Search News & Insights
EBS fails in attempt to attach pensions funds
PRACTICE AREA GROUP: Employment, Pensions and Benefits
EBS Building Society v Thomas Hefferon and Michael Kearns
Facts: The defendants were the subject of insolvency proceedings instituted by the EBS Building Society (“EBS”). On 9 May 2011, the High Court gave judgment to the EBS against the defendants in the amount of €7,231,891.59, together with costs. In the course of trying to recover this sum, the EBS executed judgment mortgages over numerous properties of the defendants and wrote to them seeking further clarity surrounding their financial circumstances. In response, the defendants confirmed that they were each a member of an occupational pension scheme sponsored by their employer (the “Pension Funds”), the terms of which were identical. No further enquires were raised by the EBS in relation to the Pension Funds, at this time. On 13 March 2012 the High Court, on foot of an ex-parte application by the EBS, made an Order appointing a receiver by way of equitable execution over the Pension Funds and gave liberty to the defendants to apply to vary or discharge the Order. The defendants were seeking in this application to discharge that Order.
Legal issues: The principal issue which the Court had to determine was whether the Pension Funds or any payment thereunder to the defendants in the future was amenable to attachment by way of appointment of a receiver by way of equitable execution.
There was also a subsidiary dispute between the parties. The EBS alleged that there had been “serious non-disclosure” by the defendants in their original statement of affairs concerning the existence of the Pension Funds. The defendants rejected this and further argued that the EBS had not represented the full facts to the Court in its ex-parte application.
Judgment: Mr Justice McGovern first dealt with the subsidiary issue. He was of the view that both parties had been less than forthcoming. However, the fact that the EBS did not raise any further queries regarding the Pension Funds after it had been notified of them and then claimed that the defendants were guilty of “serious non-disclosure” was misleading and calculated to influence the Court in making the Order sought. He accepted that this, in and of itself, was sufficient grounds to discharge the Order of 13 March 2012.
McGovern J. then turned to the principal issue of whether the Pension Funds were amenable to attachment by way of appointment of a receiver by way of equitable execution. He began his ruling by asserting that this was a discretionary remedy.
He accepted the defendants’ argument that for a receiver to be appointed by way of equitable execution the asset in question must be capable of assignment or not otherwise inalienable.
He also accepted the fact that the rules of the Pension Funds expressly provided that the benefits payable thereunder were not capable of assignment. He acknowledged that this was a necessary pre-condition for Revenue approval of pension schemes under the Taxes Consolidation Act 1997.
The defendants’ normal pension age under the Pension Funds was 70 years and accordingly they had submitted to the Court that a receiver could not be appointed over future benefit payments from the Pension Funds. The EBS had rejected this argument and had cited the recent UK cases of Masri v Consolidated Contractors International (UK) Ltd and Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Company (Cayman) Ltd (No2) . The EBS claimed that these cases enabled a receiver to be appointed by way of equitable execution over future pension payments.
McGovern J. rejected the claim that these cases signalled a departure from the rule that a receiver could not be appointed over future pension benefits. In deciding for the defendants McGovern J. confirmed that the nature of the trust underpinning the Pension Funds was irrevocable and the award of any benefits thereunder was at the discretion of the trustees, as the defendants were not the legal or beneficial owners of the assets of the Pension Funds. In addition, the fact that the rules of the Pension Funds prohibited the assignment of any benefits, and that such a rule was also a pre-condition for Revenue approval, was a significant factor in coming to his determination.
Conclusion: McGovern J. concluded that the pension funds of the defendants were not amenable to attachment by way of appointment of a receiver by way of equitable execution
Author: Deirdre Cummins, Associate in the Employment, Pensions and Benefits Group.