Appointing receivers by equitable execution – good news for creditors

On 9 May 2019 the Supreme Court handed down the seminal judgment of ACC Loan Management Limited DAC v Mark Rickard and Gerard Rickard, which provides clarity on the question of when a receiver can be appointed by equitable execution.

Background

The appointment of a receiver by way of equitable execution is a powerful remedy for creditors to enforce judgment debts, as it enables a creditor to collect income from a debtor’s assets, thereby preventing the debtor from receiving those payments. It is particularly useful where the debtor has no legal interest in the assets.

Judgment

In Rickard, the Supreme Court stated that whether a receiver by way of equitable execution should be appointed turns on whether it is “just or convenient” to do so. What is determined as just and convenient will depend on the facts of each case and, importantly, the Court emphasised that convenience “cannot be subservient to justice”.

The Supreme Court noted, however, that the Courts “must be vigilant to ensure…the position of a judgment debtor is not rendered unsustainable”. The burden is on the judgment-debtor to provide the Court with evidence that the appointment of such a receiver would render their position unsustainable. In Rickard, however, the Court found that the burden had not been discharged as Mr. Rickard had failed to provide the Court with a statement of affairs.

In its judgment, the Supreme Court set out the following requirements and considerations for the appointment of a receiver by equitable execution:

• That the asset is in the nature of a grant or entitlement, and not a salary;

• whether such appointment would have a prejudicial effect on third parties, or their interests – this criterion is emphasised in the judgment as “one of the factors to which a court must have significant regard”;

• the interest, which is to be the subject matter of the application, must be sufficiently well defined; and

• the effect upon the judgment debtor.

Conclusion

This judgment provides welcome clarity on the question of appointing a receiver by way of equitable execution, which has been subject to conflicting authorities for over a century. It confirms that a flexible approach is to be adopted by the Courts going forward so that the circumstances in which it is considered “just and convenient” to appoint a receiver by equitable execution may be incrementally developed.

Consequently, the Courts now have a wide discretion to appoint a receiver by equitable execution in circumstances where it is deemed “just or convenient” in accordance with today’s standards.