New Nationwide chief Danny Kitchen

Irish Nationwide's pursuit of Liam Carroll throws up more than a few ironies. The legal action against Carroll, which could have reverberations for property development as a whole, involves the lending institution that has arguably been the most supportive to the sector in the past five years, Irish Nationwide.

The other irony is that the building society is now led by chief executive Danny Kitchen, former finance director of Green Property, one of Ireland's largest property development groups.

The final irony is that, while Irish Nationwide is vigorously pursuing Carroll, the building society itself is unlikely to be around for much longer under plans being devised in government.

Irish Nationwide, according to its latest results, has a loan book of €10.4bn, with 78% of it out to commercial property players and the rest in residential loans. Once Nama strips these loans, it will be left with a tiny loan book of about €2bn and assets of just €6.3bn. With liabilities of €13.2bn this will leave government with a big hole to fill if the society is not to be rendered technically insolvent.

The plan is to fill the hole with government bonds which can then be repo-ed with the European Central Bank. Despite this plan, government advisers in private talk about "wrapping" Irish Nationwide into another bank, most likely EBS or possibly Irish Life & Permanent (IL&P). While neither EBS nor IL&P is keen to become a "host'' bank, the government seems reluctant to grant Irish Nationwide long-term independent status, particularly as virtually all its skills have been devoted in recent years to property lending, much of it not very successful.

Obviously forcing Irish Nationwide into a merger poses serious dangers for its thousands of members who might get no payout on their shares, but the government has retained wide-ranging powers to reshape the financial services industry and even competition law has been set aside to further this objective.

Irish Nationwide has been lending money to Carroll for many years; in another one of those ironies this case brings up, it has also advanced sums to a long-time Carroll adversary, Noel Smyth. Similarly, it was reported earlier this decade that Irish Nationwide backed Liam Carroll's stake-building in Dunloe Ewart, then a Noel Smyth-led company.

This long-standing relationship with Carroll appears to have soured based on last week's exchanges in court. It is highly unusual for Irish Nationwide to call in personal guarantees on major developers, although during the boom years there was little need for it.

Last week some commentators suggested the government, in establishing Nama, would have concerns about Irish Nationwide' uncompromising stance towards Carroll. But this jars a little when one considers that two government-appointed directors, Adrian Kearns and Rory O'Ferrall, have been on the board of the lender since January.

A long and once fruitful relationship between Carroll and Irish Nationwide has come to a shuddering halt. Other developers will be hoping their relationships have more longevity.