SOME of Ireland's biggest developers were last night considering legal action against NAMA following a surprise victory against the bad bank by property tycoon Paddy McKillen.
The Supreme Court found that NAMA took a decision to take over Mr McKillen's loans before the agency was actually set up officially in late 2009. As a result, it said this decision could not stand.
Other developers whose loans were taken over during this time period could now take a legal action against NAMA, claiming their loans were taken over invalidly.
However, NAMA claimed last night the judgment specifically only related to Mr McKillen.
The judgment is the first time NAMA has suffered a legal setback and it is also an embarrassment to the outgoing government, which believed the agency's procedures would stand up to any legal test.
The Construction Industry Federation (CIF) told the Irish Independent it was studying the ruling to see what the implications were for its members.
Developers who talked to the Irish Independent said they sympathised with Mr McKillen and NAMA's "extraordinary" powers were finally being scrutinised.
A seven-judge Supreme Court ruled that a decision by an interim NAMA team to acquire Mr McKillen's €2.1bn in loans had no legal effect because it was taken before NAMA was formally established.
The interim team, led by NAMA chief Brendan McDonagh, decided to acquire Mr McKillen's loans in early December 2009, weeks before the NAMA Act came into force and its first board meetings took place.
NAMA, and some legal observers, have insisted that the decision relates specifically to Mr McKillen's case only and does not have implications for other acquisitions now completed by NAMA.
But developers whose loans were taken over in the first and second tranches by NAMA are now querying whether the decision to do so was in fact legal.
"We're going to take on NAMA now," said one whose loans have been transferred.
NAMA, which described Mr McKillen's borrowings as a "systemic risk" to the Irish financial system, may now have to start all over again and make a fresh decision whether to take over Mr McKillen's loans.
Yesterday, the Chief Justice, Mr Justice John L Murray, ruled the purported "interim" decision to acquire the loans made on December 11 and 14 2009 -- before NAMA was formally established on December 21, 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.
"This is no mere matter of form. It is fundamental to the functioning of a statutory body that it, itself, take such decisions as it is empowered to make by the statute and exercise any discretions conferred on it," the judge said.
"Consequently, NAMA has made no decision to acquire the appellant's loans."
Last night, Labour's finance spokeswoman Joan Burton said she was "surprised" that NAMA appeared to have made quite a basic error when "millions upon millions of euro" had been spent in securing top of the range advice from lawyers, economists, bankers and valuers.
"The disappointment is that, notwithstanding all this expensive advice, and with the apparent urging of the Minister for Finance Brian Lenihan -- who appointed an interim 'managing director' to NAMA seven months before it became legally established -- that interim entity and its successor made what would strike non-legal observers as a quite basic error.
"They took decisions before they had the power to take them and they failed, once they did have the power, to properly adopt and ratify those earlier, provisional decisions," she said.
The Supreme Court unanimously allowed Mr McKillen's appeal after finding NAMA had never at any stage made any legally valid decision to acquire the loans.
The court stressed that it was of "critical importance" in this case that NAMA had never reached the stage of serving on the relevant banks a "loans acquisition schedule" under the NAMA Act 2009.
Serving a schedule would mean actual acquisition of the loans by NAMA and the issue whether NAMA had made a decision to acquire them would then have had to be considered "from a different perspective", it said.
This case was "focused entirely" on the particular circumstances of the McKillen applicants and their loans, the Chief Justice said.
THE Supreme Court has ruled that no decision was taken by NAMA to take over Mr McKillen's loans. The parties will be back before the Supreme Court next Wednesday to decide whether the other issues raised by Mr McKillen -- such as whether he is entitled to fair procedures -- can be resolved by the courts in light of the ruling that no decision was made.