Appeal court says Quinn family cannot amend IBRC claim

The family of businessman Sean Quinn have lost their appeal over being refused permission to make certain amendments to their action denying any liability for €2.34 billion loans made by Anglo Irish Bank to Quinn companies.

The family can proceed with a range of claims, including alleged negligent infliction of economic harm, the Court of Appeal said.

In a judgment on Friday, the three judge appeal court endorsed the High Court’s conclusion that the desired changes to the family’s claim were not required to decide the real questions in controversy in the case.

It also allowed part of a linked appeal by Anglo's successor, Irish Bank Resolution Corporation (IBRC), against the High Court's refusal of the bank's application to strike out other parts of their statement of claim.

Ms Justice Mary Irvine said the High Court erred in not excising some of the claims but correctly found a claim of negligent infliction of economic harm was properly pleaded.

In their action against IBRC, Patricia Quinn and her five adult children contend they are not liable for their guarantees and security on the Anglo loans because of statutory and regulatory breaches by the bank.

The action was put on hold by the High Court last October due to pending criminal trials involving former Anglo executives. Before that, the Quinns applied to amend their original claim challenging the validity of share pledges and guarantees given to Anglo as security for monies loaned to Quinn companies.

They also allege breach of fiduciary duty by the bank and negligent infliction of economic harm.

Giving the the unanimous three-judge Court of Appeal decision, Ms Justice Irvine said the transactions arose out of a negative drop in the price of Anglo shares in 2007 when the bank advanced to the Quinn Group firms funds to allow them meet certain share commitments. Known as  "contracts for difference (CFDs)", they involve an agreement to exchange the difference between the current and future price of shares in a company, in this case Anglo.

The Quinns signed many security documents relating to the CFDs and said they did so without legal or financial advice.

When Anglo’s share price continued to drop in 2008, the Quinn Group needed further loan facilities as they came under pressure from banks and bondholders, she said.

When the bank demanded the Quinns reduce the CFD position, most of the CFDs were unwound into shares, one portion of which was purchased by a group of investors known as the “Maple Ten” and the rest by the Quinn Group. The Quinn shares were transferred to six Quinn-owned Cypriot companies which ultimately received €498 million from Anglo.

In their original statement of claim, the Quinns alleged the guarantees and pledges are unenforceable on grounds including they were procured by undue influence and breached company law and EU market abuse regulations.

Following a March 2015 Supreme Court decision that the Quinns cannot pursue claims of company law or market abuse breaches, they applied to amend their original claim to insert a plea of “stand alone” enforceability of share pledges and guarantees.

The High Court found they had failed to provide an adequate explanation why that was not pleaded at the outset of the case. The amendment was “an entirely new claim” never pleaded until after the Supreme Court decision, she said.

While Aoife Quinn had said in an affidavit the stand alone enforceability had always been at issue, that assertion "did not sit comfortably" with the pleadings or the fact no evidence was presented to the court during another hearing on a preliminary issue.

The High Court correctly held the amendment was not necessary to allow true issues between the parties to be determined and there was culpable delay on the part of the Quinns in bringing their application to amend, she found.

The Quinns conduct seeking to “recast their claim” was abusive of the defendants and would also mean circumventing or undermining  previously determined issue, she added.