McKillen v Misland (Cyprus) Investments Ltd and others [2012] EWHC 129 (Ch)  


National Asset Loan Management Limited, which is a subsidiary of the National Asset Management Agency (“NAMA”), was established by the NAMA Act 2009 (“the Act”) as part of Ireland’s response to the global financial crisis. NAMA’s purpose was to acquire loans from participating financial institutions in order to achieve the best possible return.

Patrick McKillen was the holder of a 36% equity interest in an English company called Coroin Limited (“the Company”), formed in 2004 for the acquisition of four well-known London hotels by a consortium of Irish investors. Sir David and Frederick Barclay, through companies and trusts controlled by them, were attempting to obtain control and ownership of the Company and, consequently, of the hotels which it owns. Mr McKillen alleged that the means employed by Messrs Barclay were unlawful and unfairly prejudiced the affairs of the Company.

Summary of events

  • Syndicated bank facilities had been provided by Bank of Ireland and Anglo Irish Bank Corporation Limited in five tranches over a number of years to the Company.  
  • The entire beneficial interests of the banks in the facilities were acquired on 28 June 2010 by NAMA, but the legal title was not transferred.
  • The transferred facilities were amended by an agreement dated 1 April 2011 (“the Facilities Agreement”) which included terms specifically dealing with NAMA; this was now a new facility provided by NAMA, its terms superseded those of the previous facilities and it also gave NAMA the power to enforce the facility as if it was the original lender.  
  • NAMA assigned the facility to Maybourne Finance Limited (“MFL”), part of the Barclay group, on 27 September 2011.
  • Mr McKillen alleged that the assignment of the facility on 27 September 2011 by NAMA to MFL was unlawful and in breach of the terms of the Facilities Agreement.  

The Issues

The Court had to determine:

  1. whether the clauses in the Facility Agreement restricting the assignment of the facility by NAMA, as contained in the Facilities Agreement, applied to the transfer of 27 September 2011; and
  2. whether another clause permitting the restrictions on transfer to be dis-applied, applied to the transfer of the facilities on 28 June 2010 to NAMA.
  1. The restrictions, if applicable, only permitted NAMA to “assign…. or transfer by novation any of its rights or 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” AND only with “the prior written consent of NAMA; and with the borrower…..”.
  2. The clause dis-applying the restrictions states that without prejudice to NAMA acquiring the beneficial interests in the facilities the restrictions “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…..”

Mr McKillen alleged that MFL was not a permitted transferee per clause (a) and that it failed to consult the Company as required also by clause (a) above, governing the assignment of loan facilities by NAMA. As a result, NAMA was in breach of the Facilities Agreement. Further, invoking clause (b) did not have the effect of dis-applying clause (a) in respect of the assignment of facilities by NAMA, as it only applied to transfers of loans to NAMA (i.e. before it had acquired the right to act in place of the lender).


NAMA and those for the defendants argued that the general purpose and functions of NAMA meant that the restrictions did not apply to NAMA when transferring a facility to MFL. Clause (b) within the Facilities Agreement dis-applying the restrictions on the transfer of facilities did apply to transfer of loans by NAMA because it was concerned with giving effect to the assignment, with the consequences of such a transfer, which was in tune with commercial reality. It also gave contractual recognition to the statutory assignment of loans by NAMA as it allowed NAMA to exercise the right “in place of any lender” without restriction. To interpret clause (b) otherwise would significantly curtail NAMA’s statutory right to transfer bank assets to third party purchasers and undermine its statutory purpose.

NAMA has statutory power to novate credit facilities that it acquires (although not expressly referring to novation) per section 139 of the Act, which 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”. “At law” was interpreted to include restrictions by contract i.e. in the Facilities Agreement, therefore, the restrictions on transfer did not apply.

McKillen countered that section 139 of the Act did not dis-apply contractual restrictions because use of the words “at law” does not, as a matter of legal usage, cover contractual restrictions. There were also other provisions in the Act which explicitly covered contractual restrictions so it was not an oversight that it was not explicitly included within section 139.

McKillen further submitted that if clause (b) was to apply to transfers by NAMA as well this could have easily have been expressly provided for in the Facilities Agreement, but it was not.

NAMA’s power of novation stems from clause (a) in the Facilities Agreement as it is not expressly stated within the Act. Therefore, if clause (a) is dis-applied, it would also follow that NAMA does not have the power to transfer by novation. The same is not true for the transfer by novation to NAMA because this was expressly provided for in the Act.

It would make no sense to empower NAMA to acquire the benefits but not the obligations arising under credit facilities, and it would also make no sense if it were unable to effect a transfer of all the obligations as well as the rights under those credit facilities which is contrary to acting as a lender. It is common for lenders to include restrictions/conditions on the assignments of facilities in the facility documents as was the case here. 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 per clause (a).

The Decision

It was held that the restrictions contained in the Facility Agreement did apply to the transfer of the facility by NAMA to MFL on 27 September 2011. However, clause (b) dis-applying the restrictions did not prevent NAMA being bound by the restrictions in the Facilities Agreement when transferring a loan facility and this is notwithstanding provisions contained in the NAMA Act allowing for unfettered assignments of such loan facilities by NAMA. If the parties had wished to ensure that NAMA was not subject to the restrictions on assignment, they should have explicitly stated this within the Facilities Agreement.