High Court of Ireland Decisions

1. The applicants seek leave pursuant to ss. 182 and 193 of the National Asset Management Agency Act 2009 (“the Act”) to issue judicial review proceedings seeking, primarily, an order of certiorari quashing a decision of the first named respondent, the National Asset Management Agency (“NAMA”), taken on 8th December, 2011, to enforce the securities held for multiple loans to the applicants, and if necessary, an order quashing a further decision of 25th January, 2012.

2. The applicants are all companies within the Treasury Holdings Group. In this judgment, I propose referring to them collectively as “Treasury” or simply the “Group”. In some specified contexts, this will not include the last named applicant which is not indebted to NAMA.

3. The first named respondent is established by s. 9 of the Act, and the second named respondent is a NAMA group entity as provided for by the Act. They are referred to collectively as NAMA in this judgment.

4. By order of the High Court of 26th January, 2012, Ireland and the Attorney General were joined as respondents. Treasury, in the intended proceedings, seeks, inter alia, declarations that certain sections of the Act are invalid, having regard to the Constitution, and are incompatible with the State’s obligations under the European Convention of Human Rights. They also sought, in the initial motion, if necessary, an interlocutory injunction in aid of the constitutional reliefs in accordance with the decision of the Supreme Court in Pesca Valentia Ltd. v. Minister for Fisheries [1985] IR 193. At the hearing, Treasury withdrew all applications for interlocutory injunctive relief. Also, no application was made pursuant to ss. 182 and 193 of the Act for leave in relation to the constitutional reliefs. The State, in its written submissions, had contended that leave was not necessary under either section to pursue the constitutional claims. Accordingly, the State did not make oral submissions.

5. On 26th January, 2012, on each of their respective applications, KBC Bank Ireland plc. (“KBC”), Irish Bank Resolution Corporation Ltd. (“IBRC”), Luke Charlton and David Hughes were joined as notice parties. Amongst the Treasury facilities taken into NAMA was a syndicated facility in relation to the Spencer Dock Development. NAMA, as successor to Allied Irish Banks plc. (“AIB”), and IBRC, holds 75% of the syndicated loan and KBC the remaining 25%. Mr. Charlton and Mr. Hughes are the receivers purportedly appointed on 25th January, 2012. IBRC is the agent and security trustee for the finance parties and secured beneficiaries under the syndicated loan agreement. At the outset of the oral hearing, counsel appeared for IBRC, Mr. Charlton and Mr. Hughes and indicated that they did not wish to participate in the oral hearing on the leave application.

Application for Leave

6. This application is only for leave to issue judicial review proceedings. There are limited issues which the Court should determine. They are, for the most part, dictated by ss. 182 and 193 of the Act. There appears to be only one area of dispute between the parties as to how the Court should approach the application. Section 182 (insofar as relevant) provides:

“(1) Subject to subsection (2), a claim to which this Chapter applies gives rise only to a remedy in damages or other relief that does not in any way affect the bank asset, its acquisition, or the interest of NAMA or the NAMA group entity or (for the avoidance of doubt) any property the subject of any security that is part of such a bank asset.

(2) A person may apply for an order that the person may apply for a remedy other than or in addition to that permitted by subsection (1) in relation to a claim to which this Chapter applies.

(3) An application for an order mentioned in subsection (2) shall be made only by leave of the Court. An application for such leave may be made ex parte.

(4) Leave shall not be granted to apply for an order under subsection (2) unless the Court is satisfied that the application raises a substantial issue for the Courts determination and–

. . .

(5) If the Court grants leave to apply for an order under subsection (2), the applicant shall serve on NAMA the order granting leave and the application.

(6) The Court shall make an order under subsection (2) if and only if the Court is satisfied that if the applicant’s claim were established, damages would not be an adequate remedy.

. . .”

7. Section 193, insofar as relevant, provides:

“(1) Leave shall not be granted for judicial review of a decision under this Act unless–

(a) either–

(i) the application for leave to seek judicial review is made to the Court within one month after the decision is notified to the person concerned, or . . .

and

(b) the Court is satisfied that the application raises a substantial issue for the Court’s determination.

. . .”

9. The parties are in agreement that the approach of the Court to the determination of what constitutes “a substantial issue” should be the approach of Carroll J. in McNamara v. An Bord Pleanála [1995] 2 ILRM 125, and as approved of by the Supreme Court in The Illegal Immigrants (Trafficking) Bill, 1999 [2000] 2 IR 360.

10. In McNamara, Carroll J. considered the phrase “substantial grounds” and stated as follows at p. 130:

“What I have to consider is whether any of the grounds advanced by the appellant are substantial grounds for contending that the board’s decision was invalid. In order for a ground to be substantial it must be reasonable, it must be arguable, it must be weighty. It must not be trivial or tenuous. However, I am not concerned with trying to ascertain what the eventual result would be. I believe I should go no further than satisfy myself that the grounds are ‘substantial’. A ground that does not stand any change of being sustained (for example, where the point has already been decided in another case) could not be said to be substantial. I draw a distinction between the grounds and the various arguments put forward in support of those grounds. I do not think I should evaluate each argument and say whether I consider it sound or not. If I consider a ground, as such, to be substantial, I do not also have to say that the applicant is confined in his arguments at the next stage to those which I believe may have some merit.”

12. In Dellway Investment Ltd & Ors v. National Asset Management Agency & Ors [2010] IEHC 375, the Divisional Court decided that statutory language in s. 193 of the Act was similar to that contained in the Planning and Development Act 2000 and in the Illegal Immigrants (Trafficking Act) 2000 and that the applicants should therefore satisfy the test set out by Carroll J. in McNamara. The Court then went on to consider each ground advanced before deciding whether or not it constituted a substantial ground. In Daly & Ors v. NAMA & Ors (the High Court, Unreported, Peart J. 12th September, 2011), Peart J. followed this approach and considered whether each of the grounds advanced was a substantial ground for the purpose of deciding the leave application pursuant to ss. 182 and 193 of the Act.

13. In this application, counsel for Treasury submits, in reliance, in particular, upon the difference in wording between s. 193 of the Act and the sections in the Planning and Development Act and Illegal Immigrants (Trafficking) Act 2000, that once the Court is satisfied that one of the grounds advanced by Treasury raises a substantial issue for the determination of the Court as to whether Treasury is entitled to orders of certiorari of the decisions of NAMA of 8th December, 2011, and 25th January, 2012, then the order granting leave should include any additional grounds which meet the standard prescribed by the Supreme Court in G. v. Director of Public Prosecutions [1994] 1 I.R. 374. In accordance with that decision, a ground must support an arguable case in law to the effect that the applicant is entitled to the relief sought. Treasury submits that the Court should have regard to the change in wording in s. 193 of the Act to the prior analogous provisions. Further, it submits that, as it is a section which limits a constitutional right of access to the courts, it should be narrowly construed and the Court should have regard to the limitation on the right of appeal to the Supreme Court in s. 194 of the Act. Counsel for NAMA disputes this construction, invites the Court to follow the approach of the Divisional Court in Dellway and Peart J. in Daly, where this issue was not raised, and to have regard to the purpose of the legislature in enacting ss. 182 and 193, having regard to the overall purposes of the Act and the purposes of NAMA as prescribed by s. 10 of the Act, and, in particular, subs. 10(1)(b) to deal “expeditiously with assets acquired by it”.

14. In my judgment, the Court, in hearing an application for leave to issue judicial review proceedings to which s. 193 of the Act applies, should only grant leave on those grounds which raise a substantial issue for determination by the Court as to the applicants’ entitlement to the relief sought. My reasons for so concluding are as follows.

15. Order 84 of the Rules of the Superior Courts applies to all applications for leave to issue judicial review. On hearing an application for leave, the Court, in an application not governed by a statutory provision, will consider, in accordance with the decision of the Supreme Court in G. v. DPP., whether the applicant, on each of the grounds advanced, has demonstrated an arguable case in law for entitlement to the relief sought. In accordance with the well-established practice, leave will only be granted on those grounds which meet that threshold.

16. The intention of the Oireachtas in enacting s. 193(1)(b) is to raise the threshold in a leave application from an arguable case in law to “a substantial issue for the court’s determination”. There is no intention expressed to interfere with the requirement that the Court examine each of the grounds advanced by an applicant. In obliging the Court to be satisfied that the application raises a substantial issue for the Court’s determination, it appears to me that the Oireachtas intended that the Court, in accordance with its normal practice, examine each of the grounds advanced and only grant leave on those grounds which raise a substantial issue for the Court’s determination as to the applicant’s entitlement to relief on that ground. Having regard to the overall purpose of the Act, the purpose of NAMA, in particular, that of expedition already referred to, and also having particular regard to the limitations on legal proceedings in Part 10 Chapter 1, the Oireachtas, in my judgment, intended that judicial review proceedings be confined to a challenge to a decision on grounds which raise a substantial issue for the Court’s determination.

17. Counsel for Treasury is correct in submitting that a court will normally have regard to a change or difference in wording used by the Oireachtas in the same Act or analogous legislation. It will often indicate an intended difference. The difference in terminology used in s. 193 as compared with the earlier Planning Act provisions may be explained by s. 182(4). Section 182 applies to all types of proceedings and is not confined to judicial review. Plenary proceedings come within its ambit and, unlike the Planning Acts, there is no prohibition in s. 193 against challenging decisions other than by way of judicial review. A reference to substantial grounds would not be appropriate in s. 182 as it is only terminology applicable to judicial review proceedings. The desirability of having similar wording in ss. 182(4) and 193(1)(b) is obvious so as avoid any contention of different thresholds intended by the Oireachtas.

18. The second difference between s. 193 and the analogous Planning Act provisions is that there is no requirement in s. 193 that an application for leave to issue proceedings by way of judicial review in relation to a decision of NAMA be made on notice to NAMA or any other person. The intention of the Oireachtas is that it might be brought ex parte under O. 84. Similarly, s. 182 expressly provides that an application for leave under that section may be made ex parte. This appears consistent with the requirement of expedition in the Act as it may avoid two contested hearings. It does not indicate any intention that each ground on which leave is granted should not be required to meet the “substantial” test.

19. Treasury did not seek leave ex parte. Similarly, the applications for leave were brought on notice in the earlier challenges to decisions of NAMA in Dellway and Daly. However, in Dellway, the parties agreed to what is known as a “telescoped” hearing. This does not involve any concession by a respondent that substantial grounds have been made out. Instead a court is still required to examine each of the grounds and to determine whether it constitutes a substantial ground, but if it does so decide, the court then moves on to immediately consider whether the applicant is entitled, on that ground, to the reliefs sought. It precludes the delay and expense of two hearings. The parties did not agree to that approach in Daly. In this application, the parties were invited at a direction hearing to agree to this approach. NAMA declined to do so.

Relevant Statutory Framework

20. The decisions challenged and the grounds therefor must be considered in the context of the purposes of the Act; the purposes of NAMA and its functions, powers and practices. The purposes of the Act referred to in the long title and as set out in s. 2 are:

“The purposes of this Act are—

(a) to address the serious threat to the economy and the stability of credit institutions in the State generally and the need for the maintenance and stabilisation of the financial system in the State, and

(b) to address the compelling need—

(i) to facilitate the availability of credit in the economy of the State,

(ii) to resolve the problems created by the financial crisis in an expeditious and efficient manner and achieve a recovery in the economy,

(iii) to protect the State’s interest in respect of the guarantees issued by the State pursuant to the Credit Institutions (Financial Support) Act 2008 and to underpin the steps taken by the Government in that regard,

(iv) to protect the interests of taxpayers,

(v) to facilitate restructuring of credit institutions of systemic importance to the economy,

(vi) to remove uncertainty about the valuation and location of certain assets of credit institutions of systemic importance to the economy,

(vii) to restore confidence in the banking sector and to underpin the effect of Government support measures in relation to that sector, and

(viii) to contribute to the social and economic development of the State.”

“(1) NAMA’s purposes shall be to contribute to the achievement of the purposes specified in section 2 by—
(a) the acquisition from participating institutions of such eligible bank assets as is appropriate,

(b) dealing expeditiously with the assets acquired by it, and

(c) protecting or otherwise enhancing the value of those assets, in the interests of the State.

(2) So far as possible, NAMA shall, expeditiously and consistently with the achievement of the purposes specified in subsection (1), obtain the best achievable financial return for the State having regard to—
(a) the cost to the Exchequer of acquiring bank assets and dealing with acquired bank assets,

(b) NAMA’s cost of capital and other costs, and

(c) any other factor which NAMA considers relevant to the achievement of its purposes.”

“(1) In order to achieve its purposes, NAMA shall perform the following functions:
(a) acquire, in accordance with Part 6 , such eligible bank assets from participating institutions as it considers necessary or desirable for achieving its purposes;

(b) hold, manage and realise acquired bank assets (including the collection of interest, principal and capital due, the taking or taking over of collateral where necessary and the provision of funds where appropriate);

. . .

(d) take all steps necessary or expedient to protect, enhance or realise the value of acquired bank assets, including—

(i) the disposal of loans or portfolios of loans in the market for the best achievable price,

(ii) the securitisation or refinancing of portfolios of loans, and

(iii) holding, refinancing, realising and disposing of any relevant security.”

“(a) provide equity capital and credit facilities on such terms and conditions as NAMA thinks fit,

. . .

(k) enforce any security, guarantee or indemnity.”

“Credit Risk

NAMA’s primary role is to manage the acquired loan portfolio which at the present time is expected to run off over a 7 to 10 year timeframe so as to obtain the best achievable financial return for the State. However, as with a financial institution, the management of these loans has a significant bearing on their subsequent credit performance.

Such management actions which accordingly give rise to a need for explicit credit risk consideration, include but are not limited to:

a) New money - extending further credit to an existing Debtor as a means to support them as part of an agreed recovery plan;

b) Loan restructuring - varying the terms of the acquired loan; and

c) Enforcement and recovery - exercising rights under the loan contracts, such as vesting, sale or enforcement of guarantees, with a view to enhancing NAMA cashflows relative to what could be expected under the loan agreement itself.

. . .”

“3.2 Debtors will be treated in a reasonable manner

In discharging its responsibilities to the taxpayer, NAMA acting commercially intends to deal with Debtors in a reasonable manner, but recognizing Debtors’ corresponding obligations to NAMA as described in section 3.3 (Mutual responsibilities). In particular:

a) Under the terms of its mandate and powers including those set out in Section 12 of the Act, NAMA has an interest in facilitating, where prudent, the continuation of the ongoing commercial activities of viable Debtors and other stakeholders, and will endeavor to act accordingly;

b) Respecting Debtors’ confidentiality except where disclosure is required by law or in the event of legal pursuit of the Debtor by NAMA to ensure discharge of the debt;

. . .

e) NAMA will put a process in place to assess each Debtor’s business plan to evaluate whether it is economically viable. NAMA will meet with the Debtors that are economically viable and review their proposed business plan to assess the extent to which NAMA may facilitate the ongoing commercial activity of such Debtor and ongoing support from NAMA.”

“(a) a credit facility,

(b) any security relating to a credit facility,

(c) every other right arising directly or indirectly in connection with a credit facility . . .”

28. Section 99 provides for the position of NAMA in relation to a bank asset after acquisition. Insofar as relevant to this application, it provides:

“(1) After NAMA or a NAMA group entity acquires a bank asset, and subject to section 101 and any exclusion of obligations and liabilities from the acquisition set out in the acquisition schedule—

(a) NAMA and the NAMA group entity each have and may exercise all the rights and powers, and subject to this Act is bound by all of the obligations, of the participating institution from which the bank asset was acquired in relation to—

(i) the bank asset,

(ii) the debtor concerned and any guarantor, surety or other person concerned,

(iii) any receiver, liquidator, or examiner concerned, and

. . .

(2) The reference in subsection (1) to the rights, powers or obligations of a participating institution in relation to a bank asset is a reference to the rights, powers or obligations, as the case may be—

(a) derived from the bank asset, and

(b) arising under any law or in equity or by way of contract.

(3) In particular, NAMA and the NAMA group entity may each—
(a) take any action, including court action, that the participating institution could have taken to protect, perfect or enforce any security, right, interest, obligation or liability,

(b) realise any security that the participating institution could have realised,

. . .”

30. Finally, s. 17 provides an immunity to NAMA and certain other persons in the following terms:

“Without prejudice to any defense otherwise available to, or immunity otherwise enjoyed at law by NAMA, a NAMA group entity or a person specified in section 34 (1), no action for damages shall lie against NAMA, a NAMA group entity or such a person in respect of or arising out of the performance or non-performance in good faith of any of the functions provided for in Parts 4, 5 and 6, or in respect of any decision made in good faith to perform or not to perform any of the functions provided for in Parts 8 and 9.”

The Facts

31. Fifteen affidavits were sworn in the application for leave, and with the exhibits, they run to five lever arch files. Having regard to the limited issues to be decided in this judgment I have attempted to limit recitation of facts. I have nevertheless taken into account all the facts deposed.

32. The Treasury Holdings Group currently consists of 197 Irish registered companies and 44 non-Irish registered companies. Treasury Holdings, the first named applicant, was formed in 1993 by John Ronan and Richard Barrett. They remain the shareholders of the Group. Treasury Holdings provides management services to companies throughout the Group. It has 45 employees based in its offices in Dublin. The operations of the Group are stated to be interdependent. The Group as a whole employs approximately 400 persons globally. The 22 applicants are part of the Group.

33. Between March and May 2010, facilities held by Treasury from participating institutions were transferred to NAMA. Nine groups of facilities are listed in the grounding affidavit of Mr. Bruder, the managing director of Treasury. The debts transferred had a par value of approximately €1.76bn. The facilities relating to the Spencer Dock Development had been made by a banking syndicate, originally Allied Irish Banks plc. IBRC and KBC (under their former names). As mentioned, those advanced by AIB and IBRC have been acquired by NAMA as a result of which it holds 75% of the borrowings. The amount due in respect of the syndicated facilities at the date of demand was approximately €272 million.

34. On 4th May, 2010, Treasury submitted a business plan to NAMA in respect of the acquired facilities and related securities. It was independently assessed on behalf of NAMA. There were significant negotiations and changes made. Ultimately, a Memorandum of Understanding (“MoU”) was executed between Treasury and NAMA on 13th December, 2010. The MoU is not a legally binding document, save in respect of a reservation of rights and remedies by NAMA and provisions in relation to confidentiality. In accordance with its terms, at para. 2, it:

“sets out the principal commercial terms and conditions underpinning a potential financial restructuring of the Group’s debt by NAMA and a summary of the key commercial objectives against which NAMA would consider, at its sole discretion, offering the revised facilities, described below, in that respect”.

“The negotiation and agreement on a detailed financing term sheet, credit approval, satisfactory due diligence and facility documentation. Furthermore, it will be subject to there being, in the sole opinion of NAMA, no material adverse change occurring in the financial position of the Group generally prior to the signing of any formal agreement”.

35. The next step, as envisaged by the MoU was negotiation and agreement on detailed financing term sheets. Prior to setting out the facts in relation to the term sheets, it is necessary to refer briefly to four other transactions, or potential transactions, to which the parties have repeatedly referred, albeit recognizing that they are background only, but which undoubtedly affected Treasury and NAMA’s relationship and respective views of each other.

36. Firstly, in the period after the identification of Treasury’s facilities with participating institutions but prior to their acquisition by NAMA, Treasury, by a series of transactions, in substance, transferred shares in a subsidiary (CREO), then valued at approximately €20m, to Mr. Ronan and Mr. Barrett in consideration of €100,000 and an unsecured loan note for €20 million. NAMA has consistently sought the reversal of this transaction which became known as the “TAIL” transaction. The MoU included non-binding provisions intended to achieve a reversal. Treasury and its shareholders have sought on more than one occasion to renegotiate terms in relation to the reversal.

37. Secondly, Treasury contends that it has effectively cooperated with NAMA since its inception. NAMA does not dispute the fact of cooperation but would appear to have a different view of its quality. NAMA has advanced approximately €100m for capital expenditure to Treasury. Amongst the matters referred to by Treasury, as evidence of its positive contribution to advancing the delivery of its business plan as set out in the MoU, is the sale to Google in early 2011 of its office building in Barrow Street, Dublin 4, for approximately €100 million. It also refers to other sales and lettings achieved in 2011. The sale to Google was completed well in advance of the estimated disposal date in the MoU of 2014, and resulted in a repayment of approximately €70m to NAMA.

38. Thirdly, from September 2010 until May 2011, there were negotiations with CIM (a US based private equity firm) in relation to proposals involving the acquisition by CIM from NAMA of Treasury’s loans. Negotiations finally broke down in May 2011. Treasury and NAMA blame each other in relation to the breakdown. The detail is not relevant, save to note that it appears to have complicated the relationship between the two parties.

39. Fourthly, there were negotiations in 2011 with a third party, Setia, in relation to a syndicated facility secured on the Battersea Power Station site in London. NAMA acquired loans from Bank of Ireland which held 50% of the facility. The other participating lender is Lloyds TSB. All material decisions required agreement by Lloyds and NAMA as syndicate lenders. Ultimately, the negotiations with Setia failed and on 21st November, 2011, NAMA and Lloyds called in the loans and made an initial application to the Jersey courts, where certain of the relevant companies were incorporated, to allow administration of the Battersea-owning companies to take place before the English courts. An application to the English courts was made on 30th November, 2011, and an administrator appointed on 12th December, 2011. Treasury complains of a non-commercial approach by NAMA, whilst NAMA identifies uncertainties and delays surrounding the Setia bid. The detail is not relevant but is a further example of difficulties in the relationship between Treasury and NAMA prior to December 2011.

September 2011 to 8th December 2011

40. The facts immediately preceding the challenged decision of 8th December, 2011, commence on 22 September 2011 with the issue by NAMA, through a senior portfolio manager, Ms. Birmingham, of four draft term sheets, in relation to Treasury Holdings, REO plc. IREO Fund plc. and Harrisrange Ltd., for approval by Treasury. There were six stipulated preconditions to the issue of any finalized term sheets. The first four preconditions sought confirmation of certain matters from Treasury and related persons which had to be given on or before 30th September, 2011. The remaining two required: (i) the presentation by Treasury of a satisfactory strategy in relation to third party creditors for approval by NAMA; and (ii) an appropriate tax efficient strategy to fund the operation of the Group on a day-to-day basis. Both of these had to be provided by Friday 14th October, 2011, together with confirmation that the draft term sheets were in agreed form.

41. On 29th September, 2011, Treasury, through Mr. Rory Williams, General Counsel and a director of Treasury, sent a detailed response raising what, in his view, were “fundamental structural issues arising in the term sheets” which, in Treasury’s view, required to be addressed before they could proceed further. This gave rise to an exchange of correspondence through the month of October in relation to the issues raised. At Treasury’s request, a high level meeting was arranged for 8th November, 2011. The meeting on 8th November was attended by Mr. Daly, Chairman of NAMA, Mr. McDonagh, CEO of NAMA and Ms. Birmingham on the one side and on the other, Mr. Barrett, Mr. Ronan and Mr. Niall O’Buachalla, Group Finance Director of Treasury. Ms. Birmingham prepared a minute of the meeting which she exhibited. Mr. O’Buachalla exhibited an email sent the next day to certain persons within Treasury setting out his account of the meeting. The issues discussed related to both the Treasury Holdings Group and Mr. Ronan, who is separately a debtor within NAMA. The discussion appears to have followed a pre-identified agenda which included “Refinancing Option” and “TAIL”.

42. The parties in submission have referred to one exchange at the meeting in relation to third party investors which is partly in dispute.

43. It is not in dispute amongst the deponents present at the meeting that Mr. Barrett informed the NAMA representatives of ongoing discussions, in which Treasury were engaged, with third party investors with a view to refinancing the Treasury Group’s NAMA loans. Mr. Barrett so deposes at para. 20 of his affidavit and the minutes, prepared by Ms. Birmingham under the heading ‘Refinancing Option’, state:

“RB noted that since the CIM deal fell away they had been in discussions with a number of parties and had serious interest on a refinancing with due diligence underway. RB wished to clarify how the Board Policy on tendering would apply”.

“Mr. McDonagh then told me that NAMA would not welcome further approaches from Treasury Holdings and investors on foot of negotiations that were taking place until term sheets had been signed between NAMA and the Treasury Holdings Group, and he emphasized NAMA’s wish to get term sheets signed with Treasury as soon as possible. We confirmed to the NAMA representatives at that meeting that Treasury was fully engaged in finalising the term sheets and was hopeful that the term sheets could be signed within weeks. Accordingly, I did not identify Hines or Macquarie but did say that the discussions were advanced. Mr. Daly and Mr. McDonagh confirmed that Treasury were seen as cooperative and the relationship was working as it should, emphasising that NAMA was looking to work with cooperative debtors.”

“ . . . I was also present at the meeting and Mr. McDonagh did not say that NAMA would not consider proposals put forward by third parties to acquire NAMA’s loans unless and until term sheets were signed. Rather, Mr. McDonagh re-stated NAMA’s practice in relation to the sale of its loans, outlined the limited exceptions that the Board may consider to that practice and made it clear that the pursuit of third parties to acquire the loans should not be a substitute for nor should it be prioritized over the internal restructuring process, which involved the signing of term sheets.”

45. It is not possible nor is it appropriate to resolve, on the application for leave, on affidavit evidence only and in the absence of Mr. McDonagh giving evidence, any conflict as to what he said or the message imparted, if indeed a conflict truly exists. Mr. Barrett then deposes at para. 26:

“We came away from the meeting with the feeling that NAMA would finalise the term sheets, after which Treasury would be able to finalise a deal with an appropriate investor”.

“If term sheets were signed it would necessarily mean that both NAMA and Treasury would have agreed the basis upon which the Group’s connection would be restructured. The achievement of this status would expedite any future negotiations with interested third parties as it would be clear what would need to be done to conclude a deal. It would also put NAMA in the position of controlling the sale of its assets for the benefit of the tax payer.”

“If preconditions (a) to (f) above have not been fulfilled/delivered upon in full by 5pm on Friday 18 November 2011, NAMA will have no option but to take such action as it deems appropriate.

Please note that signing of the term sheets by NAMA would be subject to the following being achieved in parallel by 2 December 2011:

(i) NAMA’s approval of the detail within the strategies to be furnished under preconditions (e) and (f) above; and

(ii) the execution of assignments of rental income and charge documents in form satisfactory to NAMA over all bank accounts into which rent from NAMA’s secured assets is paid and where these accounts are not currently secured - we would propose issuing the relevant draft documents with the revised draft term sheets.

47. The first response from Treasury was a request from Mr. O’Buachalla on 14th November, 2011, for a meeting with Ms. Birmingham and her team to ascertain the nature of NAMA’s requirements in relation to the creditor and tax strategies. The meeting took place on 15th November, 2011, and there was an exchange of emails on 16th November, 2011, in which Mr. O’Buachalla set out his understanding of what was required and this was responded to by Ms. Hughes of NAMA, inserting by way of track changes on an email, certain additional requirements.

48. On 18th November, 2011, Treasury provided the confirmations sought, as preconditions (a) to (d) (inclusive) as per the letter of 11th November, 2011, including reversal of the TAIL transaction to which confirmation was also given as required, personally, by Mr. Ronan and Mr. Barrett. On 18th November, 2011, Treasury also separately sent the creditors strategy and tax strategy. It is agreed that the matters to be complied with as preconditions to the reissue of term sheets were completed by 18th November, 2011.

49. On 22nd November, 2011, NAMA issued four revised draft term sheets, for Treasury Holdings, REO plc., IREO Fund plc. and Carrylane Ltd., for approval by Treasury. The covering letter includes the following reservations and conditions:

“The enclosed draft termsheets are being issued strictly subject to each of the obligors referred to therein continuing in being and continuing to operate on a day-to-day basis without any form of insolvency process. NAMA reserves the right to withdraw any or all draft termsheets in the event of a change in status of any of the obligors such as in NAMA’s discretion may impact its ability to continue its day-to-day operations. Without prejudice to their generality, your attention is drawn to clauses 3 and 4 on page 1 of each draft term sheet in this regard.

. . .

Please note as outlined in our letter of 11 November 2011, the issuing by NAMA of the final termsheets for signing will be subject to the following being completed to NAMA’s satisfaction by 2 December 2011:

1. NAMA’s approval of the detail within the creditor and tax strategies furnished.

2. The execution of assignments of rental income and charge documents in form satisfactory to NAMA over all bank accounts into which rent for NAMA’s secured assets is paid and where these accounts are not currently secured. We will forward you the relevant documents shortly under separate cover.

. . .

Please note that the MoU, draft termsheets and the contents of this letter are entirely without prejudice to, and shall not be construed as a waiver of, any rights or remedies available to NAMA or any NAMA group entity under any loan agreements, security documents, the National Asset Management Agency Act, 2009 and other legislation and/or otherwise conferred by law, including but not limited to the appointment of receivers. All such rights and remedies are exercisable by NAMA at its discretion.”

50. The draft term sheets do not include the syndicated facilities in relation to the Spencer Dock Development. There were parallel communications with the syndicate, and on 24th November, 2011, Treasury sent to IBRC, as agent for the lenders, a creditors strategy for the Spencer Dock Group.

51. On 1st December, 2011, NAMA, through Ms. Birmingham, wrote to Treasury in relation to the creditors strategy submitted and stated:

“NAMA continues to have serious concerns over the creditor position, which we do not believe are addressed by the TH proposed strategy submitted to NAMA. At a high level, these include the following.”

“We are in receipt of the termsheets with your suggested mark-ups which are under consideration, however, as previously advised in our correspondence of 11/11/11 and 22/11/11, NAMA does not propose to issue termsheets, tomorrow, Friday 2 December for signing prior to approval of a group creditor strategy, which remains outstanding.

Please submit a final response to address the matters above by 5.00pm, Tuesday 6th December.

In addition, we await the final executed rental assignment and assignment of bank accounts documentation. We understand that there has been correspondence between our legal advisors today on this and we expect these to be delivered by close of business, Friday, 2 December.”

52. On 6th December, 2011, Treasury requested an extension to 7th December, 2011, for its responses on the creditor strategy concerns which had been raised by NAMA. The request was acceded to and on 7th December, 2011, Treasury sent NAMA by the extended deadline the replies to the queries raised in the form of a response paragraph by paragraph.

53. There is significant dispute between the deponents as to whether the responses from Treasury should have alleviated the concerns of NAMA or whether, as deposed to by Ms. Birmingham, the information supplied “caused considerable alarm to NAMA”. The merits of NAMA’s concern or the responses given is not a matter for this Court, and accordingly, I do not propose referring to the detail of either the concerns or the responses.

54. A meeting of the NAMA Board was held on 8th December, 2011. The only information available to the Court as to the challenged decision, is the averment of Ms. Birmingham at para. 93 of her first affidavit where she states:

“At a NAMA Board Meeting on 8th December 2011 the Board was updated on progress on the case. The Board, following careful consideration, approved a recommendation to enforce with the proviso that the timing of the commencement of enforcement was to be delegated to the NAMA Executive.”

55. There is limited further information in relation to the internal decision making of NAMA leading to the board decision in Ms. Birmingham’s first affidavit at paras. 90 to 92, and in her second affidavit at para. 18 where she deposes:

1st Affidavit

“90. A detailed update and recommendation to the NAMA credit committee was provided on 6th December, 2011.

91. As part of the update, NAMA’s credit committee was advised that an initial creditor strategy, which was a pre-condition to the term sheets, had been submitted by the Borrower, but that it was not credible, unacceptable in its then form and that further responses were awaited from Treasury by close of business on 6th December.

92. On 7th December, we received additional information from Niall O’Buachalla which indicated . . .”.

2nd Affidavit

“18. Contrary to Mr. Barrett’s assertion at paragraph 4.2 and Mr. O’Buachalla’s at paragraphs 16 and 17, on 7 December 2011 the creditor information provided by Treasury on 7 December did not alleviate NAMA’s concerns. The Board had the benefit of the information provided by Treasury on 7 December when it made its decision on 8 December and had previously been made aware of potentially interested parties. The Board had regard, inter alia, to the views of the Portfolio Management team dealing with Treasury on unsatisfactory elements of the creditor strategy including . . .”.

56. It is agreed that Treasury was not aware at the time of either the Credit Committee meeting of 6th December, 2011, or the Board meeting of 8th December, 2011.

8th December, 2011, to 25th January, 2012

57. It is agreed that no part of the Board decision of 8th December, 2011, was communicated to Treasury until a partial communication in a letter of 6th January, 2012, and full communication of the decision to enforce at a meeting on 9th January, 2012, and finally in a letter of the same date, albeit without reference to the fact that it had been taken on 8th December, 2012. Nevertheless there were communications in the intervening period.

58. There were email exchanges between Mr. McDonagh and Mr. Barrett between 5th and 14th December, 2011.

59. On 12th December, 2011, Mr. Bruder spoke on the telephone with Ms. Birmingham. He deposes at para. 84 of his first affidavit, “Mary Birmingham advised in the conversation on 12th December, 2011, that NAMA had received everything that they had requested from us in relation to the creditors strategy”. This is not disputed.

60. On 15th December, 2011, Mr. Bruder requested a meeting to discuss the potential letting of a building to be constructed on the Spencer Dock Development site to BNY Mellon. This forms part of the property securing the syndicated loans. The meeting was attended by Mr. Paddy Teahon, a director of Treasury, Mr. Niall Kavanagh, Group property manager, and Mr. Bruder on the one side and Ms. Birmingham and Mr. Mulcahy, head of NAMA portfolio management, on the other. There were discussions in relation to the property issues and the creditor strategy for the Spencer Dock Development Group. At the end of the meeting, it is commoncase that Mr. Teahon raised concerns about communications between Treasury and NAMA, and in particular, a failure by Mr. McDonagh to reply to his calls. Mr. Bruder deposes at para. 86 of his first affidavit that:

“NAMA advised that they were not in a position to provide any detailed feedback with regard to the Creditor Strategy nor are they in a position to advise when such feedback might be forthcoming nor written term sheets would issue from them (not even an indications as to whether we were talking days, weeks or months) but they did undertake to consider the general question of the relationship and the communication between the parties and revert to us after Christmas”.

“I would note that Mr. Bruder at the end of the meeting asked for an indication on the time of issuing term sheets. I advised that NAMA could not give any certainty and timing on this. Mr. Bruder queried what he should read into this and I restated the position advising that it would be wrong of me to give any certainty on the issue.”

61. The next communication was an email received by Mr. Bruder from Ms. Birmingham on Thursday 5th January, 2012. This is not exhibited but Mr. Bruder states that it was “asking whether I would be free to attend a meeting following on from the pre-Christmas meeting with herself and John Mulcahy and proposing a time of 3pm on Monday 9th January, 2012”. This description is not disputed. Mr. Bruder deposes that he confirmed the meeting and asked what would be on the agenda but that despite a number of reminders, did not receive a reply until an email of 7.30pm on the evening of Friday 6th January, 2012, which enclosed a letter in the following terms:

“0011 Treasury Holdings Connection (“TH”)

Dear Sirs,

We refer to the Creditor Strategy for Treasury Holdings and REO plc. submitted by you on 18 November and the subsequent responses to queries raised by NAMA received from you on 7 December, 2011.

We wish to advise that having considered fully the information submitted NAMA is not satisfied with the proposed creditor strategy and will not be proceeding with the issue of revised draft term sheets.

Yours faithfully”

62. At the meeting of 9th January, 2012, the NAMA representatives read out a pre-prepared script and handed to the Treasury representatives a letter in the following terms:

“Dear Sirs,

NAMA Secured Assets within Treasury Holdings, SDDC Group and REO (Debtor Connection ID 011) (the “Group”)

We refer to recent correspondence and meetings.

Having considered the matter carefully, NAMA has decided, in performance of its functions under Section 11 of the National Asset Management Agency Act, 2009 (the “Act”) and bearing in mind its purposes under Section 10 of the Act, to arrange for demands for repayment to be issued in respect of facilities in default and, failing repayment, to proceed to appoint receivers (including statutory receivers) as appropriate to various properties that comprise security for such facilities.

We believe that this course of action is most consistent with NAMA’s obligation to achieve its purposes under the Act.

In arriving at our decision, we have taken account of a range of factors including, but not limited to, the current creditor position, the Group’s deteriorating cash position, the ongoing funding required to meet the Group’s exposure in terms of its various contractual obligations, the SDDC Syndicate’s preference to appoint a receiver over SDDC, the dissatisfactory nature of the Group’s proposed Creditor Strategy and the increased risk of third party insolvency actions.

We would appreciate your co-operation, in relation to the work required to be done by the receivers, if and when appointed.

Yours faithfully.”

64. The fact that the decision to enforce referred to in NAMA’s letter of 9th January had been taken by the board of NAMA on 8th December, 2011, was not communicated to Treasury in the exchanges between 5th and 10th January, 2012. It was not communicated until after the commencement of these proceedings.

65. On 10th January, 2012, McCann Fitzgerald, solicitors, then acting for Treasury, on its instructions wrote a long letter in which they referred, inter alia, to:

(i) Treasury’s surprise at the content of the meeting and letter of 9th January and the letters of demand of 10th January; ;

(ii) the potential interest of Hines and Macquarie; the fact that their interest had not previously been disclosed by reason of confidentiality agreements and also the alleged representation made at the meeting of 8th November, 2011, that NAMA would only consider prospective investments after conclusion of term sheets;

(iii) the first indication by NAMA to Treasury that it was not fully prepared to continue supporting it with a view to maximising returns from the relevant assets was at the meeting on 9th January; and

(iv) their contention that the decisions and actions of NAMA are matters of public law and NAMA’s obligation to exercise its powers in a fair and reasonable manner which, on the facts set out, included giving Treasury an opportunity to be heard prior to making demands and taking any steps to appoint a statutory receiver.

“We have advised our clients that they should seek the protection of the Courts by applying to have an examiner appointed to the Group. That application is being prepared currently and will issue prior to 4pm tomorrow Wednesday 11 January 2012 prior to the expiry of those letters of demand served by you today.

However, our clients are prepared, if your clients will agree to a standstill agreement being entered into prior to 1.30pm tomorrow between NAMA and our clients, for a period of 14 days to the effect that NAMA will take no step on foot of the letters of demand already served and that it will not serve any fresh letters of demand or other demands within that period. The period is sought to permit detailed discussion to take place between NAMA and our clients and the two investors, Hines and Macquarie, with a view to an agreement which is satisfactory to our clients and NAMA and Hines and/or Macquarie being achieved. In order to show our clients good faith in this matter we are instructed that should those discussions not prove to be satisfactory from NAMA’s point of view then our clients will agree not to object to the appointment of receivers and will not commence any application in that regard seeking to have the group placed in examinership or any like application.

Your reply is sought before 1.30pm tomorrow Wednesday 11 January 2012. Our clients are prepared to meet with you this evening or tomorrow morning in advance of 1.30pm. We intend to refer to this correspondence in the application for the appointment of an examiner if that be necessary.

Yours faithfully.”

“We note the penultimate paragraph of your letter wherein you have asked NAMA to agree to a standstill for a period of 14 days during which time NAMA will take no steps on foot of the letters of demand already served and that it will not serve any fresh letters of demand or any other demands within that period. We note the purpose of the period of 14 days being to permit detailed discussions to take place between NAMA and your clients and the two prospective investors with a view to an agreement which is satisfactory to all parties being achieved. We hereby agree to a standstill on that basis noting that such agreement is done expressly in reliance on your client’s undertaking as set-out in your letter that should the discussions during the 14 day period not prove to be satisfactory from NAMA’s point of view that your clients will not object to the appointment of receivers and that they will not commence any application in that regard seeking to have the group placed in examinership or any like application.

Please be advised however that IBRC, as security agent for the SDDC Group facility, has been instructed by the syndicate to take relevant enforcement steps. NAMA has sought the agreement of the other syndicate lender to countermand this instruction but this has not been forthcoming. It does not appear to NAMA, at this point, that NAMA is unilaterally empowered to countermand the original instruction to the security agent.

Yours faithfully.”

68. There were oral exchanges in the afternoon of 11th January, 2012, between Treasury and NAMA personnel in which NAMA confirmed that it had instructed IBRC, as syndicate agent, not to proceed with instructions that they had already been given, but that it could not be certain that this was an effective instruction as NAMA could not control KBC as the other syndicate lender. Treasury decided during the afternoon of 11th January, 2012, not to proceed with the presentation of a petition seeking the appointment of an examiner which had been prepared.

69. On the morning of 12th January, 2012, there was oral contact between Mr. Bruder and Ms. Birmingham with a view to progressing matters. A meeting was requested by Mr. Bruder, and by an email at 11:14, Ms. Birmingham confirmed that NAMA was available to meet “today at 2.00pm subject to receipt of an executed undertaking as discussed earlier”. The draft of that document was furnished by NAMA to Treasury by email at 13:11. This was the subject of some amendments in the course of the afternoon. The meeting at 2pm went ahead, notwithstanding that the document had not been executed. Ms. Birmingham deposes that at that meeting, she set out certain ground rules for “our conduct during the standstill period” and to which she contends NAMA agreed. She states these included:

“a. It was a precondition to the meeting on 12th that we obtain and reach agreement on a specific undertaking to address the third party action risk.

b. We required unfettered access to the interested parties during the evaluation process and we would carry out an internal appraisal process on the offer from Macquarie to determine whether it was a satisfactory outcome.”

70. The undertaking required of Treasury was executed at approximately 5pm on that day and is in the form of a letter from Treasury to NAMA. Insofar as is material to the disputes between the parties on this application, it provided:

“Treasury Holdings, SDDC Group, REO plc and IREO Irish Real Estate Opportunities plc (together the “Treasury Holdings Group”)

Standstill Arrangements

Dear Sirs,

We refer to your letter dated 11 January and note your agreement, and the basis of that agreement, to standstill for a period of 14 days from 11 January 2012 (the “Standstill Period”).

For the avoidance of doubt, it is acknowledged that the Standstill Period will expire:

. . .

whichever first occurs.

Further, as regards SDDC, NAMA will not withdraw its instruction to IBRC as security agent (as indicated in the attached letter from NAMA to IBRC dated 11 January 2012) unless and until the Standstill Period expires.

. . .

For the purpose of taking account of and addressing the threat of third party creditor pressure during the Standstill Period, on behalf of the Treasury Holdings Group, we hereby undertake to notify you during the Standstill Period:

1. . . .

2. By a period of not less than 24 hours in advance of the taking of any of the following proposed courses of action:

(i) . . .

(ii) any form of application by any party to apply for examinership or the seeking of court approval of any proposed scheme of arrangement or court protection concerning any company within the Treasury Holdings Group.

. . . .”

“We hereby confirm our instructions to your client not to take any further steps on foot of the letters of demand delivered on Tuesday 10 January 2012 to certain of the SDDC Group entities for a period of 14 days from the date of this letter and not without further written instruction from us.”

72. NAMA established two separate appraisal teams and appointed PwC to carry out a third party financial review of the proposals. Ms. Birmingham headed the team appraising the Macquarie proposal and Mr. Moriarty that from Hines.

73. The facts pertaining to the exchanges between NAMA and each of Macquarie and Hines and between NAMA and Treasury during the Standstill Period are set out in detail in the affidavit of Niall O’Buachalla at paras. 23 to 28 inclusive. The facts stated therein do not appear to be in dispute. They are not disputed in the subsequent affidavits of Ms. Birmingham and Mr. Moriarty. In accordance with those facts, it is not in dispute that Treasury was not invited to attend and did not attend any meeting between either Macquarie or Hines and NAMA in relation to their respective proposals. Much of the characterization of the exchanges by each side is in dispute. That is comment and argument by deponents and is not relevant to any issue which I have to determine.

74. There is a dispute between the parties on the question as to whether the final exchanges of communications between NAMA and Macquarie and Hines, respectively, prior to the Board meeting of NAMA of 25th March, 2011, should be construed as indicating some willingness on the part of either of Macquarie and Hines to improve their respective proposals. The resolution of that is not relevant to any issue I have to determine on this application. There is undisputed evidence of continuing interest by Macquarie and Hines. The merits of the Macquarie and Hines proposals, either on their own, objectively, or in comparison with the realisation of securities by appointment of receivers is not a matter for this Court.

75. On 25th January, 2012, there was a Board meeting of NAMA at 2.00pm. Ms. Birmingham deposes at para. 123 of her first affidavit that the Board “unanimously concluded that proceeding with the Macquarie and Hines offers was not in the best interests of NAMA”. Mr. Moriarty, at para. 17 of his first affidavit, deposes that the proposals were submitted, firstly, to the Credit Committee, and then to the board of NAMA. Subsequently, at approximately 3pm, NAMA participated in a decision by the syndicate to reject the Macquarie and Hines proposals insofar as they related to the Spencer Dock Development. Neither of those decisions are challenged in the intended judicial review application.

76. At 15:55 on 25th January, 2012, an email was sent by NAMA to the directors of Treasury Holdings in the following terms:

“NAMA Secured Assets within Treasury Holdings, SDDC Group and REO (Debtor Collection ID 0011)(“the Group”)

Dear Sirs,

We refer to our letter of 9 January wherein we notified you of NAMA’s intention to proceed to enforce its security. We refer also to the letter dated 10 January 2012 from McCann FitzGerald, NAMA’s reply dated 11 January 2012 and the letter dated 12 January 2012 from the Group, all in relation to the agreed standstill.

We have engaged in detailed discussions with representatives of Hines and Macquarie in relation to their proposals to acquire the NAMA secured assets within the Group during the course of the last 14 days.

NAMA, with the assistance of external advisors has expended considerable time, effort and cost evaluating both proposals.

Having considered the matter carefully, NAMA has decided, in performance of its functions under Section 11 of the National Asset Management Agency Act, 2009 (the “Act”) and bearing in mind its purposes under Section 10 of the Act, that neither proposal is satisfactory, and that NAMA’s objectives would be better served by proceeding to enforcement.

Consequently, as the standstill ends at 4 p.m. on 25 January, NAMA will proceed with enforcement of security as outlined in its letter of 9 January 2012. This is the course of action most consistent with NAMA’s obligation to achieve its purposes under the Act and, in particular, NAMA’s obligation to obtain the best available financial return for the State.

We note from the undertaking given by the Group in McCann FitzGeralds letter dated 10 January 2012 that the Group will not object to the appointment of receivers and will not commence any application in that regard seeking to have the Group placed in examinership or any like application.

Yours sincerely.”

78. At 16:42, DAC Beachcroft Dublin, solicitors now acting for the applicants herein, responded, listing the names of the applicants and stating:

“We act on behalf of the above named entities who have instructed us in relation to the decision which was communicated to them this afternoon by NAMA.

We refer to your email of today’s date (sent at 15.55). We note what you say in relation to our agreement not to object to the appointment of a Receiver. However, that offer was superseded by the Standstill Agreement entered into on 12 January 2012.

Accordingly, we are instructed to seek injunctive relief restraining NAMA and NALM from taking any further steps in respect of the letters of demand which were issued to the aforementioned entities on the 10 and 11 January 2012.

We are instructed to bring an application to Court today seeking short service and we will serve copies of these papers upon you later on this afternoon and inform you of any Order made.

In the interim however we trust that you will take no further steps on foot of these letters of demand.

Yours faithfully.”

Other Facts

80. Treasury, through its deponents, has deposed to the impact of the decision of NAMA to enforce the securities and appoint receivers on the applicant companies and the wider Treasury Group. The facts deposed to include: interference with the applicant companies’ ability to use their acquired expertise to complete certain of the developments of those companies and to manage its properties and realise best value for same; the reputational damage to the Treasury Group; the impact on the Treasury activities in China and certain companies quoted on the Singapore Stock Exchange; enforcement will constitute an adverse event giving rise to events of default in facilities held by other companies within the Treasury Group not indebted to NAMA.; Treasury has also filed an affidavit from Dr. Michael Cragg, an independent economic expert, in support of certain of its contentions including the adverse impact of appointment of the receivers.

81. NAMA, through its deponents, states that the Treasury Group “is hopelessly insolvent”. Prior to demand for repayment, the majority of the NAMA loans of €1.7bn were in default. The Group experienced a deteriorating cash situation and was insolvent in the sense of being unable to meet its debts as they fell due in 2011. While there is some dispute about the cash position, there is no dispute that the Group is and was insolvent in the two senses referred to. It continues to be in receipt of rental income and management fees.

82. KBC filed two affidavits of Mr. Edward Dillon, a senior commercial banking manager. The facts relating to the syndicate facility agreement are not in dispute. The facilities relate only to the Spencer Dock Development and what, within Treasury, is referred to in the NAMA documents as the “SDDC Group”. This includes several of the applicant companies. Under the terms of the syndicate facility agreement, KBC cannot unilaterally decide to enforce the security held for the loans. NAMA, which currently holds the majority of the loans, in terms of value, must so decide and obtain KBC’s consent. Similarly, NAMA must obtain KBC’s consent to any restructuring of the facility. Since 1st July, 2010, the SDDC Group has not been paying the full amount of the interest on the syndicated loans. Mr. Dillon deposes that on or about 16th November, 2011, KBC decided to seek to have the syndicate appoint receivers to the borrowers. He also deposes that KBC has decided not to agree to a restructuring of the syndicate loans and that KBC rejected the Macquarie and Hines proposals. He avers that KBC’s consent to any restructuring “will not be forthcoming”. He lays much emphasis in his affidavit upon the private law relationship between KBC and the Treasury borrowers and to KBC’s entitlement to act in its commercial best interests. That is not in dispute. He also avers to the private law relationship between NAMA, as successor to AIB and IBRC, and KBC pursuant to the syndicate facility agreement. That is in dispute and will be referred to below.

Relief Sought

83. The reliefs sought in the intended judicial review proceedings in accordance with the amended statement of grounds and pursued at the leave hearing are:

“(i) An order of certiorari by way of an application for judicial review quashing the purported decision of the First Named Respondent, in performance of its functions under Section 11 of the National Asset Management Agency Act, 2009 (the “Act”), as evidenced in the letter of 9 January 2012 but actually made on 8 December 2011, ‘to arrange for demands for repayment to be issued in respect of facilities in default and, failing repayment, to proceed to appoint receivers (including statutory receivers) as appropriate to various properties that comprise security for such facilities.’

. . .

(viii) If necessary or appropriate, an order of certiorari quashing the decision of the Respondents of 25 January 2012 to proceed with enforcement in respect of the Applicants’ assets, including the appointment of receivers;

. . .”

85. It is not in dispute that, insofar as Ms. Birmingham deposes that the decision taken on 8th December, 2011, is a decision “to enforce”, in practical terms, as applied to the relationship between NAMA and Treasury, it was a decision to make a demand for the repayment of the facilities and failing repayment to appoint receivers (including statutory receivers). Further, that the decision taken on 8th December, 2011, related both to the securities for the loans held exclusively by NAMA and the securities for the syndicated loans. In the latter case, the decision is implemented by giving instructions to IBRC as security agent to make the demand and if repayment is not made, to appoint receivers. KBC had, prior to 8th December, 2011, requested such a course of action from NAMA. It is proposed to refer to the decision of 8th December, 2011, as “the decision to enforce” for convenience.

86. The affidavit evidence of NAMA does not indicate that any distinct decision in relation to enforcement was taken by NAMA on 25th January, 2012. The decision by NAMA (either at Board or executive level) was to proceed with the enforcement already decided upon on 8th December, 2011. NAMA also took decisions on 25th January, 2012, to reject the Hines and Macquarie proposals. These decisions are not sought to be challenged in this application. On the undisputed evidence, not in dispute, the substantive decision challenged is that taken on 8th December, 2011. The relevant decision of 25th January is to proceed with decision already taken and hence its validity is dependent on the validity of the decision of 8th December. I propose, therefore, initially considering the grounds relied upon by Treasury in relation to the decision taken on 8th December, 2011. What occurred between the parties from 8th December, 2011 to 25th January, 2012, is, however, relevant to the question as to whether Treasury has raised a substantial issue for determination as to its entitlement to an order of certiorari of the decision of 8th December, 2011 and is considered later in the judgment.

87. The grounds upon which the decisions are challenged may be summarized as follows:

(i) The decisions are in the area of public law and are therefore amenable to judicial review;

(ii) The decision of 8th December, 2011, was taken in breach of NAMA’s duty to notify Treasury of the proposed decision and to give it an opportunity to be heard prior to the taking of the decision and in breach of Treasury’s corresponding rights to receive notification and be heard;

(iii) NAMA, in exercising its discretionary power to take a decision to enforce and proceed with that decision is under a duty to exercise such power in a fair and reasonable manner; and

(iv) NAMA, in taking the decision on 8th December, 2011, failed to exercise its discretionary powers in a fair and reasonable manner by reason of:

a) the failure to give notice of the proposed decision and to afford an opportunity to be heard; and/or

b) the Credit Committee considering the matter on 6th December, 2011, when Treasury had been given until 7th December, 2011, to respond to concerns relating to the creditors strategy; and/or

c) the failure to take into account relevant considerations on 8th December, 2011, namely, the availability of investors/purchasers for the loans

(v) The decision was taken for an improper purpose and in bad faith.

Public/Private Law Decision

89. Treasury submits that the decisions taken to enforce and to proceed to appoint receivers are decisions in the area of public law and are, as such, amenable to judicial review. They do so in reliance upon the Act, the establishment of NAMA by statute and, in particular, the statutory scheme including: the functions imposed on it by s. 11; the powers given it pursuant to s. 12; and its entitlement pursuant to s. 99 to exercise the rights and powers of participating institutions in relation to an acquired bank asset . A similar issue arose in Daly and contrary submissions were made on behalf of NAMA. In Daly, Peart J. at pp. 96-97, in conclusion on this issue stated:

“. . . for the purposes of the present case, I am satisfied that at least the decisions to make a demand for repayment of these facilities, and the decision to appoint receivers following default of repayment, are decisions in the area of public law, despite the provisions of section 99, and the plaintiffs are not excluded from an entitlement to seek leave to pursue remedies in the nature of judicial review, whether under section 182 or 193 of the Act.”

90. I have considered this issue independently of the conclusion reached by Peart J. having regard to one factual difference relied upon between the loans at issue in Daly and those in the present case. In Daly, the loans were held exclusively by NAMA, having acquired same from AIB. In this application, NAMA holds some of the Treasury loans exclusively whilst those relating to the Spencer Dock Development are held as part of a syndicate.

91. In my judgment, Treasury has raised a substantial issue for determination by the Court. that the decisions to enforce of 8th December, 2011, and to proceed to appoint receivers of 25th January, 2012, are decisions taken in the area of public law. I have reached this conclusion having regard, in particular, to: the scheme of the 2009 Act; the establishment of NAMA by statute; the submission that NAMA, in taking the decisions, is performing functions imposed on it by s. 11 of the Act, and exercising powers given it by s. 12 and s. 99 of the Act. The fact that NAMA has, as part of the decisions taken, made decisions, in relation to enforcement of the syndicated loan or to proceed with the appointment of receivers, pursuant to the securities held by the syndicate as successor to AIB and IBRC, does not, in my judgment, deprive the issue of meeting the “substantial issue” threshold. The contentions which support that are firstly, that s.99 of the Act is the source of NAMA’s entitlement as a statutory body, which was not a party to the original loan agreements and security documents, to exercise the contractual rights previously held by the participating institutions in relation to bank assets whose acquisition by Nama has been effected by s.90 of the Act.. Secondly, that NAMA, in taking these decisions, is exercising a statutory power and the subject matter of the decision does not bring it within any of the recognised exceptions where a statutory body exercising statutory powers will not be considered to be taking decisions in the realm of public law. Treasury is required to establish that the challenged decisions are decisions taken in the realm of public law as a necessary prerequisite to reliance on each of the remaining grounds. Those grounds are now considered upon an assumption, but not a determination, that they are decisions in the realm of public law.

Right to be Heard

92. This is the primary ground upon which the decisions are sought to be challenged. In submission, the parties dealt with it separately from the alleged obligation of NAMA to exercise its discretionary powers in a fair and reasonable manner. I propose doing likewise in this judgment.

93. The principles are not in dispute. The parties agree that the principles are those set out by the Supreme Court in Dellway Investments & Ors v. NAMA & Ors [2011] IESC 13. The judgment concerned the right of Mr. McKillen and other applicants to be heard on a decision of NAMA to acquire eligible bank assets pursuant to s. 84 of the Act. Whilst the parties drew attention to some differences of approach in the six judgments delivered on this issue, the primary issue in dispute between the parties herein is the application of the principles to the decisions at issue and the facts pertaining to Treasury. In Dellway, the seven judges of the Supreme Court were unanimous in concluding that on the facts therein, the applicants had a right to be heard prior to the taking of the decision pursuant to s. 84 of the Act.

94. In Dellway, central to several of the judgments (Denham, Hardiman and Fennelly JJ.) were the following well-known statements of principle by Walsh J. in East Donegal Cooperative v. Attorney General [1970] I.R. 317, at pp. 341 & 343-344.

“… the presumption of constitutionality carries with it not only the presumption that the constitutional interpretation or construction is the one intended by the Oireachtas but also that the Oireachtas intended that proceedings, procedures, discretions and adjudications which are permitted, provided for, or prescribed by an Act of the Oireachtas are to be conducted in accordance with the principles of constitutional justice. In such a case any departure from those principles would be restrained and corrected by the Courts.

. . .

All the powers granted to the Minister by s. 3 which are prefaced or followed by the words ‘at his discretion’ or ‘as he shall think proper’ or ‘if he so thinks fit’ are powers which may be exercised only within the boundaries of the stated objects of the Act; they are powers which cast upon the Minister the duty of acting fairly and judicially in accordance with the principles of constitutional justice, and they do not give him an absolute or an unqualified or an arbitrary power to grant or refuse at his will. Therefore, he is required to consider every case upon its own merits, to hear what the applicant or the licensee (as the case may be) has to say, and to give the latter an opportunity to deal with whatever case may be thought to exist against the granting of a licence or for the refusal of a licence or for the attaching of conditions, or for the amendment or revocation of conditions which have already attached, as the case may be.”

“It is now established as part of our constitutional and administrative law that the constitutional presumption that a statute enacted by the Oireachtas intended that proceedings, procedures, discretions and adjudications permitted, provided for, or prescribed by Acts of the Oireachtas are to be conducted in accordance with the principles of constitutional justice. . . . It follows therefore that an administrative decision taken in breach of the principles of constitutional justice will be an ultra vires one and may be the subject of an order of certiorari. Constitutional justice imposes a constitutional duty on a decision-making authority to apply fair procedures in the exercise of its statutory powers and functions.”

“The term ‘natural justice’ has largely been replaced by a general duty to act fairly which is a key element of procedural propriety. On occasion, the term ‘due process’ has been invoked. Whichever term is used, the entitlement to fair procedures no longer depends upon the adjudicative analogy, nor on whether the authority is required or empowered to decide matters analogous to a legal action between two parties. The law has moved on; not to the state where the entitlement to procedural protection can be extracted with certainty from a computer, but to where the Courts are able to insist upon some degree of participation in reaching most official decisions by those whom the decisions will affect in widely different situations, subject only to well established exceptions.” (Emphasis added by Hardiman J.)

“It appears to me, therefore, that there is ample authority both in Ireland and elsewhere for the existence of a right to fair procedures in the making of a discretionary decision by a public official or officials is based on the status of the person claiming such fair procedures as a person who is or may be ‘affected’ or ‘adversely affected’ by such decision.”

“The parties have offered two theories of the test for entitlement to a hearing. According to NAMA, only interference with a legal right qualifies. The appellants propose a broader criterion for assessment of effects, which would not be limited to cases of probable encroachment on legal rights.”

“It does not appear to me that it has been established that the right to be heard before a contemplated decision is made depends on establishing interference with a specific and identifiable legal right. It is difficult to discern a principled basis for restricting the right in that way. The courts have never laid down rigid rules for determining when the need to observe fair procedures applies. Everything depends on the circumstances and the subject-matter. The fundamental underlying principle is fairness. If a decision made concerning me or my property is liable to affect my interests in a material way, it is fair and reasonable that I should be allowed to put forward reasons why it should not be made or that it should take a particular form. It would be unjust to exclude me from being heard. For the purposes of the right to be heard, I would not draw a sharp line, what is sometimes called a ‘bright line’ of distinction between an effect which modifies the legal content of rights and a substantial effect on the exercise or enjoyment of rights. I would fully endorse the first part of the statement of the High Court, quoted above as follows:-

‘The Court is not satisfied that any mere possibility that there might be an indirect consequence for a party’s rights affords the party concerned a right to fair procedures. There must be a real risk that a party’s rights will be interfered with in the event that there is an adverse decision’.

The problem is with the interpretation of the following statement that ‘[t]he adverse decision must be such as would directly interfere with those rights, or at least any interference must be so closely connected with any adverse decision so as to warrant that the party concerned be entitled to invoke a right to fair procedures’. If the requirement is that there be direct interference with the legal substance of the rights, the statement is too narrow. It should be capable of including material practical effects on the exercise and enjoyment of the rights. Subject to this qualification, which was crucial to the outcome of the case in the High Court, I would approve the passage at paragraph 7.14 (quoted at paragraph 85 above) as a correct statement of principle.”

“The consequence of an acquisition decision is to make a substantial change in the way in which the appellants are in a position to exercise their property rights. Their ability to manage their properties independently is reduced.”

“to enable the person potentially affected by the contemplated decision to make representations to the decision maker concerning the effects any decision will have on him with a view to persuading the latter to make or not to make the decision or to make it in certain terms”.

“• effects: The manner and extent to which any proposed decision will potentially affect rights or interests of the person claiming the right; and

• representations: The nature of the representations which the person wishes to make and, in particular, whether any proposed representations are such as relate to the grounds on which the decision-maker may make his decision. In other words, is the decision-maker permitted in law to have regard to representations of the sort the person proposes to make?”

103. In Daly, Peart J. decided on the facts and circumstances of the applicants therein that they had raised a substantial issue for determination in relation to their entitlement to be heard prior to the taking by NAMA of a decision to enforce (i.e. to demand repayment and/or the appointment of receivers). He reached that conclusion, having considered the principles set out by the Supreme Court in Dellway and applying them to the facts and circumstances of the applicants.

104. It is not in dispute that the decision in Daly was made on the facts and circumstances of that case or that, in this application, I must determine whether Treasury has met the threshold of a substantial issue for determination on its entitlement to be heard on the facts and circumstances pertaining to it.

105. Counsel for NAMA and KBC laid much emphasis upon the fact that in Daly, the loans at issue were performing in the sense that interest was being paid in full as it fell due and they were categorised in the judgment as unimpaired loans at the date of acquisition by NAMA. They also rely on passages of the judgment of Peart J. in which he distinguished the facts and circumstances pertaining to Mr. Daly from other potential debtors in NAMA. At p. 113, he stated:

“The facts and circumstances include the fact that by the time the assets were acquired by NAMA, any loans which the plaintiffs had with AIB had expired, since the plaintiffs had not accepted the proposed new facilities from AIB following review in 2009. In that regard one should take into account also the fact that I have concluded earlier that no substantial issue has been raised by the plaintiffs that these loans were other than repayable on demand.

The facts and circumstances include also that while part of their business generally involves speculative property development, the loans at issue in this case are personal loans sanctioned by AIB in order to renew previous loans obtained to assist the acquisition of properties which generate significant rental income both in this State and in the UK, and which were not impaired loans at the time of acquisition by NAMA, those properties being intended and expected to be held for the longer term, with the loans being repaid over a similar period.

I mention this fact as it may be appropriate to distinguish, for the purpose of ascertaining the extent of fair procedure rights, between a borrower whose loans have become delinquent and impaired in which case all the consequences flowing from a default must be expected to follow without any right to be constantly consulted as to steps to be taken by the creditor, and a borrower such as any of the plaintiffs, whose entry into the NAMA regime is not following upon any default by them in relation to the terms of the loans obtained since they were servicing the interest, and this was all that was required of them.”

107. As was done by Peart J. in Daly, this Court must, in accordance with the principles set out by the Supreme Court in Dellway, determine whether, on the facts and circumstances in evidence in this case, Treasury has established a substantial issue to be determined that in December 2011, it had a right to be heard by NAMA before it took a decision to enforce the securities it then held. In doing so, in addition to taking into account the statutory scheme, the facts pertaining to Treasury and its relationship with NAMA, it appears that, in accordance with the judgment of Fennelly J., the Court should also focus on the effects on Treasury of the challenged decision and the representations which it might have wished to make if entitled to be heard and whether it would have been lawful for NAMA to take into account such representations prior to reaching its decision.

108. Treasury is indebted to NAMA by reason of the acquisition of its loans, facilities and securities as eligible bank assets by NAMA, which now holds legal mortgages and charges from Treasury over certain of its property. NAMA is obliged to perform its functions set out in s. 11 so as to achieve its purposes as set out in s. 10 of the Act including to deal “expeditiously with the assets acquired by it” and to “obtain the best achievable financial return for the State”. The functions of NAMA, under s. 11(1) include to:

“ . . .

(d) take all steps necessary or expedient to protect, enhance or realise the value of acquired bank assets, including—

(i) the disposal of loans or portfolios of loans in the market for the best achievable price,

(ii) the securitisation or refinancing of portfolios of loans, and

(iii) holding, refinancing, realising and disposing of any relevant security.”

109. NAMA approved a business plan and entered into an MoU with Treasury in December 2010. The MoU is not legally binding but envisages, subject to conditions set out, the offering of revised facilities and sets out the principal commercial terms and conditions underpinning a potential financial restructuring of Treasury’s debt by NAMA. It envisages the disposal of Treasury’s properties including certain developments on a phased basis by 2017.

110. Pursuant to the MoU, NAMA issued draft term sheets in September 2011. By 18th November, 2011, the preconditions to the issue of final draft term sheets were satisfied by Treasury. On 22nd November, 2011, NAMA issued final draft term sheets. The signing of the term sheets remained subject to conditions including the approval by NAMA of a creditor and tax strategy. As put by counsel in submission, the track upon which NAMA and Treasury were operating and negotiating from September 2011, in the context of the MoU, was a track leading to the refinancing by NAMA of Treasury’s portfolios of loans. The exchanges between NAMA and Treasury continued on that track at least up to and including 7th December, 2011, the date upon which, by agreement, Treasury’s response to the concerns expressed by NAMA on the creditor strategy were to be submitted. This is one of the methods expressly envisaged by which NAMA may achieve its statutory purpose and contribute to the purposes of the Act.

111. It is not in dispute that NAMA is entitled to change from this track and move to a different (permitted) track to achieve its statutory purposes provided it does so in a manner which is in accordance with the constitutional principles already set out, and is fair and reasonable in the sense next discussed. It is not contended that the exchanges in the autumn of 2011 bound NAMA to proceed to sign term sheets. As one would expect, several of the letters from NAMA expressly reserved its right to take a different course.

112. Treasury, in the autumn of 2011, was in default in making interest payments or repayments as they fell due in respect of many of its facilities and loans. In addition, it is not in dispute that the then current values of the secured properties were less than the par value of the indebtedness. Nevertheless, Treasury, as mortgagor or chargor, remained in possession of the secured assets. No liquidator or receiver had been appointed to any of the applicant companies. Treasury was in a position to manage and conduct its ongoing business including in relation to the secured assets subject, of course, to the financial constraints and other duties imposed by its contractual obligations. Treasury also continued to earn significant management fees. The appointments of the receivers of 25th January, 2012, are not in evidence. By agreement, counsel informed me that those relating to the NAMA-held loans are made pursuant to s. 147 of the Act and relating to the syndicated loans pursuant to the securities held. Further, certain of the appointments are as receiver and manager and others are as an asset receiver. The practical effect of the appointments on either basis is to interfere in a material way with the continuing ability of the relevant company either to manage its business, including the secured assets, or in the case of the asset receiver, to manage the secured asset.

113. In the autumn of 2011, Treasury was also in negotiations, initially, with Macquarie, and at a later stage, with Hines, in relation to acquisition of the Treasury loans held by NAMA. It is not in dispute that the fact of current negotiations, albeit with unidentified interested persons, was made known to NAMA at the meeting of 8th November, 2011. As set out above, the disposal of loans for the best achievable price is one of the functions expressly envisaged by s. 11(1)(d)(ii). Treasury perceives such disposal of loans by NAMA as its opportunity to exit NAMA with what it believes to be commercial advantages for the Group.

114. All of the above facts were known to NAMA prior to issue of final draft term sheets on 22nd November 2011.

115. The representations which Treasury might have wished to make if notified of the proposed decision to enforce in December 2011, and given an opportunity to be heard, were summarised by its counsel as including:

(i) Representations to address any continuing concerns of NAMA with the creditors’ strategy submitted on 7th December, 2011, and as to why NAMA should approve same and sign term sheets;

(ii) Representations as to why appointment of receivers was not in the best interests of NAMA and why it would not be the best way to enhance and realise the best achievable value for the secured assets; and

(iii) Representations in relation to the benefits for NAMA of the potential investments or acquisitions by Hines and/or Macquarie.

117. I have concluded, having regard to: the statutory scheme applicable to NAMA, including in particular its obligation to act with expedition and its functions pursuant to s. 11 (1)(d); the facts and circumstances set out above relating to the engagement between NAMA and Treasury in particular following the MoU and the ongoing term sheet process; the potential effects for Treasury of the decision to enforce and the representations which would have been sought to be made; that, notwithstanding its financial position, Treasury has raised a substantial issue for determination that NAMA was in December 2011 under an obligation to notify it of the proposed decision to enforce and to give it an opportunity to be heard prior to the taking of a decision to enforce.

118. For clarity I wish to add that there were wider potential effects relied upon by Treasury which I have not taken into account in reaching the above conclusion. These included the creation of events of default for other companies which are not NAMA debtors within the Treasury Group by the decision to enforce and appoint receivers. Also the alleged adverse reputational impact on operations which are perceived as Treasury operations in China, but conducted through companies which are not beneficially owned by Treasury Holdings. The last named applicant, which is beneficially owned by Treasury Holdings, only has a management role in relation to what I would loosely describe as the Chinese operation. This exclusion from present consideration does not preclude Treasury from seeking to rely upon these matters at a full hearing.

119. Counsel for NAMA submitted that even if the Court were satisfied that Treasury had raised a substantial issue for determination, that it was entitled to be heard in advance of the decision to enforce, nevertheless, it had failed to raise a substantial issue on the facts herein that NAMA was in breach of any such obligation to notify Treasury and to give it an opportunity to be heard prior to the taking of the decision. He relied on the course of dealing between NAMA and Treasury since the MoU in December 2010, and in particular, to those paragraphs in the NAMA letters/emails from September 2011, which expressly reserve NAMA’s right to take other actions including the appointment of a receiver. In accordance with the judgments in Dellway, the obligation on NAMA, if applicable, includes an obligation to notify, as put by Hardiman J. at p. 84, “of the proposed decision and to sufficient detailed information, including criteria, as may be necessary to allow the person to be affected to make the best case he can against the decision which he fears”.

120. I am satisfied that there exists a substantial ground for contending that whilst the correspondence in question reserves NAMA’s right to take alternative courses of action, it did not give notice of an intention by NAMA to take a proximate decision to enforce in the sense of making demand for repayment and in default appoint receivers or to move from the existing track towards term sheets to a track towards enforcement. Hence, for the purposes of this application, I am satisfied that Treasury has raised a substantial issue for determination that on the facts NAMA, in December 2011 was in breach of its duty to notify and give Treasury an opportunity to be heard prior to taking a decision to enforce.

121. Counsel for NAMA made a further alternative submission that even if there was a substantial issue raised that NAMA was in breach of its obligation to give Treasury an opportunity to be heard prior to the taking of the decision to enforce on 8th December, 2011, that any such breach had been remedied by the actions of NAMA in January 2012 agreeing to the standstill period and considering the proposals from Hines and Macquarie such that the Court should not find a continuing substantial issue for determination by the Court. Treasury, in response, contends that those actions did not and could not remedy the breach which is alleged to have occurred in December 2011. Counsel for Treasury submitted that “the world” (in the sense of its relationship with NAMA) was a different place for Treasury after the decision to enforce of 8th December, 2011. He also identified the wider representations than just in relation to the proposals from Macquarie and Hines which Treasury would have sought to make, and also an alleged lack of any opportunity by Treasury to make representations in relation to the Macquarie and Hines proposals prior to 25th January, 2012. Those submissions raise significant responses such that for the purposes of this application, I am satisfied that there continues to exist a substantial issue for determination that the decision taken by NAMA to enforce on 8th December, 2011, was taken in breach of NAMA’s duty to notify and to give Treasury an opportunity to be heard and of Treasury’s corresponding right to receive notification and heard in advance of the decision which is consequently ultra vires or void or invalid.

Duty to Act in a Fair and Reasonable Manner

122. The applicable principles derive from the judgment of Walsh J. in East Donegal Cooperative, already cited. There is no dispute about such principles. Treasury also relied upon the judgment of Kelly J. in Zockoll Group Ltd. v. Telecom Éireann [1998] 3 IR 287, and the judgment of Blayney J. in Deane v. Voluntary Health Insurance Board [1992] 2 I.R. 319. NAMA disputes the applicability of the principles in the latter decisions. It is not necessary for me to resolve that issue at this stage.

123. There was also some confusion as to what was intended by the submission of Treasury that NAMA in breach of the duty contended for, had acted unfairly and unreasonably. In reply, counsel for Treasury clarified that they were not advancing any ground of unreasonableness in accordance with, what are known as, the “Wednesbury principles” or in the sense of O’Keeffe v. An Bord Pleanála [1993] 1 I.R. 39. He drew attention to the following division made by Lord Roskill in relation to challenges by way of judicial review in CCSU v. Minister for Civil Service [1985] 1 A.C. 374, at pp. 414-415:

“This branch of public or administrative law has evolved, as with much of our law, on a case by case basis and no doubt hereafter that process will continue. Thus far this evolution has established that executive action will be the subject of judicial review on three separate grounds. The first is where the authority concerned has been guilty of an error of law in its action as for example purporting to exercise a power which in law it does not possess. The second is where it exercises a power in so unreasonable a manner that the exercise becomes open to review upon what are called, in lawyers’ shorthand, Wednesbury principles (Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 KB 223). The third is where it has acted contrary to what are often called ‘principles of natural justice’. As to this last, the use of this phrase is no doubt hallowed by time and much judicial repetition, but it is a phrase often widely misunderstood and therefore as often misused. That phrase perhaps might now be allowed to find a permanent resting-place and be better replaced by speaking of a duty to act fairly. But that latter phrase must not in its turn be misunderstood or misused. It is not for the courts to determine whether a particular policy or particular decisions taken in fulfilment of that policy are fair. They are only concerned with the manner in which those decisions have been taken and the extent of the duty to act fairly will vary greatly from case to case as indeed the decided cases since 1950 consistently show. Many features will come into play including the nature of the decision and the relationship of those involved on either side before the decision was taken.”

124. There is an overlap between the first alleged breach by NAMA of its obligation to exercise its discretionary powers in a fair and reasonable manner and the separately identified ground of failing to give notice of the proposed decision and the taking of the decision without giving Treasury an opportunity to be heard. This ground has already been considered.

125. The next ground relied upon is an alleged breach of the duty to act in a fair and reasonable manner in that the Credit Committee considered the Treasury matters on 6th December, 2011, when Treasury had been given until 7th December, 2011, to respond to concerns relating to the creditors strategy. NAMA has not put before the Court either the decision or recommendation of the Credit Committee following its consideration on 6th December, 2011, nor the minute of the Board decision of 8th December, 2011. The decision of the Board, as deposed to by Ms. Birmingham, refers to approval of “a recommendation”. There is a lack of clarity as to when or by whom such a recommendation was made. Treasury contend that NAMA is in breach of its duty of candour to the Court in opposing the application for leave and that Treasury should not be prejudiced in this application by any uncertainty by reason of absence of relevant documents.

126. Treasury relied upon the summary of a respondent/defendant public authority’s duty of candour to the Court as summarised in the English text Judicial Review Handbook, (5th Ed. Hart Publishing 2008) by Michael Fordham Q.C., at para. 10.4 where it is stated that:

“A defendant public authority and its lawyers owe a vital duty to make full and fair disclosure of relevant material. That should include: (1) due diligence in investigating what material is available; (2) disclosure which is relevant or assists the claimant, including on some as yet unpleaded ground; and (3) disclosure at the permission stage if permission is resisted. An interested party is also under a duty of candour. A main reason why disclosure is not ordered in judicial review is because Courts trust public authorities to discharge this self-policing duty, which is why such anxious concern is expressed where it transpires that they have not done so.”

“Counsel for the council also contended that it may be an undesirable practice to give full, or perhaps any, reasons to every applicant who is refused a discretionary grant, if only because this would be likely to lead to endless further arguments without giving the applicant either satisfaction or a grant. So be it. But in my judgment the position is quite different if and when the applicant can satisfy a judge of the public law court that the facts disclosed by her are sufficient to entitle her to apply for judicial review of the decision. Then it becomes the duty of the respondent to make full and fair disclosure.

. . .

[Counsel for the council submits] . . . that it is for the applicant to make out his case for judicial review and that it is not for the respondent authority to do it for him. This, in my judgment is only partially correct. Certainly it is for the applicant to satisfy the court of his entitlement to judicial review and it is for the respondent to resist his application, if it considers it to be unjustified. But it is a process which falls to be conducted with all the cards upwards on the table and the vast majority of the cards will start in the authority’s hands.”

129. However, it appears correct that Treasury should not be prejudiced by the absence before the Court of relevant documents such as the record of the Board decisions and any recommendation or other document considered by the Board. Nor should Treasury be prejudiced by a lack of clarity as to by whom or when the important recommendation was made to enforce which is stated to have been approved by the Board on the 8th December. On the present evidence, I find that Treasury have raised a substantial ground that NAMA was in breach of its duty to act fairly and reasonably by having the Credit Committee meet on 6th December to receive “a detailed update and recommendation” while extending the deadline for submission of the Treasury response on the creditor strategy concerns to 7th December.

Relevant and Irrelevant Considerations

130. It is not in dispute that NAMA, in exercising its discretion, is bound to have regard to all relevant considerations and is not to have regard to any irrelevant consideration. Treasury submits that, in neglecting to have regard to the availability of a potential investor or, as described by NAMA, a potential purchaser of the loans, prior to making its decision of 8th December, 2011, it failed to take into account a relevant consideration. It is undisputed that NAMA was informed at the meeting of 8th November, 2011, that Treasury was in negotiations with an unidentified investor. Treasury has raised a substantial issue that the potential availability of such an investor/purchaser was a relevant consideration. Further, on the evidence produced to date to the Court, in relation to the decision taken by the board of NAMA, Treasury has raised a substantial ground no consideration was given to this fact.

Improper Purpose and Bad Faith

131. The amended statement of grounds refers, in a number of paragraphs, to a contention that each of the decisions of 8th December, 2011, and 25th January, 2012, was taken for an improper purpose and/or in bad faith. However, the statement of grounds does not identify the alleged improper purpose. I accept the submission made by counsel for NAMA that, if a ground of improper purpose is being relied upon, the improper purpose contended for must be set out and there must also be credible evidence to support same. No such improper purpose has been particularised nor any credible evidence of an improper purpose adduced and, accordingly, I therefore refuse leave on that ground.

132. The position in relation to bad faith is slightly different. The allegation of bad faith is not particularised in the statement of grounds. However, in the written submissions, whilst Treasury indicates its reluctance to make the case it states that the matters which led it to make the case are summarised in the affidavit of Mr. Williams sworn on 31st January, 2012 and indicates an intention to rely, inter alia, on the decision of Listowel Urban District Council v. McDonagh [1968] 1 I.R. 312.

133. Counsel for Treasury, in oral submission, did not make any legal submissions on this ground, but relied on the written submission and submitted that, by reason of the alleged breach by NAMA of its duty of candour in opposing the application for leave, that, if the Court was minded to grant leave on other grounds, it should adjourn to the full hearing the leave application on this ground and direct a telescoped hearing on same. Bad faith is a serious allegation. Morgan and Hogan: “Administrative Law in Ireland” 4th Ed. at p. 745, states that:

“Fraud (frequently known as mala fides or bad faith) exists where a public body intends to achieve an object other than that for which he believes the power to have been conferred. Thus, bad faith includes, but is wider than, the concept of “malice” . . .. In the other direction, bad faith may be distinguished from bias . . . in that bias may have an objective existence, without any element of consciousness similar to the criminal law concept of mens rea; whereas the essence of bad faith is dishonesty.”

“Mala fides is a phrase often used in relation to the exercise of statutory of powers. It has never been precisely defined as its effects have happily remained mainly in the region of hypothetical cases. It covers fraud or corruption. . . .”

135. Whilst, as already stated, I accept counsel for Treasury’s submission that Treasury should not be prejudiced in an application for leave by a failure of NAMA to disclose relevant documents, it does not appear to me that having regard to the matters raised by Mr. Williams in his affidavit, even in the absence of all relevant documents there is any basis for adjourning rather than refusing the application for leave in relation to the grounds of improper purpose or bad faith. Hence, I refuse leave on that ground.

Certiorari - A Discretionary Remedy

136. Counsel for NAMA correctly submits that certiorari is a discretionary remedy. He also correctly submits that, having regard to the wordings of ss. 182 and 193 of the Act, the Court must not only be satisfied that there is a substantial issue raised as to the invalidity of the decisions challenged, but it must also be satisfied that Treasury has raised a substantial issue for determination as to its entitlement to an order of certiorari quashing the challenged decisions.

137. For the reasons already set out, I have concluded that Treasury has raised a substantial issue for determination as to the invalidity of the decision to enforce of 8th December, 2011.The decision to proceed on 25th January, 2012, on the present undisputed evidence is to proceed with the decision already taken to enforce by appointing receivers. On that evidence, there is a substantial issue that its validity is dependent on the validity of the decision of 8th December. Accordingly, it follows that Treasury has raised a substantial issue for determination as to the invalidity of the decision of 25th January 2012, to proceed and appoint receivers.

138. Counsel for NAMA submits that, even if the Court so concluded, that by reason of the standstill agreement entered into on the basis contended for, a court would not exercise its discretion to grant orders of certiorari in favour of Treasury and, hence, Treasury has not established a substantial issue for determination as to its entitlement to orders of certiorari of the challenged decisions.

139. NAMA contends that this application is brought in breach of the undertaking given in the letter from McCann Fitzgerald of 10th January, 2012, not to object to the appointment of receivers and not to “commence any application in that regard . . . or any like application”. Treasury submits that the undertaking given in that letter was in the context of the standstill agreement sought in the same letter which was replaced and superseded by a different standstill agreement entered into on 12th January, 2012. It contends that the undertakings expressly sought by NAMA and obtained from Treasury as part of the latter agreement are those set out in its letter of 12th January, 2012, which do not include any such undertaking. Treasury draws attention to the absence of any express reference in its letter of 12th January (initially drafted by NAMA and amended by Treasury) to the undertaking given in the letter of 10th January from McCann FitzGerald. NAMA disputes the difference in the agreement concluded on 12th January, 2012, from that sought on 10th January, 2012, which it contends was agreed to on 11th January, 2012, and submits that the earlier undertaking is incorporated by the reference in the opening phrase of the letter of 12th January, to NAMA’s letter of 11th January, 2012, to their agreement as expressed therein and “the basis of that agreement” to standstill for a period of 14 days from 11th January, 2012.

140. There is, in my judgment on the facts deposed to in the affidavits and the documents exhibited, a genuine dispute between the parties as to the terms of the concluded standstill agreement, the proper construction of the letter of 12th January and, in particular, as to whether the agreement includes an undertaking from Treasury which precludes it from challenging the decisions of 8th December 2011 and 25th January 2012 in the intended application for judicial review. Treasury, in supplemental written submissions, also raises issues as to the validity and enforceability of an agreement incorporating the undertaking as alleged by NAMA. It does so having regard to the common law principle that a contract which ousts the jurisdiction of the Court is invalid and unenforceable as a matter of public policy and the right to litigate as an aspect of the right of access to the courts protected by Article 40.3.1 of the Constitution. It also raises the necessity for clear wording and the change of position by NAMA from the purpose of the standstill period as expressed in its letter of 11th January, 2012, “to permit detailed discussions to take place between NAMA and your clients [Treasury] and the two prospective investors with a view to an agreement which is satisfactory to all parties being achieved” to that of the “ground rules” established orally on the morning of 12th January, 2012, and acted upon, which excluded tripartite discussions.

141. In my judgment, the resolution of the factual and legal issues in dispute raised by the above summarised contentions of Treasury and NAMA should not and could not properly be decided in this leave application.

142. Whilst certiorari is a discretionary remedy, there are limited circumstances in which a court which determines a decision to be invalid on grounds such as the substantial grounds advanced herein will refuse an order of certiorari. Nevertheless, Treasury does have to satisfy the Court on this application that it has raised a substantial issue for determination that a court would exercise its discretion in its favour. The only preventative matter raised by NAMA is the undertaking allegedly given as part of the concluded standstill agreement. Treasury has, in my judgment, established a substantial issue for determination as to whether or not there exists an enforceable undertaking given by it as part of the standstill agreement which prevents it from now seeking orders of certiorari of the decisions of 8th December and that of 25th January as contended for by NAMA. In those circumstances, having regard to my conclusions on the existence of substantial grounds for the invalidity of the decisions, I have concluded that Treasury has raised a substantial issue for determination by the Court as to its entitlement to orders of certiorari of the challenged decisions.

The Position of KBC

143. KBC correctly submits that its relationship with Treasury is a matter of private law i.e. contract. However, it has to acknowledge that it cannot take a decision to enforce the securities for the syndicated loans by itself. It requires a decision of NAMA to enforce the loans. For the reasons already analysed, Treasury has raised substantial issues for determination in relation to its entitlement to an order of certiorari quashing the decision of NAMA to enforce which includes, on the present evidence, the decision to enforce the securities for the syndicated loan. Treasury does not seek leave to challenge any decision made by KBC unilaterally, which is a matter of private law. KBC, however, is in the unfortunate position, as a minority member of the syndicate, that its majority syndicate partner is now a statutory body with public law obligations.

144. The second ground upon which KBC opposes leave, is that as is averred by Mr. Dillon, its deponent, it has determined that the Macquarie and Hines proposals are less advantageous to it than proceeding with receivership and hence NAMA would not be in a position to move forward with either proposal in relation to the syndicate’s loans absent the consent of KBC. Further that KBC has decided not to agree to a restructuring of the syndicate loans. It submits in those circumstances that there is no purpose in the Court granting an order of certiorari in relation to the NAMA decision and has referred to authorities which support the contention that the courts will not make an order which serves no purpose.

145. The decisions challenged relate to the enforcement of securities. Treasury is not seeking leave to challenge NAMA’s decision not to proceed with the Hines and Macquarie proposals. Similarly, no decision to restructure the syndicate loans is under challenge. Further, the syndicate loans only form a part of the Treasury loans held by NAMA. If Treasury is ultimately successful, NAMA may well be required to alter the procedure by which it reaches any new decisions in relation to enforcement, but the content of the decision remains solely a matter for NAMA.

146. Accordingly, I am not satisfied that the submissions of KBC preclude the Court from now finding that Treasury has raised a substantial issue for determination by the Court as to its entitlement to the claimed orders of certiorari.

Damages an Adequate Remedy

147. Section 182(6) of the Act only permits the Court to make an order giving leave to seek the orders of certiorari where it is satisfied that “if the applicant’s claim were established, damages would not be an adequate remedy”. Treasury’s claim herein is that the challenged decisions are invalid i.e. that they are void and of no effect and that Treasury is entitled to orders of certiorari quashing the decisions. In accordance with the analysis of Costello P. in McCormack cited above, if Treasury succeeds in establishing that the decisions were taken in breach of NAMA’s obligations derived from the constitutional presumption attaching to the exercise of statutory discretionary powers and/or in breach of the principles of constitutional justice, then it will be ultra vires. The duty to give an opportunity to be heard and right to be heard forms part of such principles. As already set out, certiorari is a discretionary remedy and Treasury must also establish its entitlement to have the court exercise its discretion in Treasury’s favour to succeed fully in its claim.

148. In my judgment, damages would not be an adequate remedy for Treasury if it were to succeed in its claim that the challenged decisions are invalid. Section 17 of the Act, and the well-known principles in relation to the absence of liability in damages for a bona fide exercise of statutory power as set out in Pine Valley Developments & Ors v. Minister for the Environment & Ors [1987] I.R. 23, cast considerable doubt as to the availability of damages as a remedy to Treasury if it succeeded on any of the substantial grounds advanced herein. Even if available, the impact of the challenged decisions on Treasury and its business set out above is such that damages would not, in my judgment, be an adequate remedy. If successful in its claim for orders of certiorari, Treasury should be entitled by way of remedy to have the decision quashed so that new decisions may be taken in accordance with the applicable principles of constitutional justice.

Conclusion
149. Treasury has established its entitlement pursuant to ss. 182 and 193 of the Act and O. 84 of the Rules of the Superior Courts to an order granting leave to issue judicial review proceedings seeking orders of certiorari of the decision of NAMA of 8th December, 2011, “to enforce” and the decision of 25th January to proceed by appointing receivers on those grounds found in this judgment to meet the threshold of “substantial ground” and set out in summary below.

Undertaking as to Damages

150. NAMA, in its oral submissions, made an additional submission contingent on the Court deciding to grant leave to Treasury. This now arises for consideration. In reliance upon the decision of Laffoy J. in Broadnet Ltd. v. Director of Telecommunications Regulation [2000] 3 IR 281, it was submitted that the Court should require, as a condition of any order granting leave, a fortified undertaking as to damages from Treasury. A “fortified undertaking as to damages” was intended to mean an undertaking as to damages supported by the shareholders of Treasury, namely, Mr. Ronan and Mr. Barrett.

151. In Broadnet, Laffoy J. decided on a motion brought by the respondents and notice parties seeking both security for costs and undertakings as to damages following the granting ex parte of an application for leave, that the Court did have jurisdiction to entertain, and if appropriate, to make an order after the grant of leave requiring an undertaking for damages pursuant to O. 84, r. 20(6) of the Rules of the Superior Courts. That rule provides:

“If the Court grants leave, it may impose such terms as to costs as it thinks fit and may require an undertaking as to damages.”

152. Counsel for NAMA only made this application in the course of the oral hearing. It was not referred to in the written submissions and there are no facts on affidavit setting out any alleged losses of NAMA in the event that the Court was to grant leave. The circumstances in which this issue arose are that Treasury, in its notice of motion, written submissions and until the third day of the oral hearing, had sought an interlocutory injunction restraining the receivers from acting pending the determination of the judicial review proceedings in addition to the orders granting leave. Counsel for Treasury indicated at that late stage that Treasury had decided not to pursue the application for an injunction. This appears to have been motivated by a consideration of the practical constraints on the receivers if leave were granted by the Court to seek orders of certiorari of the challenged decisions. If Treasury had proceeded with the application for an interlocutory injunction, then, inevitably, Treasury would have been obliged to address the obligation to provide an undertaking as to damages in accordance with the well-established principles.

153. I have concluded that I should not, on this application, determine NAMA’s application for an order requiring a fortified undertaking as to damages pursuant to O. 84, r. 20(7) as a condition of leave. In Broadnet, Laffoy J. determined that such an application may be made after the granting of leave. Further, and central to her reasoning in that judgment, were findings made by her on the evidence before her that the parties who sought the undertakings were incurring loss and damage by reason of the delay in awarding the licences the subject matter of the application which, in turn, was caused by the existence of the judicial review proceedings. There are no similar facts on affidavit in these proceedings. The issue was not addressed at the time of the affidavits as, at that point in time, Treasury was pursuing an application for an interlocutory injunction. Finally, any application for a fortified undertaking as to damages would have to be on notice to Mr. Ronan and Mr. Barrett. The Court could not consider such an application fairly without those persons being notified of the application and being given an opportunity to be heard.

154. Accordingly, in all the circumstances, I am not going to determine that application in the present judgment and instead indicate that NAMA is at liberty to bring such an application by motion on notice to any person from whom an undertaking is sought provided it does so promptly after the order granting leave has been made. Counsel for NAMA indicated in the course of submission that if an order granting leave was made, then as a matter of probability, an application for security for costs would also be made. In Broadnet, the two applications were combined in one motion and this appears an effective and expeditious way of dealing with those two issues. Similarly, in this proceeding, any such application should be brought at the same time.

Relief

155. There will be an order made pursuant to ss. 182 and 193 of the Act and O. 84 of the Rules of the Superior Courts granting leave to the applicants to seek the orders of certiorari as claimed in paras. (i) & (viii) of the amended statement of grounds, i.e.:

“(i) An order of certiorari by way of an application for judicial review quashing the purported decision of the First Named Respondent, in performance of its functions under Section 11 of the National Asset Management Agency Act, 2009 (the “Act”), as evidenced in the letter of 9 January 2012 but actually made on 8 December 2011, ‘to arrange for demands for repayment to be issued in respect of facilities in default and, failing repayment, to proceed to appoint receivers (including statutory receivers) as appropriate to various properties that comprise security for such facilities.’

. . .

(viii) If necessary or appropriate, an order of certiorari quashing the decision of the Respondents of 25 January 2012 to proceed with enforcement in respect of the Applicants’ assets, including the appointment of receivers.”

(i) The decisions are in the area of public law and are therefore amenable to judicial review;

(ii) The decision of 8th December, 2011, was taken in breach of NAMA’s duty to notify Treasury of the proposed decision and to give it an opportunity to be heard prior to the taking of the decision and in breach of Treasury’s corresponding rights to receive notification and be heard;

(iii) NAMA, in exercising its discretionary power to take a decision to enforce and proceed with that decision is under a duty to exercise such power in a fair and reasonable manner; and

(iv) NAMA, in taking the decision on 8th December, 2011, failed to exercise its discretionary powers in a fair and reasonable manner by reason of:

a) the failure to give notice of the proposed decision and to afford an opportunity to be heard; and/or

b) the Credit Committee considering the matter on 6th December, 2011, when Treasury had been given until 7th December, 2011, to respond to concerns relating to the creditors strategy; and/or

c) the failure to take into account relevant considerations on 8th December, 2011, namely, the availability of investors/purchasers for the loans.

157. The first and second named respondents have liberty to bring an application pursuant to O. 84 r. 20(7) seeking an undertaking as to damages. Having heard the parties, I will fix a time limit within which this must be done.

158. In granting leave on the above grounds, it is not intended that the applicants be confined to setting out the grounds in the above terms in the amended statement of grounds to be delivered pursuant to the order now made. The applicants should state precisely each ground and as required by O.84 r.20(3) “identify in respect of each ground the facts or matters relied upon as supporting that ground”. Duplication should be avoided.

159. I will also hear the parties on any further consequential directions required to expedite the proceedings.