McKillen v Misland (Cyprus) Investments Ltd & Ors

This is the trial of a preliminary issue in two sets of proceedings, a petition under section 994 of the Companies Act 2006 and an associated action. I gave judgment on a number of other preliminary issues on 21 December 2011: see [2011] EWHC 3466 (Ch). Reference can be made to my earlier judgment for a summary of the proceedings and the issues arising in them. For present purposes, a brief summary will be sufficient.

Both sets of proceedings are brought by Patrick McKillen, the holder of a 36% equity interest in an English company called Coroin Limited (the company). The company was formed in 2004 for the acquisition by a consortium of Irish investors of four well-known London hotels. One of the hotels, The Savoy, has been sold, but the company indirectly retains the others, which are Claridge’s, The Connaught and The Berkeley.

Sir David and Sir Frederick Barclay, through companies and trusts controlled by them, are pursuing an avowed policy of trying to obtain control and ownership of the company and hence of the three hotels which it owns. Mr McKillen alleges that the means by which the Barclay interests are seeking to obtain control are unlawful and involve unfairly prejudicial conduct of the affairs of the company. This is the basis of the petition under section 994 and of the action in which a conspiracy to injure by unlawful means is alleged.

The preliminary issues tried in December 2011 concerned allegations by Mr McKillen that the sale of a corporate shareholder triggered the pre-emption provisions in a shareholders’ agreement between the investors and in the company’s articles. The preliminary issues raised questions of construction of the relevant provisions and involved no disputed issues of fact. I decided the issues against Mr McKillen and my decision is currently the subject of an appeal.

Another of the acts alleged by Mr McKillen to be unlawful was the transfer on 27 September 2011 of secured bank loan facilities to Maybourne Finance Limited (MFL), a company within the Barclay interests. The present preliminary issue concerns contractual provisions relevant to this transfer.

The bank facilities had been provided by Bank of Ireland and Anglo Irish Bank Corporation Limited (the banks). The entire beneficial interest of the banks in the facilities was acquired in June 2010 by National Asset Loan Management Limited. It is a wholly owned subsidiary of the National Asset Management Agency (the Agency), a public body established by statute in December 2009 as part of Ireland’s response to the international economic and financial crisis and in particular to the problems in the Irish banking sector. The facilities were acquired in exercise of NAMA’s statutory powers, which it can exercise directly or through subsidiaries or other group entities (as defined). For convenience I shall use the term NAMA to cover both the Agency and National Asset Loan Management Limited.

The transferred facilities were amended by an agreement dated 1 April 2011 (the Facilities Agreement) which included terms specifically dealing with NAMA and stated the terms of a new facility provided by NAMA. The total amount then outstanding under the existing and new facilities was £660 million.

The transfer of the facilities to MFL was made by a loan sale agreement dated 27 September 2011, to which the parties were NAMA as beneficial owner of lenders’ rights under the banks’ facilities and as lender under the new facility provided by it, the banks as the named lenders under their facilities and MFL as purchaser. The purchase price was just over £662.5 million. It was a novation of the facilities, so that as a matter of legal analysis MFL succeeded to the benefit of the banks’ facilities legally owned by the banks but beneficially owned by NAMA, to the obligations of the banks under those facilities and to the rights and obligations of NAMA under its facility.

Mr McKillen alleges that the transfer of these facilities was in breach of the Facilities Agreement, specifically under two sub-clauses, clauses 24.2 and 24.3. The defendants allege that the terms of these provisions were satisfied, but in any event they rely on a different provision, clause 40.3, as disapplying the restrictions and conditions in clauses 24.2 and 24.3 to the transfer in question. If that is right it obviates the need for the factual inquiry needed to resolve the issues otherwise arising under clauses 24.2 and 24.3.

MFL applied for the trial as a preliminary issue of whether the effect of clause 40.3 was that clauses 24.2 and 24.3 did not apply to the transfer to MFL. The company, which acts by a chief executive who is independent of the protagonists in these proceedings, supported this application on the grounds that uncertainty as to the validity of the transfer made it commercially difficult for it to deal with the loans, all of which are currently repayable, and with MFL as the lender.

I directed the trial of the following preliminary issue:

“On a true construction of clause 40.3 of the Facility Agreement:

1.

Did clause 40.3 apply to the transfer of the company’s loan facility to MFL; and

2.

Did the restrictions on transfer in clauses 24.2 and/or 24.3 apply to the transfer of the company’s loan facility to MFL?”

The uncertainty as to the validity of the transfer would not however be resolved unless NAMA was a party to the proceedings and was bound by the result. On MFL’s application, I directed that NAMA be joined as a party, subject of course to its right to apply to discharge the order. NAMA would have been entitled to a discharge of the order because the Facilities Agreement provides for the Irish courts to have exclusive jurisdiction, a provision expressly included for the benefit of the lenders. NAMA has, however, agreed to accept the jurisdiction of the English courts for the determination of the validity of the transfer and has appeared by solicitors and counsel at the trial of the preliminary issue. NAMA has served a defence limited to the issue of the validity of the transfer.

Before coming to the Facilities Agreement and its terms, it is necessary to set out some background.

The bulk of the finance required for the acquisition by the company of the Savoy group of hotels and associated properties was provided by the banks. The principal facility was provided in five tranches under a senior facility agreement dated 21 September 2005 and subsequently amended. As at 1 April 2011, a total of just over £528 million was outstanding under this facility. £50 million was advanced under a subordinated facility agreement also dated 21 September 2005, which was amended and restated on 29 June 2006. Funds were advanced under the Brook Street Agreement dated 12 March 2008, used to finance the purchase of a leasehold property adjacent to Claridge’s. £35 million was outstanding under this facility on 1 April 2011. Further funds were advanced under a facility agreement used to finance the purchase of a property in Knightsbridge adjacent to The Berkeley. Just over £35.4 million was outstanding to Anglo Irish Bank under this facility on 1 April 2011. These facility agreements contained restrictions on the assignment and transfer of the facilities but these restrictions were superseded by the Facilities Agreement.

I have earlier mentioned the circumstances in which the Agency was created. Aideen O’Reilly, head of legal and tax affairs at the Agency, gives this account of NAMA and its role in a witness statement filed in these proceedings:

“8.

The Agency was established in December 2009, by virtue of the National Asset Management Agency Act 2009 (the “NAMA Act”), as one of a number of initiatives taken by the Irish Government to address the serious and well-publicised problems which had arisen in Ireland’s banking sector.

9.

The NAMA Act was enacted by the Irish parliament (the Oireachtas) in response to the threat to the Irish economy posed by the global financial crisis. The establishment of the Agency and performance by the Agency of its functions, as provided for in the NAMA Act, was considered by the Irish government to be a vital component in the preservation of the viability of the financial system of Ireland and the wider economy of the country.

10.

The Agency’s role is to acquire loans from those financial institutions that applied to participate in the Agency’s scheme and which were designated by the Minister for Finance of Ireland as participating institutions, to deal expeditiously with the loans acquired by it and to protect or otherwise enhance the value of those acquired loans for the purpose of contributing to the achievement of the public policy objectives of the NAMA Act.

11.

As set out in the Recitals to and section 2 of the NAMA Act, those public policy objectives include “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 of the State”, “to facilitate restructuring of credit institutions of systemic importance to the economy” and “to remove uncertainty about the valuation and location of certain assets of credit institutions of systematic importance to the economy”.

12.

As at 1 January 2012, the Agency has acquired loans (including land and development and associated loans) with a nominal value of €74,072,543,452 from five participating financial institutions, including Bank of Ireland and Anglo Irish Bank. Ultimately, the Agency’s objective is to obtain the best achievable financial return for the Irish State on this portfolio, and, in the case of each individual loan, to achieve such a return as soon as practicable in order to reduce the value of the portfolio to zero as soon as commercially practicable….”

As earlier mentioned, NAMA acquired on 28 June 2010 the entire beneficial interest of the banks in the senior, subordinated and Brook Street facilities, but the legal title of the banks was not transferred.

The Facilities Agreement had three purposes. First, it amended the senior, subordinated and Brook Street facilities agreements. Secondly, it introduced new provisions relevant specifically to the position of NAMA. Thirdly, it contained the terms of a new facility called the Knightsbridge Acquisition Facility provided by NAMA. The purpose of this facility was to repay Anglo Irish Bank under its existing Knightsbridge Facility Agreement.

The parties named in the Facilities Agreement are Anglo Irish Bank, as facility agent and as security trustee under the Brook Street and Knightsbridge facilities; the Bank of Ireland, as security trustee under the senior and subordinated facilities; the banks as original lenders; and National Asset Loan Management Limited as the lender under the Knightsbridge Acquisition Facility. The Agency is not named as a party and did not execute the agreement. However, clause 40.3(a) provides in part that:

“Anglo Irish Bank Corporation Limited continues to manage each Loan other than a Knightsbridge Acquisition Facility Loan on behalf of and for the benefit of NAMA and is authorised to enter into this Agreement with the Borrower on behalf of NAMA.”

NAMA is defined for the purposes of the Facilities Agreement as the Agency and any relevant group entity. All the parties before the court are agreed that the effect is to make the Agency a party through the agency of Anglo Irish Bank, in particular for the purpose of enabling it to enforce the provisions directly applicable to it.

Clause 24 deals with the transfer of the facilities, which are made subject to restrictions and conditions. Clause 24.2 makes provision for transfers and contains a restriction on the class of permitted transferee:

“24.2

Assignments and transfers by Lenders

Subject to this Clause 24 a Lender (the “Existing Lender”) may:

(a)

assign any of its rights and benefits; or

(b)

transfer by novation any of its rights, benefits and obligations,

to another bank or financial institution or a trust fund or other entity regularly engaged or established for the purpose of making, establishing or investing in loans, securities and other financial assets (the “New Lender”).

Clause 24.3(a) contains conditions applicable to transfers:

24.3

Conditions of assignment or transfer

(a)

A Lender may not effect an assignment or transfer under Clause 24.2(a) (Assignments and transfers by Lenders) without:

(i)

the prior written consent of NAMA; and

(ii)

having first notified and consulted with the Borrower in relation to such proposed assignment or transfer.”

Mr McKillen alleges that MFL was not within the class of permitted transferee in clause 24.2 and that there was a breach of the requirement of consultation with the company under clause 24.3(a)(ii).

Provisions as to the procedure for transfers are contained in clauses 24.3(b) and (c), 24.5 and 24.6:

“24.3(b) An assignment will only be effective on:

(i)

receipt by the Facility Agent of written confirmation from the New Lender (in form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other Finance Parties and the other Secured Parties as it would have been under if it was an Original Lender; and

(ii)

performance by the facility Agent of all “know your customer” or other checks relating to any person that it is required to carry out in relation to such assignment to a New Lender, the completion of which the Facility Agent shall promptly notify to the Existing Lender and the New Lender.

(c)

A transfer will only be effective if the procedure set out in Clause 24.5 (Procedure for transfer) is complied with.

24.5

Procedure for transfer

(a)

Subject to the conditions set out in Clause 24.3 (Conditions of assignment or transfer) a transfer is effected in accordance with paragraph (b) below when the Facility Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.

(b)

The Facility Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender upon its completion of all “know your customer” or other checks relating to any person that it is required to carry out in relation to the transfer to such New Lender.

(c)

On the Transfer Date:

(i)

to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights, benefits and obligations under the Finance Documents and in respect of the Transaction Security, each of the Obligors and other members of the Group party to any Finance Document or the Transaction Security and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and in respect of the Transaction Security and their respective rights against one another under the Finance Documents and in respect of the Transaction Security shall be cancelled (being the “Discharged Rights and Obligations”);

(ii)

each of the Obligors and other members of the Group party to any Finance Document and the New Lender shall assume obligations towards one another and/or acquire rights and benefits against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor or other member of the Group and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;

(iii)

the Facility Agent, the relevant Security Trustee, the New lender, the other Lenders, and any Hedge Bank shall acquire the same rights and assume the same obligations between themselves and in respect of the Transaction Security as they would have acquired and assumed had the New Lender been an Original Lender with the rights, and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Facility Agent, the relevant Security Trustee, and any Hedge Bank and the Existing Lender shall each be released from further obligations to each other under this Agreement; and

(iv)

the New Lender shall become a Party as a “Lender”.

24.6

Copy of Transfer Certificate to the Borrower

The Facility Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, send to the Borrower a copy of that Transfer Certificate.”

Clause 24.7 permits the disclosure of confidential information by a lender to its affiliates, transferees of the facilities, and certain others, provided the recipient gives a confidentiality undertaking.

Clauses 24.8 and 24.9 are not in point. Clause 24.10 provides:

“24.10

Changes to the Lenders under the Existing Facilities Documents

Any assignment or transfer by any Lender of any Loan shall only be permitted in accordance with this Agreement and on such assignment or transfer there will be deemed to have been an equivalent assignment or transfer under the relevant Existing Facilities Documents.”

Clause 1.1, the main definitions clause, defines “Lender” to mean:

“(a)

any Original Lender

(b)

any Knightsbridge Lender and

(c)

any bank, financial institution, trust, fund or other entity which has become a Party in accordance with the relevant Existing Facilities Documents or Clause 24 (Changes to the Lenders) of this Agreement,

which in each case has not ceased to be a Party in accordance with the terms of this Agreement.”

The “Original Lenders” were the banks and the only “Knightsbridge Lender” was NAMA. “Loan” means any of the advances made under the facilities to which the agreement applies.

Clause 24.1 provides:

“24.1

The provisions of this Clause 24 (Changes to the Lenders) are subject to the terms set out in Clause 40.3 (Transfer to NAMA).”

Clause 40.3 provides:

“40.3

Transfer to NAMA

(a)

The Senior Lenders, the Subordinated Lenders and the Brook Street Lenders hereby give notice that and each Obligor acknowledges that each Loan other than a Knightsbridge Acquisition Facility Loan is held by the Senior Lenders, the Subordinated Lenders and the Brook Street Lenders for the benefit and to the direction of NAMA pursuant to the NAMA Act. Anglo Irish Bank Corporation Limited continues to manage each Loan other than a Knightsbridge Acquisition Facility Loan on behalf of and for the benefit of NAMA and is authorised to enter into this Agreement with the Borrower on behalf of NAMA.

(b)

Without limiting the generality of paragraph (a), the provisions of Clause 24 (Changes to the Lenders) (other than Clause 24.5(c) and Clause 24.7), Clause 26.10 (Resignation of the Facility Agent) (other than clause 26.10(f)) and Clause 27.17 (Resignation of Security Trustee) (other than Clause 27.17(e)) shall not apply in relation to the assignment or transfer of any rights, benefits and obligations to NAMA or its Affiliates or the exercise of any rights, powers and discretions by NAMA or its Affiliates under the Finance Documents in place of any Lender, the Facility Agent or the relevant Security Trustee and any change or resignation under Clause 24 (Changes to the Lenders), Clause 26.10 (Resignation of the Facility Agent) and Clause 27.17 (Resignation of Security Trustee) shall be effected by notice in writing from NAMA to the Borrower.”

Clause 40.3(b) refers to clauses 26 and 27 as well as to clause 24. Clause 26 is concerned generally with the facility agent and the security trustees. Clause 26.1 provides:

“Appointment of the Facility Agent

(a)

Each of the Lenders appoints the Facility Agent to act as its agent under and in connection with the Finance Documents.

(b)

Each of the Lenders authorises the Facility Agent to exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

(c)

NAMA may in its sole discretion exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under or in connection with the Finance Documents, and any such exercise by NAMA of such rights, powers, authorities and discretions shall be as valid as if they were exercised by the Facility Agent.”

Clause 26.10 provides:

“26.10

Resignation of the Facility Agent

(a)

Subject to Clause 40.3 (Transfer to NAMA) and the prior written consent of NAMA the Facility Agent may resign and appoint one of its Affiliates as successor by giving notice to the Lenders and the Borrower.

(b)

Alternatively the Facility Agent may, subject to Clause 40.3 (Transfer to NAMA) and the prior written consent of NAMA, resign by giving notice to the Lenders and the Borrower, in which case the Majority Lenders (after consultation with the Borrower) may appoint a successor Facility Agent.

(c)

If the Majority Lenders have not appointed a successor Facility Agent in accordance with paragraph (b) above within 30 days of resignation was given, the Facility Agent (after consultation with the Borrower) may appoint a successor Facility Agent.

(d)

The retiring Facility Agent shall, as its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as Facility Agent under the Finance Documents.

(e)

The Facility Agent’s resignation notice shall only take effect upon the appointment of a successor.

(f)

Upon the appointment of a successor, the retiring Facility Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 26.10. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(g)

After consultation with the Borrower, the Majority Lenders may, by notice to the Facility Agent, require it to resign in accordance with paragraph above. In this event, the Facility Agent shall resign in accordance with paragraph (b) above.

(h)

The Facility Agent may not resign without the prior written consent of NAMA.”

Clause 27 is concerned with the security trustees. Clause 27.17 provides:

“27.17

Resignation of Security Trustee

(a)

Subject to Clause 40.3 (Transfer to NAMA) and the prior written consent of NAMA, each Security Trustee may resign and appoint one of its Affiliates as successor by giving notice to the other Secured Parties (or to the Facility Agent and the Facility Agent under the Subordinated Facility Agreement together on behalf of the Secured Parties).

(b)

Alternatively subject to Clause 40.3 (transfer to NAMA) and the prior written consent of NAMA, each Security Trustee may resign by giving notice to the other Secured Parties (or to the Facility Agent and the Facility Agent under the Subordinated Facility Agreement together on behalf of the Secured Parties) in which case the Majority Lenders may appoint a successor relevant Security Trustee.

(c)

If the Majority Lenders have not appointed a successor Security Trustee in accordance with paragraph (b) above within 30 days after the notice of resignation was given, the relevant Security Trustee (after consultation with the Facility Agent and NAMA) may appoint a successor Security Trustee.

(d)

The retiring Security Trustee shall, at its own cost, make available to the successor Security Trustee such documents and records and provide such assistance as the successor Security Trustee may reasonably request for the purposes of performing its functions as the relevant Security Trustee under the Finance Documents.

(e)

The relevant Security Trustee’s resignation notice shall only take effect upon (i) the appointment of a successor and (ii) the transfer of all of the Transaction Security to that successor.

(f)

Upon the appointment of a successor, the retiring Security Trustee shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of Clauses 26 (Role of the Facility Agent and Others), and this Clause 27. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(g)

The Majority Lenders may, by notice to the relevant Security Trustee, require it to resign in accordance with paragraph (b) above. In this event, the relevant Security Trustee shall resign in accordance with paragraph (b) above.

(h)

Each Security Trustee may not resign without the prior written consent of NAMA.”

The Facilities Agreement is governed by Irish law but the parties are agreed that there is no difference between English and Irish law as regards the principles of construction applicable to the agreement. Equally it was accepted, if relevant, that the principles of statutory construction are the same. No evidence of Irish law was put before the court.

The parties were agreed that the NAMA Act was part of the admissible context for the construction of the Facilities Agreement. In my judgment, this is clearly right. Not only is NAMA’s involvement explicable only by reference to its functions and powers under the Act, but the Act contains powers and provisions which may be directly relevant to the clauses to be construed. Moreover, clause 40.3(a) and other provisions of the agreement expressly refer to the Act.

There are a number of provisions in the NAMA Act to which I should refer.

Some of the definitions in sections 4(1) and 4(2) should be noted. “Acquired bank asset” means a bank asset acquired by NAMA. “Bank Asset” includes a credit facility and security relating to it. “Credit Facility” is broadly defined and includes the facilities in this case. “Acquire” and “Acquisition”, in relation to a bank asset, are defined so as to include, among other things, “any form of legal or beneficial transfer”, novation and assignment.

Section 10(1) states NAMA’s purpose as being to contribute to the achievement of the general economic and financial 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.”

Section 11(1) sets out NAMA’s functions, including the acquisition of eligible bank assets in accordance with Part 6 of the Act and holding, managing and realising acquired bank assets. Section 12(1) confers on NAMA “all powers necessary or expedient for, or incidental to, the achievement of its purposes and performance of its functions”. Section 12(2) sets out a large number of specific powers without prejudice to the generality of section 12(1) and Mr Dicker QC, appearing for NAMA, drew attention to paragraph (w) of section 12(2):

“(w)

sell or dispose of the whole or any part of the property or investments of NAMA, either together or in portions, for such consideration and on such terms as the Board thinks fit,”

Part 6 of the NAMA Act contains detailed provisions relating to the acquisition by NAMA of bank assets (sections 80-98) and the effects of acquisition (sections 99-111). Section 90 provides for the acquisition by NAMA of bank assets by service of an acquisition schedule and for the deemed assignment of all related contracts to which the transferring bank is a party. Section 90(6) states that these provisions have effect notwithstanding:

“(a)

any legal (including contractual) or equitable restrictions on the acquisition of the bank asset or any part of it,

(b)

any legal or equitable restriction, inability or incapacity relating to or affecting any matter referred to in the acquisition schedule (whether generally or in particular) or any requirement for a consent, notification, authorisation, licence or document to similar effect (by whatever name and however described), in each case,

(c)

any insignificant or immaterial error or any obvious error, or

(d)

any provision of any enactment to the contrary.”

The acquisition by NAMA of the senior, subordinated and Brook Street facilities was achieved in accordance with Part 6 of the NAMA Act. Three points should be noted. First, the effect of defining “Acquisition” so as to include novation is that NAMA could have acquired the legal title to the banks’ obligations as well as rights under the facilities without the consent of the company. Given the purposes of NAMA and the context in which the NAMA Act was enacted, as well as the general nature of facility agreements, it would have made no sense to empower NAMA to acquire the benefits, but not the obligations, arising under facility agreements. Secondly, NAMA acquired the banks’ beneficial interest in the facility but not their legal title. It was nonetheless an acquisition for all the purposes of the NAMA Act and the facilities became acquired bank assets by reason of the definition of “Acquisition” in section 4(2). Thirdly, by reason of section 90(6) the restrictions and conditions applicable to transfers contained in the various facilities agreements did not apply to their acquisition by NAMA, and equally would not have done so if full legal title had been transferred.

As regards the effect of acquisition of bank assets by NAMA, relevant provisions are contained in section 99.

Section 99(1) and (2) provide:

“99.―(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

(iv)

the participating institution ceases to have those rights and obligations except to any extent to which this Act provides otherwise.

(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.”

Section 99(1) would seem unnecessary where NAMA acquires a bank asset by legal assignment or novation. The relevant rights, powers and obligations are thereby made exercisable by or enforceable against NAMA without the need for section 99(1). Where, however, the acquisition is equitable, not legal, so that as against the debtor the rights, powers and obligations remain those of the original party, section 99(1) has an important effect. It is an acquisition for the purposes of the Act, so that section 99(1) confers on NAMA a direct right to exercise those rights and powers. I can see no reason why this provision would not apply also to powers, rights or obligations of lenders contained in any amendments to the terms of the acquired facility after its acquisition pursuant to the Act, such as those contained in the Facilities Agreement.

Part 9 of the NAMA Act deals with the powers of NAMA in relation to acquired bank assets. Section 139 provides:

“NAMA may validly transfer, assign, convey, sell on or otherwise dispose of an acquired bank asset to any person notwithstanding―

(a)

any restrictions on such a disposal at law or in equity,

(b)

any contractual requirement, or any requirement under any enactment, for the consent of, for notice to, or for a document from, any person to such a disposal, or

(c)

any provision of any enactment that would otherwise prohibit or restrict such a disposal.”

Mr Onions for MFL and Mr Dicker for NAMA relied strongly on this section as important background for the purposes of construing clause 40.3. Mr Onions submitted that following NAMA’s acquisition of the facilities in June 2010, it was entitled by reason of section 139 to transfer the facilities to any person without the restrictions in the facilities or, after the making of the Facilities Agreement, the restrictions in clause 24.

It is convenient to deal with this submission here.

Mr Onions submitted, first, that the words “transfer … to any person” of themselves confer a complete freedom as to the identity of the transferee and, secondly and in the alternative, that paragraph (a) (“any restrictions on such a disposal at law or in equity”) have the effect of disapplying any contractual restriction on the class of permitted transferees.

If Mr Onions were correct in his reading of section 139, it would be a powerful consideration in MFL’s favour in construing clause 40.3. I am, however, unable to accept either limb of Mr Onions’ submission.

As to the first limb, section 139 is in my judgment a composite provision. There is not a metaphorical full stop or semi-colon after the words “to any person”. The purpose of the section is to disapply the restrictions identified in paragraphs (a), (b) and (c) to transfers to any person. If not in any event clear, it follows from the phrase “such a disposal” repeated in each paragraph, which refers back to “transfer … of an acquired bank asset to any person”.

As to the second limb, paragraph (a) does not in my judgment cover contractual restrictions. Each paragraph seems to me to cover separate sources of enforceable restriction: case law (paragraph (a)); contract and legislation as they relate to requirements for consent, notice or a document (paragraph (b)); and legislation (paragraph (c)). The phrase “at law or in equity” does not as a matter of ordinary legal usage cover contractual restrictions. That it does not do so in section 139(a) is, I think, made clear by two factors. First, paragraph (b) explicitly covers contractual provisions, albeit of a limited class. Secondly, where in other sections a similar expression as that used in paragraph (a) is intended to include contracts, they contain express provision to that effect: see section 90(6)(a) and section 99(2)(b), both cited above.

Mr Dicker differed from Mr Onions in his approach to section 139. He submitted that the restrictions on permitted transferees in clause 24.2 were disapplied not by the reference to “any person” but by paragraph (b) of section 139. He submitted that because contractual restrictions can be waived with the consent of all the parties to the contract, clause 24.2 is a “contractual requirement … for the consent of … any person” within the meaning of section 139(b). This is not, in my judgment, a correct reading of that provision. The restrictions on permitted transferees in clause 24.2 is a “restriction on disposal”, the phrase used in section 139(a), but it is not a contractual requirement for consent within section 139(b). As it seems to me, section 139(b) is directed to those provisions, commonly found in commercial contracts, expressly requiring the consent, notice or documents to which section 139(b) refers.

Contractual restrictions on the permitted categories of transferee do not therefore fall within the terms of paragraph (b), although a contractual requirement for consultation may well do so. It is not surprising that on transfer by NAMA as opposed to transfer to NAMA, the legislature has interfered with third party contractual rights as little as possible. There is a clear contrast between the narrow terms of section 139(b) and the broad terms of section 90(6)(a).

Leaving aside all issues of construction of clause 40.3, Mr Miles submitted that there was a short answer to the preliminary issues, grounded in the undisputed facts of what occurred on the transfer of the facilities to MFL.

The loan sale agreement dated 27 September 2011 was made by NAMA as seller of its beneficial interest in the facilities and by the banks as the named “Lenders and legal owners of the rights and obligations of the Lenders”. It was not, therefore, a transfer by NAMA “in place of” the Lenders. I will later consider the effect of the phrase “in place of”.

The loan sale agreement was premised on the basis that clause 24 applied to it, and NAMA and the banks purported to comply with clause 24. By clause 13.3, NAMA and the banks warranted that they had complied with their obligations under clause 24.3(a)(ii) (to notify and consult with the company). They, and MFL as the new lender, provided a transfer certificate, expressly pursuant to clause 24.5. NAMA did not purport to effect the transfer by giving notice as provided by clause 40.3(b).

Mr Miles submitted that, even if NAMA had the option of transferring the facilities to MFL in accordance with clause 40.3(b), it did not exercise that option, but attempted to transfer the facilities in accordance with clause 24. That, Mr Miles submitted, provided the answer to the preliminary issues. The issues which remain, whether in fact NAMA complied with the restrictions and conditions of clause 24, are for the full trial.

I do not accept this submission. It proceeds as if the Facilities Agreement provided NAMA with two methods of transfer, under clause 24 and under clause 40.3, but this is not in my judgment the effect of the Facilities Agreement. If clause 40.3 applies to a transfer by NAMA, it disapplies clause 24, leaving clause 40.3 as the sole contractual method of transfer. That NAMA in fact purported to effect the transfer in accordance with clause 24 is nothing to the point. The questions are, as posed by the preliminary issues, whether clause 40.3 applied to the transfer to MFL and whether the restrictions on transfer in clauses 24.2 and 24.3 applied to that transfer. I shall therefore go on to consider the parties’ submissions on those issues.

I turn to the terms of clause 40.3(b). For the sake of convenience only, all parties agreed that clause 40.3 could be broken down as follows:

“…

(b)

Without limiting the generality of paragraph (a),

(1)

the provisions of Clause 24 (Changes to the Lenders) (other than Clause 24.5(c) and Clause 24.7), Clause 26.10 (Resignation of the Facility Agent) (other than Clause 26.10(f)) and Clause 27.17 (Resignation of Security Trustee) (other than Clause 27.17(e)) shall not apply in relation to

(i)

the assignment or transfer of any rights, benefits and obligations to NAMA or its Affiliates or

(ii)

the exercise of any rights powers and discretions by NAMA or its Affiliates under the Finance Documents in place of any Lender, the Facility Agent or the relevant Security Trustee; and

(2)

any change or resignation under Clause 24 (Changes to the Lenders), Clause 26.10 (Resignation of the Facility Agent) and Clause 27.17 (Resignation of Security Trustee) shall be effected by notice in writing from NAMA to the Borrower.”

I will refer to the paragraph numbering used in this version of clause 40.3 but it is important to emphasise that it is for convenience only.

Mr Onions for MFL submitted that the purpose and effect of clause 40.3(b), and specifically paragraph (1)(ii), is that NAMA, exercising the rights of a lender under the Facilities Agreement, could transfer the facilities which are the subject of the Facilities Agreement to any person without regard to the restrictions or conditions of clause 24. He submitted that the entirety of clause 40.3 is concerned with giving effect to the transfer of the facilities to NAMA and the consequences of that transfer. Clause 40.3(a) gives contractual recognition to the statutory transfer to NAMA of the entire beneficial interest in the facilities. Clause 40.3(b), he submitted, is addressing the consequences of that transfer of beneficial interest to NAMA. Paragraph (1)(i) of clause 40.3(b) has the effect of disapplying the restrictions in clause 24 to the assignment or transfer of rights, benefits and obligations to NAMA, that is to say a legal assignment or transfer of that which has already been the subject of an equitable transfer. This is uncontroversial. He submitted that it is important to note that the opening words of paragraph (1), referring to the provisions of clauses 24, 26.10 and 27.17, apply to the entirety of what follows in paragraph (1), that is to say that both the transfer of rights to NAMA in subparagraph (i) and the exercise of any rights, powers and discretions by NAMA referred to in (ii). Accordingly, he submitted, the provisions of clause 24 are disapplied in the event of any exercise by NAMA of any rights, powers and discretions under the finance documents, which of course include the Facilities Agreement. The exercise of a right of transfer to a new lender is therefore free of the restrictions and conditions contained in clause 24.

Mr Onions submitted that subparagraph (ii) covers the exercise by NAMA of rights both before a legal assignment or transfer to it and after such a transfer. In the first situation, before a legal assignment or transfer, NAMA will be exercising rights “in place of” the lenders, in circumstances where it, rather than the lenders, exercises the rights. This would be, as I think Mr Onions submitted, by operation or application of the powers conferred on NAMA by section 99 of the NAMA Act, cited above. It applies also in the second situation, after a legal assignment or transfer to NAMA. Although it is not a precise legal use of language to say that at that point NAMA is exercising rights, powers and discretions legally transferred to it “in place of” any lender, Mr Onions submitted that as a matter of commercial usage NAMA can be said to be exercising those rights in place of the prior lenders. Mr Onions also submitted that the terms of subparagraph (ii) are apt to apply to the case where, prior to any legal assignment or transfer, the lenders nominally exercise the rights, powers or discretions but do so at the direction of NAMA. Again, Mr Onions submitted that this accords with a broad commercial reading of the provision and of the phrase “in place of any Lender”.

Mr Onions submitted that the natural reading of clause 40.3(b) by a person with the relevant background knowledge is that NAMA was permitted to transfer the facilities free of the restrictions and conditions in clause 24. Those restrictions and conditions would, however, apply to any subsequent transfer of the facilities.

Mr Onions supported his principal submissions with a number of further points.

First, he referred to clause 12.2(a) which requires each borrower and guarantor to do all acts and execute all documents as the relevant Security Trustee may reasonably specify:

“To facilitate the transfer or assignment of any Loan, Transaction Security or other rights and benefits under or in connection with Finance Document to NAMA and/or a NAMA group entity.”

He submitted that if clause 40.3(b) was confined in its effect as regards transfers to NAMA, it added nothing to clause 12.2(a)(iii).

Secondly, Mr Onions relied on section 139 of the NAMA Act. On his construction of section 139, the effect of Mr McKillen’s reading of clause 40.3(b) would be to curtail very significantly NAMA’s statutory rights to transfer bank assets to third party purchasers. This, he submitted, would be a very surprising result and thus a significant factor against the opposing construction of clause 40.3(b). I have already dealt with this above. I do not accept Mr Onions’ construction of section 139.

Thirdly, Mr Onions relied on paragraph (2) of clause 40.3(b) to show the breadth of the disapplication in paragraph (1). Paragraph (2) provides that “any change … under clause 24” shall be effected by notice in writing from NAMA to the borrower. He accepted that paragraph (2) is concerned essentially with the mechanics for transfers permitted by paragraph (1), but he submitted that “any change … under clause 24” shows that paragraph (1) has a wide scope, not confined to transfers to NAMA.

Mr Dicker QC appeared for the Agency and any relevant group entity, including in particular National Asset Loan Management Limited. His fundamental submission was that the transfer provisions of clause 24 of the Facilities Agreement, other than clauses 24.5(c) and 24.7, do not apply to any exercise by NAMA of its rights, powers and discretions under the Facilities Agreement, including its power to transfer the facilities, as well as not applying to the transfer of the facilities to NAMA.

As well as relying specifically on section 139 of the NAMA Act, he relied more generally on the purposes and functions of NAMA, and its role in dealing with Ireland’s banking crisis, as providing both context and support for his submissions as to the meaning of clause 40.3(b). Its statutory purpose, having acquired bank assets is to deal expeditiously with them (section 10(1)) and its functions include taking all necessary steps to realise the value of acquired assets for the best achievable price (section 11(1)). NAMA’s publicly stated policy is to dispose of the bank assets acquired by it as soon as commercially practicable.

Mr Dicker’s analysis of clause 40.3(b) was that paragraph (1)(i) deals with clause 24 as regards transfers to NAMA and paragraph (1)(ii) deals with clause 24 after an acquisition by NAMA has taken place, “acquisition” here covering both the acquisition of beneficial interest by NAMA, acknowledged in clause 40.3(a), and a transfer of legal title to which paragraph (1)(i) of clause 40.3(b) refers.

Further submissions of Mr Dicker were made in a response to Mr Miles’ submissions and I will refer to them later.

The fundamental submission of Mr Miles, on behalf of Mr McKillen, was that as regards the power of lenders, clause 40.3(b) is limited to dealing with the position following NAMA’s equitable acquisition of the benefit of the bank facilities, acknowledged in clause 40.3(a), but before any legal transfer to NAMA. The opening words of clause 40.3(b) (“without limiting the generality of paragraph (a)”) make clear its limited scope. It is directly linked with clause 40.3(a) and is dealing with the consequences of the beneficial acquisition of the facilities by NAMA. Paragraph (1)(i) deals with the legal transfer of rights and obligations under the facilities to NAMA. Paragraph (1)(ii) deals with the position pending such legal transfer as regards the exercise of rights, powers or discretions by NAMA “in place of” any lender.

The words “in place of” indicate that paragraph (1)(ii) is confined to the exercise of rights, powers and discretions under facilities still legally vested in a lender and are not apt to describe the position once the facilities have been legally transferred to and vested in NAMA. Following a legal transfer of the facility, it can no longer sensibly be said that NAMA would be exercising powers “in place of” a lender. The effect of paragraph (1)(ii) is not to disapply the provisions of clause 24 to a transfer by NAMA but is to enable NAMA to exercise rights etc by virtue of section 99 of the NAMA Act or otherwise without engaging clause 24. In other words, it is not open to the company as borrower to object to the exercise by NAMA of any of the lenders’ powers “in place of” the lender on the grounds that there should first be a transfer in accordance with clause 24.

Mr Miles made further submissions in support of his construction.

First, clause 40.3(b) disapplies in clear terms clause 24 to a transfer to NAMA. If it had been intended to have the further effect of disapplying it also to transfers by NAMA it would have been easy to say so.

Secondly, it would be a commercially surprising result if the limitation on permitted transferees in clause 24.2 did not apply to a transfer by NAMA to any person it chose, while it does apply, as MFL and NAMA accept, to all subsequent transfers. The company’s interest as borrower in there being a limited class of lender remains the same in all cases.

Thirdly, if MFL and NAMA were right that paragraph (1)(ii) enabled NAMA to exercise powers of transfer without the transfer being subject to clause 24, it would follow that paragraph (1)(i) was unnecessary. The exercise of a power of transfer in favour of NAMA would fall within paragraph (1)(ii) as much as a transfer to a third party.

Fourthly, the power of transfer, so as to effect a full novation, arises under clause 24. If MFL and NAMA are right that all the provisions of clause 24, save for clauses 24.5(c) and 24.7, are disapplied to a transfer by NAMA, it would follow that there is no power to effect a novation. The same is not true of a novation to NAMA because paragraph (1)(i) of clause 40.3(b) itself confers the power.

Fifthly, the Knightsbridge Acquisition Facility is governed by the Facilities Agreement but, Mr Miles submits, is not dealt with in clause 40.3. It is clearly not dealt with in clause 40.3(a) or paragraph (1)(i) of clause 40.3(b). Nor, Mr Miles submits, does it fall within paragraph (1)(ii) because, first, NAMA is the original lender and a transfer of it would not be the exercise of a right “in place of” any lender and, secondly, the opening words of clause 40.3(b) linking with clause 40.3(a) show that clause 40.3(b) is concerned only with the three facilities dealt with in clause 40.3(a). It makes no commercial sense from the standpoint of either NAMA or the company for different regimes to govern transfers of the three bank facilities on the one hand and the Knightsbridge Acquisition Facility on the other.

All parties were agreed that clause 40.3 is not as clearly drafted as it might have been. No construction advanced to me, or indeed any that has occurred to me, fits perfectly with all aspects of the clause. Any result will have some ragged ends.

The main thrust of the principal submissions of Mr Onions and Mr Dicker was that, whatever the difficulties round the edges, there was only one clear and sensible reading of the sub-clause, which was that the restrictions and conditions of clause 24 did not apply to transfers made by or at the direction of NAMA. As the legal owner or as the beneficial owner of the facilities, NAMA had respectively the right to transfer, or the right to direct the transfer, of the facilities. In either case NAMA would be exercising the right of a lender and clause 40.3(b) provided that restrictions and conditions of clause 24 did not apply to the exercise by NAMA of any right of a lender.

I do not consider that the terms of clause 40.3 are as straightforward as presented by Mr Onions and Mr Dicker. Mr Miles made a number of significant submissions as to its terms to which, as it seems to me, no sufficient answer was given.

First, Mr Miles submitted, and I agree, that the fact that clause 40.3(a) is dealing with the position of NAMA as at the date of the Facilities Agreement and before any legal transfer to it, and that clause 40.3(b) opens with the words “without limiting the generality of paragraph (a)” provides a strong pointer to the intended scope of clause 40.3(b). They indicate that clause 40.3(b) is limited to the period while NAMA is the beneficial, but not legal, holder of the facilities. Paragraph (1)(i), dealing with the legal transfer of the facilities, is within that category and, as will appear, there are good grounds for considering that paragraph (1)(ii) is also limited to that period as regards the lenders’ rights. As against this, I would accept that the disapplication of clauses 26.10 and 27.17 as regards the facility agent and the security trustee would continue to apply after a legal transfer of the facilities to NAMA.

Secondly, the words “in place of” are not apt to describe the exercise by NAMA of its own powers as lender following a transfer of facilities by novation to it. Mr Dicker accepted that this reading could be justified only by giving them a commercially colloquial meaning, rather than a meaning with any legal precision. I accept, of course, that even as complex an agreement as this is not to be construed like a statute and that a colloquial meaning may appropriately be given when it can be seen to be the intended meaning. But this is a legal document, professionally drafted and conferring rights and obligations in respect of very substantial loan facilities. If the legal meaning of the word is inconsistent with a particular construction, it is at least a factor against that construction.

Equally, Mr Onions’ submission that the words “in place of” covered the case of the exercise of the power “at the direction of” NAMA does not fit satisfactorily with the terms of the provision.

Thirdly, Mr Miles is correct also in his submission that if Mr Onions and Mr Dicker are right as to the scope of paragraph (1)(ii) of clause 40.3(b), paragraph (1)(i) is unnecessary.

Fourthly, and more importantly, there is no good answer to Mr Miles’ simple submission that if clause 40.3(b) was intended to cover assignments or transfer by NAMA as well as to NAMA it could very easily have so provided. All that was needed was to add the words “or by” between “to” and “NAMA and its Affiliates” in paragraph (1)(ii). As Mr Miles submitted, the objective reader of clause 40.3(b) would think that paragraph (1)(i), not paragraph (1)(ii), was dealing with assignments or transfers.

Fifthly, the construction advanced by MFL and NAMA is difficult to reconcile with the definition of “Lender”. By clause 24.5(c)(iv) a transferee of the facilities becomes a party as a “Lender”. I have earlier set out the definition of Lender. It comprises the banks as Original Lenders, NAMA as the Knightsbridge Lender and “any bank, financial institution, trust, fund or other entity which has become a Party in accordance with the relevant Existing Facilities Documents or Clause 24 of this Agreement”. This repeats the restricted class of transferee in clause 24. It is inconsistent with, or at least an indication against, NAMA enjoying an unrestricted right of transfer. No provision is made for including other transferees from NAMA within the definition.

Sixthly, neither of the constructions put forward by the parties is commercially implausible. A restricted class of transferees of the facilities is not a surprising provision to see. A borrower has a clear interest in the type of creditor with whom he must deal. That interest is the same whether the transferee acquires the facilities from NAMA or from other parties. At the same time, it is possible that the parties would have agreed to give NAMA a freer hand when it came to disposing of the facilities than that afforded to other holders of the facilities. However, given the clear interests of the company as borrower referred to above, one would expect the disapplication of clause 24 to be achieved in clear terms. It is achieved in clear terms as regards transfers to NAMA. It is certainly not achieved in clear terms in relation to transfers by NAMA.

Seventhly, what would certainly not be commercially plausible would be to exclude the Knightsbridge Acquisition Facility from any regime applicable to disposals of facilities by NAMA. The submissions made by Mr Miles in this respect very strongly point to the conclusion that clause 40.3(b), as well as clause 40.3 (a), does not apply to the Knightsbridge Acquisition Facility. Mr Dicker acknowledged the difficulty of bringing the Knightsbridge Acquisition Facility within the terms of clause 40.3(b). He accepted that because NAMA was the original lender under that facility it was at least clumsy to talk of NAMA exercising rights of transfer “in place of any lender”. Mr Dicker’s submission was that the answer lay in giving the phrase “in place of any lender” a sufficiently purposive construction to encompass the Knightsbridge Facility Agreement within clause 40.3(b) rather than to reach the opposite conclusion. In the alternative, if that was too strained a construction, then the consequence would have to be accepted that the Knightsbridge Acquisition Facility was not within clause 40.3(b) but the substantial majority of the lending did fall within it. Mr Dicker suggested that it was permissible to read the words “in place of” as apposite because the Knightsbridge Acquisition Facility was itself used to refinance an earlier facility granted by Anglo Irish Bank and could therefore be said to be itself “in place of” that earlier facility. It seems to me that there is no sensible way in which the words “in place of any lender” can be made to apply to NAMA in relation to the Knightsbridge Acquisition Facility. That facility does not fall within the terms of either part of clause 40.3, which is a strong indication that paragraph (1)(ii) of clause 40.3(b) was not intended to have the effect for which MFL and NAMA contend.

Eighthly, Mr Miles submitted that the submissions of MFL and NAMA created a logical gap for them. As I have previously summarised, he submitted that NAMA’s power of transfer by novation stems from clause 24 and so if the relevant provisions of clause 24, in particular clause 24.2, are disapplied to a transfer by NAMA, it follows that NAMA has no power to transfer by novation. The same is not true of a transfer by novation to NAMA because paragraph (1)(i) of clause 40.3(b) itself confers the power.

While, of course, Mr Miles is correct that in the absence of other legal authority a novation requires the consent of the parties to a contract, in my judgment NAMA has a statutory power to novate credit facilities that it acquires. I have earlier referred to the provisions of the NAMA Act which in express terms confer a power on NAMA to acquire by novation credit facilities. Just as it would make no sense for NAMA to be unable to acquire all the rights and obligations under credit facilities, so it would make no sense if it were unable to effect a transfer of all the obligations as well as the rights under those credit facilities. While the provisions governing disposal do not expressly refer to novation, section 139 confers the power to transfer, assign, convey, sell on or otherwise dispose of an acquired bank asset, which for present purposes means a credit facility, notwithstanding any restrictions on such a disposal at law. The inability to novate a contract without the consent of the other parties to the contract for a novation is a restriction “at law” and in its context it seems to me clear that the opening words of section 139 encompass a transfer by way of novation in addition simply to an assignment of rights.

This is not however a complete answer to the point raised by Mr Miles, because paragraph (1)(ii) of clause 40.3(b) refers to “the exercise of any rights, powers and discretions … under the Finance Documents”. The Finance Documents include the Facilities Agreement and Mr Miles is right that any right or power to transfer by novation “under the Finance Documents” arises under clause 24 of the Facilities Agreement. However, the whole of clause 24.5(c) continues to apply and clause 24.5(c)(i) specifically provides for novation. This clearly applies to a transfer to NAMA under paragraph (1)(i). If for other reasons it can be seen that paragraph (1)(ii) is intended to apply to a transfer by NAMA, paragraph 24.5(c)(i) can sensibly be read as acknowledging that the power of transfer by novation continues to apply notwithstanding the disapplication of the rest of clause 24. Nonetheless, this issue, although not quite the logical gap described by Mr Miles, is a pointer to a conclusion that paragraph (1)(ii) is not intended to apply to a transfer by NAMA.

Mr Onions relied significantly on paragraph (2) of clause 40.3(b) to show the breadth of the disapplication in paragraph (1). Paragraph (2) provides that “any change … under clause 24” shall be effected by notice in writing form NAMA to the borrower. While accepting that paragraph (2) is concerned with mechanics, he submitted that the reference to “any change” shows that paragraph (1) has a wide scope, not confined to transfers to NAMA. I do not think that paragraph (2) provides the support which Mr Onions claims for it. In its context it is I think addressing the transfers to which paragraph (1) applies, whatever they may be. If anything, paragraph (2) goes against Mr Onions’ submission. Normally the mechanics for a transfer require the transferee as “the new lender” to provide written confirmation that it will assume all the obligations of an “original lender” and a completed transfer notice. It is readily understandable why these requirements should not apply to a transfer to NAMA, but it is difficult to think of any good reason why they should not apply to a commercial party taking a transfer of facilities from NAMA.

As I have earlier indicated, Mr Onions also relied on clause 12.2(a)(iii) as showing that if Mr Miles was right in his construction of clause 40.3(b) it added nothing to the earlier provision. I do not think that this is right. Clause 40.3 makes clear that the restrictions and conditions on transfers in clause 24 do not apply to a transfer to NAMA and clause 12.2(a)(iii) imposes a positive obligation on borrowers and guarantors to assist the transfer to NAMA. These two provisions go together and neither means the other is “belt and braces” as Mr Onions put it.

Mr Dicker’s reliance on the role and purposes of NAMA, while undoubtedly part of the background relevant to the construction of the Facilities Agreement, does not in my judgment provide any significant support for the construction advanced by him. The statutory duty of NAMA to deal expeditiously with the credit facilities acquired by it and to do so at the best achievable price provide no more than a context in which NAMA might have sought to negotiate for the disapplication of all restrictions on the sale of a facility by it. It does not explain why a borrower, having regard to its own commercial interests, would agree to such a disapplication.

In contrast to the construction advanced on behalf of MFL and NAMA, the construction put forward on behalf of Mr McKillen fits the terms of clause 40.3(b). First, it makes sense of the words “in place of”. The power conferred on NAMA by section 99(1) of the NAMA Act, to exercise rights and powers under the facilities beneficially but not legally transferred to it, is accurately described as an exercise of rights and powers “in place of” the lenders. Likewise the exercise by NAMA pursuant to clause 26.1(c) of the Facilities Agreement of rights, powers or discretions specifically given to the facility agent is accurately described as being “in place of” the facility agent.

Secondly, while clause 40.3(b) disapplies only clauses 24, 26.10 and 27.17, it does so in relation to the exercise of any rights, powers and discretions, not just those under those clauses. If the intention was to disapply clause 24 to a transfer by NAMA, paragraph (1)(ii) would not refer to the exercise of any rights, powers or discretions, but would be more specific. These broad words are consistent with Mr Miles’ construction.

Mr Miles’ construction is by no means implausible. It is entirely understandable that NAMA would want to shut out any argument that its exercise of these powers involved a transfer of the facilities to which clause 24 would apply or that the powers could not be exercised without there first being such a transfer.

For these reasons, I have concluded that the construction advanced on behalf of Mr McKillen is the correct construction of clause 40.3. It follows that my answers to the preliminary issues are “No” to question 1 (“did clause 40.3 apply to the transfer of the company’s loan facility to MFL”) and “Yes” to question 2 (“did the restrictions on transfer in clauses 24.2 and/or 24.3 apply to the transfer of the company’s loan facility to MFL”).