McKillen wins Supreme Court appeal against Nama

PROPERTY INVESTOR Paddy McKillen and his companies have won their Supreme Court appeal aimed at preventing the National Assets Management Agency acquiring their €2.1 billion loans.

The seven-judge court yesterday unanimously allowed the appeal after finding Nama had never at any stage made any legally valid decision to acquire the loans.

As a result of the judgment, it appears, if Nama still wants to acquire the McKillen loans, it will have to make a formal decision to that effect and restart the process.

This case was “focused entirely” on the particular circumstances of the McKillen applicants and their loans, the Chief Justice, Mr Justice John Murray, said.

Given its finding that no valid decision was made to acquire the loans, the court did not make findings on three other issues raised but it did reject a fourth claim the proposed loans acquisition breached the European Commission (EC) decision approving the Nama scheme.

The court will next Wednesday consider arguments whether the three other issues, including the constitutionality of provisions of the Act and whether a right to fair procedures applies, should be determined. Those issues could be considered contingent on whether Nama had taken a valid decision and there was an issue about their justiciability, the court said.

Mr McKillen and 15 of his companies had appealed against a three-judge High Court decision last November refusing to halt the loans acquisition. The case relates to the McKillen loans with Bank of Ireland but has implications for their €2.1 billion loans with the participating institutions in Nama.

Nama had argued the extent of that exposure represented a “systemic risk” to the relevant institutions but Mr McKillen denied any such risk and argued his loans were performing.

Yesterday, the Chief Justice ruled the purported “interim” decision to acquire the loans made on December 11th and 14th 2009 by a team doing preparatory work for Nama, before Nama was formally established on December 21st, 2009, was invalid and of no legal effect.

Contrary to what the High Court had decided, that interim decision was not given legal effect by any subsequent act or series of acts by Nama, he also ruled.

The interim team (including Brendan McDonagh, later appointed CEO of Nama) was set up after the Minister for Finance directed the National Treasury Management Agency to provide staff for a team to do preparatory work in anticipation of Nama’s establishment.

Ruling on the EC issue, Mr Justice Nial Fennelly rejected arguments the proposal by Nama to acquire the McKillen loans would amount to unlawful State aid.

That argument was based on an incorrect view the February 2010 EC decision permitting the Nama scheme required Nama to consider whether loans were impaired before making any decision to acquire them, he ruled.

The EC decision imposed no obligation on Nama to acquire only the loans of impaired borrowers, he said.

The State had duly notified to the EC of its proposal to implement a State-aid scheme via Nama, the EC had considered the scheme was compatible with the EU Treaty and had not objected. It followed the Nama scheme may be implemented.