should be directed in order to bring the matter to a determination. The question between the defendants has not been stated in a way that is ripe for decision now and the parties ought be compelled to properly propound their claims and have them adjudicated upon.
Accordingly, while Civil and Civic is correct that this is not a matter for interpleader, it does not follow that it is entitled to receive the disputed sum on a summary basis. The circumstances now include a foreshadowed counter-claim by Nova Builders for restitution (the consequence of which may be that, effectively, Civil and Civic owes money to Nova Builders). The contention of a subrogated right by Benex, if properly articulated and developed, would itself require proof that Nova Builders first had an entitlement to the disputed sum. Either way, a contested hearing on formal pleadings is required. The threshold for summary relief is high and the “proper destination” (to adopt the words of Blackburn CJ in Abel Equipment quoted above) of the disputed sum should not be determined in a vacuum.
Conclusion
Neither defendant has yet satisfied the Court of a clear entitlement to the disputed sum. Although the parties perceived that the proceedings could be pursued in stages, regrettably the “proper destination” of the disputed fund cannot be separately determined. Despite its efforts, Nova Builders presently remains an interested party defending claims made directly against it, which have a bearing on entitlements to the disputed fund.
The parties will be directed to consult as to a timetable for the filing of pleadings (if they choose to do so in light of how the case has now developed), and for the service of evidence in order to bring the matter to a fully contested hearing.
In the meantime, the disputed sum has been paid into court voluntarily. As the competing claims to the disputed sum are still being adjudicated, albeit not by an interpleader procedure, it seems to me that it is appropriate for the funds to remain in court pending the resolution of the parties’ claims and counter-claims. For this reason, I will not vacate the order pursuant to which the disputed sum was initially paid into court. However, if there is an alternative order sought by Nova Builders in light of these reasons, I will hear the parties further. Meanwhile, the parties may also wish to give consideration to whether it is now appropriate for orders to be made for the disputed sum to be invested in an interest-bearing account.
Costs
As to costs, each party has made submissions as to the appropriate costs order in these proceedings. However, the submissions were made on the basis of a fundamental disjunct between the parties’ interpretation of the law of interpleader proceedings and the result that would follow.
Nova Builders submitted that it is entitled to be paid the costs of the proceedings on a solicitor and client basis, referring to the authority in Kennett v Charlton [2007] NSWSC 190 at [11] to [24]. There is clear authority supporting the position that a stakeholder who comes to court promptly when faced with conflicting claims and has been guilty of no conduct which has increased costs will be entitled to costs, so far as the fund will permit: see Re McPherson, Thom & Co.; Sandhurst and Northern District Trustees, Etc., Co. Ltd. v Coombie Pastoral Co. Pty. Ltd. [1929] VLR 295 at 301; cited in Riabkoff v Abenergy Properties Pty Ltd [2012] NSWSC 724 at [66].
While accepting that is the ordinary principle on interpleader, the proceeding here was not ultimately appropriate for interpleader, and Nova Builders is not a disinterested stakeholder, which is the underlying basis for a complete indemnity out of the fund.
Benex submitted that the costs of the proceedings should be paid by Civil and Civic. However, that was on the basis that Benex was entitled to the disputed fund. That has not yet been established.
Civil and Civic submitted that Nova Builders should pay the costs of the proceeding on an indemnity basis, or alternatively, on a party and party basis. There are cases where costs were awarded against the person who brought the application for interpleader when it was found that the proceeding was not appropriate for interpleader: see Wells v Glasscock at 118. However, I do not consider that course would be just here, where Nova Builders was initially granted interpleader relief without Civil and Civic contesting the application and where Civil and Civic has not yet been successful in establishing an entitlement to the disputed sum.
Given that costs are in the discretion of the court, no party was successful on the present applications, and the substance of the dispute between the parties is yet to be determined, I am of the view that each party should bear its own costs. Orders
The orders of the Court are:
The applications are dismissed.
Within 14 days of the making of these orders, the parties are directed to forward by email to chambers agreed short minutes of order proposing a timetable for the progress of the matter in accordance with these reasons, or in the event of continuing disagreement, a draft of the orders each party proposes.
Each party is to bear its own costs.
I certify that the preceding sixty-five [65] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Acting Justice McWilliam.
Associate: Zoe Saunders
Date: 18 November 2021
Nova Builders Pty Ltd
Beno Excavations Pty Ltd [2021] ACTSC 295
(1977) 138 CLR 52
(1969) 120 CLR 365