INTERPLEADER PROCEEDINGS: FILLING THE GAP IN THE RULES

February 18, 2018 · by · in Applications, Civil Procedure, Enforcement

In Celador Radio Ltd v Rancho Steak House Ltd (Equitable Interpleader – Enforcement) [2018] EWHC 219 (QB) Master McCloud had to look back at a few centuries of jurisprudence in order to find a solution to a very modern problem. What does the court do when a party who claims a right to ownership of seized goods fails to issue an application? The Master turned to principles of equity to fill a very obvious gap in the Civil Procedure Rules.

“I shall not go too far into the history, much though doing so would be among the more pleasurable things a Master could do given that it would concern the decisions of my learned predecessors in the same judicial role…”

THE ISSUE

When a High Court Enforcement Officer seizes goods under a Writ of fi fa they may not be the debtor’s goods. CPR 85.  sets out a method whereby anyone making a claim to the seized goods can apply to the Court.  A party claiming title to the goods must make give notice under CPR 85.4(1). The creditor can then serve a counter-notice under CPR 85.2(3).  The party claiming title must then issue an application under CPR 85.5.

f neither party gives notice then the Enforcement Officer can apply to the court for directions and for protection against liability.

However the rules do not deal with the situation where a third party has given notice that they believe they are entitled to the goods but that party then fails to commence the application required under CPR 85.5.

THE DEFICIENT RULES

The Master observed the problem and that the rules were deficient.

  1. The problem, however, is that the rules omit to deal with the situation where a third party has given notice that they believe they are entitled to the goods, under r. 85.4(1), and a counter-notice is duly given by the creditor under r. 85.4(3), but the third party then fails to commence the application to the court which is required under r. 85.5. There is no provision in those circumstances for what steps must be taken by the HCEO who is holding the goods.
  2. Furthermore the provisions of rule 85.5 impose no time limit by which the application under that rule must be made by the creditor or other party claiming an interest. Hence there is no clear point at which the rule has been breached, and no provision within the rule for what should happen when no application is made.
  3. I think with all respect to the draftsperson, the rule must be said to be deficient. It is silent as to those aspects and perhaps ought not to be. The HCEO cannot release the goods or dispose of them but may well be storing them at cost. The purpose of swift enforcement is thereby frustrated, and costs and expense wasted. Court time can be taken because on an ad hoc basis the HCEOs attend court seeking local solutions from judges without there being a clear procedure which they can rely on as the proper one to adopt.

THE NEED FOR  A UNIVERSAL PRACTICE

The Master noted that there were various practices being adopted. The aim of this judgment was to ensure a consistent approach.

    1. By these applications the HCEOs ask me to make directions and indicate what procedure ought to be adopted. The HCEO’s evidence is that he is ‘in limbo’ and storage charges are accruing in the case of Riaz. The draft order proposed is along the lines discussed above in terms of allowing the Third Party some further time to make the application in default of which it would be debarred from making the application and the Third Party would be ordered by me not to bring any future claim against the HCEO or its contractors in respect of the goods and money, and an order to permit the sale of the goods in Riaz.
    2. In my judgment one has to be cautious about ostensibly ordering a party not to bring a claim whilst leaving the question of title undetermined. Such is in my judgment dubious, jurisdictionally, and might well not offer the protection which the HCEO might think it would. The solution which I am prepared to deploy goes back to the notion of the interpleader, and it finds favour with me because it determines the ownership of the goods and binds the Third Party: that in my judgment is a firmer foundation for protecting the ‘middleman’ HCEO than a purported quia timet form of injunctive relief which leaves title undetermined.
    3. The notion of an interpleader action arises at common law but as so often happens, the rigidity of the interpleader as it was known to the law was mitigated by the superimposition of the court of equity. That is one analysis but views differ as to whether equity supplied an entirely different relief rather than merely expanding the common law form of action.
    4. I shall not go too far into the history, much though doing so would be among the more pleasurable things a Master could do given that it would concern the decisions of my learned predecessors in the same judicial role but in essence an interpleader action at law was confined to cases of detinue. It was a form of action used in the fourteenth and fifteenth centuries where a person faced rival claims to goods in a detinue action brought against him. It appears to have survived into the eighteenth century but shrivelled to nothing by the nineteenth with the decline in the use of detinue as a form of action. A useful paper (Hazard, Geoffrey C. Jr. and Moskovitz, Myron, “An Historical and Critical Analysis of Interpleader” (1964) U. Penn. Faculty Scholarship. Paper No. 1069) sets out the some of the history and case law for the interested reader.
    5. The more modern era of the Interpleader has its origins in the courts of equity. Where the equitable doctrine was applied it was not even necessarily identified as ‘interpleader’ by name. Be that as it may, a party faced with rival claims would either have to defend suits brought by the rival claimants or would have to pursue a Bill in Equity which would lead to equitable relief.
    6. The modern era of a more codified approach to interpleader began with the Interpleader Act of 1831. The informative book “The Law of Interpleader as Administered by the English, American, Canadian and Australian Courts” (RJ MacLennan, 1901 pub. Carswell) describes the ensuing history at 14-15. In essence the attempts at statutory codification of the law of interpleader which began in 1831 in turn gave way, in the light of case law, to the court rules. Thus in ex p. Mersey Docks and Harbour Board [1899] 1 QB 546 at 551 AL Smith LJ said: “The matter [ie, of interpleader] now depends upon the provisions of Order LVII, r.1” and in Reading v the London School Board (1886) 16 QBD 686 at 690[1] per Wills J “All the common law statutes as to interpleader are now repealed and the right to that class of relief is regulated by Order LVII, by which the old practice of the Court of Chancery is modified“.
    7. Thus it was by the turn of the 20th Century that one looked to the rules for the interpleader procedure. Today, many lawyers will recall that the final form of the Interpleader before its disappearance from the rules was that of RSC Ord. 17 by which time our Victorian brethren’s preference for roman numerals when identifying rules of court had passed into history in favour of the Arabic form, but the rule number remained the same. Order 17 in turn disappeared by deletion from the schedules to the CPR, when CPR Part 85 was enacted in this decade. A good reference to the authorities which applied to RSC Ord. 17 down the years can be found in the White Book 2013 edition in the footnotes to RSC Ord. 17 which at that stage was still a part of the CPR via Schedule 1 to the rules.
    8. What we are left with, then, is the abolition of the statutory interpleader in the 19th century at the point when the court rules in the form of Order LVII came in to effect. In turn those rules were supplanted by CPR 85.4 and the demise of RSC Ord.17 (as Order LVII had by then become). I note also that The Tribunals Courts and Enforcement Act 2007 s. 65 abolishes “common law rules about the exercise of the powers which under it become powers to use the procedure in Schedule 12.” It is I think doubtful that s.65 has effect in relation to any common law rights relating to interpleader brought by enforcement agents, since sch. 12 is silent as to such applications and arguably therefore not caught by s. 65. However the analysis in MacLennan rather implies that interpleader at law had already been abolished by the advent of RSC Ord. 17 at the latest.
    9. I do however take heart from the analysis in MacLennan, helpfully dating as it does to a time more proximal to the nineteenth century yet late enough to be a time where Order LVII was in force, at page 17 where the learned author considers whether the supplanting of the interpleader at common law with the interpleader governed by statute (which I read here as including the RSC) had any impact on the existence, in principle, of the equitable form of interpleader relief. His conclusion is as follows:
“Statute does not oust equitable remedy – Where courts of Chancery have existed separate and distinct from courts of law, the existence of an interpleader statute governing the proceeding in courts of law has been held not to oust or take away the concurrent jurisdiction of the court of Chancery. A court of equity if first resorted to would not refuse to entertain a bill of interpleader, although a court of law might have been resorted to on the facts stated. … Where courts of law and equity are fused, and equitable principles are followed in the consolidated court, the rule is clear that interpleader statutes are not at all to limit or affect the equitable jurisdiction of the court to entertain an interpleader suit or action. Such statutes merely furnish another special, cumulative and concurrent remedy, summary in its operation, and they do not alter the settled doctrines concerning interpleader. The statutory remedy is a mere substitution for the equitable remedy, in the kinds of actions to which it applies.”
    1. The author in my judgment correctly then notes that where there exists a codified system such as under statute (or rules, I add) then that should be used if it covers the situation at hand. In a manner which would find favour in the post-Jackson reform era, the author observes that where a statutory provision is convenient, an applicant who does not avail himself of it will not be allowed to impose greater costs on the fund or subject matter by using a different procedure. That perhaps is an early reference to the fairness of requiring proportionate means to be used in any application.
    2. The above detour, which is offered with apologies to others no doubt appreciating the detail of interpleader history and the extent to which I have in the interests of brevity simplified matters, is by way of basis for my conclusion which is that the introduction of CPR 85 and revocation of RSC Ord. 17 does not in my judgment have the effect of abolishing the ability of a court of merged equitable and legal jurisdiction to render equitable relief where the black letter law offers none. A purist would interject that the equitable form of relief as it was known prior to the 19th century statutes may not have been aimed at resolving issues concerning sheriffs (enforcement officers) and that it was only in the 20th century that the notion of the sheriff’s interpleader arose.
    3. However, appreciating that as I do, where there is a need for sheriffs (enforcement officers) to access a court in an interpleader context, and the statutory and procedural law does not meet that need, yet where there has been historically a clear recognition of the existence of that need, Equity can still assist absent express statutory abolition of interpleader in Equity.
    4. Therefore, my order is that:
(1) Unless by 4pm on a date 14 days from the date of service of this order the Third Party files and serves evidence setting out its basis for its asserted rival claim to title, it shall be debarred from relying on evidence of title to contradict that put forth by the HCEO.
(2) In the event that the Third Party is so debarred then without further hearing the HCEO shall be entitled to a declaration that the judgment debtor was at the material time the person with title to the seized goods and consequent upon that declaration the HCEO shall be entitled to dispose of them in execution and shall be entitled to his reasonable costs summarily assessed in the sum of [£959.30 in Riaz, £681.50 in Celador] being the sum claimed for this application.
(3) In the event that the Third Party serves and files evidence as above and is not debarred, the HCEO shall apply to this court for directions as to determination of the issue of title and as to management of the dispute and payment of the sums required by para 60(4)(a) of the Tribunals Courts and Enforcement Act 2007 Sch. 12, and for the application to proceed thereafter in accordance with CPR Part 85, and in that event costs shall be reserved.
(4) In the event that the Third Party serves and files evidence as above and is not debarred, any further evidence relied on by the judgment creditor in respect of the ownership of the [goods, in Riaz money in Celador] shall be provided by the Creditor, and the HCEO’s witness evidence shall deal with enforcement steps taken insofar as not already detailed in the original application for this order.
  1. In my judgment, whilst in these two cases I shall make the order in paragraph 4, there will be many occasions when the court could usefully, instead of requiring a further hearing per para. 4 so as to set a sum to be paid into court, simply make a decision as to the sum to be paid into court at the same time as it makes the above order, so as to obviate the need for the expense of dealing with that aspect separately and to discourage spurious claims.
  2. It may be of use for HCEOs to adopt the approach in future cases of making an application to the court supported by evidence of the basis for seizure, and evidence from the Creditor of the basis for the Creditor’s belief that the ostensible title to the goods is that of the judgment debtor, and seeking an unless order in the form broadly as above leading to a declaration in the event of default, which then should offer the degree of protection reasonably required by the HCEO as ‘middleman’.
  3. I do however endorse the approach in the text which I quoted above namely that such an application ought only to be made where the provisions of the CPR do not meet the case, such as the circumstances here.
  4. Before formally handing down this judgment I gave leave to the Authorised Enforcement Officers generally to be made aware of the draft to enable them to make any observations which might assist the court given the specialist nature of this decision and of their expertise. The time limit of 14 days in para. (2) of my order was proposed by them and I consider that appropriate. Further, the suggestion on para. 32 was also one made by them and which I also consider sensible (that suggestion arises from a case which I understand was heard by Master Yoxall in which he fixed the sum payable in the manner which para. 33 proposes may be appropriate). Para. (4) of the order is, likewise, derived from a suggestion by them as to the proper evidence and witnesses in the application, which maintains the neutrality of HCEOs on an interpleader.
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