Custom House Capital Ltd ((in Liquidation))
| Jurisdiction | Ireland |
| Judge | Mr. Justice Heslin |
| Judgment Date | 10 March 2022 |
| Neutral Citation | [2022] IEHC 179 |
| Court | High Court |
| Docket Number | 2011/219MCA |
[2022] IEHC 179
2011/219MCA
THE HIGH COURT
Right of subrogation – Net loss – Investor Compensation Act 1998 – Applicant seeking directions as regards the scope and operation of its right of subrogation pursuant to s. 35 of the Investor Compensation Act 1998 – Whether the applicant’s right of subrogation was restricted to the assets of the company
Facts: On 21 October 2011 an order was made that Custom House Capital Ltd (CHC) be wound up, pursuant to the provisions of the Companies Acts 1963–2009. Mr Wallace, a Chartered Accountant and Insolvency Practitioner, was appointed as official liquidator and administrator within the meaning of the Investor Compensation Act 1998 (as amended). The Investor Compensation Company DAC (ICCL), an independent statutory body established under the 1998 Act to provide compensation to customers of failed investment firms in the circumstances prescribed by the 1998 Act, applied to the High Court pursuant to s. 231 of the Companies Act 1963 and/or pursuant to the inherent jurisdiction of the court, seeking directions as regards the scope and operation of the ICCL’s right of subrogation pursuant to s. 35 of the 1998 Act, in circumstances where the ICCL had paid, or would pay, compensation to the clients of CHC who had suffered a “net loss” within the meaning of s. 30(1) of the 1998 Act. On 13 October 2021, Heslin J held that all relief sought by the ICCL must be refused. In the wake of that judgment, the relevant parties corresponded with each other and agreement was reached on the appropriate form of final order, including as to costs, save for a number of disputed issues. It was the costs of a motion which was issued by the ICCL on 30 July 2019, which motion was heard by Pilkington J on 8 August 2019, which constituted the first issue and the dispute was between the ICCL and the liquidator. In that motion, the ICCL sought an order requiring the liquidator to provide the ICCL with certain information within a 14 day period or such other period as the court might direct. The second issue concerned whether the ICCL should cover costs on a ‘solicitor and own client’ basis. The third issue in dispute arose in circumstances where the ICCL had made a concession that it would not make a lodgement or tender, in the context of the costs of the legitimi contradictores and the ICCL agreed to include, for the benefit of the legitimi contradictores, wording in the relevant order that the costs to which the legitimi contradictores were entitled should include “the costs of any adjudication of costs arising from this order”.
Held by Heslin J that he accepted the liquidator’s submission that the information motion and stay application were entirely ancillary and incidental to the directions motion. Heslin J did not hear the former but, in circumstances where he dealt with the latter, the relevant parties were satisfied that he was in the best position to deal with the question of costs arising from the information motion and stay application (in circumstances where Pilkington J adjourned the question of costs). Heslin J held that the ICCL must bear the costs of same. In light of Ms Beirne BL’s submissions on behalf of Mr Nugent (who was a notice party in respect of the same motion), Heslin J held that Mr Nugent’s costs also fell to be discharged by the ICCL. Heslin J held that the interests of justice required that neither the liquidator, nor the relevant company, nor its clients, face the potential of having to meet any element of costs all of which were generated as a result of ICCL’s decision, in its own interests, to articulate and pursue rights which it did not have. Heslin J took the view that the justice of the situation was met by making an order that the official liquidator’s costs be on a ‘solicitor and own client’ basis. Heslin J agreed with Mr McCann for the ICCL that the Court had no jurisdiction to remove from the ICCL the entitlement, should it so wish, to make a tender or lodgement as regards the official liquidator’s costs; the ICCL was free to make such a concession, or not.
Heslin J invited the parties to submit an agreed form of order reflecting what the Court had determined.
Judgment approved.
RULING of Mr. Justice Heslin delivered on the 10th day of March, 2022
This ruling is in relation to the issue of costs, the backdrop being this court's judgment delivered on 13 October 2021. In the wake of that judgment, the relevant parties corresponded with each other and agreement was reached on the appropriate form of final order, including as to costs, save for a number of disputed issues in respect of which the parties, very helpfully, provided detailed written submissions. I have carefully considered these as well as the oral submissions made on 01 December 2021.
The first issue concerns the costs of a motion which was issued by the Investor Compensation Company DAC (formerly Limited) (hereinafter “the ICCL”) on 30 July 2019, which motion was heard by Ms. Justice Pilkington on 8 August 2019. In that motion, the ICCL sought an order requiring the official liquidator, Mr. Wallace (“the Liquidator”) to provide the ICCL with certain information within a 14 day period or such other period as the court might direct. It is the costs of that motion which constitute the first issue and the dispute is between the ICCL and the liquidator.
What the ICCL pressed for in the aforesaid motion was an order requiring the liquidator to furnish the following:
“A. In respect of the clients of CHC for whom the Liquidator has certified a compensatable loss within the meaning of the Investor Compensation Act, 1998 (or such clients within that cohort as may be identified and agreed between the liquidator and the ICCL):
(a) the value of each client's claim, on an asset-by-asset basis, in the liquidation of CHC as at the date of the winding-up of CHC;
(b) the amount available for distribution as against each client's claim, on an asset-by-asset basis, in the liquidation of CHC as at March 2019;
(c) the value of the distributions from the liquidation of CHC to date on an asset-by-asset basis;
(d) the amount of the net loss certified for each client on an asset-by-asset basis;
(e) the amount of the compensatable loss certified for each client on an asset-by-asset basis; and
(f) the estimated value of future distributions from the liquidation of CHC.”
At paragraph 2 of the said motion, ICCL also sought “such further or other relief as this Honourable Court may seem fit”. The foregoing is of some significance because it is not in dispute that, at the hearing of the motion, the ICCL also sought an order to restrain the liquidator from making distributions to clients. Whether one characterises the foregoing as an order requiring a “stay” in respect of distributions which the liquidator was otherwise entitled to make or an “injunction” restraining distributions, the net effect is the same. For the sake of convenience, I will refer to the aforesaid motion and application to prohibit distributions by the liquidator as “the information and stay motion”.
The relevant background to the information and stay motion involved an application which was made in December 2018, wherein the ICCL applied for an order which would have directed the liquidator/administrator to bring an application for directions in order to have determined the dispute as to the scope of the ICCL's right of subrogation pursuant to the 1998 Act. At this juncture it is appropriate to note that in this court's 13 October 2021 judgment, there was a rejection of the right of subrogation which the ICCL had contended for. In other words, insofar as there was a dispute between the parties, in 2018, as to the correct interpretation of the 1998 Act, it was only a dispute because the ICCL took a particular position which was ultimately found to be incorrect.
In any event, the December 2018 application gave rise to a judgment of 31 January 2019, wherein Finlay Geoghegan J. refused to direct the liquidator/administrator to bring an application for directions. The court made it clear that if ICCL wished to bring such an application, it would be necessary to identify at least a representative sample of compensated clients. The learned judge also observed that this might require ICCL to obtain further information.
In the wake of the 31 January 2019 judgment, ICCL wrote to the liquidator on 7 March 2019 seeking information and this gave rise to a response dated 26 March 2019 which inter aliaflagged certain practical and timing difficulties which prevented the liquidator from providing information. The ICCL point out that there was no unwillingness to cooperate and no objection to providing information flagged by the liquidator at that juncture. While this may be true, it takes nothing away from the basic fact that the sole reason why the information was sought was in furtherance of an objective held by ICCL based on a contention (ultimately found to be incorrect) as to its subrogation rights pursuant to the 1998 Act.
On 29 April 2019 the liquidator provided the ICCL with a breakdown on a fund-by-fund and client-by-client basis of the net loss certified up to that point. Further information was pursued by the ICCL in correspondence of 30 April and 17 June 2019. By letter dated 17 July 2019, the liquidator raised concerns regarding data protection. In particular, the liquidator highlighted concerns that the provision of client information to the ICCL would result in a breach of data privacy protections contained in the General Data Protection Regulation 2016/679 (i.e. the “GDPR”).
It was made clear in correspondence that the liquidator was...
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