The High Court has ruled that six Quinn family plaintiffs may rely on alleged breaches of market abuse law and company law in seeking to challenge personal guarantees and share charges connected with borrowing from Anglo Irish Bank Corporation Limited, now Irish Bank Resolution Corporation Limited.
Mr Justice Charleton’s 23 February 2012 decision concerned a preliminary legal issue, not whether the alleged wrongdoing occurred or whether the securities are invalid. The court took the plaintiffs’ case at its highest for the purpose of deciding whether they could invoke the illegality principle. The allegations remain to be proved.
The plaintiffs allege that Anglo and Seán Quinn Senior were involved in manipulating Anglo’s share price through contracts for difference and related lending. They say they were unaware of, or did not participate in, the alleged scheme and that guarantees and share pledges were put in place as a result. Anglo disputed that alleged illegality could be used to undermine the contracts, arguing that market abuse legislation provided a confined set of remedies.
The court rejected that argument at this stage. It held that the Market Abuse (Directive 2003/6/EC) Regulations 2005 and section 60 of the Companies Act 1963 did not prevent the plaintiffs from relying on the general law of illegality. The judge said public policy could permit such a plea where the alleged conduct was central to the transactions and refusing relief could allow a party to benefit from the alleged wrongdoing.
The ruling does not cancel the guarantees or charges, determine the debts, or decide whether the receiver was entitled to act. The receiver had been appointed over shares on 14 April 2011 after a demand for repayment and non-payment. Whether the challenged securities are unenforceable, and whether any legitimate borrowing can be separated from sums allegedly linked to market manipulation, remain for later proceedings.
The plaintiffs bear the burden of proving the alleged illegality, its effect on Anglo’s share price, their lack of involvement in the alleged conspiracy and specific loss. The judge noted that the financial amounts pleaded did not then reconcile and urged the parties to clarify how the borrowed funds were used. The preliminary ruling leaves those factual and financial questions open.