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High Court of Ireland Decisions |
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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Irish Bank Resolution Corporation Ltd & Ors -v- Quinn & Ors [2012] IEHC 507 (05 December 2012) URL: http://www.bailii.org/ie/cases/IEHC/2012/H507.html Cite as: [2012] IEHC 507 |
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Judgment Title: Irish Bank Resolution Corporation Ltd & Ors -v- Quinn & Ors Neutral Citation: [2012] IEHC 507 High Court Record Number: 2011 5843 P & 2012 120 COM Date of Delivery: 05/12/2012 Court: High Court Composition of Court: Judgment by: Kelly J. Status of Judgment: Approved |
Neutral Citation Number: [2012] IEHC 507 THE HIGH COURT COMMERCIAL [2011 No. 5843 P]
[2012 No. 120 COM] BETWEEN IRISH BANK RESOLUTION CORPORATION LIMITED, QUINN INVESTMENTS SWEDEN A.B. AND LEIF BAECKLUND PLAINTIFFS AND
SEÁN QUINN, CIARA QUINN, COLETTE QUINN, SEÁN QUINN JR., BRENDA QUINN, AOIFE QUINN, STEPHEN KELLY, PETER DARRAGH QUINN, NIALL MCPARTLAND, INDIAN TRUST A.B., FORFAR OVERSEAS S.A., LOCKERBIE INVESTMENTS S.A., CLONMORE INVESTMENTS S.A., MARFINE INVESTMENTS LIMITED, BLANDUN ENTERPRISES LIMITED, MECON FZE, CJSC, VNESHKONSALT, OOO STROITELNYE TEKHNOLOGII, OOO RLC-DEVELOPMENT AND KAREN WOODS DEFENDANTS JUDGMENT of Mr. Justice Kelly delivered on the 5th day of December, 2012 Introduction 2. Earlier in the litigation, the moving parties were professionally represented. That is no longer the case. For the most part it was the defendant, Niall McPartland, who is legally qualified, who presented the case but I also heard from two other defendants. 3. The defendants presented their case in a competent and courteous fashion. It is clear that they have a deep-seated distrust of the plaintiff bank (the bank), the receivers (the receivers) and the receivers’ solicitors (the solicitors). 4. The case that the Quinns make is that the receivers and the solicitors ought not to be permitted to continue in those roles because of an alleged real or apparent conflict of interest and partiality. 5. In order to appreciate the basis for these contentions it is necessary to set out a short account of the proceedings to date. The Proceedings 7. Before these proceedings were sought to be admitted to the Commercial List, interim and interlocutory orders were made in June 2011 and July 2011 by Clarke J. It was alleged that a number of the defendants were in breach of those orders and Dunne J. heard and determined an application seeking committal to prison of three of the defendants on 29th June, 2012. She found that a contempt of court had been committed and ordered the imprisonment of two of the defendants. (Subsequently a third defendant was directed to be imprisoned.) She also made disclosure orders and granted injunctions in the proceedings. In addition, she appointed Mr. Taite as receiver over the assets of Seán Quinn Jr. and Peter Darragh Quinn wheresoever situate. Her order also set out the powers of the receiver. The appointment of the receiver was expressly stated to be in aid of the disclosure orders made against the relevant defendants. Those disclosure orders require information to be furnished on affidavit of all assets of whatever nature or kind situate in Ireland or worldwide and all documents relating to the material which was specified in the order of Dunne J. 8. Following the acceptance of the litigation into the Commercial List, an application was made to me for Mareva type injunctions restraining the Quinns (except Karen Woods) from reducing their assets below the sum of €50m pending trial. I granted those orders as well as disclosure orders. In addition, I appointed Mr. Taite as receiver over the assets of the Quinns (except Karen Woods) and specified the powers which he would have. These powers permitted the receiver to take possession, control and to secure and collect all assets in or out of the jurisdiction including but not limited to shareholdings of the Quinns and power to take steps to secure any credit balances in any bank accounts in or out of the jurisdiction in the names of the Quinns or any aliases or bank accounts held on their behalf. On 30th July, 2012, Dunne J. by consent granted similar and somewhat more extensive powers to Mr. Taite as receiver over the assets of the fourth and eight defendants. 9. On 31st July, 2012, I granted injunctive relief against Karen Woods and appointed the receivers over her assets with similar powers to those contained in my earlier order of 25th July, 2012. 10. It is not without significance that the orders made by me on 25th July and 31st July were grounded upon extensive affidavit evidence setting out very serious allegations of wrongdoing on the part of the relevant defendants. Although a full opportunity was provided for replying affidavit evidence to be sworn by those defendants, no such evidence was forthcoming. Neither did they object to the making of the orders sought. 11. At a vacation sitting of the Commercial Court on 3rd September, 2012, application was made by the receivers to Charleton J. for a series of orders requiring delivery up of identified material. The relevant defendants were given time to respond to that application and on a further vacation sitting on 24th September, the matter came before me. The Quinns on that occasion intimated a desire to apply for the reliefs with which I am dealing in this judgment. I fixed a date for the hearing of that application and affidavit evidence was exchanged between the parties. 12. On 2nd November, 2012, I refused the reliefs sought. The Application 14. The basis of the application for the removal of the receivers is an alleged demonstration of a lack of independence in the performance of their duties and an alleged conflict of interest. Insofar as the receivers’ solicitors are concerned the allegation is that they also have demonstrated a lack of independence and have a conflict of interest. 15. The Quinns contend that they have a full defence to this action. They assert that the security which the bank is relying on is tainted with illegality and is unenforceable. They rely on allegations made in related proceedings where the Quinns are plaintiffs and the bank defendant, bearing record No. 2011/4336 P. The Quinns say that the assets were purchased from Quinn family resources and not as a result of any borrowing from the bank. In addition, they say that any purported security that the bank has over the assets is as a result of lending made by it to support its own share price which is alleged to be in breach of s. 60 of Companies Act 1963 and the Market Abuse (Directive) 2003/6/EC Regulations 2005. Events of 29th June, 2012 17. The bank’s second nominee was Mr. Eamon Richardson also of KPMG. The judge rejected that nomination and stated that she did not “want to impugn the reputation of any individual in any firm in any practice in any shape or form, be it solicitors, accountants or whatever, and went on to say that she “was not a great believer in Chinese walls”. She indicated that the bank should nominate somebody who was independent. Mr. Taite was nominated and appointed. Subsequent Correspondence 19. The response from the receiver was to the effect that he had indeed retained McCann Fitzgerald to act as his legal advisers. His letter went on:-
21. The matter was again before Dunne J. on 20th July, 2012 and the issue was raised before her. There was a debate before the judge with views being expressed by counsel on behalf of the receiver, the Quinns and the bank. In the event, the judge expressed herself as follows:-
25. Information subsequently obtained by the Quinns, it is said, casts a different light on the alleged independence of the receivers and their solicitors which would justify their removal. 26. It is appropriate that I should record here the receiver’s explanation of his initial attempt to appoint Messrs. McCann Fitzgerald as his solicitors. His stated intention in so doing was to save costs and time because those solicitors were familiar with the asset position of the Quinns. Mr. Taite points out that in any role involving the location and preservation of assets, it is always necessary to move as quickly as possible to locate those assets and to secure them against dissipation. Because McCann Fitzgerald already had substantial knowledge regarding the defendant’s assets and their location, he felt it was appropriate to make use of that information in seeking to locate and secure the assets. 27. Mr. Taite points out the different role of the receiver as distinct from their legal advisers. It is the personal responsibility of the receivers to locate and secure the assets. Legal advice is tendered by the solicitors but the decision is that of the receivers. The Receivers 29. Mr. Taite points out that neither he nor his co-receiver was a party to the action in which the Quinn family have brought proceedings against the bank nor is he a party to these proceedings. The receivers are disinterested as to the outcome of all of these proceedings. 30. Mr. McPartland’s affidavit deals in great detail with various items which he contends are supportive of this application. Since I am of opinion that this application misunderstands the independence which is required of the receivers it is not necessary to deal with them in minute detail. Rather, I will deal with the major elements of the complaints made. Bazzely 32. Insofar as the receiver is concerned, he points out that Bazzely was used by members of the Quinn family to purchase contracts for difference in the bank. Bazzely is beneficially and legally owned by a number of the defendants in these proceedings. That being so, it is incumbent on him as receiver of the Quinns’ assets to investigate their shareholding in it. That was why his solicitors wrote to the defendants’ former solicitors seeking such details. The information was not requested because of any instruction issued to him by the bank in a direct or indeed indirect form. The information, rather, was directly relevant to his investigation of the defendants’ assets. He does not share Mr. McPartland’s view that because Bazzely is allegedly valueless that it is not of any relevance to the receiver’s inquiries. He makes a similar point concerning allegations made regarding information sought by him in respect of Quinn Group (ROI) Limited. This was, he says, part and parcel of him doing his job of gathering information in furtherance of his work and not because he was in any way influenced by the bank. Sparks 34. Mr. McPartland also averred to having carried out a web search with a view to identifying employees of Sparks who might have some connection to the bank. There are indeed persons who once worked for the bank and now work for Sparks and vice versa. 35. Two of the individuals named by Mr. McPartland are former employees of Sparks and now work for the bank. Four more once worked for the bank and now work or have worked for Sparks. None of these individuals have any involvement in the current engagement. Two of them ceased to be employees of the bank a number of years ago and a third, whilst formerly an employee of the bank, subsequently became an employee of Irish Nationwide Building Society and moved from there to Sparks. 36. The receivers contend that there is no actual or apparent conflict of interest and that they have not acted in a manner inconsistent with the duties imposed upon them by the court order. The receivers believe that having regard to the task imposed upon them they have acted properly and independently and are objective in their approach to their work. 37. The Quinns also contend that the receivers ought not to pass onto the bank any information which they may acquire. The intention to do so is alleged to be evidence of bias. The receivers say that in so doing in respect of relevant non-privileged information they are merely carrying out their task. The Solicitors 39. Mr. William Day, a partner in Arthur Cox retained by the receivers has sworn a detailed affidavit dealing with these various allegations. 40. When Mr. Taite first approached Mr. Day, he contacted his firms’ conflicts committee and discussed the assignment with members of that committee in detail. He did this because he knew that his firm had acted in connection with and against the bank on many occasions on separate and distinct assignments. However, he points out that the issue of client confidentiality is treated with utmost seriousness by his firm and its members do not share information gained from instructions by third parties without client consent. Because of that it is not possible for him to go into the specifics of the other instructions and activities of his firm on behalf of different clients referred to in Mr. McPartland’s affidavit. 41. He admits that Cox’s were appointed to act for a syndicate of banks who are owed significant sums by Quinn Group Limited which was the holding company of the group of companies commonly referred to as the Quinn manufacturing group. Subsidiaries of Quinn Group Limited have provided guarantees in respect of the borrowings of that company. Neither Quinn Group Limited nor any of its subsidiary guarantors within the Quinn manufacturing group formed part of the international property group which is a distinct collection of companies established by the Quinn family that forms the subject matter of the proceedings which have resulted in the appointment of the receivers. 42. Quinn Group Limited was the counter party with whom the bank syndicate was obliged to deal with on the restructuring of the debts of the Quinn manufacturing group. Quinn Group Limited negotiated a consensual restructuring of the debt due by it to the banking syndicate. Cox’s did not act for the bank in relation to that matter and it was at all times represented by separate Irish and United Kingdom solicitors. The bank was not a creditor of Quinn Group Limited nor was it either an instigator or the instructing party in relation to the creditor’s contingency planning. 43. Mr. Day says that his firm’s involvement on behalf of the banking syndicate to the Quinn manufacturing group was a matter of public record and was known to both Seán Quinn Snr and Peter Darragh Quinn, both of whom were directors of Quinn Group Limited at the relevant time. There was, therefore, no question of Arthur Cox having attempted to mislead the defendants or anyone else. 44. Insofar as the queries raised concerning Bazzely are concerned, he says that these were made with a view to ascertaining what assets the defendants own so that the receiver could fulfil the duties imposed upon him by the court. 45. More generally, Mr. Day says that he believes that Mr. McPartland is of opinion is that if an individual or firm has acted for the bank or its shareholder, the Department of Finance, at any time, such involvement conflicts that person or firm and precludes them from acting for the receivers. He says that this proposition is incorrect and is not really believed by the Quinns because their former solicitors have acted for the bank themselves on many occasions. That firm only ceased to act for the defendants due to funding issues. Indeed, he points out that the profile of one member of Eversheds (the Quinns’ former solicitors) makes specific reference to his role as adviser to the joint administrators of Quinn Insurance Limited on the sale of the general insurance business to a joint venture entity. 46. Mr. Day swears that neither his firm nor himself have any conflict of interest in acting for the receivers. His firm upholds, he says, the correct highest standards of professional conduct and that there is and will be no question of client confidentiality being breached. He furthermore indicates that if the court is of opinion that he ought to, he is quite willing to withdraw and cease to act for the receivers. The Legal Position 48. The receivers were appointed in aid of orders made by the court. Those orders required the defendants to disclose all of their assets in circumstances where there was a finding by Dunne J. that the assets of the Quinns had been dealt with by them with a view to placing them beyond the reach of the plaintiffs in these proceedings. The receivers’ role is an active rather than a passive one. It is not merely to preserve such assets as the defendants have chosen to disclose. Rather, it is to collect in and preserve all of the assets of the defendants in whatever jurisdiction they may be and whether they have chosen to disclose them or not. 49. The Quinns apprehend that information is going to be furnished by the receivers to the bank. They believe that this demonstrates a lack of independence which justifies the receivers removal. I believe this to be an incorrect view. 50. Nobody could dispute the statement contained in Kerr and Hunter on Receivers and Administrators (19th Ed.) relied upon by Mr. McPartland where at para. 12 it is said:-
52. In the present case, the crucial thing to bear in mind is that the receivers have to be wholly disinterested in the subject matter of this action. The receivers have no interest in the assets of the Quinns. That is not in dispute. 53. The receivers accept that they have important obligations to the court. These are summarised by Ferris J. in Mirror Group Newspapers Plc v. Maxwell [1998] 1 BCL 638 where he said:-
Onus of Proof – Receivers 57. In Thomas v. Dawkin [1792] 1 Ves Jun 452, Thurlow L.C., held that where an applicant seeks to set aside the appointment of a receiver on the grounds of bias there must be “some substantial objection to induce the court to overturn the appointment”. 58. Assistance as to the yardstick to be applied by the court on an application such as this can be gleaned from a number of more recent English cases. The first dealt with an application seeking to remove trustees in bankruptcy from their office on the grounds that they had colluded with a creditor of the bankrupt to work against the latter’s interest. The case is that of Doffman & Isaacs v. Wood & Hellard [2011] EWHC 4008. Proudman J. had this to say:-
61. I am of the view that there is no basis established for removing the receivers because of their firm’s former involvement in the manner already described with aspects of Quinn Finance. Neither is there any case established by reference to employees who were or are employees of the bank. 62. I of the opinion that Mr. Taite did not act inappropriately in initially seeking the appointment of McCann Fitzgerald as his solicitors. While Dunne J. did not accede to that application she made no suggestion express or implied that he had acted inappropriately in seeking to do so. I have already dealt with his motivation for seeking to appoint McCann Fitzgerald and his belief that that course of action would save considerably on costs and time. Indeed, such occasionally occurs in official liquidations where liquidators have sought to instruct the solicitor who acted for a creditor which originally presented the petition. Whilst that does not happen frequently it nonetheless has had judicial approval as, for example, in Re Schuppan [1996] 2 All E.R. 664 where Robert-Walker J. held:-
65. Likewise, I am of the view that there is no demonstration of partiality or bias by reference to the receivers’ activities concerning Bazzely. The Quinns seem to believe that the receivers are not obliged to carry out any investigative work. That is not so. In order to secure and preserve the assets, they must first locate them. I do not perceive any impropriety on the receivers’ part in this regard. Indeed, the receivers could be criticised for not pursuing this line of enquiry. 66. In due course the receivers will be entitled to disclose to the bank all relevant non-privileged information obtained by them pertaining to the assets. An intention to do so is not indicative of bias or partiality. Onus of Proof - Solicitors 68. One begins with the proposition that parties are free to chose their own legal advisers. There is, nonetheless, a jurisdiction to intervene so as to ensure that a solicitor does not remain on record for any party where his doing so would not be in the interests of justice. The jurisdiction to remove a solicitor is, however, exercised sparingly. In Re Recover Limited [2003] 2 BC LC, Pumfrey J. said:-
‘The basis of the courts' intervention is not a possible perception of impropriety: it is the protection of confidential information’.”
72. Sometimes it is a former client who takes exception to his erstwhile solicitor acting against him. This has been considered on a number of occasions by the English courts. 73. In Prince Jeffri Bolkiah v. KPMG (A Firm) [1999] 2 AC 222, Lord Millett said this:-
My Lords, I would affirm this as the basis of the court’s jurisdiction to intervene on behalf of a former client. It is otherwise where the court's intervention is sought by an existing client, for a fiduciary cannot act at the same time both for and against the same client, and his firm is in no better position. A man cannot without the consent of both clients act for one client while his partner is acting for another in the opposite interest. His disqualification has nothing to do with the confidentiality of client information. It is based on the inescapable conflict of interest which is inherent in the situation.”
77. What the Quinns contend is that because of the identity of some of its former clients, Arthur Cox may give biased evidence to the receivers or part with information confidential to the receivers. But in this regard, there is no evidence of any particular incidents of improper advice being given or of any apprehended or actual disclosure of confidential information. Merely because Cox’s have in the past acted for clients whose interests may be perceived by the Quinns to be adverse to theirs is not evidence of bias. 78. I do not find any evidence of any form of wrongdoing, conflict of interest or impropriety on the part of Mr. Day or Arthur Cox to warrant the making of the order sought. Conclusion |
