A SEVEN-JUDGE Supreme Court has unanimously ruled that property investor Paddy McKillen is entitled to an opportunity to make representations to Nama before it can decide whether or not to acquire some €2.1 billion loans of his companies.
However, the court dismissed his claim that a portion of the Nama Act was unconstitutional.
Mr McKillen claimed the definition of “eligible bank assets” in Section 69 of the Act was so broad it constituted an unjust attack on his property rights.
In a judgment on behalf of the court, the Chief Justice Mr Justice John Murray, ruled the criteria according to which Nama must exercise its discretion are sufficiently set out and did not give the agency an arbitrary or untrammelled discretion to acquire assets.
But the general principles of fairness and due process derived from the Constitution entitled the McKillen side to be informed by Nama of any intention to consider making a decision to acquire their loans and to be give an opportunity to make appropriate representations in advance of any decision, the court ruled.
There was a real risk the property and contractual rights of Mr McKillen and his companies may be directly and adversely affected by any proposed loans acquisition, the court said.
The State and Nama had failed to show any evidence or urgency justifying abrogation under the Nama Act 2009 of the right of persons in the position of the McKillen appellants to be heard, it added.
While the State claimed acquisition was urgent because of the financial crisis and the loans represented a “systemic risk” to the financial system, Nama failed to act on its purported December 2009 decision to acquire the loans prior to Mr McKillen challenging that decision in summer 2010, the court noted.
It also criticised the “furtiveness” of Nama in dealing with Mr McKillen. It was for Nama to decide how Mr McKillen should be heard and the court was not stipulating there must be an oral hearing, it added.
While stressing the court did not have to decide whether the McKillen loans were “impaired”, he said there was no evidence of that and he was also far from satisfied the State was correct in its claim the size of the McKillen loans was the sole critical factor in assessing risk.
Mr Justice Joseph Finnegan noted the McKillen side’s equity of redemption was capable of being adversely affected by any loans acquisition. The differences between the McKillen side’s commercial relationship with their bankers and the relationship with Nama adversely affects them in a manner sufficient to give rise to a right to be heard, he said.
The Chief Justice stressed the court’s decision on the right to be heard does not affect the fundamental functioning of the system established under the Nama Act but rather affects the procedures to be followed by Nama in considering whether to acquire eligible bank assets.
The court was giving its reserved judgments on outstanding issues raised in Mr McKillen’s appeal against the High Court’s rejection last year of his challenge to the proposed acquisition of the loans.
Last February, the Supreme Court allowed Mr McKillen’s appeal after upholding another argument by him that Nama never made any lawful decision to acquire the loans but had deferred its decision on other issues.
Yesterday, Mr McKillen’s “fair procedures” or right to be heard argument was upheld in six separate judgments delivered by the Chief Justice, Ms Justice Susan Denham, Mr Justice Hardiman, Mr Justice Fennelly, Ms Justice Macken and Mr Justice Finnegan. Mr Justice Liam McKechnie concurred.
Section 84 of the Nama Act, which gives Nama the power to acquire “eligible bank assets”, must be construed in accordance with the principles of constitutional justice so as to require Nama to grant to borrowers in a position similar to Mr McKillen the opportunity to make representations to Nama before it decides to acquire those assets, the judges ruled.
Section 84 confers a discretionary power on Nama to acquire assets and such a decision affects directly and individually the particular borrower(s), they found. The Act required Nama to take into account representations made on behalf of the McKillen appellants, having regard to their particular circumstances.
