BACKGROUND:MR JUSTICE Peter Charlton said that details of yesterday's preliminary hearing between the Quinn family and the former Anglo Irish Bank were on the morning radio news bulletins before he knew he was hearing it.

He was responding to a query from counsel as to whether he had read up on the issues in advance.

The fact that the judge hadn’t fully briefed himself on the issues between the family of businessman Seán Quinn and the bank now known as Irish Bank Resolution Corporation made yesterday’s hearing a lot more colourful.

What could have been a technical hearing on the legality of Anglo’s €2.34 billion loans to cover Quinn’s losses on his investment in the bank turned into a lively narration about their mutually destructive relationship.

The story has been well told but it was the first time an Irish judge heard the blow-by-blow account of how Anglo tried to save Quinn and itself by lending him €2.34 billion.

At one point, the judge asked why the investors tapped to buy a 10 per cent stake behind Quinn’s contracts for difference (CFDs) were known as the “Maple 10”.

“I have always been bemused by that,” said Brian O’Moore SC, for Mr Quinn’s wife and five children.

The six Quinn family members are challenging IBRC’s claim that they owe the loans on the basis of personal guarantees they gave.

The family argue that the bank’s loans are illegal and are therefore unenforceable as their purpose was to prop up Anglo’s share price during the 2007 and 2008 financial crash, breaching company law and EU market abuse regulations.

“There would have been no loans without a desire to manipulate the market,” O’Moore said.

Quinn’s wife and adult children claim they knew nothing of the massive investment, which, O’Moore added, was “colossal” by the time it had reached 24 per cent of the bank’s share capital in September 2007.

That month, Quinn revealed his hand at a meeting in the Ardboyne Hotel in Navan, Co Meath, to Seán FitzPatrick and David Drumm.

Up to that point, Quinn had built up his stake with €750 million from “Quinn family resources”. An executive in Quinn Insurance, Mark McNamara, managed the CFD investments for Quinn, whose Anglo stake later hit 28.4 per cent.

Between the Ardboyne sit-down in September 2007 and late 2008, the bank provided debt of €2.34 billion to cover margin calls on the CFDs as the share price declined.

O’Moore said this was what Anglo applied “to the distortion of the market” and to set the price of its shares “at an artificial level”.

The loans were falsely stated by Anglo to be for Quinn property developments in Russia and India, and went to cover losses at Bazzely, the Madeira company used by Quinn to invest in CFDs in public companies on tax advice from PricewaterhouseCoopers.

As the Anglo share price fell and the global credit crunch turned into a full-blown banking crisis, Quinn came under pressure to maintain the cash margin on his CFDs.

If he defaulted on margin calls, O’Moore said, it could have been “catastrophic” for the bank as the shares on the CFDs could have been dumped in firesales.

Anglo successfully challenged the Quinns’ attempt to include an expert report from Hugo Watson Brown of London firm Navigant in support of their case on how Anglo could have been affected by this.

The court is hearing preliminary issues of law on whether the family can claim the loans were illegal to support their action so no evidence is being heard in court.

O’Moore spoke of a system created after September 2007 that allowed Quinn to request funds from Anglo to cover CFD losses.

In December 2007, Quinn and Drumm spoke by telephone. Quinn asked for €400 million that had been “sucked out” of Quinn Group companies to cover losses. Drumm agreed to advance €500 million to “tidy up” existing loans to Bazzely for earlier CFD losses.

Anglo advanced more than a third of a billion euros over four days following the St Patrick’s Day share massacre in March 2008.

The scale and purpose of the loans, the certainty they would be given and the knowledge in Anglo showed that this was an “egregious and, we would say, almost deliberate breach” of company law and market rules, said O’Moore.

He added that it was difficult to see how the bank could legally demand payment of illegal loans.

Anglo took control of Quinn’s businesses last year based on share pledges given by his children, the owners of the business, as security for the loans in 2008.

Outlining the seriousness of what is at issue, O’Moore said that breaches of market abuse rules carried fines of up to €10 million and 10 years’ imprisonment or both.

The preliminary hearing in this civil action is touching on areas at the centre of criminal investigations into the bank’s collapse.

The legality of Anglo’s lending to the Maple 10 in July 2008 continues to be investigated by the Garda and the Director of Corporate Enforcement.