BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION v. OXFORD PROPERTIES AND FINANCE LTD AND ANOTHER

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JUDGMENT

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1. These are two separate appeals against the orders made by Master Suttill on the 15th August of this year. The proceedings out of which these appeals arise, although heard together are different in form. It is necessary for me to outline the history of the matter. It is easier for me to describe the parties by name than by their appropriate titles in the actions.

2. There is an action pending in this court between the Bank of America and Oxford Properties. Oxford Properties are mortgagors and landlords of the Jubilee Commercial Building, the Bank of America are mortgagees. Dantas who appeared here asking for interpleader proceedings and Grolier also asking for interpleader proceedings are tenants of the mortgagors.

3. On the 19th December of last year the Bank of America (as mortgagee) issued a writ for payment of $62.5 million. They said that Oxford properties were in default under the mortgage. They asked for amount in default of the payment of that sum for possession of the building. There was a statement of claim and a defence was filed in January 1985 denying on behalf of the Oxford that they were in default and contending that the money was not due.

4. I pause for a moment there. The issues in those proceedings are of the greatest possible relevance in these because it is necessary to consider in these proceedings (certainly so far as Grolier is concerned) whether any issues between Grolier and Oxford properties and the Bank of America would be resolved in those proceedings whenever they reach trial. Following the history of this matter - on the 7th July of this year the Bank wrote to the tenants of Jubilee Building including the parties before me, demanding that they should pay their rent to the Bank of America rather than Oxford Properties, claiming that that was in accordance with their rights under the mortgage. They threatened proceedings if that request was not complied with.

5. A dispute then arose and one can follow that dispute in the letters that have been exhibited to affidavits in these proceedings.

6. As I have said on the 7th June the Bank of America wrote to the tenants including these two. On the 14th June the solicitors for the Bank wrote to the solicitors for Oxford Properties saying that the Bank were going to insist upon their rights, that is their rights to the rent and it appeared that they were intending by that to enter into possession of the property as mortgagees. A Copy of the mortgage deed was included in the letter.

7. There was no similar letter to Grolier but on the 26th June there was a letter from the Bank to Dantas demanding rent and on the same day there was a further letter (that was the 26th June) and it is exhibited as "TT-4" in the affidavit in supporting Dantas' proceedings. This is from the solicitors for the Bank. They enclosed copies of earlier letters (also exhibited) and they said amongst other things that:

"We understand that doubts have been raised by the various tenants as to whether such payment should be made by them to the Bank of America. Such doubts may have arisen as a result of Oxford's solicitors, Messrs. Lau, Wong & Chan, writing to ourselves on the 13th June stating that our clients have no right to call for the rent to be paid to them. We replied to that letter confirming that our clients were entitled to exercise this lawful right under the mortgage and intended to do so.''

Their letter was also enclosed. They go on to say that:

8. The only other matter for present purposes to which I need refer is this; through their agent on the 10th July 1985 Oxford demanded rent from Grolier.

9. Consequent upon that Grolier and Dantas then took interpleader proceedings. The form in which they took their proceedings differed. So far as Dantas was concerned Dantas took out an originating summons, it is before the court. The effect of it was to require Oxford and the Bank of America to appear, state the nature of their claims to rent and abide by any order that might be made. Grolier took proceedings by way of summons in the present action and asked for the same relief.

10. Having regard to the matters that have been addressed to me, I must consider first whether Dantas and whether Grolier are entitled to ask for this relief. Let me deal first with Dantas.

11. The matter is dealt with in the Whitebook Order 17 rule 1 and it reads:

"Where a person is under a liability in respect of a debt and he is, or expects to be, sued for that debt by two or more persons making adverse claims thereto, he may apply to the court for relief by way of interpleader."

The first question that arises is did Dantas expect to be sued in respect of that debt? The cases say that there must be a real foundation for that expectation. (See the note under para. 17/1/4 to that effect). It is quite clear from a reading of the correspondence in the case of Dantas that the two parties, Oxford and the Bank, were insisting on their rights. Those letters of the 25th July mace it clear that the Bank of America are insisting on their rights or were going to do so. That is why they mere suggesting that interpleader proceedings might be appropriate. Otherwise they certainly would not have been. In those circumstance, mere Oxford going to insist upon their rights?

12. First, one has to consider the tenancy agreement. It would have been a very serious matter indeed for Dantas to leave the matter in obeyance because of the provisions in the tenancy agreement which had all the usual provisions for recovery of possession, for example on non-payment of rent. A letter was written on Dantas' behalf on the 25th July which said this:

"If we do not hear form you by the 31st July we shall have to protect our client's position by assuming that you do oppose the Bank of America's claim and will institute interpleader proceedings i.e. ask the Court to determine which of Bank of America and you is entitled to the rent."

There may have been some slight misconception in the wording but it is quite clear that those who were acting for Dantas at the time were only too conscious of the legal consequences of leaving the matter in obeyance.

13. Having regard to all those letters and the background of them and the serious difficulty in which Dantas were going to find themselves, I have no doubt that they are a party who is entitled to bring these proceedings by way of interpleader.

14. So far as Grolier is concerned, it was submitted on behalf of Oxford that although adverse claims were made against Grolier they were not co-existing. In other words, they were not being made at the same time. With the greatest respect to a very careful clear and helpful argument, that was presented, it is my judgment that even if they were not being pursued actively and exactly at the same time, that does not prevent a party expecting to be sued in respect of that debt. I am quite certain that Grolier also was a person who expected to be sued in respect of that debt by two or more persons.

15. Let me leave aside Grolier for the moment and turn then to Dantas because many of the matters are common to both these parties. As I have said they took different proceedings. Dantas took out an originating summons. Having taken that summons, the next matter which must be considered is what relief is available to a person bringing such an application. The power of the court on hearing such a summons is set out under Order 17 rule 5. It is an important rule because it limits the court's powers. It says:

"5(1) Where on the hearing of a summons under this Order all the persons by whom adverse claims to the subject-matter in dispute appear, the Court may order -

That is not appropriate, in this case.

Then (2) where ((a) applies only to a sheriff):

the Court may summarily determine the question at issue between the claimants and made an order accordingly on such terms as may be just."

 

16. That states the powers of the court. In some cases it is not quite the end of the matter because it may arise that there are issues in proceedings between all the parties which will later be resolved and it may be that there has to be some interim order pending the trial of an issue.

17. I pause there to consider what the situation is at this stage. The issue that has to be tried here is: Who is entitled to the rent? I turn now (dealing only with the case of Dantas) as to what is being done in the main proceedings about that issue. I regret to say that at this stage one draws a blank in the main proceedings.

18. I now turn to the order made by the Master because it is of importance. He ordered that the rent be paid into court pending determination of the main proceedings between the plaintiff and defendants, those are Oxford and the Bank of America. That is the nub of the order and the question must be asked (as indeed I was invited to consider by counsel for Oxford in these proceedings): Are those proceedings going to resolve this issue as to who is now entitled to the rent? Without going through the pleadings at any great length because they are all before the court, one can see that an issue as to who is entitled to the rent does not arise on the pleadings. I am, therefore, driven to say that at present (and in front of the Master as he left the matter) regrettably this issue was left in the air. There was an order that, money be paid into court pending the main proceedings but the main proceedings were not appropriate to resolve this matter. I have to say, therefore, that I am driven (to an extent which I will now go into) to allow the appeal against that order.

19. Having gone as far as that let me turn now to the position of Grolier because I left Grolier in mid-air. As I have indicated I am satisfied that Grolier was entitled to bring interpleader proceedings. The mode of application is dealt with under Order 17 rule 3 and 3(1) reads:

"An application for relief under this order must be made by originating summons unless made in a pending action, in which case it must be made by a summons in the action."

Those representing and advising Grolier following the alternative method set out in rule 3(1) chose to bring proceedings by way of summons in this action. I do not know what happened in front of the Master, it is quite clear that they were encouraged to take proceedings in this form, if they needed encouragement, by the Bank of America. See their letter of the 26th July encouraging them to bring the action by way of summons in these proceedings. The question is: Is it open to Grolier to bring an application for the relief they claim in these proceedings by way of summons in the pending action? Grolier are not a party to the present action, I do not think that it is necessary for a person bringing such a summons to be a party to the action for it may be that in the main action issues arise between the parties which will resolve the point.   Regrettably the action between the two parties will not resolve or may not resolve this question about to whom the rent shall be paid. So I am driven to say on that ground that Grolier's summons was not the appropriate way of bringing the matter before the court. I say I regret with point because they were encouraged to bring the point in this way in front of the court by one of the parties. In the end, I am bound to say that it is not an appropriate way of bringing it and it cannot resolve in that form the issues which Grolier want to resolve. However, fortunately Dantas stand in exactly the same position as they do and it does mean that the court can resolve the issues in another way and perhaps with other parties which will resolve the issues for them.

20. Let me now return to where I was before. Having decided that the order made by the Master was not appropriate, the question arises as what order should now be made by this court. I am turning now to Dantas' case, the application is for the respective claims to be resolved and Dantas are therefore entitled under Order 17 rule 5 that the issue between the claimant's be stated and tried. I pause there because no one has made any submissions to me about that matter. It seems to me that that is the only relief that I am entitled to give unless I were to take the view and that everyone consented or requested that an issue should be tried summarily to determine this matter. Before anyone seeks to make any submissions which I will, of course, allow because the matter has not so far been dealt with. It would be right to express my initial view which is this; that as much as I would not want to try the issue of entitlement to rent which seems to me may have considerable ramifications, I must do so if required to do and it would not be an appropriate issue to try summarily because I would necessarily have to hear argument which has not being presented and possibly I will have to hear evidence. So I am going to pause there and say simply, that subject to any further argument about the issue, my decision is to allow the appeal and say that it is available to those who bride the interpleader proceedings for Dantas to have the issue stated and tried. I do not know whether I will be requested to do that summarily but I would not easily acceed to such a request.

21. So far as Grolier are concerned I am driven in the particular circumstances to dismiss the application because of the form in which it was brought.

[Counsel then considered the order to be made and agreed the order in the light of the decision. There were then submissions upon the orders for costs.]