DEVELOPER PADDY McKillen has lined up three senior counsel to take on the State in the first legal challenge by a property developer to the constitutionality of one of the most controversial pieces of legislation produced in this State.
Mr McKillen is resisting Nama’s acquisition of €80 million in loans from Bank of Ireland – one of three lenders participating in the State’s toxic loan plan that he banks with.
He and 15 of his companies are pursuing the first judicial review action against Nama – as reported first by The Irish Times – claiming that the transfer of the loans to Nama would have “a detrimental effect” on their businesses and the value of their properties.
While Mr McKillen and his companies owe money to two other lenders involved in Nama – he owes €800 million to Anglo Irish Bank and further loans to Irish Nationwide – he is using the Bank of Ireland loans to fight this case.
Mr McKillen’s counsel, Michael Cush SC, said he did not see the case as a full-frontal attack on Nama but the action related partly to the agency’s procedures.
Mr McKillen and his companies claim they should be entitled to make representations that his loans are “not eligible bank assets” under the Nama Act, 2009 and should not be transferred.
He claims he should be given “reasonable opportunity” to refinance his loans and those of his companies (with non-Nama lenders) and the opportunity to make representations on the value at which Nama is buying the loans.
Mr McKillen claims the loans are “fully performing” and their transfer will have “a seriously detrimental impact” on the value of the underlying properties.
For example, he said he planned to sell an investment property on Old Bond Street in London for €18.2 million last May, but when he went to enter a contract on the deal he was told by Bank of Ireland that the sale had to be approved by Nama, even though the loan on the property had not yet been acquired by Nama.
He has claimed he stopped buying Irish assets in 1998 thereby avoiding speculative development, the type of activity against which the banks lent heavily and the reason why Nama was set up to deal with the banks’ worst losses.
The case has spurred the State into action.
Nama successfully asked the court to fast-track the action into the Commercial Court list for hearing on October 12th in yesterday’s application to court.
Ann Nolan, assistant secretary general at the Department of Finance, who has overseen the Nama project for well over a year, outlined in detail in a court submission Nama’s importance to the banking system and the economy.
The very existence of the claims in Mr McKillen’s action, which include “an attack on the constitutionality of various provisions in the 2009 act”, pose “a very real threat to the vital work of Nama that must continue, and be seen to continue, in order to increase and maintain confidence in the Irish banking sector and thereby strengthen and protect the economy of the State”, she said.
A perception that Nama is “flawed and may falter” would “undermine the building of confidence within international financial markets which the ongoing work of Nama seeks to foster”, she argued.
