//Appointment of Receiver by way of Equitable Execution over Single Farm Payment Funds

Appointment of Receiver by way of Equitable Execution over Single Farm Payment Funds

A particular execution remedy available to lending institutions with specific reference to situations involving periodic or lump sum payments such as Single Farm Payment funds (“SFP”), has come before the Commercial Court recently, with surprising results.

In respect of the entitlement to access the SFP, there are essentially two options available to a creditor or receiver. First, such funds may be amenable to attachment by garnishee order, as would be the case with any funds coming to the debtor via a third party. A garnishee order operates to direct the third party to pay a specific sum of money to a creditor. It effectively allows a creditor to collect funds owed by a debtor by accessing the debtor’s property when it is in the hands of a third party. In such circumstances, where a garnishee order is secured, the funds sought would be paid directly by the third party to the creditor. However, one of the drawbacks of this approach is that it applies only to a specific payment then due and owing, and that further orders are required for each and every subsequent payment to be made by the third party into the future. So for example, a creditor or receiver could get a garnishee order in relation to the SFP currently due to a debtor but would have to apply for another garnishee order for any future SFP, upon same becoming due and owing.

The second or alternative option available would be to apply to the court for an order appointing a receiver by way of equitable execution. This allows a receiver to attempt to recover assets in which the debtor merely has an equitable interest, rather than a legal interest. Prior to last year, it had been thought that such an order could not be obtained in respect of SFP currently due and owing, as the debtor would be considered to have a legal, and not merely an equitable interest in the SFP. The court in such circumstances would therefore not allow the appointment of a receiver by equitable execution in relation to that payment – the view being that all other legal avenues for recovering the debt (such as, for example, an application for a garnishee order) must be exhausted before resorting to equitable execution. By contrast, where a payment is not currently due and owing but is rather expected at some stage in the future, the debtor will be deemed to merely have an equitable interest in the payment and appointment of a receiver by way of equitable execution may therefore be appropriate.

However, Mr. Justice McGovern decided in the Commercial Court in the case of ACC Bank v Rickard (ex tempore) last year that a receiver by way of equitable execution could be appointed in respect of SFP currently due and owing. That decision is currently the subject of an appeal before the Court of Appeal, which was heard in November 2016 but in respect of which judgment was reserved and is currently awaited. The line of legal authority prior to the decision of McGovern J had been that such appointment was not ordinarily possible where a legal interest in the funds was retained, as legal enforcement mechanisms, as opposed to equitable, had to first be utilised in such circumstances. Were the decision in Rickard to be upheld in the Court of Appeal, it would afford a significant additional and efficient enforcement mechanism to creditors/receivers, in allowing such a receiver to effectively ring fence both current and future funds owing to the debtor towards satisfaction of a debt.

However, until the Court of Appeal judgment issues, we would advise that any application relating to SFP seek both a garnishee order and in the alternative, the appointment of receiver by way of equitable execution. These applications are made, in the first instance, ex parte, with a subsequent hearing on notice to show cause. This common law ex parte list is taken in the High Court each Monday. The reason for making such an application on an ex parte basis initially is due to the risk that funds will be dissipated if the debtor is put on notice of the initial application. If no such risk of dissipation exists, the proceedings should be taken on notice to the other side in the normal course.

We hope this update is of some assistance to you. Should you have any further queries or require legal assistance in relation to the matters mentioned above, or indeed any other matter, please do not hesitate to contact us.

By Pat McInerney, Senior Associate Solicitor, and Eadaoin Jackson, Senior Associate (Insolvency and Corporate Recovery Unit). 

2018-11-13T10:47:15+00:00May 19th, 2017|Publications|

About the Author:

Pat McInerney is a Partner in our corporate and commercial and litigation departments. Pat specialises in commercial litigation and dispute resolution, public administrative law, regulation and defamation. Pat practises in […]

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