Judgment reserved on Quinn application to defend €2.3bn action

A HIGH Court judge has reserved judgment on whether bankrupt businessman Seán Quinn is entitled to defend a legal action which could result in judgment for more than €2.3 billion being entered against him in favour of the former Anglo Irish Bank.

Anglo, now Irish Bank Resolution Corporation, has alleged fraud and conspiracy against Mr Quinn in allegedly obtaining loans from it for an illegal purpose.

Mr Quinn has delivered a full defence, denying those claims and alleging that Anglo at all times knew that the real purpose of the loans was to meet margin calls on contract-for-difference positions in an unlawful effort to prop up its share price.

Mr Justice Peter Kelly heard final arguments yesterday on an application by Mr Quinn to be permitted to defend the claims, made by Anglo against him in the action brought against it by his wife and children. The judge said he had a good deal of material to consider and was reserving judgment.

Anglo contends that, as a bankrupt, Mr Quinn is not entitled to defend proceedings where the Official Assignee in Bankruptcy has decided not to defend and where, it claims, entry of judgment of more than €2 billion would not involve “findings” by the court against Mr Quinn.

In the family’s proceedings against Anglo, yet to be heard, Mrs Patricia Quinn and her five adult children contend they are not liable for loans of some €2.34 billion advanced to companies in the Quinn Group on grounds that those were allegedly illegally made to prop up the bank’s share price.

Anglo denies the claims but has joined Mr Quinn and two former Quinn Group senior executives – Liam McCaffrey, former Quinn Group finance director and Dara O’Reilly, chief executive of Quinn Group (NI) Ltd — as third parties.

In closing submissions yesterday, Brian Murray SC, for Anglo, said Mr Quinn’s argument that he was entitled to be treated equally before the law was “surprising” and “spurious” in the circumstances of this case.

This was not a situation where Mr Quinn was being treated differently as a result of poverty, counsel said. Rather, Mr Quinn was a bankrupt because he had incurred over €2 billion of debt which he was unable to discharge. If Mr Quinn was correct in his claims, that would leave almost every section of the Bankruptcy Act open to constitutional challenge.

A bankrupt has no legal or constitutional right to defend in a case where there would be no “finding” by the court on allegations made against them, counsel argued. The cases being relied on by Mr Quinn in arguing for such a right related to tribunals of inquiry which would involve “findings” against persons, but that situation did not apply here.

Earlier, Brian Cregan SC, for Mr Quinn, argued that his adjudication as a bankrupt was an economic attribute which did not affect his absolute right as a human being to defend the claims against him. Where the official assignee was not defending, Mr Quinn retained a residual right to defend the case himself, he also argued.

COMPENSATION FUND: QUINN INSURANCE HAS €166m DRAWDOWN APPROVED

THE PRESIDENT of the High Court has approved an application by the administrators of Quinn Insurance Ltd to draw down €166 million from the State’s Insurance Compensation Fund.

Bernard Dunleavy, for the joint administrators, Michael McAteer and Paul McCann, appointed by the Financial Regulator in April 2010, sought the approval for the payment yesterday from Mr Justice Nicholas Kearns. Counsel said the Minister for Finance had been put on notice of the application. The judge said he was satisfied to approve the payment.

The insurer is to be paid a total of about €740 million from the fund, established to protect insurance policy holders if an insurer cannot meet its liabilities. The fund payment forms part of the deal under which QIL was transferred to US company Liberty Mutual and Irish Bank Resolution Corporation (formerly Anglo Irish Bank).

All of QIL’s businesses in the Republic, except healthcare, transferred to Liberty Mutual. The US insurer is now wholly responsible for the business while IBRC is acting in a loan recovery capacity.

The High Court was previously told the payment of €740 million was necessary for protection of policy holders transferring to Liberty, remaining policy holders and employees. Had the proposed sale collapsed more than €800 million would have been required from the fund, the court was told.