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Equitable Execution in the Context of Debt Recovery

11 March, 2020

The appointment of a receiver by way of equitable execution is an equitable remedy available to the courts whereby the court appoints a receiver over a judgment debtor’s assets. This arises in cases where the remedies available to a judgment creditor at common law are inadequate. Generally, a judgment creditor must show the court that they have exhausted all other methods of enforcing of the judgment debt. The effect of an appointment of such a receiver is that a receiver will manage the income of the judgment debtor over which the appointment was made in order to make payments to the judgment creditor to discharge the judgment debt.

The Supreme Court recently delivered a judgment in ACC Loan Management Limited -v- Rickard (2019) IESC 29 on 09 May 2019 which has clarified the scope of a judgment creditor being able to appoint a receiver by way of equitable execution. The decision provides a thorough background to the historical evolution of this issue, from the Victorian era to today.

In February 2011 judgment was obtained in the High Court on consent against two borrowers. In October 2011, the High Court appointed a receiver by way of equitable execution over payments made by the Department of Agriculture, Fisheries and Food to the debtors in respect of the Farm Single Payment Scheme (“SPS”).

ACC made an application to the High Court in 2015 to vary the terms of the order due to the fact that the Basic Payment Scheme (“BPS”) had been introduced to replace the SPS. The judgment debtor challenged the application on this occasion but the application was granted by the High Court nevertheless.

The decision of the High Court was appealed to the Court of Appeal on the basis that the High Court had erred in law in not following contemporary High Court decisions in relation to the appointment of a receiver by way of equitable execution. The Court of Appeal upheld the decision of the High Court. This was then further appealed to the Supreme Court, who accepted jurisdiction to hear the case as it raised “issues of general public importance”. The Supreme Court, through Mr Justice MacMenamin, delivered its judgment on 09 May 2019.

The Supreme Court forensically examined historical case law on this topic, both Irish and English, since the inception of the Judicature Act of 1873 in England, and the Supreme Court of Judicature (Ireland) Act 1877. The nub of the issue was whether or not the courts can appoint a receiver by way of equitable execution over not only an equitable interest, but also over a legal interest.

The Appellant relied on a number of cases which confirmed that this remedy only applied to a judgment debtor’s equitable interest in property. The rationale underlying this approach was that one could not rely on an equitable remedy to enforce a legal right. Much of the decision centred on the interpretation of the Acts of 1873 and 1877 and whether or not they should be interpreted to take into account contemporary life in the 21st Century.

Interestingly, the Supreme Court repeatedly stated that the law in relation to the appointment of receivers by way of equitable execution is analogous to the manner in which an injunction, specifically mareva injunctions, may be granted. In this regard, the law in respect of mareva injunctions has developed over time and the granting of such injunctions “are now taken as a day to day occurrence”. Ultimately, the Supreme Court ruled that it was appropriate to interpret the relevant provisions relating to the appointment of a receiver by way of equitable execution in light of prevailing contemporary circumstances.

The Supreme Court decision confirms that the High Court may appoint a receiver by way of equitable execution over not only equitable interests, but also over legal interests. However, it must be noted that the Supreme Court emphasised that, if a receiver is to be appointed by way of equitable execution, it must be in circumstances where is it “just and convenient” to do so. What may be determined as just and convenient will depend on the facts of each case, but convenience cannot be “subservient to justice”. An order appointing a receiver by way of equitable execution should only be granted when it is “just”.

The Supreme Court also made it clear that the use of this remedy by judgment creditors will be guarded very closely by the court and the courts must remain “vigilant to ensure that the position of a judgment debtor is not rendered unsustainable by the making of such order.” In order for the court to balance the competing interests in a given case, a judgment debtor should “lay his or her cards on the table” as to the effect that the appointment of a receiver will have on them.

Further, a receiver may be also appointed over future payments to be made to a judgment debtor, however, a receiver cannot be appointed over a salary due to the judgment debtor. In this regard, any interest that a receiver is to be appointed over must be “sufficiently well defined” and the court must have regard to whether the appointment of a receiver would have a prejudicial effect on the interests of third parties. However, in the present case, the Supreme Court ruled that the BPS did not constitute a salary for work done and they considered it to be more in the nature of a grant or entitlement. Therefore, there was no reason why a receiver could not be appointed over the BPS.

The judgment provides clarity to an area of law which has been the subject of much judicial scrutiny and debate for over a century. In practice, this remedy may still be most useful when a judgment creditor is seeking to appoint a receiver over an equitable interest. It is likely that a judgment creditor will be required to demonstrate to a court that they have exhausted all other remedies before seeking this particular relief. Further, the requirement for it to be weighed in terms of justice and convenience also limits the granting of this remedy.

However, the judgment will be welcomed by judgment creditors as it confirms that the right to appoint a receiver by way of equitable execution will extend to legal interests as well as equitable interests. The courts now have a wide discretion to appoint a receiver by equitable execution when it is just and convenient to do.

What is considered just and convenient will depends on the circumstances of each case and it is a concept which will be teased out by the courts in future cases.

This note is for general information purposes and does not constitute legal advice. Legal advice must be obtained for all individual circumstances. Each case must be assessed on its own merits

About the Authors

John Kelly

John Kelly

         Solicitor

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