A HIGH COURT judge has dismissed the challenge by insolvent developer Treasury Holdings to the National Asset Management Agency’s decision to call in more than €1 billion of its loans and appoint receivers over its properties here.

A decision on liability for the very substantial costs of the action will be made in October. Treasury, following an application by Nama, previously agreed to provide €600,000 and charges over four properties as security for the costs of the proceedings.

In a lengthy judgment yesterday, Ms Justice Mary Finlay Geoghegan said Treasury had agreed under a “standstill agreement” with Nama last January not to take certain actions if Nama considered proposals from two entities, Hines and Macquarie, to buy Treasury’s debts from Nama.

Nama had, as agreed, considered those proposals but dismissed them.

Having decided in December 2011 to call in the Treasury loans, Nama entered that standstill agreement expressly in reliance on Treasury’s assurances that, if the discussions during the 14-day standstill period were not satisfactory from Nama’s point of view, then Treasury would not object to Nama appointing receivers or seek court protection or bring “any like application”, the judge noted.

In reliance on Treasury’s representations, she said Nama acted to its own detriment in entering into the standstill agreement, committing resources to, and incurring expenses, in evaluating the Hines and Macquarie proposals which it ultimately rejected.

In entering that standstill agreement, Treasury had agreed to the “ground rules” set out by Nama. It had also participated in the discussions on the Hines and Macquarie proposals during the standstill period.

In those circumstances – despite her other findings, that Nama’s decision to take over the loans was a public-law decision and Nama breached its duty to hear and consider Treasury’s submissions prior to making its decision – Treasury was prevented from pursuing its claim for orders quashing the loans-takeover decision of December 8th 2011 or the decision to appoint receivers taken on January 25th, 2012.

Even if Treasury was not prevented from pursuing its claim on grounds of the standstill agreement, the judge said she would also, given the facts found by her on the standstill arrangements, exercise her discretion against granting Treasury the orders sought.

Treasury Holdings and 22 related companies had secured leave earlier this year to bring proceedings challenging Nama’s decisions. The action was opposed by Nama and KBC Bank, which is owed €75 million by Treasury. It was heard over seven days.

Treasury, which is insolvent with debts of more than €2.7 billion, had argued the decision calling in its loans was made without notice to it and without giving it a proper opportunity to be heard.

Nama denied the claims and said it could not be expected to engage in “endless debate” with Treasury before calling in the €1 billion loans when Treasury was unable to continue trading without money from Nama.

KBC argued Treasury’s action was pointless in circumstances where KBC had said it would not agree to any restructuring of the Treasury loans. KBC has also petitioned for an order winding up Treasury Holdings unless it is paid €20 million.

Earlier this month Nama also issued demands for repayment of €3 million each to John Ronan and Richard Barrett in their capacity as guarantors of a €13.5 million loan to Treasury.

In her judgment yesterday, Ms Justice Finlay Geoghegan found the decision to enforce the loans was a public-law one amenable to judicial review.

This was a composite decision to make demands and, if the demands were not met, to appoint receivers, she noted. The later decision of January 25th, 2012, to proceed with enforcement and appointment of receivers was also amenable to judicial review.

Nama was obliged to give Treasury a right to be heard before taking the decision to enforce, the judge ruled. Treasury accepted, as it must, that it was insolvent and had been for some time but it had a legal right to be heard.

The right arose particularly in circumstances including that a Memorandum of Understanding between Nama and Treasury was the first step towards potential financial restructuring of the Treasury group, she said.

The minutes and notes of Nama board meetings, produced as part of the court proceedings, failed to show as a fact that the potential availability of investors to purchase the Treasury loans was considered by Nama board members before the decision to enforce, she said. Even if some board members were aware of the potential investors, that awareness did not constitute consideration, she also found.

The potentiality of any investors in December 2011 was a relevant matter for consideration prior to taking a decision to enforce but that was not then considered by Nama, she said.

The importance of potential investors was they were perceived by Treasury as a mechanism to exit Nama. While Treasury referred to “investors”, the likely form of investment was buying its debts from Nama, she added.