Once judgment has been obtained against a debtor there are a number of different enforcement options available to a judgment creditor. One option is an application for the appointment of a receiver by way of equitable execution  where the judgment creditor believes that money, which the judgment creditor is entitled to, is held by or may be paid by a third party  to the judgment debtor. Appointing a receiver by way of equitable execution is an equitable remedy which means it is granted at the court’s discretion and will not be granted if another method of legal execution is available. A judgment creditor seeking this remedy must show the court that they have tried to enforce their judgment in the normal legal way, for example, by sending a judgment to the sheriff for execution first.  Timing is important so that the third party is advised of the order before the monies are paid to the debtor.

 

This procedure is useful where a debtor gets periodic payments, for example, rental income.  It is also useful where money will become payable in the future by a third party to a debtor, for example, where you know the debtor is about to sell a large asset such as property.  Appointing a receiver means that a creditor can get funds on a phased basis.  The difference between this type of remedy and a garnishee order is that in seeking a garnishee order the debt is already due to the debtor from a third  party but the debt has not been paid.  In order to be able to apply for this remedy a creditor must have a judgment against the debtor. 

 

An application is made ex parte to either the Circuit Court or the High Court (depending on the amount of the debt) seeking an order appointing a receiver over the assets which are about to come into the possession of the debtor. 

  

In determining whether it is just or convenient to appoint a receiver by way of equitable execution the court will consider:

 

An order appointing a receiver by way of equitable execution operates in a similar manner to an injunction and prevents the debtor from receiving money from the third party which owes the debtor money in the future. However if that third party does not pay, the receiver cannot take action against him.  It will be necessary for the creditor to obtain the leave of the court to proceed against the third party in the debtor’s name. The creditor gets purely personal rights against the debtor when the receiver is appointed therefore; the order appointing the receiver does not create a charge over the property and the creditor has no right to sell property, unless he gets further relief from the court.  In fact the creditor takes the place of the debtor to receive the money or the proceeds of sale of any property. The appointment of a receiver does however prevent subsequent judgment creditors from gaining priority over the creditor who has a prior order appointing the receiver.

    

When the receiver has collected money from a third party the creditor has a duty to apply to the court for further directions to the receiver. A receiver who takes possession of property holds that property not for the creditor but for the court who will direct what shall be done with the property.  However the court is likely to direct that the property be paid over to the creditor.

   

If you have any further queries on how this procedure works in practice please contact Gabriel Daly, Head of Beauchamps Corporate Restructuring and Insolvency Unit.