Bank's liquidation raises a raft of legal issues

ANALYSIS:The impact of the liquidation of the Irish Bank Resolution Corporation on its remaining customers, and those who were involved in legal proceedings with it up to last week, remains unclear.

Nevertheless, following yesterday’s brief discussion of the Quinn case before Mr Justice Peter Kelly in the Commercial Court, a number of broad brushstroke issues appear clearer.

From the comments made by Paul Gallagher SC, for the former State-owned bank, it appears the special liquidators are of a mind to continue the case (the conspiracy case)against the Quinn family, alleging that some of its members conspired to put assets over which the bank claims security, beyond the bank’s reach.

This will have been noted by others who were being pursued by IBRC and who may now conclude that the special liquidators will continue to brief legal teams.

In time some or many of these cases may become the property of the National Asset Management Agency. Everything we know about its chairman, former Revenue Commissioner Frank Daly, would indicate his instinct to doggedly pursue any cases that involve a potential return to the State.

Likewise any purchasers of debts and associated rights from the liquidators will undoubtedly seek to maximise their returns. This could be of special concern to those who have given personal guarantees.

From what happened before Mr Justice Kelly yesterday, it would also seem to be the case that the Quinn family will be allowed make their plea to the court that justice cannot allow their case against the bank (the main case) to be shut out by the legislation passed in such a hurry by the Oireachtas last week.

Because the family’s defence to the conspiracy allegation includes its claim that loans issued by Anglo Irish Bank were illegal, and that, therefore, the associated security is also illegal, it appears the case the Quinns want to air against Anglo, the Financial Regulator, and the Department of Finance, may yet get its day in court.

On the other hand, once the family’s loans transfer to Nama, the legislation appears to dictate that any case the family might have concerning the legality of the security being claimed, would be declared invalid. This would seem to raise issues of constitutionality.

The family had hopes of winning very substantial damages from the bank, if it won its main case. As the bank is now liquidated, it is very questionable if there is any mark to target any more.

All the talk in the Law Library, according to sources with knowledge of such matters, was about who drafted the legislation that put IBRC into liquidation. The provision that, on the face of it, appears to prevent the court from having any role in whether a stay, imposed by the legislation, on cases being taken by the bank, can be lifted is attracting particular interest – not least whether it would stand up to an argument that it is unconstitutional.

They point to the fact that the new law seems prepared to allow new cases be taken against the bank, despite the apparent permanent stay on cases already in existence.

Those who have to refinance their loans or risk losing control over them, or having them passed to Nama, are no doubt busy consulting their financial and legal advisers, while trying to assess the import of last week’s dramatic developments. Time will tell.