Re Custom House Capital Ltd ((in Liquidation))

• Jurisdiction: Ireland
• Judge: Ms. Justice Finlay
• Judgment Date: 21 November 2018
• Neutral Citation: [2018] IEHC 652
• Docket Number: [Record No: 2011/219MCA]
• Court: High Court
• Date: 21 November 2018

In the Matter of Custom House Capital Limited (In Liquidation)

And In the Matter of Regulations 157 and 158 of the European Communities (Markets In Financial Instruments) Regulations 2007

And In the Matter of the Companies Acts 1963-2012

And In the Matter of the Investor Compensation Act 1998

On the Application of Kieran Wallace, Official Liquidator

[2018] IEHC 652

[Record No: 2011/219MCA]

THE HIGH COURT

Remuneration – Legal costs – Winding up – Official Liquidator seeking multiple reliefs and directions in relation to his remuneration and legal costs and expenses in the winding up – Whether the High Court should consider the “reconciliation” work of the Liquidator as work which was required to be done as part of the orderly winding up of the company

Facts: Mr Wallace, Official Liquidator of Custom House Capital Ltd (In Liquidation) (“the liquidator” and “CHC”, respectively), on a notice of motion dated 29 March 2018, applied to the High Court seeking inter alia an order measuring and determining the liquidator’s remuneration, fees and expenses in connection with the liquidation of CHC for the period from 1 July 2016 to 31 December 2017 in the sum of €699,586.77, inclusive of professional fees, VAT and outlay. The notice of motion also sought directions in relation to the appointment of a legitimus contradictor and related matters in relation to the preparation and hearing of the substantive application. Initial directions were given at a hearing on 12 April 2018. Following consideration of the directions given, it was decided that Mr Nugent should act as legitimus contradictor. The initial directions included fixing time for a request for further information by or on behalf of the legitimus contradictor, the reply thereto and the exchange of further affidavits and written submissions. This was done, albeit with some delay. The application also included the determination of the legal costs of the liquidator for the period from 1 July 2016 to 31 December 2017. The directions given included permitting the legitimus contradictor to retain a cost accountant and significant progress was made in relation to the legal fees prior to the hearing of the application. The legitimus contradictor was not satisfied with the information furnished by the liquidator to the Court and made available to him in the course of the application and sought certain directions from the Court in relation to the provision of further information and/or permitting inspection by the legitimus contradictor prior to the determination of the substantive application. A second set of issues related to the determination of the remuneration sought.

Held by Finlay Geoghegan J that the directions sought on behalf of the legitimus contradictor that the liquidator produces contemporaneous time sheets, for inspection of the liquidator’s records and for a more detailed description of certain of the work done, were refused. However, in refusing the directions sought in the application, the judgment drew attention to the direction given in Re Custom House Capital (In Liquidation) [2017] IEHC 484 that the liquidator should henceforth keep a separate record of the expenses incurred by him in the necessary reconciliation, recovery and distribution work of misappropriated monies referred to in that judgment; it was not intended that the refusal of the directions in the application indicated, in any way, that the information provided in the application in relation to such work should be considered as sufficient in a future application where the liquidator seeks to have measured remuneration which he may also seek to have paid out of client funds.

Finlay Geoghegan J held that the amount allowed for the official liquidator’s remuneration, fees, expenses and outlay in connection with the liquidation for the period from 1 July, 2016 to 31 December, 2017 was measured and determined in the sum of €493,515.95 plus VAT. The recommendations of the cost accountants retained by the liquidator and the legitimus contradictor in relation to the legal costs insofar as agreed were accepted by the Court and allowed as reasonable. The Court considered the further letters from the cost accountants filed and determined that an additional deduction of €11,000 should be made in respect of some but not all of the dual attendances of two solicitors at consultations and court. The Court did not direct any further deduction to be made and the total amount computed in accordance with the judgment was allowed.

Judgment approved.

Judgment of Ms. Justice Finlay Geoghegan delivered on the 21 ^st day of November, 2018.

1 This judgment is given on an application brought by Kieran Wallace, Official Liquidator of Custom House Capital Limited (In Liquidation) (‘the liquidator’ and ‘CHC’, respectively) on a notice of motion dated 29 March 2018 seeking inter alia an order measuring and determining the liquidator's remuneration, fees and expenses in connection with the liquidation of CHC for the period from 1 July 2016 to 31 December 2017 in the sum of €699,586.77, inclusive of professional fees, VAT and outlay. I heard the application sitting as an additional judge of the High Court pursuant to s. 2(5)(a)(i) of the Courts (Establishment and Constitution) Act 1961 as amended by s. 32 of the Court of Appeal Act 2014.

2 The notice of motion also sought directions in relation to the appointment of a legitimus contradictor and related matters in relation to the preparation and hearing of the substantive application. Initial directions were given at a hearing on 12 April 2018. At that point in time, there were two applications from clients of CHC who had participated in earlier applications to act as legitimus contradictor. Following consideration of the directions given, it was decided that Mr. Michael Nugent, a solicitor who was a client of CHC and has participated from the outset of this liquidation, should act as legitimus contradictor. He is represented by solicitor and counsel.

3 The application of the liquidator was grounded on an affidavit sworn by him on 28 March 2018, together with a report to the Court and other exhibits. The initial directions included fixing time for a request for further information by or on behalf of the legitimus contradictor, the reply thereto and the exchange of further affidavits and written submissions. This was done, albeit with some delay, and will be referred to in more detail below.

4 The application also included the determination of the legal costs of the liquidator for the period from 1 July 2016 to 31 December 2017. The application in that regard was grounded on a report from Behan & Company, cost accountants retained by the liquidator. The directions given included permitting the legitimus contradictor retain a cost accountant and significant progress was made in relation to the legal fees prior to the hearing of the application and is not the subject of this judgment.

5 In addition to the grounding affidavit of the liquidator and exhibits thereto, the Court has had and considered an affidavit of Michael Nugent sworn on 27 May 2018 and exhibits thereto, a second affidavit of the liquidator sworn on 1 June 2018, a second affidavit of Michael Nugent sworn on 8 June 2018 and exhibits thereto and an affidavit of Michael Murphy, solicitor of McCann Fitzgerald (which relates only to the legal costs), sworn on 13 June 2018 and an exhibit thereto. The Court has also had the benefit of written submissions delivered on behalf of the liquidator and the legitimus contradictor and oral submissions made by counsel on behalf of each.

6 These give rise to two sets of issues. The legitimus contradictor is not satisfied with the information furnished by the liquidator to the Court and made available to him in the course of this application and seeks certain directions from the Court in relation to the provision of further information and/or permitting inspection by the legitimus contradictor prior to the determination of the substantive application. The second set of issues relate to the determination of the remuneration sought. At the hearing, the Court heard oral submissions in relation to both sets of issues and reserved its decision.

Relevant Background

7 The order for the winding up of CHC was made by the High Court (Hogan J.) on 21 October 2011 and on the same date, the liquidator was appointed as official liquidator of CHC and also administrator of CHC for the purposes of s. 33A of the Investor Compensation Act 1998 (as amended). This followed the appointment by the High Court in July 2011, on the application of the Central Bank, of inspectors to CHC pursuant to the European Communities (Markets In Financial Instruments) Regulations 2007 ( S.I. No. 60 of 2007) as amended (‘the MiFID Regulations’). The report of the inspectors identified inter alia that ‘[t]here was a systematic and deliberate misuse of assets and cash belonging directly and indirectly to clients of CHC. This misuse was deliberately disguised by CHC through the use of false accounting entries and the issue of false and misleading statements to clients’. At that point, it was estimated that the amount of money taken directly and indirectly from clients by CHC was in excess of €56 million.

8 This judgment is the fourth written reserved judgment which I have delivered in this liquidation: Re Custom House Capital Ltd. (in liquidation) [2012] IEHC 382, [2012] 3 I.R. 93 (‘the 2012 judgment’); Re Custom House Capital Ltd. (in liquidation) (Unreported, High Court, Finlay Geoghegan J., 22 December 2014) (‘the 2014 judgment’); and Re Custom House Capital (in Liquidation) [2017] IEHC 484 (‘the 2017 judgment’). It is the third application for the determination of remuneration by the official liquidator. I have heard and determined the earlier two, the first being the subject of the 2014 judgment and the second the subject of an ex tempore...