The Cannon Kirk group of property development firms are suing over an alleged €15 million loans redemption "penalty" imposed by a Nama company.
More than 20 corporate entities in the group, along with Michael Cannon, Cathal Cannon, Seamus Cannon and Owen Kirk, have brought the High Court case against National Asset Loan Management Designated Activity Company (NALM)
The ex parte application for permission to bring the action against NALM was granted on Wednesday by Mr Justice Paul Gilligan who said he was satisfied a substantial issue had been raised. Under the Nama Act, the High Court has to grant permission for proceedings against Nama or its subsidiaries.
Seeking leave to bring the case, Lyndon MacCann SC, with Niall Buckley, said the group, having secured a deal for alternative financing, wants to redeem its loans taken over by NALM but cannot do so because of a €15 million redemption fee sought by NALM. That fee was "impermissible" and unlawful, he argued.
Outlining the background, counsel said loans advanced to the group by AIB in 2010 were taken over by Nama, which transferred them to NALM.
Over time, the group has reduced its indebtedness in respect of the loans by more than 50 per cent, he said.
Loan facilities
In February 2016, the group executed an agreement for extension of certain loan facilities held by NALM which were due to expire in March 2016.
As part of the agreement to extend the facilities, NALM included a clause whereby the group would have to pay a redemption fee of €5 million, plus a further monthly fee of €1.5 million on top of that and NALM says a total of €15 million is due and owing, counsel said.
That clause in the agreement “operates as a penalty” and an “impermissible clog” in regard to loan redemption, he said.
The fees are not related to the quantum of the group’s debt to NALM, he added. “The fees being charged are due whether €100 million or one cent is owed.”
NALM’s demand for payment of the €15 million fee could put the group’s business at risk, he added.
In their action, the plaintiffs seek declarations including the clause in the 2016 agreement relating to payment of a redemption fee constitutes a penalty clause and is void and unenforceable. They want an order for repayment of all money paid to date to NALM under the clause.
They are also claiming damages for alleged intentional interference with their economic interests and alleged breach of contact and breach of duty.
The case has been adjourned to later this month.
