Nama law constitutional, court rules

The Supreme Court has unanimously ruled that National Asset Management Agency (Nama) must allow property investor Paddy McKillen and his companies a right to be heard before it can make any decision on whether to acquire €2.1 billion of loans.

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 seven-judge court said.

The general principles of fairness and due process derived from the Constitution entitled the McKillen side to be informed by the agency 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.

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 stability of the financial system, the agency 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 the agency in dealing with Mr McKillen and its failure over months to confirm it had decided to acquire the loans

It was for the agency to decide how Mr McKillen should be heard and the court was not stipulating there must be an oral hearing, it added. Mr Justice Nial Fennelly and Ms Justice Fidelma Macken indicated written representations would be adequate.

Mr Justice Adrian Hardiman said there was “ample evidence” Nama is regarded by respected financial journals as a “bad bank” and a workout vehicle for toxic assets. He said the attempts by the agency to argue the contrary “parted company with reality”.

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 judges also noted Mr McKillen’s arguments most of his loans were not directly land and development loans, his property portfolio was valued at up to €2.2 billion and interest payments on loans were being met.

The Chief Justice, Mr Justice John Murray, 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 the agency 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.

Welcoming the ruling, a spokeswoman for Mr McKillen said: “We are delighted with the decision today and we have been vindicated by the Supreme Court’s unanimous decision that we have a right to fair procedures.

"Our business is robust with quality assets. All of our loans are fully performing and being repaid and our properties are over 95 per cent occupied with blue chip tenants."

Nama chairman Frank Daly also welcomed the ruling, saying the "outcome of this hearing is an important confirmation of the legal standing of Nama and eliminates any uncertainty in this area".