A Rose between Thorns: The Interpleader Motion

October 17, 2019 Hull & Hull LLP Estate & Trust, Estate Litigation, General Interest, Litigation, RRSPs/Insurance Policies Tags: , , , , 0 Comments

Occasionally in litigation, an innocent party will get caught in the crossfire between two litigants that have made competing claims to property held by the innocent party.  The classic case is that of an insurance company in possession of the proceeds of an insurance policy, the benefit of which is claimed by two parties.

The insurer may not necessarily be a party to the litigation between the two claimants, but they are nonetheless implicated given that they hold the coveted payout.  What is the insurer to do?  Enter the interpleader motion.

The interpleader motion is a powerful yet rarely utilized tool that can be used by an innocent party to essentially extricate itself from a proceeding in which competing claims have been made against property held by that party.  Rule 43.02 of the Rules of Civil Procedure provide that a party may seek an interpleader order in respect of personal property if,

(a) two or more other persons have made adverse claims in respect of the property; and

(b) the first-named person (being the “innocent” party),

(i) claims no beneficial interest in the property, other than a lien for costs, fees, or expenses; and

(ii) is willing to deposit the property with the court or dispose of it as the court directs.

In other words, the interpleader motion permits a party to seek an order from the court allowing that party to deposit, with the Accountant of the Superior Court of Justice, the property against which the adverse claims are being made.  However, that party must not have any beneficial interest in the property being deposited, although they are entitled to have any legal fees in bringing the motion, and other reasonable expenses, paid out of that property.

Some cases have opined on whether the court hearing the interpleader motion has an obligation to assess the likelihood of success of one or  both of the claims to the property at issue.  In Porter v Scotia Life Insurance Co, for example, the court considered whether, notwithstanding that one of the competing claims was “without strong foundation and built upon hearsay and suspicion”, it nonetheless held that the claim was “not frivolous” and granted the interpleader order.

Thanks for reading.

Garrett Horrocks

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