As we have been getting so many queries from clients recently about interpleader, I thought an FAQ on the subject might be of assistance.
This first FAQ covers the most common cause for interpleader when a third party claims title to the goods that have been seized.
What is interpleader?
It is the duty of the High Court Enforcement Officer (HCEO) to seize goods under a writ of fieri facias (fi fa) and, if necessary, to sell the goods at auction to recover the debt on behalf of the judgment creditor. The HCEO must take reasonable steps to ensure the goods being seized belong to the judgment debtor.
If a third party claims that the goods seized belong to him and not to the debtor, then he will make a claim to ownership of the goods. He then becomes the ‘interpleader claimant’.
Once the claim is made, providing it adheres to specific requirements, the HCEO will ask the judgment creditor to either ‘admit’ or ‘dispute’ the claim. If the judgment creditor disputes the claim, the HCEO will apply to the High Court to determine ownership. If the judgment creditor admits that claim the HCEO releases seizure of the goods accordingly.
Enforcement action may continue whilst the claims are being dealt with.
How is a claim made?
The claim must be made in writing to the HCEO within 5 days of the seizure and must include the following details:-
- it must be dated
- it must state the name and address of the interpleader claimant
- the interpleader claimant must be identified
- it must make a positive statement to the ownership of goods
- the items claimed must be specifically identified
Oral claims are not accepted. If an oral claim is made, the HCEO must fully investigate it, but it needs to be in writing for interpleader proceedings to take place.
If the claim is not received within 5 days of seizure, the claim could be deemed ‘out of time’.
Can the goods be sold once a claim has been made?
No. Until ownership is determined, the goods cannot be sold.
What if they were sold before the claim was made?
The interpleader process is still followed if the money realised for the sale has not been distributed. Once the Court has determined ownership, the money received from the sale will pass to appropriate party. If the money has been distributed then the claim is ‘out of time’.
What proof does the interpleader claimant need to provide?
He needs to provide clear and documented proof of ownership of each item he is claiming that will satisfy the Court.
How can the HCEO protect the goods?
Once seized, the HCEO can leave them in situ and obtain a Walking Possession Agreement. However, if he has any concerns about the goods, he can remove them and take them into close possession, for example, into secure storage.
What if the goods are jointly owned?
Goods that are jointly owned, for example by a husband and wife or “tenants in common”, can be sold by the HCEO. However, there may be subsequent interpleader proceedings to decide how the proceeds of the sale are distributed.
What is the difference between hire purchase and credit sale agreements?
With an HP agreement the provider of the goods retains title until paid in full. However, with credit sale agreements, because ownership passes to the purchaser when they sign the agreement, there are not grounds for a claim.
What happens if the Court rules in favour of the judgment creditor?
The Court will issue Interpleader Order No.1 and execution continues as normal.
What happens if the Court rules in favour of the interpleader claimant?
The Court will issue Interpleader Order No.2 and the HCEO will release seizure of the goods. If the goods have been removed they will be returned to or collected by the interpleader claimant.
What happens to the original writ?
Once interpleader summons are issued, then the writ of fi fa is automatically extended for a further twelve months from the date of the final interpleader order, allowing the judgment creditor to attempt further execution if he wishes.
Which Court forms are used?
The procedural rules for interpleader are covered by RSC Order 17.
When should the creditor defend the claim, when should he walk away?
The judgment creditor should carefully consider the strength of the interpleader claimant’s claim, as well as the value of the goods (and the amount they are likely to reach when sold) when deciding whether to admit or dispute the claim.
What does it cost?
HCEO execution costs: if the judgment creditor admits the claim, i.e. agrees the validity of the third party’s ownership of the goods, then the he is only liable for the HCEO’s execution fees and expenses incurred up to that point.
HCEO legal costs: the judgment creditor will be liable for the HCEO’s legal costs for handling the interpleader proceedings. If the Court rules in his favour, the costs are usually awarded against the interpleader claimant. These costs can then be enforced if payment is not made within the timescales stipulated on the order.
Summary of the process
- If a claim is made, the HCEO investigates it and advises the judgment creditor
- The interpleader claimant puts the claim in writing and addresses it to the HCEO. The claim must include the claimant’s name and address (if a company, they must also give company registration details), specifically identify the goods and state positive ownership of the goods, and it must be dated
- The HCEO will send the claim to the judgment creditor and/or his solicitors using form PF23
- Within seven days of receiving the notice of the claim, the judgment creditor must decide whether to admit or dispute the claim using form PF24
- If the judgment creditor admits the claim, i.e. says the third party’s claim is valid, then the goods are returned to the debtor, and the judgment creditor will technically be liable for the HCEO’s fees to that point.
- If the creditor disputes the claim, then the HCEO will apply to the court for interpleader relief
- Within 14 days of receiving the interpleader summons, the claimant must swear and file an affidavit in support of his claim
- The Court will then decide ownership at the hearing. The interpleader claimant must attend or be represented. A company should be represented by a solicitor
- The court will rule either in favour of the creditor or the claimant