Mark John Wilson & Anor. v Michael Bernard McNamara

The Court of Appeal dismissed the trustees' appeal against the judge's refusal to permit them to raise and litigate an objective justification defence after the Court of Justice of the European Union (CJEU) had decided on questions of EU law on a reference. The key legal principles applied were (i) the binding effect of a CJEU ruling on questions of EU law referred before the end of the transition period, (ii) the distinction between questions of EU law (for the CJEU) and factual or mixed questions (for the national court), and (iii) the national court's procedural case management discretion to refuse late amendments or new factual inquiries.

The subject statutory provisions included section 11 and section 12 of the Welfare Reform and Pensions Act 1999, Article 49 TFEU and the Finance Act 2004 / Schedule 33 formalities for overseas pension schemes. The CJEU had held that section 11, insofar as it required UK tax approval of a pension scheme for exclusion from the bankruptcy estate, was indirectly discriminatory unless objectively justified; but it left the question of whether objective justification existed to the referring national court. The Court of Appeal held that the trustees had not preserved or properly pleaded a defence of objective justification at the preliminary hearing, had ample opportunity to do so, and that the judge’s refusal to permit the late amendment to argue justification was a proper exercise of discretionary case management power.

This appeal concerned whether pension benefits accrued by the bankrupt under an Irish occupational pension (the "Simcoe Scheme") were excluded from his English bankruptcy estate under the Welfare Reform and Pensions Act 1999 (in particular section 11). The trustees sought declarations that the bankrupt's entitlement vested in them and alternatively that a particular transfer was a transaction at an undervalue.

Background and facts:

• Mr McNamara, an Irish national, had an Irish occupational pension established for him; the scheme and the underlying policy were governed by Irish law and at times involved substantial transfers into an Irish policy fund.
• MMC (the original employer) assigned the policy to the Simcoe Scheme trustees and the bankrupt received some payments before bankruptcy but had not received his full entitlement before adjudication in England on 2 November 2012.
• By the time of bankruptcy, Mr McNamara had moved his centre of main interests to the United Kingdom.

Procedural posture: The dispute came before the English court as a preliminary issue directed to be decided largely on agreed or assumed facts. The issue was whether, by reason of EU law and Article 49 TFEU, the Simcoe Scheme should be treated for the purposes of section 11 WRPA 1999 as an "approved pension arrangement" and therefore excluded from the bankruptcy estate. The national court (Nugee J) made a reference to the CJEU. The CJEU (Case C-168/20) concluded that the UK statutory scheme was indirectly discriminatory unless objectively justified, but left the ascertainment of justification and proportionality to the referring national court.

Issues framed and reasoning:

1. Whether the CJEU ruling required the national court to decide the question of objective justification on return of the case: the Court of Appeal held it did not. The CJEU's ruling on EU law was binding but it did not remove from the national court the procedural discretion and competence to determine whether, in the particular proceedings, a factual inquiry into justification should be reopened; factual and evidential matters remained for the national court.
2. Whether the trustees were entitled as of right under national procedure to run a justification defence: the court held they were not. The preliminary issue had been posed and litigated on the basis of indirect discrimination; the trustees had not pleaded or reserved the justification defence nor sought a direction for evidence on the matter before the hearing, and the sequential skeleton procedure put both sides on notice of the issues.
3. Whether the judge abused his discretion in refusing permission to amend or to re-open and permit evidence on justification: the court held the refusal was a proper exercise of case management powers. The proposed new inquiry was late, would require extensive factual investigation (including approaching government departments), and would cause delay and prejudice; the trustees had been put to their election by their earlier conduct and skeletons and had not taken timely steps to preserve the defence.

The Court therefore dismissed the appeal, upholding the judge's case management decision and concluding that the trustees had not shown that national procedural rules or the CJEU ruling required a different result.

Appeal dismissed. The CJEU’s ruling on EU law was binding but did not oblige the national court to re-open factual investigation into objective justification where the parties had not pleaded or preserved that issue at the preliminary hearing; the judge did not abuse his procedural discretion in refusing a late amendment to run a justification defence and his decision fell within the legitimate range of case management choices.

First instance and interlocutory decisions: Mr Justice Nugee at first instance: [2020] EWHC 98 (Ch) (preliminary judgment and reference to the CJEU); on return the Insolvency & Companies List decision: [2022] EWHC 243 (Ch). A reference was determined by the Court of Justice of the European Union in Case C-168/20 (BJ and OV v Mrs M & others) ([2022] 1 WLR 3633). The present appeal was decided in the Court of Appeal as [2023] EWCA Civ 20.