Interpleader proceedings do not permit counterclaims for damages; such claims must be filed separately, and collusion disqualifies a stakeholder from seeking interpleader relief.

Ahmad Maarop FCJ (delivering judgment of the court):

BACKGROUND

[1]On 15 November 2010, leave was granted to the appellant (the plaintiff in the High Court) to appeal against the decision of the Court of Appeal dated 5 March 2010 which set aside the decision of the High Court dated 6 March 2008 pursuant to an interpleader application filed by the plaintiff. For convenience, in this judgment, we will refer to the parties as they were in the High Court.

[2]The brief background facts which led to the present appeal are these. The plaintiff was appointed by the first defendant, to handle a joint venture agreement entered into by the first and the second defendants. The second defendant was the registered proprietor of all the land formerly held under EMR 8468, Lot No 2485 Mukim of Kapar, district of Klang (‘the land’). The first defendant was the developer of the land. A joint venture agreement was entered into between the first defendant and the second defendant on 22 March 1995 and this was followed by a supplemental joint venture agreement dated 23 April 1998 (‘the contract’). The second defendant had, pursuant to the contract, duly executed a power of attorney in favour of the first defendant. Under the contract, the first defendant agreed, at its own costs and expenses, to cause the land to be converted, sub-divided and eventually construct thereon a mixture of light industrial buildings in accordance with the layout and building plans as may be approved by the relevant authorities. Pursuant to the contract, the construction of the said buildings were to be completed on or before 21 March 2000. This was not done and the contractual dateline was extended to 22 March 2003.

[3]The land was sub-divided into 19 plots and 18 issue document of titles were deposited with the plaintiff as stakeholders. It transpired that one plot of the land was surrended to the relevant authorities without the prior knowledge and/or consent of the second defendant.

[4]The first defendant did not commence nor complete construction of any industrial buildings on the land by 22 March 2003. The only building constructed on the land was a sewerage treatment plant which was meant to service the first defendant’s neighbouring project. On the basis that the first defendant had breached the contract, the second defendant proceeded to terminate the contract and claimed for the return of the land together with damages and costs. The first defendant accused the second defendant of delaying the project and refused to accept the termination of the contract.

[5]By way of a letter dated 29 June 2005 and addressed to the plaintiff and the first defendant, the solicitors for the second defendant set out in detail the grievances of the second defendant. The plaintiff and first defendant were invited to make good on their breaches. The plaintiff was asked to return the document of titles to the land so as to mitigate the losses of the second defendant and to avoid costly legal action. The plaintiff and the first defendant were also given notice of the second defendant’s intention to arbitrate. The first defendant agreed to resolve the dispute by way of an arbitration pursuant to the contract. But the plaintiff, by its letter dated 4 July 2005, declined to participate in the proposed arbitration proceedings and requested for a list of the proposed arbitrators for the first defendant’s consideration. In a letter dated 26 July 2005, the plaintiff said that as it was not a party to the contract or any other agreement with the second defendant, the provision for arbitration of disputes was not applica