Quinn family may avoid liability for €2bn loans

The family of bankrupt businessman Sean Quinn yesterday won the first leg of a legal battle with Anglo Irish Bank.

A significant Commercial Court ruling means the Quinn family might avoid liability for loans of up to €2.34bn if it proves its claims Anglo Irish Bank made those loans to various Quinn companies for the unlawful purpose of supporting the bank’s share price.

Legal sources believe the decision by Mr Justice Peter Charleton could have consequences for other cases.

Patricia Quinn and her five adult children are seeking to avoid liability for loans of €2.34bn, including €1.8bn allegedly illegally made from Sept 2007 to fund margin calls on contract for difference positions built up by Sean Quinn Snr in Anglo from 2005 through a Madeira-registered company, Bazzely, owned but not controlled by the Quinn children.

Anglo denies the family’s claims and contends that €500m loans were unrelated to the alleged loans to fund margin calls.

Anglo — now Irish Bank Resolution Corporation — had asked the Commercial Court to rule, as a preliminary issue, that the family could not advance its claims the loans were unenforceable due to alleged illegality. If the family was prevented making such claims, that would considerably shorten the full hearing of its case, it said.

A date for the full hearing has yet to be fixed but Mr Justice Charleton made suggestions aimed at reducing costs and length of that hearing. Legal sources believe the case will last several months and is likely to cost over €30m.

In his key ruling, Mr Justice Charleton ruled the family was entitled to advance claims it can avoid liability for loans if it proved those loans were made for “wholesale” market manipulation in breach of Irish and European law. There may also be a portion of “legitimate debt” involved, he added, a reference to Anglo’s claim €500m loans were unrelated to the allegedly unlawful loans.