Anglo Irish Bank behaved in a “morally reprehensible” manner towards Sean Quinn’s children when they signed guarantees for loans of hundreds of millions of euro aimed at propping up its falling share price, the High Court has been told.
These five young people were ignorant of the bank’s true financial position when they signed guarantees in 2007 and 2008 and were never contacted by Anglo about the guarantees, Bernard Dunleavy SC said. “It did not even know their ages.”
Brenda Quinn, the youngest of the children, was aged 20 when she signed a guarantee for a loan to a Cypriot company in the Quinn group, he said.
The guarantees were required by Anglo for loans advanced by it to Quinn companies for the purpose of unwinding Contracts for Difference (CFD) held by their father in the bank, he said.
At the time, Anglo’s share price was “tanking” and it needed to unwind the CFDs – agreements to exchange the difference between the current and future price of shares in Anglo - “to protect itself”.
The bank was engaged in a complex exercise of “presenting a picture of itself to the public which was entirely at odds with reality”, he said.
Between the time the lending was agreed and the drawdown of the loans, the value of Anglo shares had further fallen and no one would give a personal guarantee for such loans except in very extreme circumstances, he said.
This situation was “so at odds with normal common sense” the bank’s conscience should have alerted it to need to make sure the Quinn children absolutely understood what they were doing.
There was a “morally objectionable” character to Anglo taking guarantees from the children when it never contacted them about those or advised them to take independent legal advice.
Counsel agreed with Mr Justice Garrett Simons the guarantees stated that independent legal advice should be taken. “Every guarantee says that,” he said.
When the judge asked why the children did not take independent legal advice, counsel said that did not arise because their relationship with their father was such they signed “whatever they were asked to sign”.
Refusing a request from their father about any aspect of the Quinn business “could not be contemplated because he had absolute influence over them”.
The bank must also have concluded that was so because it never contacted them at all about the guarantees, he said.
Mr Dunleavy, with Ciarán Lewis SC, is continuing his opening of the children's action against Irish Bank Resolution Corporation (IBRC), Anglo’s successor in title, and against receivers appointed over shares.
In the proceedings, Aoife, Brenda, Ciara, Colette and Sean Quinn Junior contend the guarantees and share pledges signed by them are invalid and have no legal effect. When the CFDs were unwound into shares, one portion 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 €498m from Anglo. The children’s core claim is the securities provided by them are invalid on grounds including "unconscionable bargain", negligence and breach of duty by the bank to them, especially to advise them.
They dispute they have any liability under the guarantees and share pledges.
The bank denies the claims and pleads the children understood what they were doing. It has counterclaimed for some €83m each against them arising from their guarantees.
It previously obtained a judgment for €120m, from their mother, Patricia Quinn, arising from a guarantee provided by her. She is bankrupt and is not involved in the case.
Sean Quinn Senior and two former Quinn group senior executives, Liam McCaffrey and Dara O'Reilly, are third parties to the case.
The bank sought to join them for the purpose of claiming, if it is found liable to the children, an indemnity against the third parties arising from how the guarantees and share pledges were allegedly obtained. The third parties deny the bank’s claims against them.
Arising from Mr Quinn’s bankruptcy, which he has since exited, the bank previously got liberty to enter judgment, if applicable, against him.
The hearing is continuing.