Irish property developer to keep multi-million-euro pension pot despite bankruptcy

An Irish property developer has been allowed to keep his multi-million-euro pension pot despite being declared bankrupt, following a judgment by the European Court of Justice (CJEU).

The property developer, Bernard McNamara, who filed for bankruptcy in the UK after building up large debts, is allowed to keep his pension because the CJEU has ruled that the freedom of establishment enshrined in European Union law precludes rules of UK bankruptcy law.

The trustees of the bankruptcy had claimed that the rights in the insurance policy held in the pension scheme be vested in them for the benefit of the bankruptcy estate, as per UK law. The bankruptcy trustees claim that the pension was worth € 8.5m in August 2020, but this has been disputed by McNamara.

McNamara, a high-profile property developer in Ireland, founded the company MMC under Irish law in December 2002. Through this he also established for his benefit an occupational pension scheme in the form of an insurance policy taken out with Irish Life Assurance (ILA) and governed by Irish law.

In July 2009, he established a new company incorporated under Irish law (S Industries), in which he was a director and employee. S Industries established its own pension scheme governed by Irish law, the only members of which were in fact McNamara, his wife and their son. That pension scheme was approved by the Irish tax authorities as a retirement benefits scheme.

On 7 December 2009, MMC assigned the insurance policy with ILA to McNamara in the main proceedings, his wife and MH. As a result, that insurance policy was included in the S Industries pension scheme. Under that insurance policy, benefits would be paid on McNamara’s retirement or earlier death.

As a result of the financial crisis, MMC was put into receivership in Ireland in November 2010, and he moved to London permanently in July 2011. In April 2012, S Industries, which had opened an establishment in London in December 2011, was also registered in the United Kingdom as an overseas company. McNamara declared himself bankrupt in November 2012.

“In today’s judgment, the Court of Justice holds that EU law precludes a provision of the law of a member state which makes, in principle, the full and automatic exclusion from the bankruptcy estate of pension rights under a pension scheme dependent on the requirement that, at the time of the bankruptcy, the pension scheme be tax approved in that state, where that requirement is imposed in a situation where an EU citizen who had, prior to becoming bankrupt, exercised his right of free movement by moving permanently to that member state for the purposes of pursuing a self-employed economic activity there, has pension rights under a pension scheme established and tax approved in his home member state,” the judgment stated.

The CJEU did find that such a restriction on freedom of establishment may, however, be justified if it furthers an overriding reason relating to the public interest, is appropriate to ensure that the objective it pursues is achieved and does not go beyond what is necessary to achieve that objective.

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