Allied Irish banks plc v McGuigan & ors

Factual and Procedural Background

Pursuant to a breach of a loan agreement between Company A and three brothers (the Defendants), Company A obtained a consent judgment against the Defendants jointly and severally for over €2.4 million on 21st December 2015. The judgment was stayed for three months to allow negotiations for a repayment arrangement, which ultimately failed. No payments were made by the Defendants post-judgment. On 29th May 2017, Company A obtained a conditional garnishee order nisi against the Defendants, appointing a named solicitor as receiver by way of equitable execution over certain properties. Company A applied to have this garnishee order made absolute and, alternatively, sought the appointment of a receiver over certain settlement monies held by solicitors under an undertaking.

The Defendants and Company B, a company jointly owned by the Defendants, were involved in litigation against two construction companies, resulting in agreed settlement monies totaling approximately €850,000 plus costs. The settlement monies were paid into solicitors' client account under an irrevocable undertaking given by the solicitors on behalf of the Defendants and Company B to hold the monies to the order of Company A until an agreement regarding disposal was reached.

Two of the Defendants jointly own apartments in Croatia with their spouses, which were in the process of being sold. The proceeds had been offered to Company A in partial satisfaction of the debt but were withheld pending waiver of the balance of the judgment debt.

The conditional garnishee order attached the settlement monies held by the solicitors. Company A sought to make this order absolute and, failing that, to appoint a receiver by way of equitable execution over the settlement monies and the proceeds of sale of the Croatian properties.

Legal Issues Presented

1. Whether the conditional garnishee order nisi obtained by Company A should be made absolute over the settlement monies held by the solicitors.
2. Whether a receiver by way of equitable execution should be appointed over the proceeds of sale of the Croatian properties jointly owned by the Defendants and their spouses.
3. Whether a receiver by way of equitable execution should be appointed over the settlement monies held by solicitors pursuant to their undertaking.

Arguments of the Parties

Appellant's Arguments (Company A)

• Company A contended that the settlement monies should be garnished and controlled to satisfy the judgment debt.
• It argued for the appointment of a receiver over the Croatian properties' proceeds to prevent dissipation of assets.
• Company A asserted that the failure to reach repayment agreements justified equitable execution remedies.
• Company A suggested that the solicitors holding the settlement monies might treat their undertaking as lapsed.

Respondents' Arguments (Defendants and Company B)

• The Defendants and Company B relied on the irrevocable undertaking given by their solicitors to hold the settlement monies until an agreement with Company A was reached.
• They argued that no agreement had been reached and therefore the monies should not be released.
• The Defendants contended that the garnishee order should not be made absolute given Company B's interest in the settlement monies and the nature of the solicitors' client account.
• The Defendants highlighted that the apartments in Croatia were jointly owned with spouses who are not parties to the proceedings, limiting equitable relief.
• They asserted that Company A was not entitled to equitable execution over the settlement monies given the existing agreement and undertaking.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the nature of the irrevocable undertaking given by the solicitors holding the settlement monies, emphasizing that the monies were to be held until an agreement was reached between the parties regarding their disposal. The court found that no such agreement had been reached and the undertaking remained extant, supported by the solicitors' confirmation that they would abide by it. The court rejected Company A's concern that the undertaking might be treated as lapsed, noting that the solicitors alone determine compliance with their undertaking and are subject to professional discipline.

Regarding the garnishee order, the court identified three principal difficulties: (1) Company B's interest in the settlement monies, which had not been addressed or heard in the proceedings; (2) the monies were held in a client account involving multiple clients, complicating garnishment; and (3) the perpetual nature of the undertaking meant that the settlement monies did not constitute a debt presently payable to the judgment debtors or Company B. Consequently, the court declined to make the garnishee order absolute.

On the appointment of a receiver by way of equitable execution over the Croatian properties' proceeds, the court acknowledged that no prior execution attempts had been made and no evidence suggested ordinary execution methods were ineffective. However, the court considered the risk of dissipation of proceeds as an exceptional circumstance justifying equitable execution. The court imposed conditions on the appointment, including requiring Company A to provide further affidavit evidence on probable recoveries and costs, and to pay 50% of proceeds to the spouses who were joint owners but not judgment debtors, thereby protecting their interests.

The court refused to appoint a receiver over the settlement monies held by solicitors, reasoning that Company A had freely agreed to the undertaking and that equity would not intervene to frustrate an agreement voluntarily entered into. There was no risk of dissipation given the solicitors' regulated status and the irrevocable nature of their undertaking. Additionally, the court noted the difficulty of exercising equitable jurisdiction to the detriment of Company B without it being a party to the proceedings.

Finally, the court addressed the equitable maxim of "clean hands," finding no evidence of dishonest or improper conduct by Company A that would bar equitable relief.

Holding and Implications

The court's final decision was as follows:

• The court refused to make absolute the conditional garnishee order nisi obtained by Company A on 29th May 2017.
• The court granted an order appointing a receiver by way of equitable execution over the proceeds of sale of the Croatian properties, subject to conditions protecting the interests of the spouses and requiring further evidence from Company A.
• The court refused to appoint a receiver by way of equitable execution over the settlement monies held by the solicitors pursuant to their undertaking.

The direct effect is that Company A cannot presently access the settlement monies through garnishment or receivership but may enforce its judgment against the proceeds of the Croatian properties under controlled equitable execution. No new precedent was established; the court applied established principles of garnishment, equitable execution, and solicitor undertakings in the context of complex debt enforcement negotiations.