knowledge 23 May 2019 |

Court’s Equitable Power to Appoint Receivers and Grant Injunctions Can and has Evolved

In ACC Loan Management v Rickard,¹ the defendant defaulted on a loan. ACC obtained judgment against him and then successfully applied to have a receiver appointed by way of equitable execution over payments which the defendant was due to receive from the Department of Agriculture under an EU farm payments scheme.

In the Court of Appeal, the defendant unsuccessfully sought to have that order set aside arguing that in line with older authorities and practice stretching back to the Courts of Chancery:

• the appointment of a receiver was confined to where a judgment debtor held an equitable interest in property which could not be reached by legal process; 
• the law provided that a receiver could not be appointed over future payments.

However, the Court of Appeal concluded that historical practice did not preclude 21^st century courts from making the order. On a subsequent appeal, the Supreme Court agreed.

In giving judgment, MacMenamin J referred to s28(8) of the Supreme Court of Judicature Act (Ireland) 1877. This sets out the court’s power both to grant an injunction and appoint a receiver. It reads:

“A mandamus or an injunction may be granted or a receiver appointed by an interlocutory order of the Court in all cases in which it shall appear to the Court to be just or convenient that such order should be made and any such order may be made either unconditionally or upon such terms and conditions as the Court shall think just…” (emphasis added)

MacMenamin J was satisfied that a receiver could be appointed over a legal interest in property.² He said that it was impossible to ignore the close statutory link between injunctions and receivers. Focussing on the words “just or convenient”, he said that the courts had given a contemporary interpretation to those terms, recognising over recent decades its power to grant new forms of injunction such as the Mareva injunction. Simply from the perspective of consistency, it seemed incongruous that, in this one area of law relating to receivers, the terms should be interpreted only through the lens of the practice of the Courts of Chancery prior to the 1870’s. McMenamin J also pointed out that the Interpretation Act 2005 permitted the updated interpretation of legislation.

However, this did not mean that the court had an unfettered power. It should only grant the order when it was “just” based on the facts of the case, appropriate, and was not overly onerous on a judgment debtor. The courts should be vigilant to ensure that the position of a judgment debtor was not rendered unsustainable by the order. There was an onus on a judgment debtor to place full and candid evidence before the court as to the effect which the appointment of a receiver would have upon him. The court should take an “evidence based” approach. Finally, when making a decision here, convenience could not be subservient to justice.

The court was also satisfied that it could grant the order in respect of a future payment. In this context, the interest, targeted by the application, should be sufficiently well defined. The court would also consider whether the appointment would have a prejudicial effect on third parties. Noting that there was authority that a receiver would not be appointed over a debtor’s future salary, MacMenamin J pointed out that the payments here were more in the nature of a grant or entitlement.

Comment

There is no doubt that this is a significant judgment as regards the appointment of a receiver by way of equitable execution to target the assets of a judgment debtor.

However, it has potentially wider implications in the context of pre-emptive relief in areas such as fraud and asset tracing. As fraudsters continue to become more adept in their methods, plaintiffs need to be more resourceful in response. The express recognition by the Supreme Court of the evolution of the court’s powers under the Supreme Court of Judicature Act (Ireland) 1877 puts plaintiffs on a firmer footing when arguing for more creative use of the court’s injunctive powers.

The Irish courts have already shown a willingness to tailor equitable remedies to meet the requirements of a particular case. For example, in IBRC v Quinn,³ when faced with allegedly fraudulent conduct, the Commercial Court appointed a receiver to preserve assets held by a Dubai company in an Indian company in aid of a prohibitory injunction. This also led to a contempt finding for a failure to comply with the receivership. The Commercial Court has also appointed receivers in aid of Mareva relief.

Our Disputes Group can address any questions you may have on this area of the law and the effect of this Supreme Court decision. Alternatively, your usual contact in McCann FitzGerald would be happy to provide further information.