Introduction

Two related cases have recently ruled on points of interest to those involved in loan management and enforcement. Both cases relate to Patrick McKillen's quest for control of three leading London hotels and both challenge steps taken to bring the company which owned those hotels, Coroin Limited ("Coroin"), within the control of two prominent hoteliers, by way of companies and trusts controlled by them (the "Buyer's interests"). First, the Court of Appeal ruled in McKillen v Maybourne Finance Limited and National Asset Loan Management Limited [2012] EWCA Civ 864, and secondly, the High Court gave judgment in McKillen v Misland (Cyprus) Investments Ltd (a company registered in Cyprus) and others [2012] EWHC 2343 (Ch).

McKillen v Maybourne Finance Limited and National Asset Loan Management Limited

The National Asset Loan Management Limited transferred a loan to Maybourne Finance Limited ("MFL"), a company within the Buyer's interests. National Asset Loan Management Limited is a subsidiary of the National Asset Management Agency (both "NAMA"). Coroin had received loans from Anglo Irish Bank and Bank of Ireland. These were transferred into NAMA in June 2010. On 1 April 2011, such facilities together with a new facility from NAMA (the "Facilities"), were consolidated so as to be governed by the terms of a new facility agreement between Coroin, Anglo Irish Bank, Bank of Ireland and NAMA (the "Facility Agreement"). On 27 September 2011, NAMA, Anglo Irish Bank and Bank of Ireland transferred all their rights in relation to the Facilities to MFL. Mr McKillen challenged the validity of the transfer.

Provisions in the Facility Agreement

Clause 24 of the Facility Agreement, relating to assignment or transfer by the lenders, imposed a restriction on the class of transferee (which, if applicable, would have prevented a transfer to MFL) and required certain procedural steps to be followed in order for an assignment/transfer to be effective. Clause 40.3(b) of the Facility Agreement sought to exclude the application of certain of the restrictions and procedural requirements in clause 24 in relation to the "…exercise of rights, power and discretions by NAMA or its Affiliates under the Finance Documents in place of any Lender…". Mr McKillen's case, based upon the details of the drafting, was that clause 40.3(b) should be interpreted in a restrictive manner. For example, the words "in place of any Lender" meant that clause 40.3(b) did not operate with respect to the September 2011 transfer as this was made by NAMA and the two banks together, not by NAMA in place of the banks. Therefore, Mr McKillen argued, clause 24 did apply to NAMA's purported transfer. He argued that the transfer breached clause 24 for two reasons: (i) MFL did not fall within the class of permitted transferee; and (ii) the requirement for consultation with Coroin had not been complied with. In the High Court, the judge found in favour of Mr McKillen.