[The judgment is now available online here]
It has taken over 30 days of hearings, the court room has been packed to the gunnels with nearly 40 solicitors and barristers, the saga encompassed Bono from U2, Tony Blair, princes, yachts and of course Derek Quinlan “sitting around on his fat arse”, and today we get one ruling on one small – but highly significant for NAMA – aspect of the Paddy McKillen versus the Barclay brothers case in London’s High Court. Earlier this year, a British High Court judge gave an interim ruling which supported Paddy’s claim on a peripheral point in the case. That ruling was appealed to the British Appeal Court. The point at issue was whether or not NAMA had the right to sell the loans in the way that it did. Paddy said it hadn’t. NAMA said it had.
Paddy has lost.
This is the case where secretive Irish property developer Paddy McKillen is trying to stop the 77-year old billionaire Barclay twins from taking control of the company which owns three of London’s most prestigious hotels – Claridge’s, the Connaught and the Berkeley. NAMA was dragged into it because NAMA had sold loans owed to the Agency by the hotel group to a company controlled by the Barclays, and the Barclays can call in the loans and acquire control over shares which will give them 64% majority control over the hotel group. Paddy had claimed that NAMA’s sale of the €800m of loans was improperly executed, and in particular he had not been consulted by NAMA prior to the sale being concluded.
In February 2012, Paddy won his argument on an interim point about whether or not he could rely on the original loan agreement which specified consultation before the transfer of loans, as well as restricting the purchaser to being a finance company. The ruling was appealed from the High Court to the British Appeal Court.
Three Appeal Court judges today overturned the earlier High Court ruling and said NAMA was not obliged either to give the hotel company notice of the sale, or to consult with the company, before transferring the debt to a company controlled by the Barclays.
Paddy had also argued that the company to which NAMA sold the loans was not a company specified in his loan agreement which seemed to confine sales to finance companies, whereas the Barclays company was a special purpose vehicle set up for the specific purpose of enabling the Barclays to take control over the hotel. The judges disagreed. They said ruled that restrictions on transfer of debts contained in the original loan facilities with the banks did not apply to NAMA.
Paddy said he had less than one hour’s notice of the sale, and that this didn’t constitute proper consultation. Again the judges ruled that the original loan facilities terms did not apply.
“Coroin was not entitled either to notice of or to be consulted about the transfer to Maybourne” said the judges, “Coroin” being the company which owns the hotels and whose loans NAMA sold.
Paddy was refused permission to appeal to the Supreme Court and was ordered to pay the legal costs of the case.
A bad day for Paddy. If you listen very quietly you might hear champagne corks popping in NAMA’s HQ. Except that’s not the culture of the place, and they’ll probably just breathe a sigh of relief that the biggest single transaction involving loans at the Agency has not been undermined, and that the Agency doesn’t face substantial damages or legal costs claims. Phew!
The main case between Paddy and the Barclays has not yet been ruled upon.
UPDATE: 27th June, 2012. The ruling from the UK’s Court of Appeal is now available online here.