Nama Act a proportionate response

The behaviour of bankers at the highest level in the years leading to the economic collapse, along with arguments of social order "founded on prudence, justice and charity", are factors justifying proportionate interference by the State via the National Assets Management Agency (Nama) in the banking affairs of individuals, a High Court judge has said.

Mr Justice Peter Charleton said it would be "contrary to the experience of this nation over the last decade" were banks to be given a final decision on whether a loan must be transferred into the agency.

Banks 'spooked'
It was clear from "multiple cases" before the Commercial Court that Anglo Irish Bank led a charge of "ill-considered lending" which "spooked" other banks into imprudent lending resulting in "social anguish".

"Since persons involved at the highest level of banking seem most responsible for this, it would be astonishing were the Oireachtas to give a final decision to any participating bank as to what assets should be transferred to Nama," he said.

He made the remarks when dismissing a challenge to the constitutionality of provisions of the Nama Act brought by a solicitor, Seamus Downes, who had objected to certain loan facilities related to property investments by Mount Kennett Investments Company, in which he was involved with two other solicitors, Dennis McMahon and Paul O'Brien, being transferred to Nama.

Development
Mr Downes, who was a partner with the other two solicitors in a firm in Limerick up to 2006, brought the constitutional challenge as part of his defence to applications by Nama for judgment orders against him. That arose from Nama's takeover of loans given by Allied Irish Banks concerning a development of shops in Castletroy, Limerick, and a guarantee concerning several loan facilities advanced by AIB to Mount Kennett Investments. Substantial judgments were previously obtained against Mr McMahon and Mr O'Brien in other proceedings.

No defence to judgment
The judge, who described Mr Downes as "a man of integrity" who gave sometimes confused evidence due to the weight of obligations he was confronting, ruled Mr Downes had made out no defence to judgment. He will decide the up-to-date judgment figures later but noted figures indicated there was some €1.34 million outstanding related to the Castletroy claim, while the guarantee under which Mr Downes was sued was limited to €5.84 million.

Mr Downes had argued two sections of the Nama Act were unconstitutional on grounds including they breached his rights to property and to earn a living.

While the arguments advanced conjured up “the spectre of Nama as a kind of monster enabled by law to gobble up performing loans and subject borrowers to authoritarian rigour”, the reality had not turned out that way, the judge said. The legislation did not enable imposition of a “despotic burden” on loan holders.

The “real issue” was, if there was any denial of property rights, whether there were arguments of social order, founded on prudence, justice and charity, as set out in the preamble to the Constitution, which justified interference by the State in the banking affairs of individuals as proportionate.