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 signing guarantees in 2007 and 2008 and were never contacted by Anglo about the guarantees, Bernard Dunleavy SC said.
The five were aged between 20 and 32 in 2007 but Anglo “did not even know their ages”, counsel outlined. Its conduct was such the court should find the children have no liability under the securities, he urged.
Brenda Quinn, the youngest, was 20 when she signed a guarantee for a loan to a Cypriot company in the Quinn group, he said. She was then pursuing a college course in business and human resources.
Aoife Quinn, aged 26 in 2007, had a BSc in health fitness and leisure, was attending the Law Society in 2007 and was an apprentice solicitor in 2008 on a salary of about €18,000.
Sean Quinn Junior, aged 28 in 2007, had completed a Business Studies degree and was working in 2007 in middle management at Quinn Insurance.
Ciara Quinn was aged 31 in 2007, had trained as a nurse and did voluntary nursing in Albania and Kosovo and agency nursing here before joining Quinn Insurance in 2005 where she was a claims manager in 2007.
Colette Quinn, aged 32 in 2007, has a BA Commerce degree and was an assistant operations manager with Quinn Hotels in 2007.
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 their action, the five contend the guarantees and share pledges signed by them are invalid and have no legal effect.
Mr Dunleavy 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.
When the CFDs were unwound into Anglo 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 the bank’s alleged knowledge of their father’s influence over them, "unconscionable bargain", negligence and breach of duty by the bank to them, especially to advise them.
They dispute they have a liability of some €83m each under the guarantees or any liability in relation to their share pledges.
Mr Dunleavy said that, in 2007, 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.
It was “morally reprehensible” of Anglo to take 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”. The bank must also have concluded that was so because it never contacted them at all about the guarantees, he said.
Sean Quinn Senior and two former Quinn group senior executives, Liam McCaffrey and Dara O'Reilly, are third parties to the case.
IBRC contends, if it is found liable to the children, it is entitled to an indemnity against the third parties arising from how the guarantees and share pledges were allegedly obtained. The third parties deny its claims.
Arising from Mr Quinn’s bankruptcy, which he has since exited, the bank previously got liberty to enter judgment, if applicable, against him.
IBRC also previously got a judgement for €120m, from the children’s mother, Patricia Quinn, arising from a guarantee provided by her. She is bankrupt and no longer involved in the children’s case.
The hearing continues on Thursday.