A THREE-JUDGE court will rule on November 1st on a legal action by property investor Paddy McKillen with important implications for the work of the National Asset Management Agency (Nama), which proposes to acquire some €2.1 billion of his loans.
The seven-day case concluded yesterday at the Commercial Court, comprising president of the High Court Mr Justice Nicholas Kearns, Mr Justice Peter Kelly and Mr Justice Frank Clarke.
Mr McKillen and 15 of his companies are seeking a judicial review of the decision of Nama to acquire their Bank of Ireland loans, estimated by them at some €211 million and by Nama at €297 million. Nama proposes to acquire a total of €2.1 billion loans held by the McKillen applicants.
Nama contends the size of the loan portfolio represents a “systemic risk” to the Irish financial system justifying acquisition of the loans in the national interest, but Mr McKillen denies that is the case and insists his loans are performing and not impaired. He also contends the intended acquisition breaches his constitutional rights to property, to earn a livelihood, to his good name and to fair procedures.
Nama was set up by the Government last year to remove the most toxic loans from the banks. It is acquiring land and development loans and associated investment property and other loans totalling €73 billion from five banks: Anglo Irish Bank, Allied Irish Banks, Bank of Ireland, Irish Nationwide Building Society and the Educational Building Society.
Closing the case for Mr McKillen yesterday, Shane Murphy SC urged the court to reject the “apocalyptic” scenario painted by Attorney General Paul Gallagher if Nama could not proceed with its plan to acquire the McKillen loans.
Mr Murphy argued the consequences of acquisition of Mr McKillen’s loans included the end of his relationship with his banks, including a 30-year relationship with Bank of Ireland and a 20-year relationship with Anglo, and the forced substitution of a relationship with Nama, perceived as a bad bank dealing with toxic loans.
A relationship with Nama also exposed Mr McKillen to a regime where Nama enjoyed powers that did not apply to other bank lenders, he added.
The court’s task was to review the exercise of a public law statutory power and to assess a decision purportedly made by Nama on December 11/14th last – to acquire the McKillen loans – as the basis for its actions, counsel said. That December 11th/14th decision was taken prior to Nama coming into being on December 21st and was therefore invalid.
Arguments that the December 11/14th decision was valid because it was adopted during some later “amorphous” process akin to a “stream of consciousness” involving Nama board members could not be correct, counsel added.
Nama was contending the decision was grounded on its view the €2.1 billion loans represented a systemic risk but before reaching such a conclusion, it was required to take into account relevant factors, such as the diversity and location of the assets, but had failed to do so.
In concluding arguments for the State, Maurice Collins SC denied the intended loan acquisition was unlawful because the decision to acquire the loans was taken by members of the National Treasury Management Agency on December 11/14th 2009, prior to the formal establishment of Nama on December 21st.
This was an “entirely technical complaint”, the evidence was consistent with a continuing intention by Nama to acquire the McKillen loans and nothing had changed in that regard, counsel said.
Michael Cush SC, for Mr McKillen, asked that, even if the court found against his side on one point or held it was entitled to succeed on one point, it should still rule on all of the issues raised.
Mr Justice Kearns said counsel would have to let the court consider how to do its job.
