[UPDATE: 4th February, 2012. The judgment is now available online at bailii.org and is discussed in an update at the bottom of this page]
Coincidentally a million euro for every minute of notice that was given by NAMA to Paddy McKillen last September in advance of the sale of €800m of loans by the Agency to the Barclay brothers, Frederick and David – that’s a speculative estimate going around London of the damages that businessman and property investor – not property “developer” as he will insist until he’s blue in the face – Paddy McKillen may eventually claim from NAMA, after Paddy won what was a preliminary court case in London’s High Court yesterday. It’s a good job NAMA only gave Paddy a paltry 57 minutes notice of the sale!
Yesterday’s win by Paddy means that he has been given leave by the UK courts to challenge the purchase of the loans – which relate to the Maybourne group of 5-star hotels in London : Claridges, the Berkeley and the Connaught – by the billionaire Barclay twins. The purchase which was announced by NAMA in September 2011 meant that Paddy’s existing shareholding and control of the Maybourne group was threatened as the loans apparently gave the Barclay twins more control over the equity of the company, adding to a stake that they had been building-up in the company for a year previously.
Following yesterday’s ruling, the full hearing of the issues in Paddy’s case is due in March 2012, and whilst yesterday’s victory for Paddy merely means that he can argue that NAMA unlawfully transferred to loans to the Barclays, it is a boost to his case as neither NAMA nor the Barclays were seemingly able to convince the judge at this stage that restrictions did not apply to the sale of the loans.
To be honest, I thought we had seen the final chapter and epilogue in the Paddy and NAMA saga last September 2011. After all, NAMA had failed in its defence of Paddy’s legal challenge to the Agency’s right to take over his loans without consultation beforehand. And NAMA had stated that it was not proceeding to acquire Paddy’s loans. Paddy had been awarded costs in the case. And NAMA had seemingly sold its remaining loans in a company in which Paddy had a controlling interest. But now, there is the possibility that not only might the €800m transaction – the largest single transaction thus far for NAMA – be undone, but Paddy might shake €50m-odd out of the Agency’s coffers in damages plus several million more in costs. Seems like we might need to start a new book….
Yesterday’s decision may also have put a halt to the Barclay twins’ plans for a rights issue which might have seen Paddy’s control of Maybourne further diluted. The judgment yesterday is not yet available online though there is another preliminary judgment from December 2011 in which Paddy lost on several points, available here. NAMA has not commented on yesterday’s development. Paddy’s spokeswoman has said no statement is being issued to the media at this stage.
UPDATE: 4th February, 2012. The judgment is now available online here. At issue at this preliminary hearing was whether Paddy was entitled to rely on terms in his agreement with NAMA as to NAMA’s rights to sell his loans. In particular, Paddy argued that he was entitled to rely on two terms in his agreement with NAMA (1) that if NAMA was to sell the loans, the sale was to be another lender and (2) that Paddy was to be consulted. NAMA argued that NAMA was not entitled to rely on these terms by virtue of NAMA’s overarching rights in relation to acquired loans, granted to NAMA in the NAMA Act. In a nutshell, Paddy won the right to argue both points at the full hearing scheduled for March 2012. This will be a major blow to NAMA, because the company to which NAMA sold the loans, Maybourne Finance seemingly doesn’t meet the requirements of being “another bank or financial institution or a trust fund or other entity regularly engaged or established for the purpose of making, establishing or investing in loans, securities and other financial assets “and if newspaper reports are correct, Paddy was given a mere 57 minutes notice of the sale, which hardly seems like fulfilling the condition of “having first notified and consulted with the Borrower in relation to such proposed assignment or transfer”