What Are Interpleader Proceedings?
Interpleader proceedings provide an opportunity for individuals and companies avoid multiple entitlement disputes for property they know they will lose.
Interpleader proceedings are a way for an individual or business facing multiple claims to the same property to avoid multiple dispute cases. They aim to absolve the applicant of their liabilities to the claimants by forgoing their right to the property. Instead, the claimants must then resolve their claims to the property amongst themselves.
In Australian courts, there are two proceedings that can take place: stakeholder and Sheriff interpleaders. Here’s how they work, and when they will be invoked.
These occur when an individual (the stakeholder) is being, or expects to be, sued by two or more persons for claims to their property. Property here can be anything, tangible or intangible.
The stakeholder will file an affidavit with the court requesting relief by interpleader.
In the event this application is in anticipation of multiple claims, they must then establish reasonable grounds, through evidence, why they have this expectation.
The court will then assess the situation and make orders appropriate to the situation.
If the court finds it necessary to invoke an interpleader proceeding, the stakeholder will be relieved of their legal liability.
Hence, the applicant will likely be required to surrender the disputed property to the court. Though this depends on the circumstances.
Following this, the court will commence proceedings to adjudicate entitlements between claimants.
The neutrality limitation
It is necessary that the interpleader applicant has no stake in the disputed property. This means the person being sued and the claimant cannot be colluding.
Likewise, it means a claimant cannot make this application themselves. Though a stakeholder will likely prefer to make the application themselves and avoid multiple disputes, so this is isn’t often problem.
These follow largely the same rules as with stakeholder interpleaders. However, rather than an individual claimant to a disputed property, the Sheriff makes a claim under a writ of execution.
Sheriffs and writs of execution
A Sheriff is a court official who performs any court duties and enforces any mandates.
A writ of execution is an order form the court, to the Sheriff, to seize, and potentially sell, a certain piece of property. This will happen when a person fails or is unable to make a payment as ordered by the court.
If the Sheriff receives notice of a claim to the property, they must notify the execution creditor. The execution creditor is the person who would receive the property, or proceeds from the sale of the property, that the Sheriff is trying to seize.
The court may refuse the claimant unless they made the claim within a reasonable time of the original writ being issued.
In return, the execution creditor must then serve an admission back to the Sheriff within seven days.
Upon receiving this admission, the court will restrain the claimant from any proceedings against the Sheriff with respect to the disputed property. This means that no interpleader will commence.
The court will grant an interpleader if the admission is not served on time.
What occurs during the interpleader?
The role of these applications is to compel individuals with competing entitlement claims to settle separately to the property dispute at hand.
For example, life insurance companies often use interpleaders. Where they believe there will be multiple claims to the policy, they make apply for an interpleader and submit the payout to the court. Thus, they avoid court and allow the claimants to sort out the dispute.
During the interpleader proceedings, the court will make directions as to resolve the dispute as efficiently as possible. This likely will be through adjudication by the court.
Accordingly, the court will then decide how the property is to be distributed amongst the claimants.
Ultimately, interpleaders help the courts and parties avoid unnecessary legal disputes. If you believe that you may need to file an interpleader application or have a claim to dispute property, it is best to contact a lawyer.
Daniel is a Legal Tech Intern at Lawpath. He is currently studying a Bachelor of Laws/Bachelor of Business at the University of Technology Sydney. His principal fields of interest are in commercial, corporate and intellectual property law.