Quinn family claim Anglo loaned money for illegal objective

Loans of about €2.34 billion by Anglo Irish Bank to Quinn companies are unenforceable as they were issued for the "illegal objective of market manipulation" to support of the Anglo share price, claimed the Quinn family in proceedings which were this week transferred to the Commercial Court. The action in Ireland comes after Quinn and his family won a court decision in Sweden last week, in which the dismissal of directors of Quinn Investments Sweden (QIS) by a receiver appointed by Anglo Irish Bank was overturned. The Stockholm District Court found that the dismissal of QIS directors and their replacement with Kieran Wallace of KPMG was not "duly approved by all shareholders" and was therefore invalid. This week's action in the Irish courts by Mrs Patricia Quinn and her five children - Aoife, Colette, Brenda, Ciara and Sean Quinn Jnr - arises from events of the past two years that led to the family losing control of companies in the Quinn group. Mr Justice Peter Kelly transferred the case on Monday to the Commercial Court. 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 further 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 31, 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 Sean 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 Sean Quinn himself and others as third parties to the action. 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.