A three judge court will rule on November 1st next on a legal action by property investor Paddy McKillen with important implications for the work of the National Assets Management Agency (Nama), which proposes to acquire some €2.1 billion of Mr McKillen’s loans.
The seven day case concluded today before a three judge Commercial Court, the commercial division of the High Court, comprising the President of the High Court, Mr Justice Nicholas Kearns, Mr Justice Peter Kelly and Mr Justice Frank Clarke. Given the urgency of the case, Mr Justice Kearns said judgment would be delivered at 10am on November 1st.
Mr McKillen and 15 of his companies are seeking 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. The case has implications for Nama’s proposed acquisition of a total €2.1 billion loans held by the McKillen applicants with the five participating institutions in Nama.
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.
Closing the case for Mr McKillen today, 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 BoI 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 the agency enjoyed powers that did not apply to other bank lenders, including exposure to possible criminal sanctions, he added.
The State had denied any right to fair procedures and also contended, if there was such a right, it was totally abrogated with regard to the objectives of the Nama Act 2009 and the overriding national interest to stabilise the financial institutions, counsel noted. His side contended the right to fair procedures should be read into the Nama Act but, if that could not be done, then the Act was unconstitutional.
Mr Murphy argued there is nothing in the Nama Act expressly excluding the right to fair procedures and that any such abrogation would have to be specified. All of the consequences of loan acquisition must trigger a right to fair procedures and prevent a total abrogation of them more radical than involved under some emergency measures.
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 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.
These loans were not impaired, interest payments were all up to date, no notice of default had been served by the banks and it was important normal banking relationships subsisted, counsel added.
When Mr Justice Kearns said all of this proceeded on the assumption the court ignored the reality of what is happening in “the real world outside”, counsel said, notwithstanding the storm surrounding the country and financial system, it was in the public interest that banks maintain the ability to do business with functioning customers.
Earlier, 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. The December 11/14th decision was a preliminary decision with no effect until a schedule of acquisition was served, he argued.
If this was “the only flaw in the Nama framework” and the court dismissed the other claims by Mr McKillen, the court should not grant relief to Mr McKillen as it would in any event be open to Nama to immediately make the decision to acquire the loans, he submitted.
At the conclusion of submissions today, 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 in the case (which would include the issue of constitutionality of the Nama Act).
Mr Justice Kearns said counsel would have to let the court consider how to do its job.
