PROPERTY INVESTOR Paddy McKillen has lost his Commercial Court action to prevent the transfer of some €2.1 billion of his loans to the National Asset Management Agency (Nama).

Nama had argued the size of the loan portfolio represented a “systemic risk” to the Irish financial system, justifying acquisition in the national interest.

The case represented the first major challenge to the manner in which Nama operates. The three-judge court repeatedly stressed that the court’s function was not to consider whether Nama or other measures adopted by the Government were “the best or even a good solution” to the problems the State faced due to the financial crisis.

Its job was to interpret the Nama Act 2009, apply the Act to the facts of Mr McKillen’s case and determine whether the Act was within the bounds of what is constitutionally permissible.

President of the High Court Mr Justice Nicholas Kearns, Mr Justice Peter Kelly and Mr Justice Frank Clarke yesterday delivered their 147-page ruling on the case, which had run for seven days and involved the unusual appearance of Attorney General Paul Gallagher SC, the chief architect of the Nama Act, for the State.

The court ruled that Mr McKillen had failed to make out a case entitling him to prevent the loans acquisition by Nama and also dismissed his challenge to the constitutionality of the Nama Act, noting the constitutional challenge was a “fall-back” position if his other claims were rejected.

The Nama Act, it held, was “a proportionate response to the very grave financial situation in which the State finds itself and which had particular relevance to financial institutions within the State”.

Noting Mr McKillen’s arguments that his loans were not impaired, the court said it did not have to address whether they were or not as it was open to Nama to acquire even non-impaired loans.

There was “ample material” to justify the view that it was reasonable for the Oireachtas to decide that relevant loans should be “taken quickly” without determining, in the case of each borrower, if there was sufficient impairment of the loans to justify acquisition.

Even if Mr McKillen’s loans were not part of the problem, that was not the central consideration as “very many people will be paying, both in jobs and other ways, and for a very considerable time, the price of solving the problems of Irish banks”.

Mr McKillen’s lawyers will indicate on Friday whether he intends to appeal to the Supreme Court.

Mr McKillen and 15 of his companies sought judicial review of the decision of Nama to acquire their Bank of Ireland loans, estimated by them at €211 million and by Nama at €297 million, but the case had implications for Nama’s intention to acquire his €2.1 billion loan portfolio with the five participating institutions in Nama.

Of the five issues in the case, the court ruled that Mr McKillen had shown substantial grounds for leave on one: whether the acquisition breached his rights to fair procedures. Before Nama decided to acquire his loans, he was given no opportunity to argue against an acquisition. He claimed this breached his property and contractual rights, his right to earn a livelihood and his reputational rights.

He was not entitled to any relief because any constitutionally protected rights which he might have were either not interfered with under the Nama Act or interfered with in such a minor way he was not required to be heard before the acquisition, the court ruled.

Arguments by Mr McKillen that he should be able to conduct his business with commercial banks rather than Nama did not amount to a constitutionally protected right not least because, without State intervention, Mr McKillen would not be able to conduct “normal banking relationships” with, for example, either Anglo or Bank of Ireland, the court said.

If it were not for the “extraordinary level” of State support, Anglo would not now exist, it noted.

Mr McKillen would also be able to redeem loans from Nama on the same basis as his banks and his position vis-a-vis his property would be no different under Nama.

The four issues on which the court ruled Mr McKillen was not entitled to judicial review included that Nama failed to take into account relevant considerations when deciding to acquire them.

The discretion given to Nama to acquire eligible bank assets was a discretion solely for Nama’s benefit and did not require it to engage in a detailed analysis, it said.

The court also dismissed the argument that the decision to acquire the loans was invalid because it was made some days before Nama’s establishment on December 20th, 2009.

Rejecting claims that the loans acquisition breached the European Commission’s decision to approve the Nama scheme, the court found the the commission did not require Nama to limit the acquisition of bank assets to loans which were impaired or connected with impaired loans.

It also ruled that Mr McKillen had not raised a substantial argument about the constitutionality of the Nama Act.