Treasury Holdings was yesterday granted permission by the High Court to mount a legal challenge to Nama’s decision to call in its loans and appoint receivers over its properties here.
The group, the High Court noted, is insolvent with overall debt of €2.7bn. Nama acquired €1.7bn of those loans in 2010 and the loans called in amount to over €1bn.
Granting leave to Treasury and 22 related companies for judicial review, Ms Justice Mary Finlay Geoghegan stressed she was not expressing any definite view on the legal and factual issues raised by the group, other than it had met the necessary threshold of raising “substantial” issues to be tried.
She also said Nama was entitled to proceed with an application seeking a fortified undertaking for damages from Treasury founders Richard Barrett and John Ronan and/or security for costs. Paul Sreenan SC, for Nama, said it will consider that issue and will outline its position when the case is mentioned before the court again next Tuesday.
In her judgment, Ms Justice Finlay Geoghegan found Treasury had raised substantial issues for determination by the court, including whether Nama breached its duty to notify Treasury of the decision of Dec 8 2011, to enforce the loans and to give it an opportunity to be heard prior to that decision being taken.
Having regard to Nama’s obligations under the Nama Act, the facts and circumstances of the case and notwithstanding Treasury’s insolvency, Treasury had raised a substantial issue Nama was obliged in Dec 2011 to notify it of the proposed decision and allow it to be heard prior to that decision.
From the materials related to the Nama board decision of Dec 8 2011 to enforce the loans, it was unclear when, or by whom, the recommendation to enforce was made, she said. No part of the board decision was communicated to Treasury until a partial communication of Jan 6 2012, and the fact the board had decided to enforce the loan was only communicated after the legal action was taken.
A 14-day “standstill agreement” between the sides did not deprive Treasury of its entitlement to be granted leave and issues as to the effect of that agreement could not be determined at the leave stage, she found.
Treasury had also raised a substantial issue Nama breached its duty by having its credit committee meet on Dec 6 to receive “a detailed update and recommendation” concerning Treasury’s creditor strategy while extending the deadline to Dec 7 for Treasury’s response to Nama’s concerns about that creditor strategy.
A further substantial issue was whether Nama failed to regard as a relevant consideration the potential availability of an investor/purchase for the loans acquired by Nama from Treasury, she ruled. Treasury had raised a substantial ground no consideration was given to that, she said.
Another substantial issue was whether the decisions to enforce the loans and appoint receivers were public law decisions, she found. KBC Bank, owed €75m by Treasury, had not advanced submissions which would disentitle Treasury to be granted leave, she added.
However, she ruled Treasury had not made out a substantial case that Nama had acted for an improper purpose or in bad faith.
Earlier, outlining the background, the judge said, while Nama did not dispute Treasury’s claims to have co-operated with Nama from the takeover of its loans, Nama appeared to have a different view of the quality of that co-operation.
The breakdown of negotiations for the acquisition by US private equity firm CIM of the Treasury loans acquired by Nama also appeared to have complicated the relationship between the sides.
Nama, she noted, had provided more than €100m working capital to Treasury after acquiring its loans and had expressed serious concerns about issues including its proposed strategy for dealing with creditors and the “TAIL” transaction, under which €20m in shares was transferred by Treasury’s board, when it knew its loans were being transferred to Nama, via a series of transactions to Treasury founders Richard Barrett and John Ronan in return for €100,000 and an unsecured €20m loan note.