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I Understand

Amid Crossfire: Legal Recourse For The Middleman

September 2025

By Chloe Chew Khe Ying

The stakeholder’s dilemma

In the increasingly intricate web of modern legal disputes, it is not uncommon for a single party to find themselves caught between competing claims over the same subject matter. Whether it is a disputed payment, property, or contractual right, such a scenario places the stakeholder—often an innocent intermediary—in a legally precarious position. 

Without a clear mechanism to resolve these overlapping claims, the stakeholder risks being sued by multiple parties, facing contradictory obligations, and becoming entangled in protracted and duplicative litigation. 

A legal firm may face competing demands from two parties in relation to release of the issue of document title which the firm is holding as a stakeholder, as seen in the case of Tetuan Teh Kim Teh, Salina & Co (a firm) v Tan Kau Tiah @ Tan Ching Hai & Anor1. Similarly, rival claims may also arise from the entitlement of life insurance proceeds. For instance, the insurance company in Lee Heng Moy v John Hancock Life Insurance2 was caught in the rival claims between the lawful wife and the named beneficiary of the deceased who each claimed that they were entitled to the insured sum. In the same vein, a bank may encounter competing claims over deposited funds, as exemplified by the case of Pertamina v Kartika Ratna Thahir3, where the deceased’s spouse, child, and employer each claimed a right to the same account balance. In executing a writ of seizure and sale, the sheriff in Chan Leong Watt v A.R.P. Aroonasalam Chitty; Tan Hong Thang, Claimant4 was confronted with conflicting claims from the execution creditor and bill of sale holder of the seized property. 

Recourse for the middleman

This is where the interpleader proceeding serves a critical function: it acts as a judicial lifeline that allows the stakeholder to compel the rival claimants to confront each other’s assertions in a unified proceeding, thus preventing a multiplicity of suits that might otherwise result in inconsistent or conflicting judicial decisions. It shifts the burden of contestation onto the true claimants while extricating the stakeholder from the embarrassment of being held liable to two persons over the same subject matter. It therefore clarifies to whom the stakeholder must ultimately account for the disputed subject matter and protects the stakeholder from the vexation of fighting parallel legal battles.

Who can apply?

It is recognised in law that there are generally two types of interpleader proceedings. The first is an application brought by a person who has either been sued or expects to be sued by two or more persons making adverse claims over the same subject matter5, known as stakeholder interpleader. The second applies specifically to a situation where a sheriff faces a third party’s claim in relation to property seized or intended to be seized6, generally referred to as sheriff interpleader. Both types of interpleaders serve the overarching purpose of protecting a disinterested party from the risk of multiple liabilities arising from the same subject matter. The bottom line is that interpleader ensures a neutral party need only account for the disputed subject matter to one rightful claimant. 

Before one can avail himself of interpleader relief, the applicant must convince the court that he has no personal stake in the disputed subject matter and has remained entirely neutral towards the competing stands taken by the rival claimants. Meanwhile, the applicant must also demonstrate his willingness to part with the disputed subject matter in the manner so directed by the court. 7

The two-tier determination 

Fundamentally, an interpleader proceeding comprises of a two-tier process. On hearing of an application for interpleader relief, the court is invited to first determine whether the applicant has met all the preconditions discussed above. It is only upon the court’s satisfaction that the applicant is a neutral party genuinely caught in between the rival claims by more than one party over the same subject matter that interpleader relief will be afforded to the applicant. 

If the court finds that the applicant is entitled to the interpleader relief sought, participation of the applicant in the second stage of the interpleader proceedings may not be necessary if the position of the applicant can be effectually and completely provided for upon the granting of the interpleader relief by the court at the first stage. This is more often than not the case if the nature of the disputed subject matter is such that its disposition by the applicant can be ordered at the first stage, as seen in Hong Leong Assurance Berhad v Idaman Tegas Sdn Bhd8. 

However, if the applicant’s position cannot be fully provided for at this stage, then the applicant will remain and appear as a nominal party in the remaining interpleader proceedings with the sole purpose of securing a final order protecting his position. It must be borne in mind that in applying for interpleader relief, the applicant is not bringing an action or making a claim against the claimant(s). In this regard, it was held by the Federal Court in Tetuan Teh Kim Teh, Salina & Co (a firm) v Tan Kau Tiah @ Tan Ching Hai & Anor that the claimant(s) is not entitled to bring a counterclaim against the applicant in the interpleader proceedings. Any claim against the applicant can only be made in a separate action after the conclusion of the interpleader proceedings9.

The second stage of the interpleader proceedings requires the court to make a determination on the interpleader issue, or more specifically, who is the rightful claimant over the disputed subject matter, either by way of summary determination or an order for trial of the interpleader issue. Summary determination is only appropriate if it is a sheriff interpleader, or that the interpleader issue between the claimants involves only a question of law with no disputed facts10. It can also be by way of consent of all claimants that the interpleader issue be determined summarily by the court. Save for the instances aforementioned, the court may proceed to order for a trial of the interpleader issue whereby the court may then order for the issues to be stated and tried between the claimants and may direct which of the claimants is to be plaintiff and which defendant, followed by pleadings to be exchanged on the issues so framed, see Bangkok Bank Limited v Wiel Brothers Cotton Inc11. 

Given that the whole idea of the interpleader is to avoid multiplicity of the proceedings, a claimant having a claim against another claimant is not a bar to interpleader relief being granted in favour of the applicant, see Chin Leong Soon & Ors v Len Chee Omnibus Co Ltd & Anor12. By dropping the applicant out of the picture, the interpleader proceedings then leave the claimants to fight any claims they may have against each other between themselves. In the same vein, the court has the power to add new parties at any time of the interpleader proceedings (see Bird v Mathews)13, so long as the party to be added is a claimant wishing to stake a claim over the disputed subject matter, see also Chan Leong Watt v A.R.P. Aroonasalam Chitty; Tan Hong Thang, Claimant14.

Conclusion

Interpleader cuts through legal chaos. It shields neutral parties, streamlines conflicting claims and provides a resolution – no double liability, no duplication, no confusion. 

This material is for general information only and is not intended to provide legal advice. If you have any queries regarding the above, please feel free to contact us at insights@chooi.com.my.

    1. [2013] 4 MLJ 313, FC
    2. [2010] 1 MLJ 624, CA
    3. [1983] 1 MLJ 136, OCJ Singapore
    4. [1909] 2 MC 7, OCJ Singapore
    5. Order 17 rule 1(a) of the Rules of Court 2012, PU(A) 205/2012
    6. Order 17 rule 1(b) of the Rules of Court 2012, PU(A) 205/2012
    7. Order 17 rule 3(2) of the Rules of Court 2012, PU(A) 205/2012
    8. [1999] MLJU 744, HC
    9. [2013] 4 MLJ 313, FC
    10. Order 17 rule 5(2) of the Rules of Court 2012, PU(A) 205/2012
    11. [1977] 2 MLJ 134, FC
    12. [1970] 2 MLJ 228, FC
    13. [1882] 46 L.T. 512, UKCA
    14. [1909] 2 MC 7, OCJ Singapore