Custom House Capital Ltd [In Liquidation] v Companies Acts (Approved)

Factual and Procedural Background

Company A was wound up on 21 October 2011, with the Official Liquidator appointed to oversee the liquidation and administration under relevant investor compensation legislation. Over a period of 14 years, significant progress was made in recovering and distributing funds to former clients. However, a residual amount of undistributed and undistributable monies and assets ("rump") remains due to factors such as inability to contact certain clients or insufficient client engagement. The Official Liquidator applied to the court on 2 October 2024 to resolve the issue of how to deal with these remaining funds, with the matter heard on 5 February 2025.

Legal Issues Presented

1. Whether the residual undistributed monies and assets constitute "unapplied or undistributable balances" under section 623 of the Companies Act, 2014;
2. The appropriate legal mechanism for dealing with such undistributable balances at the conclusion of the liquidation;
3. The validity and appropriateness of the Official Liquidator’s preferred approach under the Companies Act, 2014 to lodge these balances to a prescribed account;
4. Consideration of alternative options for dealing with the rump monies, including continuing the liquidation, establishing a trust, or distributing the funds pro-rata to certain clients.

Arguments of the Parties

Official Liquidator's Arguments

• Continuing the liquidation solely to distribute the rump funds is impractical and costly, with estimated costs of over €825,000 for ten years.
• Establishing a trust to administer these funds is undesirable due to lack of interest from trust service providers and significant associated costs, which would reduce amounts available to clients.
• Distributing the rump funds pro-rata to clients who engaged with the Official Liquidator is not justifiable because it would effectively distribute one client’s monies to another without legislative authority and would incur disproportionate costs.
• The preferred option is to apply the statutory process under section 623 of the Companies Act, 2014, which allows for lodging undistributable balances to a prescribed account, thereby concluding the liquidation.
• Client communications will be conducted in accordance with regulatory guidance, with the Central Bank’s support for the application.

Central Bank's Position

• The Central Bank, through its solicitors, does not oppose the Official Liquidator’s application and considers the proposed orders appropriate.

Table of Precedents Cited

Court's Reasoning and Analysis

The court recognized the practical difficulties faced by the Official Liquidator in distributing residual funds that remain undistributed due to client non-engagement or inability to contact. The court considered four possible approaches: continuing the liquidation, establishing a trust, pro-rata distribution to certain clients, or applying the statutory process under section 623 of the Companies Act, 2014.

The court found the first three options to be impractical or legally unsupported. Continuing the liquidation would be costly and indefinite; establishing a trust was financially disproportionate and lacked provider interest; and pro-rata distribution lacked legislative authority and risked misallocation of funds.

The court focused on section 623, which provides a statutory mechanism for lodging unapplied or undistributable balances to a prescribed account prior to dissolution. The court interpreted the phrase "unapplied or undistributable balances" in its ordinary meaning to include the rump monies and assets. This interpretation was supported by legislative history, including the Cox Report and prior Companies Act provisions, which aimed to prevent indefinite liquidations due to undistributable assets.

The court also noted the Central Bank’s non-opposition and the Official Liquidator’s commitment to follow regulatory guidance in client communications. The court declined to consider alternative procedural arguments as unnecessary given its interpretation of section 623.

Holding and Implications

The court GRANTED the Official Liquidator’s application, ordering that all unapplied or undistributable balances of monies beneficially owned by former clients be lodged to the prescribed account under section 623 of the Companies Act, 2014.

The order includes liberty for both the Official Liquidator and the Central Bank to apply further in respect of the order. Costs of the motion are awarded to the Official Liquidator as part of the winding-up costs.

The decision allows the liquidation to be concluded without indefinite extension and without incurring disproportionate costs, providing a legally grounded and practical resolution for the treatment of residual undistributed funds. No new precedent was established beyond the application of existing statutory provisions and legislative intent.