IT WAS a five-nil rout by Nama in the Commercial Court challenge taken by property developer-turned-investor Paddy McKillen, who will decide by Friday whether to seek to apply for a Supreme Court appeal.

The three referees – High Court President Mr Justice Nicholas Kearns sitting with two senior commercial judges, Mr Justice Peter Kelly and Mr Justice Frank Clarke – sided with the State in rejecting the first legal action against Nama.

The court was at pains to say in its ruling that it had no role in saying whether Nama was good or bad policy – it was there to decide whether it was permissible in fixing the broken Irish banks.

Nama was set up by the Government last year to take toxic loans out of the banks. It plans to acquire loans of €74 billion, including McKillen’s €2.1 billion.

On one of the five issues on which the court was asked to adjudicate – the constitutionality of the Act establishing Nama – the judges looked to the bigger picture, beyond McKillen’s claims the agency trampled over his rights. The legislation setting up Nama was “a proportionate response to the very grave financial situation in which the State finds itself”. The court found there was “a rational basis” for the agency. The State and Nama scored on the other four issues:

Any discretion Nama has to decline an eligible loan was solely for the benefit of the agency and it does not have to carry out detailed analysis before acquiring a loan;

Nama didn’t interfere in any constitutional right McKillen has to fair procedures or it interfered in such a minor way that it didn’t need to hear from him first;

The decision to acquire McKillen’s loans prior to Nama being established was followed up by action after it was set up;

European Commission approval did not limit Nama’s acquisition to impaired loans or loans connected with such loans.

As for McKillen’s claim he should not be eligible for Nama, “scale alone” within the property and development sector was sufficient to contribute to a systemic risk in the financial system, and Nama had broad discretion to acquire any loans.

The three judges recognised Nama was an essential policy decision to fix the banks and even if McKillen’s loans, which he claimed he was repaying in full, were not part of the problem, this was not “a central consideration”.

Loans were not going into Nama as punishment for borrowers but because it is part of policy measures necessary to repair the banks, the judges said.

McKillen wasn’t the only one affected who has claimed not to be part of the problem, they said.

“Very many people will be paying both in money, in jobs and in other ways, for a very considerable period of time, to pay the price of solving the problems of Irish banks,” the judges said. “The vast majority of those persons had nothing to do with creating the problem. Yet they will be required to play their part in its solution to their cost.”

The ruling was so unanimous against McKillen it has no adverse implications for Nama – the agency can continue to acquire loans under the Government’s plan, though it may assess how it corresponds with the borrowers.

In one of the few criticisms in the 147-page judgment, the court found Nama’s response to McKillen’s correspondence was “less than open and transparent” and that “institutions with significant power” can be expected to respond “in a more open and forthright fashion”.

Nama chairman Frank Daly said it would study the court’s decision closely and the ruling highlighted the importance of the agency’s work and “the extraordinary circumstances which led to its establishment”.

The High Court has endorsed the constitutionality of this powerful agency. Now, with legal costs well in excess of €1 million, McKillen must decide whether to bring his grievances further or accept life in Nama.