Compensation for Custom House Capital investors to be restricted

Entitlement to redress limited to assets of liquidated investment firm, High Court finds

Custom House Capital was liquidated in 2011 after a High Court-appointed investigation by two Central Bank inspectors found ‘systemic and deliberate misuse’ of clients’ money. Photograph: Bryan O’Brien

The High Court has found that the entitlement to compensation of some 1,372 investors in failed investment firm Custom House Capital (CHC) following its liquidation is restricted to the assets of the company.

Mr Justice Mark Heslin also found that the investors had not established a right to compensation, or what is known as equitable subrogation, as a result of alleged unjust enrichment by other investors.

CHC was liquidated in 2011 after a High Court-appointed investigation by two Central Bank inspectors found “systemic and deliberate misuse” of clients’ money, the majority of which represented transfers to syndicated property investments.

Accountant Kieran Wallace was appointed liquidator/administrator.



The Investor Compensation Company (ICC) was established under the Investor Compensation Act, 1998, to provide compensation to customers.

A dispute arose between Mr Wallace and the ICC as to the scope and operation of the ICC’s right of subrogation in the CHC case. Mr Wallace argued the 1998 Act confers on the ICC only a right of subrogation in relation to company assets in the liquidation.

The ICC contended its right to subrogate to the claim of a compensated investor extends to the investor’s right to maintain claims, not only as against company assets, but also as against certain client assets held by CHC.

The ICC did not accept the claim was limited in the way suggested by Mr Wallace and pointed out its subrogation claim had already been accepted in the case of two other wound up stockbroking firms.

The ICC asserted, among other things, its right of subrogation under the 1998 Act made it a creditor in the liquidation.

The case came before Mr Justice Mark Heslin, with ICC seeking a number of reliefs in relation to its claims and Mr Wallace, in his role as administrator, opposing them.

Mr Justice Heslin said it was common case that Mr Wallace did not take account of estimated future recoveries of misappropriated assets when calculating eligible investors’ net losses to date.


The ICC maintained the calculation of “net loss” must take into account actual recoveries and estimated future recoveries from the date of the commencement of the liquidation and the delivery of a statement to the ICC specifying the relevant investors’ net loss and compensatable loss, he said.

The ICC’s position was that events after the liquidation date were relevant to the proper calculation of net loss, the judge said.

Mr Wallace, in his role as administrator but not liquidator, said he was not required to take into account actual and/or estimated future recoveries of money owed or belonging to the clients of CHC when calculating “net loss” for the purposes of the 1998 Act.

Any recoveries of money after the 2011 winding-up date of CHC must not be taken into account when calculating net loss, he argued.

The court heard the compensation claims of 574 clients of CHC have been certified and paid to date. Another 1,372 eligible investors in CHC, whose claims were not certified by the administrator, have not yet received any compensation through the ICC.

In his 223-page judgment, Mr Justice Heslin said that central to the ICC’s assertion of a right to equitable subrogation was the proposition that there has been “unjust enrichment” of relevant investors.


He was “not at all” satisfied the ICC has established that there has been any enrichment whatsoever, much less unjust enrichment.

For the 1998 Act to work precisely as it was intended to work, it did not seem to the judge to involve enrichment at all because it does not involve a payment of compensation in excess of what the Act envisages.

He was satisfied the ICC has not established enrichment at the expense of the ICC, or any unjust element.

He was satisfied the ICC was not entitled to the reliefs sought.