Allied Irish Bank v Ashford Hotels Ltd

The court has jurisdiction under Supreme Court Act 1981, section 37, to require a cross-undertaking in damages as a condition of continuing a receivership by way of equitable execution. That jurisdiction is discretionary, not automatic. The analogy with a Mareva injunction is limited because such injunctions commonly require third parties to incur expenditure in complying with them. A receiver may properly refuse a settlement which would abandon a disputed chose in action where the judgment creditor, rather than the judgment debtor, bears its value. Nor is a receiver obliged to prosecute related foreign proceedings merely because English proceedings have been stayed. A stay may be lifted where the balance of convenience has shifted and the foreign proceedings may not proceed promptly.

Ashford Hotels Ltd guaranteed a loan made by Allied Irish Bank. A receiver was appointed by way of equitable execution over Ashford’s alleged right to an indemnity from Higgins and Tyree. Ashford later wished to settle New York proceedings in which Higgins and Tyree challenged the indemnity, but the receiver refused consent.

At first instance, His Honour Judge Thompson QC refused orders directing approval of the settlement, discharging the receiver, or requiring a cross-undertaking in damages. He also lifted a stay of the 1993 Action. Higgins and Tyree appealed, seeking substantive and procedural relief. The central issues were whether the receiver had acted improperly, whether the court could require a third-party cross-undertaking, whether justice required one on these facts, and whether the stay should remain in place.

1. Appeal dismissed. The receiver was an officer of the court. His appointment restrained Ashford from disposing of the chose in action but did not vest the indemnity in him or charge it in favour of the Bank.
2. The receiver was entitled to refuse the proposed settlement. Ashford had not accepted the merits of the rescission claim; it wished to settle because it lacked funds and incentive to continue litigation. The receiver was therefore acting properly in protecting the value of the disputed indemnity. No ground for his removal or for a mandatory approval order was established.
3. The receiver was not obliged to prosecute the New York proceedings. He had reasonably left them to Ashford after the stay was obtained on the basis that those proceedings would determine the indemnity issue. There was no basis to discharge him or compel intervention.
4. Under section 37 of Supreme Court Act 1981, the court had jurisdiction to impose a cross-undertaking in damages as a condition of discretionary relief. The jurisdiction was not confined to Mareva injunctions. Z Ltd v A-Z and AA-LL [1982] 1 Q.B. 558 illustrated the development of protection for third parties affected by injunctions.
5. The analogy with a Mareva injunction was not compelling on the facts. A Mareva injunction commonly requires third-party banks to take immediate steps and incur expenditure, whereas the receivership did not normally have that feature. The absence of precedent, and the comparison with garnishee orders, informed discretion rather than jurisdiction. National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] C.L.R. 271 concerned a different form of receivership and did not materially assist.
6. Justice did not require a cross-undertaking. Higgins and Tyree had chosen to litigate in New York knowing that they would not recover their costs. The proposed order would give them a possible costs recovery if successful without corresponding exposure if unsuccessful, and would unbalance the foreign proceedings.
7. The lifting of the stay was a proper exercise of discretion. The later New York trial date did not remove the uncertainty that an adjournment might be sought. Keeping the stay lifted provided an incentive for the New York trial to proceed promptly. The appeal was dismissed with costs and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): [1997] EWCA Civ 1635. Appeal from the order of His Honour Judge Thompson QC dated 27 February 1997. Appeal dismissed with costs; leave to appeal to the House of Lords refused.
• High Court of Justice, Queen’s Bench Division: dismissed the applications by Higgins and Tyree and lifted the stay of the 1993 Action.