High Court of Ireland Decisions

Judgment Title: Irish Bank Resolution Corporation -v- Quinn & Anor

Neutral Citation: [2011] IEHC 428


High Court Record Number: 2011 4510, 4511 & 4513 S

Date of Delivery: 23/11/2011

Court: High Court

Introduction
1. These are applications for summary judgment against Seán Quinn (the defendant) who is the sole defendant in the first two actions and a co-defendant with his wife Patricia in the third action listed above.

2. On any view, the amounts involved are enormous. In the first action, the amounts claimed are (a) €1,050,515,072.78; (b) US$808,201,435.07; and (c) JPY¥13,818,511,901.

3. These sums are alleged to be due on foot of a deed of guarantee and indemnity of 22^nd November, 2007. By that instrument, the defendant guaranteed the liabilities of Quinn Finance in respect of borrowings made by it from the plaintiff to finance ventures in, inter alia, Russia and India.

4. The second action seeks to recover a total sum of €372,236,748.15, due on foot of four deeds of guarantee and indemnity executed by the defendant. The first was dated 14^th January, 2003, in respect of monies due and owing by Quinn Group Properties Limited. Two are dated 6^th January, 2005, in respect of all liabilities of Quinn Hotels Praha A.S. and in respect of Shamrock Investments Properties Praha A.S. The fourth is dated 7^th February, 2007 and is in respect of money advanced by the plaintiff to Slieve Russell Hotel Property Limited.

5. The third claim, although large, is much less than the other two. It is in respect of a sum of €3,049,361.33 being monies allegedly borrowed by the defendant together with his wife.

History of Proceedings
6. All three sets of proceedings began on 2^nd November, 2011 and were the subject of motions returnable for hearing on 14^th November, 2011. The motions in each case sought to transfer the litigation to the Commercial List and also sought summary judgment for the respective amounts.

7. On Friday, 11^th November, 2011, the defendant petitioned the High Court of Justice in Northern Ireland seeking to have himself adjudged bankrupt. That petition was granted. It was granted on the basis of an affidavit sworn by the defendant.

8. In that affidavit, the defendant swore:-

“Although I am not now resident in Northern Ireland, my centre of main interest, being the place where I conduct the administration of my interests, is located within the United Kingdom, at Gortmullan, Derrylin, Co. Fermanagh, Northern Ireland BT92 9AU, which is the registered office and place of business of the companies in the Seán Quinn Group of which I have been a director and from where I have performed my duties and conducted my business affairs. I am domiciled for taxation purposes in Northern Ireland and my tax affairs are conducted within the United Kingdom under UK National Insurance and Tax References.”

“And the court being satisfied that the EC Regulation does apply declares that these proceedings are main proceedings as defined in Article 3 of the EC Regulation.”

The Hearing of Monday 14^th November, 2011
10. At the hearing of the three motions on 14^th November, the defendant was represented by senior counsel and solicitor. Counsel accepted that he had a difficulty in seeking to represent the defendant since on his own petition he had been adjudicated a bankrupt in Northern Ireland. He indicated that there had been contact with the Official Receiver there but that he was not himself appearing for the Receiver.

11. Having heard both sides, I made an order transferring all three cases to the Commercial List pursuant to O. 63A, r. 1(a)(i) of the Rules of the Superior Courts. I did not, however, proceed to enter summary judgment against the defendant. Rather, I took the view that given the very recent involvement of the Official Receiver, I ought to extend him the courtesy of having an opportunity to consider his position and to decide whether or not he wished to participate in these proceedings. Whilst the plaintiff indicated its anxiety to proceed, counsel on its behalf said if the court thought that it might be appropriate to allow the Official Receiver a short time to consider the position, no strenuous objection would be raised. In the course of my ruling, I said this:-

“I think in the circumstances, it would be more prudent to give a short period of time, in which the Official Receiver, if he wishes to do so, can come into this jurisdiction and seek whatever orders are appropriate or he may decide not to do so. Indeed that may well be the course the Receiver takes. I propose to grant a short adjournment so as to afford that courtesy to a court officer of an adjoining jurisdiction, where there is mutual respect between the courts of this State and the courts of Northern Ireland. I would not wish it to be said that the Official Receiver was taken short by any order that I might make today. So I do it in that context, with a view to ensuring that the mutual respect between our respective courts is observed and that the Official Receiver gets at least an opportunity to consider the position.”

The Hearing on 21^st November, 2011
13. The plaintiff’s application for summary judgment recommenced on this day. The Official Receiver was represented by counsel different to those who represented the defendant on 14^th November, 2011.

14. In the course of the week which had elapsed a number of things had occurred.

15. First, the plaintiff did indeed apply to the High Court of Justice in Northern Ireland seeking to have the defendant’s bankruptcy annulled. That application is listed before a Judge in Chambers I am told on 24^th November, 2011, although the motion paper refers to 25^th. Counsel for the Official Receiver informed me that on that occasion there is no question of the substantive application being heard. Rather, directions will be given for such a hearing. It is not possible to be certain but the likelihood is that such hearing will not be heard or determined prior to Christmas.

16. Second, the defendant’s bankruptcy in Northern Ireland was the subject of an application to the Official Assignee in Bankruptcy in this jurisdiction. On 18^th November, 2011, the defendant’s name and appropriate information was inserted on the Personal Insolvency Register maintained by the Official Assignee in Bankruptcy in this jurisdiction pursuant to the European Communities (Personal Insolvency) Regulations 2002.

17. Third, correspondence was exchanged between solicitors acting for the Official Receiver and the plaintiff’s solicitor.

The Correspondence
18. In a letter of 18^th November, 2011, the Official Receiver’s solicitors set out the basis upon which they would ask this Court to adjourn the application for summary judgment until a date after 24^th November, 2011. The basis for such a request was a lack of any perceived injustice to the plaintiff by such an adjournment and an apprehension that should the plaintiff press ahead while the bankruptcy order in Northern Ireland remained extant then the plaintiff would “effectively seek to cut across the jurisdiction of the High Court of Justice in a manner which is not permissible”.

19. The letter made it clear that if the bankruptcy order in Northern Ireland is valid then the plaintiff will have to prove its debt in accordance with the bankruptcy procedure in that jurisdiction. The letter went on to say:-

“We respectfully suggest that your client is not entitled to oust the proof of debt process by means of a summary judgment application in this jurisdiction. If the bankruptcy order is annulled of course, then these proceedings will continue unimpeded after what will have been a relatively brief hiatus.”

21. The plaintiff’s solicitors responded by letter dated the same date.

22. Insofar as it is relevant it stated:-

“We do not accept that by obtaining judgment our client will ‘cut across the jurisdiction of the High Court of Justice in a manner which is not permissible’. It is accepted by all parties that the adjudication in Northern Ireland does not result in an automatic stay of proceedings against the bankrupt. Accordingly, the Bank is entitled to proceed with the application for summary judgment.

In your letter you indicate that maintaining the status quo by adjourning the within proceedings will not prejudice the Bank. This is not in fact the case. As you will be aware the Bank’s application to set aside the bankruptcy order is returnable for the High Court in Northern Ireland on Thursday 24^th November, 2011. It is unlikely that any substantive order will be made on this date and it could take a number of months for the application to be finally determined. Clearly, an adjournment for an indeterminate period is not acceptable and could be prejudicial to the Bank.”

24. The letter continued:-

“The Insolvency Regulation recognises that local creditors may commence secondary or territorial proceedings in any jurisdiction where a creditor has an establishment. The secondary proceedings (which will be bankruptcy proceedings in this case) run in parallel with the main proceedings. In the event that the Bank sought to commence secondary proceedings it must be in a position to establish that a liquidated sum is due and owing from Mr. Quinn. A judgment against Mr. Quinn would greatly assist the Bank in initiating secondary proceedings in this jurisdiction.

Further, in the event that the Bank’s application in Northern Ireland is ultimately successful and the bankruptcy adjudication is annulled, it is not acceptable to the Bank that Mr. Quinn’s status will revert to ‘normal’ as it would be open at that stage to any creditor to seek to execute against Mr. Quinn’s assets. Accordingly, it is in the interests of all creditors that the Bank would be in a position to immediately proceed with the bankruptcy applications.”

26. A good deal of the time on Monday of this week was spent in agitating the issues which have been outlined in that correspondence but before considering them there are a number of matters which ought to be alluded to in respect of the merits of the case.

The Merits
27. The test to be applied on an application for summary judgment is well established in the jurisprudence of the Supreme Court and this Court. The most recent enunciation of it is to be had in the decision of the Supreme Court in Dankse Bank Trading as National Irish Bank v. Durkan New Homes & Ors [2010] IESC 22. The test can be distilled down to a simple question. The question is: is it very clear that the defendant has no case? If a defendant can demonstrate an arguable defence then summary judgment should be refused and the action sent to plenary hearing.

28. In the present case, there is no suggestion of any defence on the part of the defendant. The Official Receiver has not sought to propound any such defence despite the adjournment of the application for summary judgment which was granted on 14^th November, 2011. Rather he seeks a further adjournment until after the hearing in Belfast on Thursday and then may consider making an application to this Court for a stay on the instant proceedings.

29. This adjournment application is strongly opposed by the bank which presses for judgment against the defendant.

30. On the merits, it must be noted that insofar as the first case is concerned the defendant has, in the affidavit which he presented to the High Court in Northern Ireland, admitted to a liability of US$219,901,910.64.

31. In the second case, he has in the course of that affidavit admitted to owing a total sum of €253,951,810.67.

32. Thus, insofar as these amounts are concerned not merely is there no arguable defence presented but there is an admission under oath by the defendant that he owes those sums.

33. Insofar as the balance of the first claim is concerned, the plaintiff makes a powerful case as to it’s entitlement to summary judgment. The guarantee which the defendant executed provides at clause 2, inter alia, that the defendant unconditionally and irrevocably guaranteed to the plaintiff the due and punctual payment and discharge in full of all monies and liabilities in whatever currency denominated which would be owing or incurred by the borrower to the plaintiff. Furthermore, the defendant agreed as a primary obligation to indemnify the plaintiff on demand from and against the various instances which are set out at clause 2.1.2.

34. At clause 10 of the deed, the defendant irrevocably waived the right to interpose any defence based upon any statute of limitations or any claims of laches or set off or counterclaim of any nature or description. He furthermore agreed that a certificate in writing signed by any duly authorised officer of the plaintiff stating that the amount at any particular time due and payable by the defendant to the plaintiff would be conclusive evidence as against him save in the case of manifest error.

35. A certificate was issued on 2^nd November, 2011, certifying the amount claimed in the summary summons. Furthermore, the general conditions of the plaintiff provide that all the payments of the borrower were to be made without set off or counterclaim.

36. Insofar as the second case is concerned, the guarantee and indemnity of 14^th January, 2003, in respect of Quinn Group Properties Limited provides an irrevocable and unconditional guarantee to pay the plaintiff on demand in respect of the obligations of the borrower. Furthermore, under clause 2.2, the defendant undertook as a principal obligor and as a separate and independent obligation and liability to irrevocably and unconditionally indemnify the plaintiff in full. In addition, the defendant agreed under clause 3.2 that none of his liabilities under the guarantee would be reduced, discharged or otherwise adversely affected by any invalidity, illegality or unenforceability, irregularity or frustration of any actual or purported obligation of the principal debtor and any other person. Finally, under clause 3.3, the defendant agreed that the obligations and liabilities expressed to be undertaken by him as guarantor were those of a primary obligor and not merely as a surety.

37. In respect of the guarantee of 6^th January, 2005, concerning Quinn Hotels Praha A.S., not dissimilar obligations were undertaken. The guarantee was not merely a guarantee but also an undertaking of a primary obligation to indemnify the bank. Under clause 4.2, it was expressly provided that the liability of the defendant under the guarantee would be that of a sole or primary obligor and not merely as a surety.

38. The guarantee and indemnity of 6^th January, 2005, concerning the borrowings of Shamrock Investment Properties is in the same terms.

39. The guarantee and indemnity of 7^th February, 2007, in respect of Seán Quinn Properties Limited is an unconditional and irrevocable guarantee in respect of the obligations of the borrowing company. Again, the liability of the guarantor is as a sole or primary obligor and not merely as a surety.

40. Given these tightly drawn instruments which were executed by the defendant, it is difficult to see how any defence to them can arise and indeed no defence is sought to be propounded by the Official Receiver, at least at this juncture.

41. I must now turn to the receiver’s application for an adjournment of the motion and the exercise of my discretionary jurisdiction as to whether or not to grant it. Before doing so, I ought to set out a number of issues which are not seriously in dispute between the parties.

Issues
42. Pursuant to Article 3(1) of the Regulation, the courts of Northern Ireland have jurisdiction in the defendant’s bankruptcy unless and until that bankruptcy is annulled. All questions touching upon his bankruptcy fall to be dealt with the High Court of Northern Ireland. Questions as to whether or not the defendant had his centre of main interests in Northern Ireland are exclusively for determination by the courts there.

43. The exercise being undertaken by me in these cases is entirely different to that which will be undertaken by my counterpart in Northern Ireland.

44. The defendant has an establishment in this jurisdiction (see Article 2(h) of the Regulation) and therefore the courts of this State would be entitled to open secondary proceedings.

45. The opening of the bankruptcy proceedings in Northern Ireland does not result in an automatic stay in court proceedings. At present there is no application for a stay before this Court. There is an application for an adjournment until after the directions hearing in Belfast on Thursday. Counsel for the Official Receiver did, however, appear to accept that there was a likelihood that an application for a stay might be made to this Court next week. The length of that stay would be until such time as the plaintiff’s application in Northern Ireland seeking the annulment of the bankruptcy was finally determined. It would be at least a period of weeks and could be months.

The Adjournment
46. At the outset I wish to state that I am quite satisfied that no decision which I make on this application whether in favour of the plaintiff or the Official Receiver has or could have the effect of “seeking to cut across the jurisdiction of the High Court of Justice in a manner which is not permissible” (see Official Receivers solicitors letter of 18^th November, 2011). If I thought for a moment that any order that I might make could have such an effect, I would not make it. Comity of Courts requires that this Court respect the jurisdiction and entitlement of the courts of Northern Ireland to deal with all questions properly falling within their jurisdiction without any hint of interference by the courts of this State. I have no doubt but that a similar respect would be demonstrated by the Northern Irish courts to the courts of this State.

47. This application for summary judgment does not in the slightest way interfere with the Northern Irish court in adjudicating upon all matters pertaining to the defendant’s bankruptcy. If the bankruptcy is annulled that is an end of the matter as far as the courts in Northern Ireland are concerned. If on the other hand it stands, then the plaintiff will have to follow the prescribed procedures for proving its debt in accordance with the law and practice of Northern Ireland. That, I am told, will involve a proof of debt sitting and whatever standard of proof that has to be achieved in that regard is that prescribed by the law of Northern Ireland. The plaintiff accepts this to be the case.

48. I am thus satisfied that the contention made to the effect that any order which I might make in favour of the plaintiff would interfere in an impermissible way with the jurisdiction of the High Court of Justice in Northern Ireland is without substance.

49. I wish to afford to the Official Receiver, the courtesy which I referred to in granting the adjournment on 14^th November, 2011. I would, therefore, not wish to take any step which might be seen as taking him short or placing him in any position of embarrassment or disadvantage. It was for that reason that I adjourned the matter until Monday last. My approach in that regard continues.

50. Despite the efforts of the Official Receiver’s counsel, I am unable discern any disadvantage which might be suffered by him if I were to proceed to enter summary judgment against the defendant today.

51. On the other hand I do identify some disadvantage being suffered by the plaintiff should I refuse to do so. It is, of course, true that the plaintiff could not seek to execute against the assets of the defendant while his bankruptcy stands. His assets are not therefore in any way prejudiced.

52. There is, however, as I perceive it, an advantage to the plaintiff if judgment is entered today. Such a judgment may be of some assistance in any proof of debt sitting which may take place in Northern Ireland if the bankruptcy there stands. But much more to the point, if the bankruptcy is annulled then such a judgment can be utilised to execute against the assets of the defendant. It may also be utilised as a basis for a bankruptcy summons in this jurisdiction (although I accept that it is not an essential pre-requisite to such an application (see Harrahill v. Cuddy (Unreported, Supreme Court, 2009)).

53. I must furthermore bear in mind that insofar as a portion of the plaintiff’s claim is concerned in two of the actions, the defendant has admitted under oath in Northern Ireland that he has a liability in respect of them. It would require extraordinary circumstances before I could refuse a plaintiff judgment for a sum which is admitted to be due by a defendant. In the present case, it is accepted that the bankruptcy in Northern Ireland does not give rise to a stay of these proceedings. There is no stay application before the court despite the adjournment which I granted a week ago. The granting of judgment for that sum does not in any way interfere with or trespass upon the undoubted jurisdiction of the Northern Irish High Court to deal with all matters pertaining to the defendant’s bankruptcy.

54. Insofar as the balance of the respective claims is concerned, I am very inclined to enter judgment for the plaintiff in respect of those sums also. As I have already pointed out there is a powerful case made for summary judgment. Nothing has been suggested by way of defence. However, in keeping with the courtesy which I would wish to extend to the Official Receiver and in the absence of a clear admission of liability in respect of these sums, I propose to stand over the applications for summary judgment in respect of those balances until next Monday. This affords the Official Receiver another opportunity to consider whether he wishes to participate further in these actions or to apply for a stay of these proceedings insofar as those balances are concerned. Whilst I do not expect him to have such an application set down for hearing by Monday next, I will require firm information to be provided to the court as to his intentions in that regard. If it is his intention to apply for a stay, then there will have to be explained to me the basis for such an application and what he perceives to be the advantage to be gleaned by it. To date, I have not heard of any.

Disposal
55. I enter judgment in favour of the plaintiff on the first claim in the sum of US$219,901,910.64. I enter judgment in respect of the second claim for the sum of €253,951,810.67. I adjourn until next Monday the application for summary judgment in respect of the balance claimed in the first two cases and for the full amount in respect of the third case.