A receiver appointed by court is an officer of court. He derives his authority from the court order. The appointment of a receiver by a court does not constitute the appointee an agent of the mortgagor. A receiver appointed by court does not represent the mortgagor in the same way as a receiver appointed out of court, who is deemed agent.
Where an order requires possession to be delivered to the receiver, the receiver becomes landlord of the premises for the purposes of legislation and may incur obligations in respect of it. Monies in the hands of a receiver appointed by court is not equivalent to monies held by a sequestrator. Funds are generally collected for the benefit of the parties to the action according to their ultimate rights.
A receiver may be appointed for a limited time, as under an interim order. The office expires on the expiry of the order, subject to any further order. An order may provide for continuance of the appointment.
A receiver appointed by the court is commonly appointed as a pre-trial remedy to preserve the assets pending the determination of an ultimate claim in plenary/full proceedings.
The High Court has statutory jurisdiction to appoint a receiver in all cases where it appears to be just or convenient to do so. The appointment may be on such terms as the court thinks just. The jurisdiction was formerly exercised by the Courts of Chancery and is exercised by the High Court. The Circuit Court also has jurisdiction to appoint receiver in many cases.
Receivers may be appointed in a variety of actions including,
- actions to administer estates,
- actions to enforce security and
- actions generally requiring preservation of assets pending determination of entitlements.
Receivers may be appointed by way of equitable execution as a mechanism for enforcing a judgment obtained by the judgment creditor.
The application for appointment of a receiver other than one by way of equitable execution must be as part of a constituted and commenced legal action. The procedures are similar to those for other pre-trial remedies such as for injunction, various restraining orders and discovery order.
In the cases of companies, mortgagees and holders of debenture may apply to court for the appointment of a receiver under the relevant legislation. In this case, the jurisdiction is dependent on the statute.
The application may be made ex parte, once proceedings have been commenced. The general procedure in relation to motions applies. The originating summons must be served on the defendant, before a receiver may be appointed.
Generally, the persons affected must be before the court. However, if the defendant has absconded or cannot be found, a receiver may be appointed on an ex parte application based on affidavit. The nature of the plaintiff’s interest in the matter and the grounds justifying appointment of a receiver must be set out in the affidavit. In an ex parte case, there is a high obligation to disclose all material facts.
The court’s powers are discretionary but are exercised in accordance with principles applied by the Courts of Chancery. The principal basis for appointment of a receiver is preservation of property for the benefit of persons who have an interest in it. They may be appointed pending appointment of a representative to the estate of a deceased person, pending trial of an action, pending reference to arbitration, interpleader or for protection of security.
Receivers may be appointed at the behest of the parties with an equitable mortgage lacking a legal mortgage giving a statutory or contractual power to appoint. An application may be made on behalf of the holder of a legal mortgagee.
Receivers may be appointed for rents and profits vested in joint tenants even if an exclusion is not taking place. Receiver may be appointed in cases of specific performance for the sale of land, to preserve the property. A receiver may be appointed in a partnership action to ensure that goodwill is not diverted.
Where a claim is made in respect of the title of the property, the former practice was that a receiver would not be appointed to interfere with the person in possession. The modern practice is that if a person can show he will probably succeed, a receiver may be at appointed to receive the income of the property pending the outcome of the trial of the matter.
A receiver may be appointed against trustees who are refusing to act or are acting improperly. A receiver may safeguard trust property pending due administration of the trust.
A receiver may be appointed to aid creditors. An encumbrance is entitled to have an appointment of receiver made if the principal money has become payable or his interest is in arears, even if no default is made. An equitable receiver may be appointed at the behest of holder of an equitable charge or mortgage if the security is in danger/jeopardy.
On bankruptcy, the courts may appoint an interim receiver with power to take possession of property before a receiving order is made.
The appointment of a receiver is an equitable remedy. The court has a discretion as to whether the appointment should be made. Delay or acquiescence is a ground for refusal. It may not be sought if it was sought for an improper purpose or where its effect would be futile.
On the motion to appoint a receiver, a named person is proposed. Evidence is put forward as to his fitness for appointment. Objection may be raised if he has an interest in the matter, is not qualified or is unsuitable. Statutory requirements and qualifications apply in some cases. If no person is put forward the matter of appointment may be referred to the Master.
A receiver may be appointed in respect of property. His appointment may be over rents, profits or other income. It may be in respect of goods, chattels, tolls, plant and equipment, rents and debts due.
A receiver may be appointed over all the property and assets comprised in the charge where there is an equitable charge or legal charge. The interest must generally be a proprietary interest or an interest in the nature of a proprietary interest. Receivers may not be appointed over personal allowances and receipts.
A receiver may be appointed in relation to a property situated outside the jurisdiction. Although the court may not be able to enforce delivery or possession of the assets, it may direct an enquiry as to the best means of obtaining possession and make necessary orders on persons within the jurisdiction.
Receivers may not be appointed over salaries of public officers on the grounds of public policy. Receivers may be appointed in respect of receipts for past services such as certain pension. Military pensions are by statute inalienable.
A receiver must generally give security for performance, including to account for the receipts of the office. Security will be fixed by the order of the appointment. Time will generally be given for entry into security. It may be settled before a court officer. A surety may be required. It may be given by an insurance company or fidelity society. Where the amounts are large, it may be distributed between a number of securities.