Nama drama - showtime for legal eagles on disputed loans

 

The presence of a gaggle of young solicitors in court suggested the whiff of fresh new clients

MR JUSTICE Frank Clarke may look distracted when he flicks his pen in the air repeatedly and catches it without looking, but those familiar with his court know that this is a sign he is concentrating hard, and about to ask a question.

Michael Cush, counsel for Paddy McKillen, was in the third day of his submissions, making the case that his client’s loans should not have been transferred to Nama because they were performing loans.

“Say there are two loans,” Mr Justice Clarke said. “The Bank of Ireland one goes up, the AIB one goes down. Do all the loans get consolidated and I only owe Nama one loan?”

“I think that must be the case,” replied Mr Cush.

Counsel for the State, Attorney General Paul Gallagher was clearly dying to intervene but he restrained himself. “I don’t want to interrupt,” he said.

However, shortly afterwards he began his submission on behalf of the State and clarified that the loans were not amalgamated, they remained separate loans. “The assets can only be taken by Nama, if at all, if the borrower defaults. There is no difference, in truth, than if they are owed to separate banks. There is no diminution in the borrower’s entitlements.”

However, his main focus was on pointing out the legislation was not primarily about the rights of individual borrowers, it was intended to deal with an urgent situation whereby the Government had to act in order to protect the whole financial system. “The Act had to deal with a macro problem, not a micro problem.”

The legislation was published in July 2009 so the financial community had plenty of time to consider it before it was enacted, and those who needed to could refinance their loans, he said. He also pointed out that it was not enough to say that loans were not impaired because interest was being paid on them.

They could also be impaired because they no longer met the required loan-to-value ratio.

Nama had to have discretion in the taking in of loans because the total assets in all the financial institutions in the State exceeded €700 billion, and the Act provided for Nama to have €54 billion available to it.

“So if you didn’t have a discretion allowing Nama not to take an asset the system would collapse. Am I right in thinking that €54 billion was the best estimate at the time?” asked Mr Justice Clarke. “Absolutely,” replied Mr Gallagher.

Mr Cush had insisted it was not the intention of his client to bring down Nama. He only wanted his entitlements to be recognised under the Nama legislation.

He made no suggestion this might have implications for any other borrower whose loans had been taken in by agency. The presence of an unusual number of young solicitors observing and noting in detail the proceedings suggests otherwise.