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Bankruptcy tourism - a matter of public interest

View profile for Jonathan Chadwick
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“Bankruptcy tourism” has become a familiar phrase. The trend for individuals from outside the UK to utilise the court system here to benefit from a more lenient bankruptcy regime has been well documented in the press. The trend continues across the EU but has been particularly highlighted in cases from Ireland in light of the spectacular collapse of the property market there a few years ago.

Michael Bernard McNamara filed his own petition in the UK courts in November 2012. The Registrar duly considered his statement of affairs and supporting witness statement which apparently sought to address some anticipated questions in respect of centre of main interest (“COMI”). The bankruptcy order was made and Mr McNamara’s bankruptcy was administered under UK law.

Mr McNamara’s bankruptcy was a case not regularly seen – he and his companies had amassed debts in the region of 1.5 billion Euros and the National Asset Management Agency were attempting to have a multi million euro judgment registered against him shortly before the bankruptcy order was made. Despite this it was reported that he continued to lead a life of relative luxury.

Shortly after the bankruptcy order was made Times Newspaper Limited issued an application to have access to the court file on the basis that this issue was of public interest. The bankrupt was a well known figure and there was a public interest in discovering what steps were taken to stop any dissipation of assets prior to bankruptcy, what assets were remaining, what security did the banks have and how had he established his centre of interest to be the UK in order for him to avoid the more stringent bankruptcy system in Ireland?

Mr Registrar Baister dealt with that application.  In his judgment dated 13 August 2013 he points out that there are no reported or unreported cases dealing with the court discretion to allow access to a file, without strict entitlement, in insolvency proceedings but here the court was mindful of the permitting access to the file where the application was meritorious. He has decided Times Newspapers Limited should have access to the court file despite Mr McNamara’s objections.  

Whilst their findings will be of great interest to creditors and associates of Mr McNamara alike the public at large may well be curious to find out more given that they as tax payers bailed out the banks in question. However, this is not the opening of the floodgates insofar as access to bankruptcy matters generally is concerned – Times Newspapers Limited was taxed with showing a genuine public interest to justify such access and Mr Registrar Baister stresses that the journalist in question is a serious financial journalist and there is an assurance of no “celebrity” story to his reporting.

We will wait until The Times reveal their findings in respect of such a well known  figure in the property market in Ireland with other strong associations to that country and how his COMI was deemed to the UK with all its leniency!

By Kathryn Maclennan, commercial litigation department

 

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