Insolvency Update: Supreme Court Definitively Settles Law on Enforcement by Way of Equitable Execution

The appointment of a receiver by way of equitable execution has generally been considered a “remedy of last resort”^[1] and, for over a hundred years, courts have expressed differing views as to when such a receiver could be appointed.

The decision of the Supreme Court in ACC Loan Management DAC v Rickard^[2] clarifies the position in Ireland.

Background

ACC obtained judgment against the defendants on 25 February 2011.

In October 2011, the High Court appointed a receiver by way of equitable execution over payments that might be received by the first defendant pursuant to the Single Farm Payments Scheme.

At the end of 2014, the Single Farm Payments Scheme was replaced with the “Basic Payment Scheme” (BPS) and the Department of Agriculture took the view that it had no legitimate basis to remit sums due to the first defendant under that scheme to the receiver.

ACC succeeded in a contested application to vary the October 2011 order appointing the receiver to encompass the payments under the BPS.

That was appealed to the Court of Appeal,^[3] which upheld the order and the Supreme Court decided to hear a further appeal, finding that issues of public importance arose.

Supreme Court Judgment

The Supreme Court engaged in a detailed examination of the provisions enabling the appointment of such receivers.^[4] It examined the conflicting case law, both Irish and English, which has evolved since 1877, relating to those provisions. Ultimately, it made a clear decision that it was appropriate to interpret those provisions in light of present circumstances.

Accordingly, it found that such a receiver can be appointed:

• where the asset is reasonably well defined;
• when it is just and convenient to do so;
• irrespective of whether the creditor has taken other enforcement steps;
• irrespective of whether the debtor has a legal or equitable interest in the asset over which it is proposed to appoint a receiver; but
• not over future earnings of the debtor.

The Court noted that:

• The relevant section provided that a receiver could be appointed when it was “just or convenient” to do so. It held that this should be read as “just and convenient” and emphasised that justice took priority over convenience.
• What would be “just or convenient” would depend on the facts of each case and courts should consider any prejudicial effect on third parties and the judgment debtor.
• There is an onus on the judgment debtor to put full and candid evidence before the court as to the effect it will have on him or her.

Noting that there was no evidence before it that the appointment would be unjust, the Court held that the appointment of a receiver by way of equitable execution in this case was justified.

Comment