Stephenson Harwood LLP v Medien Patentverwaltung AG

A stakeholder claim under Part 86 is a claim for a binding direction as to the disposal of property, not merely a procedural request concerning the trial of an issue. It has a substantive aspect because the court determines which rival claimant has the better claim and directs the stakeholder accordingly. Part 11 applies. A defendant that acknowledges service must challenge jurisdiction within 14 days or is deemed to accept jurisdiction to try the stakeholder claim, including issues necessary to determine entitlement to the fund. The submission is limited to that claim and does not extend to unrelated claims between the stakeholder and rival claimants. Jurisdiction cannot be accepted in separate tranches.

Stephenson Harwood LLP, the stakeholder, held US$570,000 from the settlement of patent proceedings. Medien Patentverwaltung AG and the administrator of Irving Kagan’s estate asserted competing claims to the money. Stephenson Harwood issued a stakeholder claim under Part 86. MPV acknowledged service, sought payment of the money to itself, and filed evidence addressing the merits, but did not make a Part 11 jurisdiction challenge within 14 days.

The Deputy Master held that MPV was deemed to have accepted the court’s jurisdiction. Mr Andrew Lenon QC, sitting as a Deputy High Court Judge, dismissed MPV’s appeal: [2020] EWHC 1889 (Ch). The Court of Appeal considered the applicability and effect of Part 11, submission by conduct, and whether jurisdiction existed independently of submission.

1. The appeal was dismissed. Part 11 applies to a stakeholder claim under Part 86. A defendant must either challenge jurisdiction in accordance with Part 11 or accept the court’s jurisdiction to try the claim. Failure to make the application within 14 days after filing an acknowledgment of service creates deemed acceptance under rule 11(5).
2. A stakeholder claim is a claim by a person facing rival claims to property. It asks the court to determine which rival claimant has the better claim and to give a binding direction as to the disposal of the property. The direction is analogous in some respects to a declaration of the stakeholder’s liability or non-liability. The claim therefore has a substantive aspect and is not merely a request for procedural directions concerning a future trial.
3. A stakeholder claim does not create a direct claim by one rival claimant against another. Any issue between the rival claimants arises because the court must determine the competing claims against the stakeholder. The issues are confined to those necessary for deciding the stakeholder claim and do not extend to extraneous contractual or other claims.
4. The former interpleader cases did not assist MPV. The description in Glencore International v Shell International Trading and Shipping Co Ltd and another of interpleader as principally an application for release from proceedings did not give the whole picture under Part 86. Eschger v Morrison, Kekewich Co and Commonwealth of Australia v Peacekeeper International and another were concerned with preventing interpleader proceedings from becoming general actions; they did not prevent submission to jurisdiction for determining the stakeholder claim itself. Cool Carriers A.B. and another v HSBC Bank USA and others concerned service out of the jurisdiction and raised no issue of submission.
5. MPV could not accept jurisdiction in separate stages. The claim form and supporting evidence made clear that the court was being asked to direct payment of the money, and MPV’s acknowledgment of service sought payment to itself. Its subsequent evidence engaged with the merits. The conclusion that MPV had also submitted by conduct was evaluative and disclosed no error of principle. The court declined to decide whether it would have had jurisdiction irrespective of submission.

• Court of Appeal (Civil Division): dismissed MPV’s second appeal; [2020] EWCA Civ 1743.
• High Court of Justice, Chancery Division: Mr Andrew Lenon QC, sitting as a Deputy High Court Judge, dismissed MPV’s appeal from the Deputy Master; [2020] EWHC 1889 (Ch).
• Deputy Master: held on 6 June 2019 that Part 11 applied and that MPV was deemed to have accepted the court’s jurisdiction.