Quinn v Irish Bank Resolution Corporation Ltd
| Jurisdiction | Ireland |
| Judge | Ms. Justice Irvine |
| Judgment Date | 29 January 2016 |
| Neutral Citation | [2016] IECA 21 |
| Date | 29 January 2016 |
| Court | Court of Appeal (Ireland) |
| Docket Number | Appeal No. 289/2015 and 324/2015 Appeal No. 324/2015 |
Ryan P.
Peart J.
Irvine J.
[2016] IECA 21
Irvine J.
Appeal No. 289/2015 and 324/2015
Appeal No. 324/2015
THE COURT OF APPEAL
Bank Loans – Share Charges – Guarantees – Enforceability – s. 60 of the Companies Act 1963 – to O. 28 of the Rules of the Superior Courts 1986 – Amendments – Statement of Claim – Delay – Abuse of Process – Negligent infliction of economic harm
Facts: This case concerned two related appeals. The first was against a High Court order refusing an application by the plaintiffs to amend their statement of claim. The defendants brought the second appeal in respect of a High Court order refusing their application to strike out certain paragraphs of the plaintiffs? statement of claim. The plaintiffs sought to challenge the validity of six share charges given to the Anglo Irish Bank as security for a loan to the Quinn Group. They also sought to challenge the validity of six personal guarantees given to the bank by way of security in respect of loans made by the bank to six Cypriot companies. In addition they sought remedies against the bank for breaches of fiduciary duty and negligent infliction of economic harm. The plaintiffs maintained that the Share Pledges and Guarantees were unenforceable.
The plaintiffs asserted that the securities were provided by way of undue influence and should have been set aside. They also argued that the securities should have been set aside because they were given in breach of s. 60 of the Companies Act 1963 and/or in breach of the provisions of the Market Abuse Regulations (?MAR?). The case went to the Supreme Court where it was determined that the plaintiffs were not entitled to rely on the alleged breaches of the MAR and/ or s. 60 of the Companies Act 1963 to support their claims. However, the Supreme Court judge noted that the plaintiffs? would have had a claim had they pleaded that the securities were unenforceable on a ?stand alone? basis as opposed to being invalid due to the illegality underlying the lending.
As a result, the plaintiffs sought to amend their statement of claim pursuant to O. 28 of the Rules of the Superior Courts 1986. They wanted to insert a plea of ?stand alone? unenforceability of the Share Pledges and Guarantees. The application was refused by the High Court because of the delay in bringing the application and also because it was considered to be an abuse of process. The plaintiffs submitted that the trial judge had erred in refusing their application. The plaintiffs argued that if O. 28 r. 1 had been applied properly the court would have granted the amendment sought. The defendants argued that the High Court judge was correct in refusing the plaintiffs? application because to do otherwise would mean they would have suffered prejudice.
Held by Irvine J: The court determined that the proposed amendment was not required for determining the real questions between the parties. Irvine J was satisfied that the amendment sought concerned an entirely new claim which was never pleaded or in issue prior to the Supreme Court ruling. The court found no fault with the conclusion of the High Court that the amendment was not necessary to allow the true issues between the parties to be determined. The court also affirmed that the High Court was correct in finding culpable delay on the part of the plaintiffs in bringing their application.
The second appeal consisted of two issues. The first was whether the judge erred in refusing to strike out certain parts of the statement of claim and second whether the High Court judge erred by refusing to dismiss the plea of negligent infliction of economic harm. The court was satisfied that the High Court had erred in dismissing the defendants? application to strike out parts of the statement of claim but had not erred in finding the claim of negligent infliction of economic harm had been properly pleaded. The court dismissed the first appeal and allowed the second appeal to that limited extent.
This judgment concerns two related appeals brought in respect of the same set of proceedings. The first appeal is against the Order of the High Court (Haughton J.) dated 21st May, 2015, whereby he refused an application brought by the plaintiffs to amend their statement of claim.
The second appeal is brought by the defendants in respect of the order of the High Court (Haughton J.) dated 21st May, 2015, whereby he refused their application to strike out certain paragraphs of the plaintiffs' statement of claim.
Before considering each appeal it is first necessary to briefly summarise the background circumstances germane to both.
The proceedings were commenced by means of plenary summons dated 16th May, 2011, and were admitted to the commercial list on 30th May, 2011. In their statement of claim delivered on the 8th June, 2011, the plaintiffs, who claim that they are the ultimate beneficial owners of the Quinn Group, challenge the validity of six share charges (?Share Pledges?) which they gave to Anglo Irish Bank (?the bank?), as security for monies loaned by the bank to the Quinn Group. They also seek to challenge the validity of six personal guarantees (?the Guarantees?) which they gave to the bank by way of security in respect of significant loans made by the bank to six Cypriot companies. In addition they seek remedies against the bank for alleged breach of duty/breach of fiduciary duty and the negligent infliction of economic harm.
The following is a brief outline of the facts relied upon by the plaintiffs to support these claims.
As a result of the negative drop in the share price of Anglo in 2007, the bank advanced funds to companies within the Quinn Group so that the latter could meet the margin calls on its Contracts for Difference (?CFD?) position. The plaintiffs signed many security documents during this period and allege that they did so without obtaining any legal or financial advice.
Following further price drops in Anglo's share price in 2008, the Quinn Group came under pressure from banks and bondholders. As a result, a further loan facility was provided to the Quinn Group in return for the provision of the Share Pledges executed by the plaintiffs in favour of the bank.
Following a demand by the bank in 2008 that the Quinn Group reduce its CFD position, the majority of the CFDs were unwound into shares, the first portion of which (102,000,000) were purchased by a group of investors known as the ?maple ten? while the second portion (108,625,000) were purchased by the Quinn Group. These shares were then transferred to the six Cypriot companies, each of which was wholly owned by an individual member of the Quinn family, i.e. the plaintiffs. As part of the unwinding arrangement, the plaintiffs provided the Guarantees in respect of the relevant Cypriot companies, and those companies ultimately received a total of ?498 million from the bank.
On 14th April, 2011, Anglo appointed the second defendant as share receiver in respect of the Share Pledges.
In the original statement of claim, which runs to some 31 pages, the plaintiffs maintain that the Share Pledges and Guarantees are unenforceable at the suit of the bank. That claim is based on two separate assertions. The first is that these securities were procured by reason of undue influence or in the alternative that they ought to be considered to be improvident or unconscionable bargains, such that they should be set aside. The second is that the securities should be set aside on the grounds that the charges were given in respect of lending that was in breach of Section 60 of the Companies Act 1963 and/or in breach of the provisions of the Market Abuse Regulations (? MAR').
The defences of both defendants were delivered in July, 2011 and the plaintiffs reply thereto in August, 2011. Thereafter, the High Court (Kelly J.) on 16th December, 2011, directed the trial of a preliminary issue. That issue concerned the locus standi of the plaintiffs to rely on certain breaches of s.60 of the Companies Act 1963 and the MAR in support of their claims that the securities are unenforceable. The order of Kelly J. set the following question for determination:
?Do the Plaintiffs or any of them have the standing or entitlement to rely upon the alleged or any breach:-
(a) of the Market Abuse Regulations; or
(b) Section 60 of the Companies Act, 1963,
in aid of any of their claims for declarations of invalidity, unenforceability or no legal effect in respect of any Charge [on] Shares or any Personal Guarantees herein??
By judgment of the High Court (Charleton J.) dated 23rd February, 2012, it was held that the plaintiffs had locus standi to rely on those breaches in support of their claims. However, on appeal, it was held by a unanimous decision of the Supreme Court (Clarke J.) dated 27th March, 2015, that the plaintiffs were not entitled to rely on the alleged breaches of the MAR and /or s.60 of the Companies Act 1963 in support of their claims, as they had pleaded them.
In the course of his judgment Clarke J. summarised the Quinns' claim as pleaded in the statement of claim at para. 12.1 of his...
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