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Judgment
Title:
Dellway Investments & ors -v- NAMA & ors
Neutral Citation:
[2011] IESC 4
Supreme Court Record Number:
396/10
High Court Record Number:
2010 909 JR & 2010 222 COM
Date of Delivery:
02/03/2011
Court:
Supreme Court
Composition of Court:
Murray C.J., Denham J., Hardiman J., Fennelly J., Macken J., Finnegan J., McKechnie J.
Judgment by:
Murray C.J.
Status:
Approved
Result:
Allow And Set Aside
Details:
Judgment of the Court delivered by Murray C.J.
Judgments by
Link to Judgment
Concurring
Murray C.J.
Fennelly J.
Murray C.J., Denham J., Hardiman J., Macken J., Finnegan J., McKechnie J.



THE SUPREME COURT
396/10

Murray C.J.
Denham J.
Hardiman J.
Fennelly J.
Macken J.
Finnegan J.
McKechnie J.



BETWEEN


DELLWAY INVESTMENTS LIMITED, METROSPA LIMITED, BERKLEY PROPERTIES LIMITED, MAGINOTGRANGE LIMITED, MAY PROPERTY HOLDINGS LIMITED, SCI 20 PLACE VENDOME, DIRECTDIVIDE TRADING LIMITED, SUBMITQUEST LIMITED, BELFAST OFFICE PROPERTIES LIMITED, THE FORGE LIMITED PARTNERSHIP, FINBROOK INVESTMENTS LIMITED, CONNIS PROPERTY SERVICES LIMITED, FORMCREST CONSTRUCTION LIMITED, CHESTERFIELD (THE PAVEMENTS) SUBSIDIARY LIMITED, ABEY DEVELOPMENTS LIMITED AND PATRICK McKILLEN
APPLICANT / APPELLANTS
-v-

NATIONAL ASSET MANAGEMENT AGENCY, IRELAND

AND THE ATTORNEY GENERAL

RESPONDENTS
      Judgment of the Court delivered by Murray C.J. on the 3rd day of February, 2011.
This is an appeal of the above named appellants against an order of the High Court refusing their application for certain reliefs by way of judicial review against the above named respondents. The application for relief by way of judicial review, as amended, centred upon a purported decision of the first named respondent, NAMA, to acquire from particular banks’ certain ‘eligible bank assets’, (hereafter eligible assets) within the meaning of s. 69 of the National Asset Management Agency Act 2009. These assets consist of substantial loans made by the banks concerned to the appellants. It is relevant to note at this point that it is common case that NAMA has not actually acquired those eligible assets since it has not taken the necessary legal step pursuant to s. 87 of the Act of 2009. The exercise of its powers under that section is a necessary legal step before any decision to acquire eligible assets has practical or legal effect in that respect.

It would appear that in or about late May 2010 the appellants first became aware that NAMA proposed to exercise its powers pursuant to the Act of 2009 to acquire their eligible assets, that is to say their credit facilities, from both Bank of Ireland and Anglo Irish Bank. The appellants had initiated their application for leave to seek judicial review on July 1st 2010 by way of a motion returnable for July 5th 2010.

Thus no issue arose concerning any delay in applying for leave to bring judicial review proceedings.

The Parties

The Appellants

The first fifteen appellants are companies, bodies corporate and/or partnerships incorporated in the State, in the United Kingdom and in France in respect of which the sixteenth appellant, Mr. Patrick McKillen, has a 50% or 100% beneficial interest. Mr. McKillen is a businessman and property developer. These appellants have extensive loan credit facilities with Anglo Irish Bank and the Bank of Ireland (although the appellants have focused in these proceedings on their loans from the latter which constitute the vast bulk of such loans) which, for the purpose of these proceedings are not disputed as constituting “eligible assets” within the meaning of s. 69 of the National Asset Management Agency Act, 2009 (hereafter referred to as “the Act of 2009”) and Regulation 2 of the National Asset Management Agency (Designation of Eligible Bank Assets) Regulations 2009.

The Respondents

The National Asset Management Agency, commonly and hereafter referred to as NAMA, was established by the Act of 2009 under which, as explained later in this judgment, it has powers to acquire the interest of certain banks in “eligible assets”, including those relating to the appellants. As also explained later in this judgment, relevant to the powers and actions of NAMA is the work of an interim team, from the National Treasury Management Agency, and in particular a purported decision of that interim team to acquire those assets on 11th and 14th December 2009, carried out in anticipation of the establishment of NAMA. The Act of 2009 came into force by virtue of a Ministerial Order under the Act, on 21st December 2009. The Board itself was appointed on 22nd December 2009. The third named respondent is sued in his capacity as representative of the State, the second named defendant.

The Issues
The proceedings in the High Court were heard and determined by a divisional court consisting of the President, Kelly and Clarke J.J. The High Court refused to grant any of the reliefs sought by the appellants.

The approach adopted by the High Court was what it called a “telescoped hearing”, whereby it heard the application for leave and the merits of the application together. It refused leave to apply for judicial review in respect of four grounds and dismissed the appellants’ claim on the merits in respect of the other or fifth ground. That ground concerned the contention of the appellants that there was a breach of their constitutional right to fair procedures by reason of a failure and refusal by NAMA to receive and consider submissions on behalf of the appellants prior to taking a decision to acquire their bank loans as eligible assets.

Section 194 of the Act of 2009 permits an appeal from the High Court to this Court only where the High Court has certified that its decision involves a point of law of exceptional public importance and that it is desirable in the public interest that an appeal should be taken to the Supreme Court.

In this case the High Court granted such a certificate to the appellants and certified a point of law with respect to the fair procedures argument, in the following terms:-

      “…whether the Court was correct in concluding that the applicants did not have a right to be heard prior to a decision of NAMA to acquire loans in respect of which the applicants are borrowers …”.
Having appealed on foot of the said certificate the appellants raised four additional issues in the appeal which are essentially the same four issues in respect of which the High Court refused to grant leave to apply for judicial review. Accordingly all five issues were raised by the appellants in their appeal before this Court.

Four of these issues may be said effectively to arise from the particular decision which NAMA said it took to acquire the loans of the appellants.

A distinct and separate ground was raised concerning the scheme of the Act generally where the appellants claimed that the scope of the power of NAMA to acquire assets was unlawful on the grounds that it was in breach of a European Commission decision approving the NAMA scheme as a State aid measure.

The issues before the Court in this appeal accordingly, were as follows:

      I. (a) Whether the failure or refusal of NAMA to receive and consider submissions from the appellants prior to taking the decision to acquire the relevant eligible assets constituted a breach of their constitutional right to fair procedures.

      (b) Whether any decision taken by NAMA to acquire the loans of the appellants was invalid or unlawful by reason of the failure of NAMA to consider and take into account six matters referred to at paragraph (e) (xvC) of the Statement of Grounds contained in the appellants’ application for judicial review.

      (c) Whether the decision of NAMA to acquire the loans of the appellants with the Bank of Ireland was a nullity because the actual decision was made prior to the establishment of NAMA and was one which could not have been, or alternatively was not, ratified or adopted by NAMA after it was established pursuant to Statute. This issue has been referred to by the parties and in the High Court as the ‘timing issue’ but the Court considers it to be more appropriately characterised as an issue as to whether any decision having a legal effect was made by NAMA. In this particular context a parallel question also arose as to whether s. 17 of the Interpretation Act 2005 could be relied upon by NAMA as permitting it to rely on a decision to acquire taken by the interim team prior to the coming into force of the Act of 2009.

      (d) As an alternative, and as the High Court pointed out as a “fallback” position on the part of the appellants to the above contentions, it was argued that if a proper construction of the Act meant that NAMA was not under an obligation to give a hearing to the appellants prior to a decision to acquire its loans, or that the Act conferred on NAMA a power to acquire both impaired and unimpaired loans, this raised a question as to whether the Act is inconsistent with the Constitution in either or both regards.

      II. Whether the decision of the European Commission dated 26th February 2010 on the NAMA Scheme as a state aid requires that the Agency be precluded from acquiring loans from borrowers that are not impaired?

This latter issue regarding state aid is addressed in the separate judgment of Fennelly J.

Background Facts
The judgment of the High Court comprehensively sets out the factual background to this case; in particular at paragraphs 5.1 – 5.20. These background facts are not an issue and it is not considered necessary to replicate them in this judgment except in part for the purpose of summarising them.

By way of summary, the factual background to the case concerns both the general context of the financial or economic crisis which the State has been experiencing since 2008, and the narrower context of the business carried on by the appellants.

The general or national context of the financial crisis includes the State’s three-pronged policy response to that crisis: enactment of the Credit Institutions (Financial Support) Act, 2008 which provided a statutory basis for the State to guarantee deposits held by lending institutions; measures to recapitalise most of the main financial institutions in the State and to nationalise Anglo Irish Bank; and the establishment of NAMA under the National Asset Management Agency Act, 2009 to address significant losses suffered by banks in the State as a result of the collapsing of the property bubble, through the acquisition of eligible assets from participating credit institutions in order to remove uncertainty about those assets and to alleviate the effect of such uncertainty on the credit institutions in the State.

As the High Court noted at paragraphs 5.4-5.6, the context in which these three measures were taken, particularly concerning those institutions with which Mr. McKillen and his companies have significant loans, is at least of background relevance:

      “It must be recalled that the context in which the bank guarantee was given was the view that, at a minimum, most of the Irish banks were, in September, 2008, arriving at a position where they would be unable to obtain adequate funding to carry on their business. If there had been no major policy intervention, then it seems almost certain that the consequences for some, if not all, of the institutions which became participating institutions in the NAMA scheme, would have been severe. In the case of Anglo, it is now apparent that that bank had become insolvent and having regard to the scale of the losses which have now been shown to have been incurred, it seems certain that, in the absence of major intervention, Anglo would have ceased to trade in any way and would, as a matter of high probability, have gone into liquidation. Mr. McKillen had, of course, significant dealings with Anglo. The other bank with whom Mr. McKillen had major dealings was BOI. There can be little doubt but that the scale of BOI’s problems were less than those in the other participating institutions but, nonetheless, were significant. The Government has been required to place an additional sum of €3.5bn into BOI as a recapitalisation.

      [5.5]…in the absence of some significant executive and legislative response to those problems, it is almost certain that the existing banks operating in Ireland (including those with whom Mr. McKillen had long standing banking relationships) would have ceased to function or, at least, function in any way remotely resembling the traditional model of a bank.

      5.6 While the true scale of losses in at least many of the participating institutions was not apparent at the time when the Act was passed, it does appear on the evidence to have been clear from an early stage that there were very significant losses in the banks which needed to be dealt with in some fashion. In that context, the Government announced in the Spring of 2009 (during the budget speech of the 7th April) that what has now become NAMA would be established. The relevant legislation was published in a preliminary form in July of that year, with the Act being passed by the Oireachtas in November and coming into force on the 21st December, 2009.”

It is also relevant to the appeal to note that prior to, and in anticipation of, the establishment of NAMA under the Act of 2009 a significant level of preparatory work was carried out by senior officials of the National Treasury Management Agency (NTMA). This is germane to the appellants’ argument concerning the legal status of NAMA’s decision to acquire Mr. McKillen’s loans. The facts and evidence relating to this issue are considered in full later in this judgment.

With respect to the narrower context of the appellants’ business activities, Mr. McKillen and the companies in which he has an interest own a portfolio of approximately 62 properties, some 26% of which are located in Ireland, with the remainder in France, the United Kingdom and the United States. According to the expert evidence these properties are valued at between €1.7bn and €2.28bn and generate an annual income in the order of €150m.

Loans secured on those properties with banks in the State who are participating institutions under the NAMA scheme amount to approximately €2.1bn. The status of those loans, namely as to whether the loans could be considered as “impaired loans”, was disputed by the parties in the High Court. However, the Court, having concluded that the loans were “eligible bank assets” within the meaning of section 2 of the National Asset Management Agency (Designation of Eligible Bank Assets) Regulations 2009 (S.I. No. 568 of 2009) (hereafter “the Regulations”), irrespective of whether they were deemed to be impaired or not impaired, considered it unnecessary to express any view as to whether those loans were impaired or non-impaired. The High Court did note that on the uncontested evidence of the appellants, 96% of those properties are let, the majority of the tenants being described as “blue chip tenants on long leases predominantly with a 25 year duration”, and that the income stream thus generated, at an aggregate level, appears to provide interest cover of the loans of between 1.7 and 1.8 times: that is to say, the income is between 1.7 and 1.8 times the interest payable on the loans at current interest rates. As this is an aggregate figure the interest cover on certain individual loans may be lower.

At paragraph 5.13 of its judgment the High Court referred to one particular feature of the appellants’ business model. It noted:

      “Many of the loans in question are for a short term duration. It would appear that there has, in general terms, been a practice for Mr. McKillen to successfully negotiate renewals of such loans from time to time. However, the legal position does also need to be recorded. That legal position is to the effect that adopting a policy of financing long term property investments by short term loans undoubtedly leaves the borrower, to an extent, at the mercy of his banks who are in a position, on a regular basis, to revisit the question of whether they are to lend and, if so, on what terms. A party who, on the other hand, has long term loans, has the added security that, provided the terms of the loan are met, the relevant bank is given no opportunity to re-negotiate the terms of the loan until its expiry. It should also be noted that Mr. McKillen’s property portfolio is geographically spread between Ireland, the United Kingdom, France and the USA with, it would appear, approximately 26% by value representing properties in Ireland.”
It is appropriate at this point to refer to the definition of “eligible bank assets” which may be acquired by NAMA. Section 2 of the Regulations of 2009 provides a broad definition of “eligible bank assets” which may be transferred from participating institutions to NAMA. The principal assets under this definition are what may be termed land and development loans which are held by a borrower, but the definition also covers a wide range of other types of loans held by a borrower who has land and development loans. The definition in regulation 2 of the Regulations is as follows:
      “Eligible bank assets.

      2. The following classes of bank assets are prescribed as classes of eligible bank assets for the purposes of the National Asset Management Agency Act 2009 (No. 34 of 2009):


        (a) credit facilities issued, created or otherwise provided by a participating institution—
            (i) to a debtor for the direct or indirect purpose, whether in whole or in part, of purchasing, exploiting or developing development land,

            (ii) to a debtor for any purpose, where the security connected with the credit facility is or includes development land,

            (iii) to a debtor for any purpose, where the security connected with the credit facility is or includes an interest in a body corporate or partnership engaged in purchasing, exploiting or developing development land,

            (iv) to a debtor for any purpose, where the credit facility is directly or indirectly guaranteed by a body corporate or partnership referred to in subparagraph (iii), or

            (v) directly or indirectly to a debtor who has provided security referred to in subparagraph (ii) or (iii), for any purpose;

        (b) credit facilities issued to, created for or otherwise provided to, directly or indirectly, a person who is or was at any time an associated debtor of a debtor referred to in paragraph (a), whether by a participating institution to which the debtor is indebted or by another participating institution;

        (c) credit facilities (other than credit facilities referred to in paragraph (a) and credit cards) issued to, created for or otherwise provided to, directly or indirectly, debtors referred to in paragraph (a) for any purpose;

        (d) any security relating to credit facilities referred to in paragraphs (a) to (c);

        (e) shares or other interests, or options in or over shares or other interests, in the debtors referred to in paragraph (a), in associated debtors referred to in paragraph (b) or in any other person, which the participating institution acquired in connection with credit facilities referred to in paragraphs (a) to (c);

        (f) other bank assets arising directly or indirectly in connection with credit facilities referred to in paragraphs (a) to (c) or security referred to in paragraph (d), including—

            (i) a contract to which the participating institution is a party or in which it has an interest,

            (ii) a benefit to which the participating institution is entitled, and

            (iii) any other asset in which the participating institution has an interest;

        (g) financial contracts, including financial contracts within the meaning of section 1 of the Netting of Financial Contracts Act 1995 , that relate in whole or in part to bank assets specified in paragraphs (a) to (f), but not including financial contracts between a participating institution and a credit institution or between a participating institution and a financial institution (within the meaning of the Central Bank Act 1997 ).”
As acknowledged by counsel for the appellants, some 2.5%-5% of the appellants’ loans proposed to be transferred to NAMA are loans in respect of land and development; the remainder of the appellants’ loans are unrelated to land and development and come within the definition of an “eligible bank asset” solely by reason of their being owned by Mr. McKillen or the companies or partnerships in which he has an interest.

The Arguments of the Parties
Counsel for the appellants advanced his case on the basis of five distinct arguments, which may be summarised in turn.

Fair Procedures

Counsel for the appellants focused primarily on this argument. It was contended that Mr. McKillen enjoys certain rights connected to his bank loans and that due to interference, or potential interference, with these rights arising from NAMA’s decision to acquire the said loans, Mr. McKillen is entitled to be heard before the decision to acquire is made by NAMA. The appellants contend, in this context, that the Act of 2009 can, and should, be interpreted as affording Mr. McKillen an entitlement to be heard prior to that decision being made.

It was also submitted that the High Court erred in its judgment under this heading, in that the Court misunderstood the constitutional position concerning what constitutes an interference with constitutional rights sufficient to trigger an entitlement to fair procedures; the Court incorrectly applied the test for interference with constitutional rights; and in its assessment of the facts of the case and its interpretation the Act of 2009 the Court failed to address the facts peculiar to Mr. McKillen’s case by reference to the evidence.

The Attorney General on behalf of the respondents submitted that the conclusions of the High Court under this heading were correct. It was submitted that there is no interference or potential interference with any constitutional right which triggers an entitlement to fair procedures in favour of Mr. McKillen, that the test for interference with constitutional rights was correctly applied by the High Court and that, if this Court on appeal was to find that acquisition of the said loans does constitute an interference with the Mr. McKillen’s constitutional rights sufficient to trigger a right to a fair procedures, the exclusion of an entitlement to fair procedures in the Act of 2009 is proportionate and justifiable. It was submitted that the Act of 2009 cannot be interpreted as requiring or permitting an entitlement to be heard.

The NAMA decision to acquire the appellants’ loans

The appellants argued that, in making its decision to acquire Mr. McKillen’s loans, NAMA did not take into account relevant considerations. It was submitted that the High Court erred in finding that NAMA had had regard to certain criteria approved by the Board of NAMA on 7th January 2010 in making its decision to acquire Mr. McKillen’s loans on the 11th and 14th December 2009. It was claimed that while NAMA made its decision to acquire Mr. McKillen’s loans on the basis that the said loans represented a systemic risk or contributed to a systemic risk to the banking system, NAMA had not made any qualitative assessment of the loans in this regard. It was further submitted that the High Court erred in separating its analysis of the Act of 2009 from its analysis of the actual basis upon which NAMA had made its decision to acquire Mr. McKillen’s loans.

On behalf of NAMA and the State it was submitted that the appellants’ arguments under this heading are untenable and have no credible legal basis.

The Legal Status of the NAMA decision

Counsel for the appellants contended that the decision to acquire Mr. McKillen’s loans had no validity in that the said decision was taken before NAMA came into existence under the Act of 2009. It was submitted that the Act of 2009 provides no mechanism for ratification of decisions made before the establishment of NAMA under that Act, that the decision was accordingly not capable of being ratified by NAMA in a legal manner and that, as a matter of fact, NAMA did not ratify or re-make the decision. Counsel submitted that the High Court erred in finding that, as a matter of fact, NAMA had ratified the decision to acquire the eligible assets relating to the appellants.

Counsel for the State submitted that the decision was legally adopted by NAMA subsequent to its establishment under the Act of 2009 and that the High Court’s finding in this regard was correct.

The European State Aid Issue

It is not in dispute that the NAMA scheme and, in particular, the acquisition of Mr. McKillen’s loans, constitutes State Aid within the meaning of Article 107 of the Treaty on the Functioning of the European Union (“TFEU”). Nor is it disputed that the European Commission, in a Commission decision (State Aid Reference No. 725/2009 – 14.4.2010 OJC 94/10) did not raise any objection to the scheme established by the NAMA Act of 2009.

The appellants’ argument under this heading was that the Commission decision has direct effect and that the decision, correctly interpreted in light of materials extraneous to the decision itself, restricts NAMA to acquiring solely “impaired loans”. The respondents contended that this is not a matter within this Court’s jurisdiction to consider and further submitted that, even if the Court has such jurisdiction, on a proper construction of the Commission decision the limitation contended by the appellants is not imposed, and in any case Mr. McKillen’s loans may properly be described as “impaired”.

The Constitutional Issue

As the High Court correctly noted, the appellants posit this argument as a fallback position should the Court find against them on the other substantive arguments. It is submitted under this heading that, if the Court holds that the NAMA Act of 2009 cannot be interpreted as affording Mr. McKillen an entitlement to be heard as regards the acquisition of his loans by NAMA and/or the Act is interpreted as permitting the acquisition of unimpaired loans, the Act is accordingly inconsistent with the Constitution. A second constitutional issue raised is whether the broad definition of “eligible bank assets” in the Act of 2009 and the Regulations, and the lack of guidance provided to NAMA as to the exercise of its discretion in the acquisition of bank loans coming within this definition constitutes an interference with the constitutional property rights of the appellants.

The Attorney General for the respondents submitted that, if this Court finds no interference with constitutional rights, this was sufficient to dispose of both the fair procedures argument and the constitutional issues. It was also argued that the object and purposes for which an acquisition of assets is made under the Act affects only the interests of the Banks concerned rather than the borrowers. Furthermore, a decision to acquire assets could not be affected or was not dependent on the interests of a borrower having regard to the objects and purposes of the Act. Alternatively, if this Court was to find that Mr. McKillen has an entitlement to fair procedures, the Attorney General contended that the absence of any entitlement to fair procedures for borrowers under the Act of 2009 was justified and proportionate, having regard in particular to the purposes of the NAMA scheme under the Act to address a serious and unprecedented disturbance in the economy of the State and the necessity for expedition in the acquisition of eligible bank loans. As to the broad definition of “eligible bank assets”, the Attorney General submitted that this definition is necessarily broad given that the purpose of the Act of 2009 is to acquire all land and development loans which are capable of contributing to the serious risk to the economy and the financial system presented by exposure to such loans.

Relevant statutory provisions
A number of provisions of the Act of 2009 are of particular relevance.

The purposes of the Act

As stated above, the Act of 2009, in its long title, sets out that its purpose is to:

      “address a serious threat to the economy and to the systemic stability of credit institutions in the State generally by providing, in particular, for the establishment of a body to be known as the National Asset Management Agency […].”
Section 2 provides, in more detail, that the purposes of the Act are as follows:
        “(a) To address the serious threat to the economy and the stability of credit institutions in the State generally and the need for the maintenance and stabilisation of the financial system in the State, and

        (b) To address the compelling need–

            (i) to facilitate the availability of credit in the economy of the State,

            (ii) to resolve the problems created by the financial crisis in an expeditious and efficient manner and achieve a recovery in the economy,

            (iii) to protect the State’s interest in respect of the guarantees issued by the State pursuant to the Credit Institutions (Financial Support) Act 2008 and to underpin the steps taken by the Government in that regard,

            (iv) to protect the interest of taxpayers,

            (v) to facilitate restructuring of credit institutions of systemic importance to the economy,

            (vi) to remove uncertainty about the valuation and location of certain assets of credit institutions of systemic importance to the economy,

            (vii) to restore confidence in the banking sector and to underpin the effect of Government support measures in relation to that sector, and

            (viii) to contribute to the social and economic development of the State.”

The acquisition of eligible bank assets by NAMA involves a sequence of steps under separate provisions of the Act of 2009.

Designation of a credit institution as a “participating institution”

Under section 62 of the Act of 2009, a credit institution may apply to the Minister for Finance, within 60 days of the establishment of NAMA under the Act, to be designated as a “participating institution” under s. 67 of the Act. Five credit institutions in total applied and were designated “participating institutions” under this section: Bank of Ireland; Allied Irish Bank; Anglo Irish Bank; Irish Nationwide Building Society; and Educational Building Society.

Section 67(2) of the Act sets out the criteria for the designation of an applicant credit institution as a participating institution:

        “(a) the applicant credit institution is systemically important to the financial system in the State.

        (b) the acquisition of bank assets from the applicant credit institution or its subsidiaries is necessary to achieve the purposes of this Act, having regard to –

            (i) support that

              (I) is available to,

              (II) has been received by, or

              (III) reasonably be expected, or might reasonably have been expected, to be or to have been available to, the applicant credit institution or its subsidiaries from the State, any other Member State or a member of the group of the applicant credit institution,


            (ii) the financial situation and stability of the applicant credit institution and its subsidiaries,

            (iii) the financial situation and stability of the applicant credit institution’s group in the event that bank assets are not acquired from the applicant credit institution or its subsidiaries, and

            (iv) the resources available to NAMA and the Minister, and

        (c) the applicant credit institution has complied with all of its applicable obligations under this Act.”
Provision of information to NAMA by the participating institution

Under section 80 of the Act of 2009, NAMA may direct an applicant or participating credit institution to provide NAMA with information about each of its bank assets that may be an eligible bank asset within the meaning of section 2 of the Regulations of 2009, in order to allow NAMA to make an informed decision either to acquire the relevant asset or to decide on its acquisition value. Section 80(2) makes clear that this includes information on debtors, associated debtors, guarantors and sureties concerned and the enforceability and marketability of the security associated with each such bank asset.

Section 80(3) provides that a credit institution, if it is of the opinion that the bank asset is not an eligible bank asset, must state that fact when providing information on that asset and must also state that it objects to the acquisition of the bank asset and the reason for its opinion.

Under Section 80(5) NAMA may require that any information provided by a credit institution regarding a bank asset is certified as accurate and complete jointly by the chief executive officer and chief financial officer of the institution. Section 80(6) requires credit institutions to disclose “in utmost good faith” all matters and circumstances in relation to each bank asset concerned that might materially affect, or might reasonably be expected to materially affect, NAMA’s decision to acquire the bank asset or the determination of its acquisition value.

It is appropriate to note also that sections 7(2) and 7(3) of the Act of 2009 create two criminal offences that may be committed by a credit institution or an individual, including a borrower whose loans are transferred to NAMA: the first offence concerns the provision of false or inaccurate information to NAMA intentionally, recklessly or through gross negligence; the second offence concerns the withholding of information regarding an asset which has a material impact upon how NAMA deals with or values the asset.

Designation of “eligible bank assets”

Section 69(1) of the Act provides that the Minister for Finance, after consultation with NAMA, the Governor of the Central Bank and the Regulatory Authority (now known as the Financial Regulator), is entitled to designate “eligible bank assets” under that section.

The Minister has, by enactment of the Regulations of 2009 (S.I. 568 of 2009) prescribed the classes of bank assets which constitute “eligible bank assets” for the purposes of the Act of 2009, and has in those Regulations included all classes of bank assets the inclusion of which is permitted under the terms of section 69(2) of the Act of 2009. As already stated, the definition of “eligible bank assets” set out in section 2 of the Regulations and quoted earlier in this judgment is broad. While the principal assets covered by this definition are land and development loans held by a borrower, the definition also extends to a broad range of other types of loans held by a borrower who has land and development loans, simply by virtue of their being owned by that borrower.

Objection to designation of a bank asset as an “eligible bank asset”

Any credit institution participating in NAMA may object to the acquisition by NAMA of a bank asset or assets. However, the sole basis for such an objection under the Act is a review of the decision, the procedure for which is provided for in Part 7 of the Act. There is no express provision permitting a borrower to raise any objections to acquisition of his or her assets.

The Act provides wide scope to NAMA in the acquisition of assets given that section 84 of the Act expressly provides:

      “NAMA may acquire an eligible bank asset of a participating institution if NAMA considers it necessary or desirable to do so having regard to the purposes of this Act and in particular the resources available to the Minister.”
Sections 84(2) and 84(3) respectively provide that NAMA may acquire both performing and non-performing eligible bank assets from a participating institution and that NAMA may pursue acquisition of a bank asset notwithstanding an objection by a participating institution to the effect that it does not consider the asset to be an eligible bank asset. Section 84(4) of the Act sets out a list of fourteen factors which NAMA may take into account in deciding whether to acquire a particular eligible bank asset.

The formal acquisition process

Section 87 of the Act provides that, in order to formally acquire an asset deemed to be an eligible bank asset, NAMA must serve an “acquisition schedule” on the participating institution which holds that asset. An asset may only be included in such an acquisition schedule where its acquisition value has been determined by NAMA in accordance with the valuation methodology provided in Part 5 of the Act.

Once NAMA has served the acquisition schedule on a participating institution, under section 121 of the Act the institution can formally raise an objection to the acquisition value specified in that schedule in relation to a bank asset and NAMA may, on foot of that objection, remove the bank asset from the acquisition schedule, revoke the acquisition schedule or continue with acquisition in accordance with the schedule. Where NAMA decides to continue with acquisition of the bank asset, the participating institution may then only object to the total portfolio acquisition value in accordance with the criteria set out in section 122.

Under section 92 of the Act, payment for the asset(s) acquired by NAMA is effected by way of government bonds issued by the Minister for Finance. Section 97 requires that NAMA must then serve a “completion notice” on each participating institution. This formally completes the entire acquisition process and no further acquisition schedules may be served after service of the “completion notice”.

NAMA does not engage with individual borrowers whose loans are to be acquired until the transfer of each eligible bank asset has been completed. Only then will NAMA engage with the relevant borrowers by, inter alia, inviting the borrower to submit a business plan setting out how the credit facility acquired is intended to be managed and ultimately repaid. As the High Court noted in its judgment, the respondents indicated on affidavit that NAMA, while under no obligation to do so under the Act of 2009, has a policy of meeting with borrowers prior to the transfer of a borrower’s loans to NAMA, where such meetings are requested, in order to answer certain questions or queries that the borrower may wish to raise.

The Powers of NAMA under the Act

Section 12 of the Act of 2009 sets out the powers of NAMA. Section 12(1) provides that:

      “NAMA has all powers necessary or expedient for, or incidental to, the achievement of its purposes and performance of its functions.”
Without prejudice to the general powers of NAMA under subsection (1), section 12(2) then sets out an extensive range of specific powers. As the High Court noted, many of these powers have no bearing on the issues in these proceedings. Powers relevant to the issues in these proceedings include the power to:
        “(a) provide equity capital and credit facilities on such terms and conditions as NAMA thinks fit,

        (d) initiate or participate in any enforcement, restructuring, reorganisation, scheme of arrangement or other compromise,

        (h) distribute assets in specie to the Minister,

        (ee) do all such other things as the Board considers incidental to, or conducive to the achievement of, any of NAMA’s purposes under this Act.”

Part 9 of the Act sets out NAMA’s specific powers in relation to bank assets it has acquired. Under Chapter 2 of Part 9 NAMA has a general power to dispose of assets including by way of transfer, assignment, conveyance, sale or otherwise, to any person, notwithstanding any restrictions on such a disposal at law or equity and notwithstanding any enactment or contractual requirement, including any requirement for the consent of, notice to, or a document from, a third party or any other statutory provision which would otherwise prohibit or restrict such disposal. Chapter 2 also grants NAMA the power to discharge any prior charges on an acquired asset and the power to make applications to the District Court for an order authorising NAMA to enter onto land that is the security for an acquired bank asset.

Under Chapter 3 of Part 9 NAMA has the power to appoint statutory receivers, which is additional to the right to appoint a receiver in the normal course.

Chapter 4 of Part 9 grants NAMA the power to apply to the High Court for a vesting order over land where the chargee’s power of sale has become exercisable and NAMA forms the view that it is unlikely that the sum secured can be recovered by a sale within three months after the application. NAMA in an application for a vesting order must satisfy the Court as to the necessity for such an order and the Court may direct that evidence be given on affidavit. The Court may also direct that notice must be given to any other person. Among its effects a vesting order extinguishes the chargor’s equity of redemption in the land concerned.

Under Chapter 5 of Part 9, NAMA has the power to compulsorily acquire land. NAMA’s exercise of this power is subject to a number of conditions, including the making of an application to the High Court on notice to interested parties, the right of parties affected by such acquisition to raise objections, and the entitlement of such affected persons to compensation.

Chapters 6 and 7 deal, respectively, with NAMA’s general powers in relation to land and in relation to the development of land. Chapter 6 places limitations on certain dealings in land which may have an adverse effect on land held directly or as security for an asset held by NAMA. Chapter 7 grants NAMA the power to engage in the development of land in certain circumstances such as where the High Court has granted a vesting order or where a statutory receiver has been appointed under Chapter 3.

Other relevant provisions

Other relevant provisions of the Act of 2009 include the following:

        “102.— (1) Subject to the provisions of this Act, after a bank asset is acquired by NAMA or a NAMA group entity, the terms and conditions of the bank asset are unchanged.












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