A Supreme Court judge said borrowers whose interests could be directly affected by a decision of a public body exercising statutory powers are ordinarily entitled to notice and an opportunity to make representations before that decision is made.
In a judgment delivered on 12 April 2011, Mr Justice Finnegan agreed with the judgment of Mr Justice Fennelly and added reasons concerning the powers of the National Asset Management Agency (NAMA) and the effect of transferring mortgages to it. He concluded that the appellants had a right to be heard before NAMA decided under section 84 of the NAMA Act to acquire their loans. He would allow the appeal on that ground.
The appellants were 15 named companies and Patrick McKillen. They argued that transferring their mortgages from banks to NAMA could adversely affect their property rights and equity of redemption. Justice Finnegan said NAMA’s statutory exemptions and powers could alter the position of a mortgagor compared with an ordinary mortgagee. He highlighted the power to seek a vesting order, under which land could vest in NAMA if statutory conditions were met, the mortgagor’s equity of redemption would be extinguished and the court would determine a value to reduce the mortgage debt. NAMA would not be obliged to sell the land.
The judgment recounted evidence that the appellants’ portfolio comprised about 62 properties, including shopping centres, hotels and offices. Its current value was put at between €1.7 billion and €2.28 billion, against loans of about €2.1 billion. The portfolio generated about €150 million in annual income and was 96 per cent let. Finnegan J said the appellants maintained that their income covered interest payments; some loan due dates had passed and some loan-to-value conditions were breached, but the lenders had not enforced those rights.
He considered that a bank’s possible forbearance could benefit borrowers if property values rose, whereas NAMA’s additional powers could give it different commercial incentives. He also said provisions of the Act concerning vesting orders and section 103 directly affected the appellants’ interests, while sections 101 and 139 were capable of doing so. He did not consider section 7’s criminal offences to establish a right to be heard in the circumstances discussed.
The judgment expressly cautioned that its discussion of the statutory provisions was not a definitive interpretation; those questions would await cases where they arose between parties. The disposition in this judgment was that the appeal should be allowed on the right-to-be-heard ground. It does not state a separate order setting aside an acquisition or specify any further relief.