Proprietary Claim Case Law

In a recent decision, the Irish High Court held that if an investor has paid money to a firm based on a fraudulent misrepresentation, the payer has a proprietary claim to the payment (In re Custom House Capital; Scott v Wallace 2013 IEHC 559). This is obviously crucial where a firm is in insolvent liquidation. The Irish High Court (Justice Finlay Geoghegan) held that monies held on account by Custom House Capital Limited ("CHC") before its winding up were held on trust for one of its clients. The client of CHC had, between April and July 2009, transferred most of her personal savings and pension funds to CHC for investment, including a sum of €145,000 ($202,000), referred to as a deposit. The client had agreed that the latter sum would be invested by way of a subordinated loan agreement.

The key event in the case was a meeting at the client's home in March 2010, at which the client met with a director of CHC and discussed her investment. The Central Bank of Ireland ("CBI"), (which...