The High Court refused an official liquidator’s request to deduct remuneration and related costs from certain Custom House Capital client funds, while ruling that reconciling and administering those accounts was part of his work in winding up the company.
Ms Justice Finlay Geoghegan’s judgment concerned an application by Kieran Wallace, official liquidator of Custom House Capital Limited (in liquidation), about fees for reconciling equities and segregated cash accounts. The company was wound up by court order in October 2011 after inspectors reported unauthorised transactions involving client assets. The inspectors said the misuse exceeded €56 million, excluding a further €10.4 million owed to Mezzanine Bond holders.
The liquidator’s reconciliation covered 678 client accounts. He sought approval to charge dissenting clients 0.5% of the value of their accounts, plus VAT, toward his remuneration and legal costs. The judgment records that clients’ initial investments had been paid into pooled accounts at CHC, and that the inspectors found client cash had been moved into property funds without clients’ knowledge or consent. The judge concluded that reconciliation was a reasonable step before transferring assets, because the liquidator had to establish that the assets belonged to the clients claiming them.
The judge also found that arranging orderly distribution or transfer of client investments was part of the liquidator’s duty to wind up CHC’s affairs. Some pension products could only be transferred to specified providers or products, and a direct distribution could have tax consequences.
However, the judgment distinguished that duty from the question of who should pay for the work. The relevant client assets were not held on trust by CHC, and the court was exercising its supervisory jurisdiction in the winding up. The judge considered statutory provisions that allow recourse to client assets for certain reasonable expenses, but only where the investment firm’s assets have been exhausted and following a court application.
The evidence did not establish that CHC’s assets had been exhausted. The judge therefore held that the court had no jurisdiction on this application to authorise a charge against the dissenting clients’ funds. She refused the requested deductions. She did not decide whether the fees were reasonable or whether they qualified as expenses that could be recovered from client assets in a future application. The court was to hear the parties on other relief sought in the liquidator’s notice of motion.