The High Court refused two applications by the Investor Compensation Company DAC (ICCL) seeking directions over whether it could claim rights to Custom House Capital clients’ assets after paying them compensation. The court did not decide whether ICCL is entitled to those rights, or whether any future dispute should be heard in the liquidation proceedings.
ICCL sought an order directing official liquidator Kieran Wallace to apply for directions under section 231 of the Companies Act 1963, or permission for ICCL to make its own application. The proposed directions concerned statutory subrogation under section 35(5) of the Investor Compensation Act 1998. That provision gives a compensation scheme rights equal to the amount it has paid to an eligible investor. Section 35(5A) addresses how the investor’s and scheme’s claims rank if the investor proves a claim exceeding the compensation paid.
ICCL argued that the court should determine whether subrogation extended to client assets held by CHC and, if so, which assets and on what basis. The liquidator disputed that ICCL’s rights extended to client assets. The court noted that no formal notice of motion had yet been issued and that the dispute raised several questions beyond the broad legal scope of subrogation, including how claims might apply to different types of assets.
Justice Finlay Geoghegan said the court could properly consider those issues only in the context of actual disputed claims involving identified compensated clients and assets that had not been returned. ICCL would need to identify the clients, or a representative sample, and specify the rights it claimed in relation to particular assets. The judge said information could be sought from Wallace as administrator or liquidator.
The judge refused both applications because they did not present a factually identified dispute between ICCL and one or more compensated clients. She expressly left open whether disputes arising from specific claims should be decided by an application in the liquidation proceedings.
In additional observations described as obiter, the judge noted the potential prejudice to clients who had received compensation before their assets were returned, compared with clients whose compensation remained pending. The court was told that 574 of approximately 1,900 applicants had been paid. She also noted the prospect of further delay to the liquidation if subrogation claims were pursued. The judge said ICCL should decide promptly whether to make claims and notify the liquidator and affected clients; applicants awaiting compensation should be told of the potential consequences of payment before their assets are returned.