The family of businessman Seán Quinn have brought Commercial Court proceedings claiming that loans of about €2.34 billion made by Anglo Irish Bank to various Quinn companies and Cypriot-registered companies are unenforceable because they were issued for “an illegal objective of market manipulation” — support of the Anglo share price.
The action by Mrs Patricia Quinn and her five children — Aoife, Colette, Brenda, Ciara and Seán Quinn Jnr — arises from events of the past two years that led to the family losing control of companies in the Quinn group.
Mr Justcie Peter Kelly transferred the case yesterday to the Commercial Court. It involves the largest ever claim in the court’s seven year history and is likely to be heard early next year.
Aoife Quinn said in an affidavit the plaintiffs signed personal guarantees in late 2008 over certain loans by Anglo to Cypriot-registered companies owned by the family without being told of the “precarious” financial position of Anglo. They had no independent legal or financial advice and the nature of the loan documents was never discussed with them, she said.
The lending by Anglo to various Quinn companies and to the Cypriot companies, whether directly or via other companies held by members of the Quinn family, “was in support of an illegal objective of market manipulation” prohibited by the relevant EU Directive on Market Abuse, she said.
The lending was “tainted with illegality, or was intended to support an illegal purpose, such that the said loans are not enforceable”.
On those and other grounds, the family claim Anglo was not entitled last month to appoint Kieran Wallace as receiver over shares in several Quinn group companies. They also claim the bank cannot pursue them under the guarantees for repayment of the loans to the Cypriot companies.
They also claim they are entitled to hundreds of million Euro in damages as a result of the actions of the bank. They allege negligence, breach of duty and intentional and/or negligent infliction of economic damage.
While unable at this point to give the precise value of the damages claim, Aoife Quinn said the consolidated gross sales of Quinn Group (ROI) Ltd was €2.116 billion in the period to December 31st 2007, with profits of €453 million, and the business was “a substantial going concern”.
The net assets of that company was reported in its statutory accounts at some €753 million in December 2007, she added.
Yesterday, Mr Justice Kelly was told Anglo was consenting to the family’s action being fast-tracked in the Commercial Court.
The judge noted none of the guarantees provided for the Anglo loans were dated while copy documents of two personal guarantees in the names of Aoife Quinn and Seán Quinn Jnr over certain loans by Anglo to companies registered in Cyprus were unsigned.
When he asked Paul Gallagher SC, for Anglo, whether the original guarantee documents were signed, Mr Gallagher said he understood the documents were in order but he would make inquiries. Counsel added his side would consider whether to join Seán Quinn himself and others as third parties to the action.
The judge observed the case is likely to last several weeks and made directions for the exchange of legal documents with a view to having the case heard early next year.
In seeking transfer, Brian O’Moore SC, for the Quinns, said his side were contending various loans by Anglo to a number of Quinn companies and the Cypriot companies involved an unlawful support of the Anglo share price.
In her affidavit, Aoife Quinn said the action was brought in the plaintiffs’ capacity as owners of shares in several companies, including Slieve Russell Hotel Ltd, Quinn Quarries Ltd, Quinn Group (ROI) Ltd, Quinn Group Hotels Ltd, Quinn Finance Holding and Quinn Group Properties Ltd.
The family was claiming charges made in favour of Anglo from late 2003 up to 2009 over shares held in those Quinn companies were invalid, unenforceable and of no legal effect.
They also wanted declarations that the undated guarantees provided by them to Anglo over the liabilities of several Cyprus-registered companies were invalid and unenforceable. Those companies are Lud Investments Ltd, Moshaid Investments Ltd, Opawa Investments Ltd, Pahu Ltd, Tarate Enterprises Ltd and Morboneto Holdings Ltd, all with registered offices at Capital Centre, Nicosia.
Outlining the background, Ms Quinn said Bazzely Consultadori Economica E Particpacoes, a Madeira-incporporated company owned by the Quinn children, made investments of some €750m from Quinn resources to fund CFD (contracts for difference) positions in Anglo prior to the end of 2007.
After September 2007, as Anglo’s share price declined, it advanced some €2.34 billion to various Quinn companies, she said. Those advances were made in the full knowledge they were only to be used to support “CFD positions” in relation to Anglo shares and those shares were ultimately held by the children.
On October 7th 2008, about €77.17 million loans were granted to each of five Cypriot registered companies owned by the Quinn children while Eu102 million loans were made to another Cypriot company owned by Mrs Patricia Quinn, Aoife Quinn said. Those loans were then used by the Cypriot companies to buy shares in Anglo.
Ms Quinn said personal guarantees were executed about October 2008 related to those loans. She said the plaintiffs, when they were asked to sign the execution blocks to the personal guarantees, did not know and were not made aware the guarantees were “a purported condition” of the advance of the loans.
The personal guarantees and share pledges were “manifestly improvident” and/or “unconscionable” when executed because they were entered into in the context of borrowing to support Anglo’s share price in circumstances where Anglo, its servants or agents, knew of the “precarious financial position” of Anglo but the plaintiffs did not, she said.
There was a significant lack of autonomy on the part of the Quinn plaintiffs in the circumstances surrounding the signing of the guarantees and share pledges, she said. In all the circumstances, Anglo was not entitled to appoint Mr Wallace as share receiver.
