Yes, you can! Receiver by way of equitable execution

Author: Mark Woodcock and Joanne Cooney

June 11, 2019

The Supreme Court has just delivered a judgment confirming the entitlement of a judgment debtor to appoint a receiver by way of equitable execution. [1]

The comprehensive judgment is a useful history lesson in the development and expansion of the right to appoint a receiver by way of equitable execution which derives from the old Judicator (Ireland) Act, 1877.

Background

Judgment was obtained by a bank in February 2011 against two borrowers in the amount of €1,064,747.

The debtors owned substantial farmlands in County Meath and the Bank’s preferred enforcement action was to appoint a receiver by way of equitable execution to the payments received by the debtors from the Department of Agriculture, Fisheries and Food under the Basic Payment Scheme. The appointment of a receiver by way of equitable execution was granted by the High Court in October 2011.

The Basic Payments Scheme became the Single Farm Payment Scheme and so the Bank applied to vary the 2011 Order and a variation order was subsequently granted in October 2015.

Court of Appeal

The debtors challenged the 2015 Order and submitted that it was draconian. The debtor’s central argument was that the payments under the Scheme were akin to emoluments or earnings and should not be the subject of an order appointing a receiver by way of equitable execution.

The Court of Appeal rejected this suggestion and upheld the appointment. The Supreme Court accepted that the arguments raised by the debtors were issues of public importance and leave to appeal to the Supreme Court was granted.

Supreme Court

The Supreme Court considered whether a debtor should automatically have equitable access to assets which might not be available through normal legal means.

In doing so the Court considered the language in the Judicature Act, 1877 and particularly that it provided that a Court may appoint an equitable receiver where

“it shall appear to the Court to be just or convenient[2]that such order should be made”

The Court held that it cannot only do what is “convenient” but must do what is “just” and that this required a debtor to fully disclose all material information to the Court for it to consider the justice of the situation. In this case the Court noted that the debtors had not given any indication as to their assets or why in this particular case there was an injustice in the order made.

The Court went on to conclude the right to appoint a receiver by way of equitable execution arose only where a debtor enjoyed an equitable interest in property (in this case the entitlement to receive the Single Farm Payment) which could not be reached by a legal process (not charged) and the creditor must have a vested or contingent interest in the property over which the appointment was sought (the judgment).

Conclusion

The judgment could arguably be said to have turned on its own facts.

While the decision of the Superior Court is welcome, it provides debtors with more than enough material to contest an application to appoint a receiver. Arguably a creditor should consider exhausting all other remedies before seeking such relief (to defeat any debate on “convenience”) and the collection by the receiver should not leave a debtor without any income (which might amount to an “injustice” argument for a debtor).

The impact of the decision remains to be seen as lawyers on both sides digest what new arguments can be conjured up to best serve stakeholders.

However the judgment is important in that it confirms that an old Victorian enforcement remedy, which has vexed Courts for over a century, is available to banks and creditors today.

[1] ACC Loan Management –v- Rickard [2019] IESC 29

[2] Our emphasis

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