The High Court appointed two Central Bank inspectors to investigate Custom House Capital Ltd., but made the appointment provisional and returnable to court on 20 July 2011. The firm could challenge the order, and if it did, the Central Bank would have to renew its application and justify continuing the appointment.
Mr Justice Hogan made the initial order on 15 July on the Central Bank’s ex parte application under Article 166 of the European Communities (Markets in Financial Instruments) Regulations 2007. His written judgment, delivered on 18 July, addressed the procedural safeguards required when an investigation order is sought without advance notice.
The judge said the Central Bank had not notified Custom House before applying. Given the information it held, he could understand why notice had not been given. But he rejected the Bank’s argument that the appointment should operate as a final order, even with liberty for the company to apply to set it aside. Such an approach, he said, could impose serious reputational and financial consequences without giving the company an effective opportunity to make its case.
The application followed a series of concerns reported to the court. The Central Bank had been in contact with the firm since 2009 after receiving information that client money may have been invested in a Mezzanine Bond Fund without clients’ knowledge or consent. The judgment said evidence then available suggested more than €10 million was owed to investors. The Bank had also received concerns that pooled client assets, equity unit trusts and cash unit trusts may have been used without proper authority to cover shortfalls in property investments. The potential trust-asset shortfall was said to be more than €13 million.
Those matters were allegations and concerns before the court, not findings that funds had been misused. The judge also recorded discrepancies identified by Appian Asset Management in client records, and concerns raised by Custom House chairman John O’Dwyer about whether information from the firm could be relied on. The judgment noted that senior company figures had resigned or said they intended to resign. It also recorded that Mr O’Dwyer’s integrity was beyond question and that illness had affected his ability to serve as chairman.
Mr Justice Hogan said an ex parte appointment could be justified provisionally if needed to protect investor funds, but the company’s fair-procedure and property rights required a prompt opportunity to contest it. If Custom House challenged the order at the return hearing, the Central Bank—not the company—would bear the onus of justifying its continuation. The judgment did not determine whether the alleged misuse occurred or the ultimate outcome of the investigation.