The High Court ordered the return of €450,000 to eight Donegal investors after finding that their money remained identifiable in a bank account controlled by Eamonn Kelly, whose Ponzi scheme had defrauded investors.
In a judgment delivered on 28 September 2012, Mr Justice Kevin Feeney granted the investors’ applications under section 3(3) of the Proceeds of Crime Act 1996. The order provides for full repayment of their funds from an Ulster Bank account. It addresses the Donegal investors’ claims to that money; the judgment does not order a general distribution of all funds under the restraint orders among every investor.
The court had previously made a 21-day restraint order in January 2012, followed by a section 3 order in May covering cash in three accounts. The Ulster Bank account held almost all of the remaining funds. The judgment said the other funds covered by the orders were also subject to a separate section 24 freezing order under the Criminal Justice Act 1994.
The Donegal investors argued that their money had not been spent or mixed with other investors’ funds. They sought its return as owners. Other investors, represented in the arguments by Yvonne Sergeant and Geraldine Kelly, urged the court to divide the available money proportionately among all those who had lost money in the scheme. They argued that a first-in, first-out approach could unfairly favour investors whose money entered the account later.
The court relied on affidavit evidence tracing the Donegal lodgements into the Ulster Bank account. It found that the account had been frozen before the funds could be used, and that the €450,000 remained separate, unused and identifiable. The judgment stated that Kelly had taken possession and control of the money but had not acquired ownership of it.
Feeney said the circumstances differed from cases involving a mixed pool of funds. He concluded that the Donegal investors retained ownership and could recover their money. He also said that, even if the matter were decided on equitable principles, he would not apply a proportional distribution: the investors’ funds had been transferred for a specific purpose but could not be used after the account was frozen.
The court therefore made the section 3(3) orders sought for full repayment of the Donegal investors’ funds. The judgment records that Kelly had admitted the fraudulent nature of the scheme, pleaded guilty to criminal charges and received a six-year sentence.