Re Custom House Capital Ltd ((in Liquidation))
| Jurisdiction | Ireland |
| Judge | Ms. Justice Finlay |
| Judgment Date | 22 December 2014 |
| Neutral Citation | [2014] IEHC 705 |
| Docket Number | [2011 No. 219 MCA] |
| Court | High Court |
| Date | 22 December 2014 |
IN THE MATTER OF CUSTOM HOUSE CAPITAL LIMITED (IN LIQUIDATION) AND
IN THE MATTER OF THE EUROPEAN COMMUNITIES (MARKETS IN FINANCIAL INSTRUMENTS) REGULATIONS 2007 AND
IN THE MATTER OF THE COMPANIES ACTS 1963 TO 2009
ON THE APPLICATION OF KIERAN WALLACE OFFICIAL LIQUIDATOR
[2014] IEHC 705
[2011 No. 219 MCA]
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: The Official Liquidator, Mr Wallace, issued a notice of motion seeking multiple reliefs and directions in relation to his remuneration and legal costs and expenses in the winding up. The notice of motion which sought a total of 22 such reliefs was issued returnable for the 14th March, 2014. It followed upon a judgment delivered by the High Court (Finlay Geoghegan J) on the 9th October, 2012, on a prior application seeking directions and the determination of issues relating to the quantum and discharge of the liquidator's remuneration fees, costs and legal expenses associated with the administration and reconciliation of certain client segregated accounts comprising equities and/or cash accounts. The root cause of the reliefs in the 2014 Motion was the fact that this was a complex liquidation where the assets of the company realisable in the liquidation were unlikely to meet the probable costs of the winding up and a significant portion of the work done and to be done by the Official Liquidator related to the orderly distribution of client assets under management which at the date of winding up were valued at approximately €1.1bn. The relative paucity of company as distinct from client assets did not appear to have been adverted to by the Official Liquidator when he accepted nomination to act from the Central Bank and there were no indemnity arrangements in place to indemnify him for his reasonable costs not capable of discharge out of company assets. The following issues were identified for resolution on this module of the 2014 motion: 1) the committee of clients submitted that the Court should not 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 by reason of his dual role as liquidator and administrator and the work which he was required to do as administrator in order to comply with his statutory obligation to certify the net loss of each eligible investor; 2) the relevance of progress or proportion of work completed to date; 3) the measurement of fees, costs and expenses of the Liquidator; and 4) the Official Liquidator sought an order measuring his legal costs up to the 31st October, 2013, in the sum of €527,876.76, and an order permitting the payment of same out of the money standing to the credit of the winding up.
Held by Finlay Geoghegan J that: 1) for the purposes of this application insofar as there was included amongst the work done by the Liquidator for which he was seeking remuneration up to the 31st October 2013, work which fell within the description of reconciliation work already given, it appeared that the Official Liquidator was entitled to have the Court measure such remuneration on the basis that the reconciliation work done forms part of the work properly done by him as official liquidator in the winding up of Custom House Capital Ltd and for which he was entitled to be remunerated as official liquidator without any deduction by reason of his role as Administrator; 2) in measuring the remuneration of the Official Liquidator up to October 2013, the Court should take into account the progress achieved in the liquidation to date, but must also take into account that progress in the context of what the Liquidator had envisaged in December 2012 and the delays in the liquidation since the commencement of 2013; 3) she would measure the remuneration fees and expenses of the Official Liquidator for the period from the 21st October, 2011, to 31st October, 2013, in a sum of €1,110,809.11 plus outlay of €10,008.19 plus VAT; and 4) having regard to the prior reduction made, it appeared appropriate to allow the legal costs claimed in respect of the period up to the 31st October, 2013 in full.
Finlay Geoghegan J held that she would hear counsel prior to determining the precise order to be made on this part of the notice of motion and further directions to be given in respect of the balance of the notice of motion.
Judgment approved.
This judgment is given on a limited number of issues only arising on a notice of motion issued on behalf of the Official Liquidator seeking multiple reliefs and directions in relation to his remuneration and legal costs and expenses in the winding up. The notice of motion which seeks a total of 22 such reliefs was issued returnable for the 14th March, 2014. It followed upon (albeit with some considerable delay) a judgment delivered by me on the 9th October, 2012, In the Matter of Custom House Capital Limited (In Liquidation) [2012] IEHC 382, [2012] 3 I.R. 93, on a prior application seeking directions and the determination of issues relating to the quantum and discharge of the liquidator's remuneration fees, costs and legal expenses associated with the administration and reconciliation of certain client segregated accounts comprising equities and/or cash accounts.
The root cause of the reliefs in the 2014 Motion is the fact that this is an extremely complex liquidation where the assets of the company realisable in the liquidation are unlikely to meet the probable costs of the winding up and a significant portion of the work done and to be done by the Official Liquidator relates to the orderly distribution of client assets under management which at the date of winding up were valued at approximately €1.1bn. The relative paucity of company as distinct from client assets does not appear to have been adverted to by the Official Liquidator when he accepted nomination to act from the Central Bank and there are no indemnity arrangements in place to indemnify him for his reasonable costs not capable of discharge out of company assets.
On the 15th July, 2011 the Central Bank commenced these proceedings pursuant to the European Communities (Markets in Financial Instruments) Regulations 2007, ( SI No. 60/2007) (the '2007 Regulations'). On that day the High Court (Hogan J.) on the application of the Central Bank appointed two of its officials as inspectors (the 'Inspectors') to Custom House Capital Limited ('CHC') pursuant to the 2007 regulations.
Subsequent to the delivery by the Inspectors of a report, they sought the winding up of CHC. On the 21st October, 2011, the High Court (Hogan J.) made an order for the winding up of CHC and appointed Kieran Wallace as official liquidator (the 'Liquidator'). As appears from the judgment of Hogan J. delivered on the 28th October, 2011, In The Matter of Custom House Capital Limited [2011] IEHC 399, at para. 17, the views of the inspector in favour of the winding up of CHC weighed heavily with the Court.
Notwithstanding the origin and nature of the current proceedings, it is a winding up by the court pursuant to the provisions of the Companies Acts 1963- 2009, to which certain provisions of the 2007 Regulations apply.
On the 21st October, 2011, The High Court also appointed Mr Wallace as administrator of CHC (the 'Administrator') for the purposes of and pursuant to s. 33A of the Investor Compensation Act 1998, as amended.
Following the issue of the 2014 notice of motion, the court acceded to an application by the Official Liquidator that the reliefs sought should be determined on a phased basis. This approach arose principally by reason of Article 157 of the 2007 Regulations. This provides:
'157(1) No liquidator, receiver, administrator, examiner, official assignee or creditor of an investment firm shall have or obtain any recourse or right against client money or client financial instruments or documents of title relating to such financial instruments received held or paid on behalf of a client by an investment firm, until all proper claims of clients or of their heirs, successors or assigns against client money and client financial instruments or documents of title relating to such financial instruments have been satisfied in full.
(2) Notwithstanding paragraph (1), a liquidator, receiver, administrator, examiner or official assignee may have recourse or right against client money or client financial instruments or documents of title relating to such financial instruments received, held or paid on behalf of a client by an investment firm in respect of such reasonable expenses as are incurred –
(a) in the carrying out of their functions under these Regulations or under the Investor Compensation Act 1998, or
(b) in the distribution of client money and financial instruments to clients of the investment firm where the assets of the investment firm have been exhausted.'
Article 158 requires an application to the Court by a liquidator prior to recourse to client funds pursuant to Article 157(2). It gives the Court jurisdiction to 'determine the matter and make such order as the Court sees fit'.
The 2012 application seeking directions and the determination of issues relating to the quantum and discharge of the liquidator's remuneration fees, costs and legal expenses in relation to work done on segregated cash and equities was not brought pursuant to the 2007 Regulations. The Courts attention was drawn to it in the course of the application and in the 2012 judgment the Court held that a...
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Re Customs House Capital ((in Liquidation))
...IEHC 382, [2012] 3 I.R. 93, and para. 33 of the judgment delivered on 22 December 2014: Re Custom House Capital Ltd. (in liquidation) [2014] IEHC 705). If ICCL were to make claims to be subrogated to the rights of identified compensated clients in relation to his assets still remaining und......