Judgment held in McKillen €2.1bn Nama case

A SEVEN-judge Supreme Court has reserved judgment on the action by property investor Paddy McKillen aimed at preventing the National Assets Management Agency (Nama) acquiring €2.1 billion loans made to himself and his companies. Judgment is not expected to be delivered before the new law term opens on January 11th.

The court heard closing arguments yesterday in the appeal by Mr McKillen against a decision of a three-judge High Court last month rejecting the challenge by himself and 15 of his companies to the acquisition of their loans with Bank of Ireland.

The case has implications for €2.1 billion loans held by the McKillen companies with the participating institutions in Nama. The agency has argued the loans acquisition is necessary because that extent of exposure to the financial institutions participating in Nama created a “systemic risk” to those institutions. The appeal was listed for three days but concluded yesterday after a six-day hearing.

In closing arguments for Mr McKillen, Shane Murphy SC said Nama had characterised the McKillen loans as performing, with interest being paid even on expired loans.

Addressing claims by the State that some of the loans involved breached loan to value ratios, he said it was the practice of banks in such situations not to serve demands for repayment but to seek to renegotiate the loans. In this case, the relevant banks had indicated they wanted to continue their relationship with the McKillen companies and those relationships had continued since the Nama scheme came into effect.

The proposed acquisition involved an interference with Mr McKillen’s capacity to carry out his property rights and with his income stream and also impacted on his reputation as Nama was regarded by informed commentators as a bad bank and work-out vehicle. While the State contended the reputational damage to the McKillen side through association with Nama was minimal, it was his case that damage was very significant and a real concern, Mr Murphy said.

Addressing concerns expressed by the judges that any right of the McKillen applicants to be heard by Nama prior to a decision to acquire their loans would have to be extended to other borrowers, Mr Murphy said his clients appeared to be in a “unique” position as no other challenge had been taken to a Nama acquisition.

As only 25 per cent of the bank assets taken in by Nama were generating any income, it was very unlikely many other borrowers would be in a position to argue against acquisition, he added. “We want to be heard, it’s as simple as that.”

It was Mr McKillen’s case that this proposed acquisition involved a radical and unprecedented interference with the constitutional right to fair procedures, counsel said. It seemed the State believed the Nama Act 2009 abrogated the McKillen applicants right to fair procedures on the basis of what the State acknowledged was the “implicit” adoption of a decision to acquire the loans.

Counsel also argued the rights of the McKillen applicants to equity redemption, an income stream from their properties and good name and reputation were independent of their business model and were issues of real substance which went beyond an expectation to be allowed carry on a normal banking relationship.

While the State had made much of the fact normal banking relationships had changed due to the financial crisis, no matter how serious that crisis, it does not extinguish constitutional rights, he submitted.

Earlier, in his closing arguments, Attorney General Paul Gallagher, architect of the Nama Act, said the right to fair procedures is an unennumerated right under the Constitution and, like every right, was subject to restraint in the interests of the common good.