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knowledge 23 February 2018 |

Can a Receiver be Appointed to a Debtor’s Future Receipts?

The Court of Appeal has decided an important question affecting choices around methods of debt enforcement. In ACC Loan Management v Rickard,1 it looked at whether a receiver by way of equitable execution can be appointed to receive future sums to which the debtor may become entitled. 

The High Court made an order appointing a receiver by way of equitable execution over payments to be made by the Department of Agriculture, Fisheries and Food (DAFF) to a debtor under the single farm payment scheme (SFPS).  That order was subsequently varied to appoint the same receiver over such payments as might be received by the debtor in respect of the basic payment scheme (BPS) which was introduced to replace the SFPS.  The debtor appealed the second High Court order and argued that it was more than just a variation of the first order as there was a fundamental change in the nature of the payment. 

He relied on two arguments. First, he argued that the High Court was wrong to rely on O'Connell v An Bord Pleanála2  and should have followed the earlier decisions in National Irish Bank v Graham3  and Honniball v Cunningham,4 to the effect that receivers by way of equitable execution may only be appointed over equitable interests and not legal interests in property.   Secondly, he submitted that a receiver may not be appointed over future salaries, earnings or wages (or alternatively over any future payments), and that the BPS payment was a payment of this nature. The Court of Appeal held that the High Court had jurisdiction to appoint the receiver over the appellant’s future BPS payments, which were legal choses in action (not income), and that the order was an appropriate exercise of discretion on the facts.  The appeal was dismissed.

The legal basis of the power is s28(8) of the Supreme Court of Judicature (Ireland) Act 1877 (as applied by s8(2) of the Courts (Supplemental Provisions) Act 1961): “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.” 

Finlay Geoghegan J noted that Graham was the first modern Irish authority which held that the appointment of a receiver by way of equitable execution was confined to cases in which a debtor “enjoys an equitable interest in property which cannot be reached by legal process ” (emphasis added).5  Similarly, in Honniball, the High Court understood that the principle is “that the court will not appoint a receiver by way of equitable execution over property of which the judgment debtor is the legal owner and which can be the subject of legal process…. The principle is that the equitable remedy is only available where the judgment debtor has only an equitable interest in property against which the judgment creditor seeks recourse.”  The focus in O’Connell was different; in that case, the High Court appointed a receiver by way of equitable execution over “so much of any sum payable to [the judgment debtor] on foot of any settlement of her claim for damages or on foot of any award of damages made by the Court in proceedings… as may be required to satisfy … the judgment for costs in the within proceedings.”  In O’Connell, the High Court noted that the power to appoint “…is not itself execution but rather an equitable relief in aid of execution, in circumstances where there is some obstacle or hindrance to legal execution. Where the normal methods of legal execution are sufficient, for example where there are goods of the judgment debtor which can be seized on foot of a writ of fieri facias, a receiver will not be appointed”. 

Having considered the relevant High Court judgments and English authorities, Finlay Geoghegan J concluded that the courts when exercising the jurisdiction conferred by s28(8) of the 1877 Act are not precluded from appointing a receiver by way of equitable execution where what is sought to be executed against is a legal interest in property of a judgment debtor. The principal reasons for this conclusion were: (1) the court doubted whether there was ever binding authority that a receiver by way of equitable execution could only be appointed in respect of equitable interests; (2) having regard to the breadth of the jurisdiction given by s28(8) of the 1877 Act in relation to the appointment of a receiver, there is no reason in principle why an order appointing a receiver by way of equitable execution should not now be made in respect of legal as well as equitable interests, as it is not execution as such, but rather appointment of a receiver in aid of execution where, owing to the nature of the property or other hindrance, execution against the property is not available at law by one of the existing methods of execution. 

On whether a receiver may be appointed to receive future sums, Finlay Geoghegan J relied heavily on the judgment of Lawrence Collins LJ in the English Court of Appeal in Masri  v Consolidated Contractors International (UK) Limited & Ors (No 2)6  that there was no definitive and binding conclusion in the older authorities that a receiver cannot be appointed in respect of future debts or future income; that these were anyway undermined by another line of authorities, which establish that a receiver may be appointed in respect of a claim to an indemnity and that consequently the jurisdiction is not limited to choses in action available for legal execution; that there was no binding authority that the jurisdiction is not available in relation to future income from a defined asset, and that there was no reason why the court should not exercise a power to appoint a receiver by way of equitable execution over future receipts from a defined asset. 

On the salary argument, Finlay Geoghegan J analysed the function and operation of the BPS. She noted that the appellant’s entitlement to receive payments under the BPS was a personal entitlement as an active farmer, referable to the number of eligible hectares of which he was the owner or occupier, so the primary focus was on land use and BPS payments were not so similar to future earnings as to make appointment of a receiver by way of equitable execution something that should, as a matter of policy, be refused, though issues might arise if the appellant would be prevented from earning his living from work he had done. There was no evidence that the BPS payments would be the appellant’s sole or only income or that if deprived he would not earn a living from farming activities.

Hedigan J reached the same conclusion.  He derived a set of relevant principles on jurisdiction to appoint a receiver by way of equitable execution from the judgment of Millett J in Maclaine Watson and Company  v International Tin Council7  and held that the following principles should guide the courts in determining an application for the appointment of a receiver by way of equitable execution: (1) the court has jurisdiction to appoint a receiver to receive future debts as well as debts due or accruing; (2) a receiver may not be appointed over future wages or salary; (3) the court must consider whether it is just and convenient to do so, and in doing so should have regard to the amount of the debt, the amount that may probably be obtained by the receiver and the costs of the appointment of a receiver; (4) whether there are special circumstances in the case that make the usual process of execution or attachment unavailable; (5) whether there is some hindrance arising from the nature of the property which prevents the judgment creditor from obtaining execution at law which the appointment of a receiver can overcome; (6) there should be no way of getting at the fund other than by the appointment of a receiver; (7) it is not execution that is granted but equitable relief where there is no remedy by execution at law; (8) the remedy is discretionary.  On the application of these principles to the facts, all of the conditions required for the appointment of a receiver by way of equitable execution over the BPS payments that might be made to the appellant were met. 

Comment

Rickard is a significant judgment which expands the understood circumstances in which a receiver by way of equitable execution may be appointed by an Irish court and aligns the law in Ireland in this regard with that of England. It offers new avenues for judgment creditors to effect recovery, but only where precise conditions for the remedy are made out. 

Of further note is the fact that the Supreme Court has now granted leave to appeal from the decision of the Court of Appeal given the issues of general public importance involved. The outcome of that further appeal is awaited with interest.

  1. [2017] IECA 245, judgment of 31 July 2017.
  2. [2007] IEHC 79.
  3. [1994] 1 IR 215.
  4. [2010] 2 IR 1.
  5. Quoting In re Shephard (1889) 43 Ch D 131, 138 and Holmes v Millage [1893] 1 QB 551, 555.
  6. [2008] EWCA Civ. 303, [2009] QB 450.
  7. [1988] Ch 1, 17-20.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.