Paddy McKillen v NAMA – hearing concludes. What next?

Well the much-anticipated hearing has concluded and an army of solicitors and barristers has withdrawn from the court to write up their timesheets so that fees can be billed. This case was heard before a special divisional court of the High Court before three judges, – the President of the High Court Mr Justice Nicholas Kearns, Mr Justice Frank Clarke and the redoubtable Mr Justice Peter Kelly. The special 3-judge court is a reflection of the importance of the case. The Attorney General being tempted from his shell to deliver a personal defence of a case for only the second time since his appointment in 2007 underlines the gravity of the matter.

 

So what happens next? The judges have undertaken to deliver their judgement at 10am on 1^st November, 2010 – just over two weeks away. There have been suggestions that there would be an appeal to the Supreme Court by either losing side. Further appeals beyond the shores to Europe can take years – a far wealthier man than Paddy, Gerald Grosvenor the Duke of Westminster fought a 7-year battle against the British government that had introduced laws to enable leaseholders of flats and houses to buy their freehold or extend their leases. The Duke lost – the European courts ultimately recognising that individual property rights must be subservient to society’s rights. The Duke resigned from the Tory party in a huff following his defeat and then set about maximising his rights and wealth under the new legislation. His case reminds us that a final conclusion to this matter can take some considerable time.

 

As for Paddy’s loans, one of the most concerning aspects about this case has been NAMA’s apparent failure to take over the loans and continue with its processes unless and until the courts decide otherwise. It is not clear if any of Paddy’s loans have transferred. In July reports were suggesting NAMA would refrain from transferring any of Paddy’s loans until the judicial review has been dealt with. Later reports suggested that some of his loans – €80m from Bank of Ireland, had been transferred. And now it seems that between €211-297m is owed by Paddy to BoI – have these loans been transferred? If, as reported in the Sunday Business Post, Paddy’s overall loans from NAMA banks might realise €420m losses if the assets were sold in the short term, then that level of exposure should force NAMA to act now, determine Paddy’s overall exposures – €2.1bn is owing to AIB, Anglo and BoI – how much is owing elsewhere. NAMA needs get to grips with this exposure, at the very least Anglo (100% owned by us), AIB (effectively 90% owned by us) and BoI (36.5% owned by us, but we pull the strings) should mirror the NAMA process of obtaining a NAMA-equivalent debtor business plan and developing a strategy for dealing with this colossal exposure. It is being reported today by the BBC that one of Paddy’s companies, Belfast Office Properties Limited ran up losses of GBP £4.5m last year (compared with a profit of GBP £2m the year before). This is the company that was warned a week ago that it would be struck off for not filing accounts – something now apparently remedied.  The company is reported to own Ards shopping centre in Newtownards.

 

NAMA needs to grasp this nettle now.