Royal Bank of Canada v McLean

• Jurisdiction: Cayman Islands
• Judge: (Smellie, J.)
• Judgment Date: 04 June 1997
• Date: 04 June 1997
• Court: Grand Court (Cayman Islands)

Grand Court

(Smellie, J.)

ROYAL BANK OF CANADA

and

McLEAN, HALCYON HOLDINGS LIMITED and GRAND CAYMAN HOTELS LIMITED

D.M. Murray for the plaintiff;

Mrs. A.R. Hernandez for the first defendant;

N.R.L. Clifford for the second and third defendants.

Cases cited:

(1) De La Rue v. Hernu, Peron & Stockwell Ltd., [1936] 2 K.B. 164; [1936] 2 All E.R. 411, distinguished.

(2) Greatorex & Co. v. Shackle, [1895] 2 Q.B. 249; (1895), 72 L.T. 897.

(3) Jennings v. Mather, [1901] 1 Q.B. 108; (1900), 83 L.T. 506; on appeal, [1902] 1 Q.B. 1, distinguished.

(4) Mersey Docks & Harbour Bd., Ex p., [1899] 1 Q.B. 546; (1899), 80 L.T. 143.

(5) Sun Ins. Office v. Galinsky, [1914] 2 K.B. 545; (1913), 110 L.T. 358, applied.

(6) Tebutt v. Haynes, [1981] 2 All E.R. 238.

(7) Watson v. Park Royal (Caterers) Ltd., [1961] 1 W.L.R. 727; [1961] 2 All E.R. 346.

Legislation construed:

Grand Court Rules, O.17, r.1(a): The relevant terms of this paragraph are set out at page 300, lines 37–45.

Banking-interpleader-competing claims to funds-bank to show itself faced with competing claims to funds-claimants to have commenced proceedings asserting title-mere potential claim or doubt as to beneficial entitlement insufficient

Banking-interpleader-competing claims to funds-not to be used to obtain orders ancillary to other proceedings, e.g. inappropriate for bank to seek interpleader relief merely because matrimonial proceedings possible between signatories to account

The plaintiff bank applied for interpleader relief in respect of moneys held in the accounts of the second defendant company.

The company had several accounts with the plaintiff, for which the first defendant and her estranged husband were the jointly and severally authorized signatories. The husband, who was the company President and claimed beneficial title to its shares, authorized the bank to transfer the balances in all the accounts to the third defendant.

The bank was aware that the company had formerly held the title to the matrimonial home of the husband and wife and that the wife might wish to assert a beneficial claim to the funds in the company”s accounts in matrimonial proceedings. Upon receipt of the husband”s instructions, the bank wrote to the wife seeking her consent to the transfer of the funds to the third defendant. Having received no reply for a considerable time, it gave her 14 days within which to notify it of any claim which she might have to the funds, failing which it proposed to make the transfers. She replied, refusing to consent to the transfers on the ground that the funds constituted matrimonial property and that the husband had been asked for an undertaking not to dispose of any such property.

The bank submitted that since there were competing claims to the funds in the accounts as between the husband and wife, it was entitled to protect itself from legal proceedings by interpleader; so forcing them to claim against each other.

The wife submitted that the court should accede to the bank”s application by directing that the issue of title to the funds in the accounts be resolved in the context of matrimonial proceedings pending, and that by way of interim relief, the money should be paid into court.

The company and third defendant submitted that (a) the bank was not

entitled to interpleader relief, which required that the bank be under threat of legal action from two or more persons, since although the husband had indicated that he was prepared to prove the company”s claim in court, his wife had not threatened to bring legal proceedings of any kind; (b) in any event, there was no legal basis for the wife”s claim to the funds in the accounts, since the debts represented by the accounts were owed to the company and not to the husband or wife personally, and neither could challenge the company”s right to insist on its contractual relationship with the bank in accordance with the mandate; and (c) whilst the court had jurisdiction in matrimonial proceedings to determine the rights of third parties claiming entitlement to matrimonial property, such an order could not be made within the framework on interpleader relief.

Held, dismissing the application:

(1) The bank would not be granted interpleader relief, since that procedure was appropriate only if the applicant could show that it was faced with two or more competing claims to the same property or debt, whereas in this case the wife had done no more than assert her beneficial entitlement in a letter to the bank. In the absence of actual legal proceedings commenced by the wife or the company, the plaintiff”s application was premature (page 300, lines 24–31; page 301, lines 1–15).

(2) Furthermore, it was unclear what might be the basis of any claim made by the wife against the bank-since the bank was prima facie obliged under its contract with the company to accept the company”s mandate and act accordingly-or against the company, since legal title to the funds in the accounts was undisputed. A mere doubt as to the beneficial entitlement to the funds was insufficient to justify interpleader (page 301, lines 16–26; page 302, lines 29–37).

(3) Nor could the procedure be used to determine the rights of the company as a third party to matrimonial proceedings, since it was intended as a means for the bank, which itself asserted no right to the funds, to protect itself by calling upon competing claimants to interplead, and not as a means of making orders ancillary to other (in this case, matrimonial) proceedings before the court (page 303, lines 10–34).

15	SMELLIE, J.: This is the plaintiff bank”s application for interpleader
relief. The bank is faced with what it regards as competing claims from
the defendants to beneficial entitlement to accounts held by the bank in
the name of the second defendant company, Halcyon Holdings Ltd.
(‘Halcyon’). Legal title to the accounts is undisputedly vested in Halcyon
20	which opened them in May 1990. Pursuant to the standard form directors”
resolution regarding banking and security, the president and secretary of
Halcyon became the authorized signatories to the accounts. They were
authorized jointly and severally. At the time of the opening of the
accounts the president was, and still is, Mr. Roderick McLean. The
25	secretary was his wife, now estranged, Mrs. Susanne McLean, the first
defendant.
On August 30th, 1996, the bank received a written mandate from
Halcyon under the signature of Mr. McLean to transfer all balances in its
accounts into the accounts of the third

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