Tuesday 28 March 2017

McKillen loses legal battle to stop NAMA seizing loans

Emmet Oliver and Tim Healy

PROPERTY developer Paddy McKillen suffered a humiliating court defeat yesterday after losing his fight against NAMA taking over his loans.

Three judges decided that NAMA did not interfere with Mr McKillen's constitutional rights in any meaningful way, leaving him with a potential legal bill of €1m.

Mr McKillen (54) had fought moves by NAMA to take over his loans, arguing that they were not impaired. But after his defeat, future cases against NAMA by other developers are now highly unlikely.

The High Court judgement can be appealed to the Supreme Court by Mr McKillen, but legal experts yesterday were unable to identify any grounds for an appeal.

The judgement, which was welcomed by NAMA, even included comments on Mr McKillen's "business model'', pointing out that he funds long-term property investments with short-term loans. The judgement said this left Mr McKillen and other developers at the "mercy'' of the banks.

Mr McKillen, originally from Belfast but living in Foxrock, Co Dublin, has built up a huge property empire in Ireland and the UK. He and his companies own the Jervis Shopping Centre in Dublin and also upmarket hotels in London like Claridge's and The Connaught.

Mr McKillen's loans could now be moved into NAMA, although this is not likely to happen until the issue of an appeal is cleared up.

The judgement, handed to journalists yesterday, concluded that Mr McKillen's rights were either "not interfered with by the Act'' or interfered with in such a minor way that Mr McKillen didn't need to be heard before his loans were taken over by NAMA.

The judgement also reveals that the judges believe Anglo Irish Bank was insolvent in September 2008 when the Government brought in the guarantee scheme.

NAMA had argued that the size of the loan portfolio represented a "systemic risk" to the Irish financial system justifying acquisition in the national interest.

The case represented the first major challenge to the manner in which NAMA operates but, as the court repeatedly stressed, its [the court's] function was not to consider whether NAMA or other measures adopted by the Government were "the best or even a good solution" to the problems the State faces due to the financial crisis.

Constitutional

The court's task was to interpret the NAMA Act 2009, apply the Act to the facts of Mr McKillen's case and to determine whether the Act, as so interpreted, was within the bounds of what is constitutionally permissible, the court said.

The President of the High Court, Mr Justice Nicholas Kearns, Mr Justice Peter Kelly and Mr Justice Frank Clarke yesterday delivered their 147-page ruling on the case. It ran for seven days and involved the unusual appearance of the Attorney General, Paul Gallagher, the chief architect of the NAMA Act, for the State.

The court ruled that Mr McKillen had failed to make out a case entitling him to prevent the acquisition of the loans and also dismissed his challenge to the constitutionality of the NAMA Act, noting the constitutional challenge was a "fall-back" position if his other claims were rejected.

The NAMA Act, it held, was "a proportionate response to the very grave financial situation in which the State finds itself".

Noting Mr McKillen's arguments that his loans were not impaired, the court said it did not have to address whether they were or not as it was open to NAMA to acquire even non-impaired loans.

There was "ample material" before the court to justify the view it was reasonable for the Oireachtas to decide the relevant loans should be taken "and taken quickly" without determining if there was sufficient impairment of the loans to justify acquisition.

Even if Mr McKillen's loans were not part of the problem, that was not the central consideration as "very many people will be paying, both in jobs and other ways, and for a very considerable time, the price of solving the problems of Irish banks", it said. "The vast majority of those persons had nothing to do with creating the problem."

Irish Independent

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