Security arrangements enforceable despite underlying lending transactions being illegal under MAR and section 60.

THE SUPREME COURT

[Appeal No: 150/2012]

Denham C.J.

Hardiman J.

O'Donnell J.

Clarke J.

Laffoy J.

Between/

Ciara Quinn, Colette Quinn, Brenda Quinn, Aoife Quinn, Seán Quinn Junior and Patricia Quinn

Plaintiffs/Respondents

and

Irish Bank Resolution Corporation Limited (In Special Liquidation) and Kieran Wallace

Defendants/Appellants

and

Seán Quinn, Dara O'Reilly and Liam McCaffrey

Third Parties

Judgment of Mr. Justice Clarke delivered the 27th March, 2015.

1. Introduction

1.1 While the issues which arise on this appeal are of very considerable importance, both to the parties and in respect of the law

generally, the question which this Court now has to answer is a relatively net one. In these proceedings, the plaintiffs/respondents

("the Quinns") make a number of accusations against the first named defendant/appellant (which is, of course, a successor to Anglo

Irish Bank plc and which I will refer to as "Anglo" because most of the events relevant to these proceedings occurred when that party

bore the Anglo Irish name). In addition, certain claims are made which affect the interests of the second named defendant/appellant

("the Receiver") in his capacity as Receiver over certain assets of the Quinns resulting from loans and securities put in place involving

the Quinns and Anglo.

1.2 While a range of issues are advanced by the Quinns in these proceedings generally, one specific question was directed to be tried

as a preliminary issue.

1.3 It will be necessary to set out some uncontroversial background facts in greater detail in due course. However, it is a matter of

wide public knowledge that Seán Quinn senior (the first named third party in these proceedings, and the father or husband of each of

the Quinns ("Seán Quinn")) was involved in the acquisition of a very substantial indirect interest in Anglo by means of contracts for

difference ("CFDs"). Such contracts, in simple terms, involve an agreement to exchange the difference between the current and

future price of financial instruments such as shares. They, thus, entitle a party to benefit in the event that the share price of a

relevant company goes up but equally require that the relevant person pays money in the event that the share price goes down.

Such contracts can amount to a form of surrogate ownership of shares in the relevant company as the contracting party will be able

to acquire shares at their current price by "topping up" the original price with the proceeds of a CFD. As the Anglo share price

declined, Seán Quinn was required to make very substantial payments arising out of those CFDs. In that context, money was

borrowed from Anglo. In addition, an arrangement was put in place that Seán Quinn's indirect interest in Anglo, held through his CFDs,

would be "taken out" by the purchase of shares in Anglo by a group of ten very wealthy investors who became known as the "Maple

Ten" together with the Quinns.

1.4 One of the allegations made in these proceedings is that a series of lending transactions entered into in connection with Seán

Quinn's payment obligations under CFDs, together with the purchase of shares in Anglo designed to unwind Seán Quinn's interest in

the bank, amount to illegal contracts as being in breach of the Market Abuse (Directive 2003/6/EC) Regulations 2005 S.I. No. 342 of

2005 ("MAR") and/or section 60 of the Companies Act, 1963 ("section 60").

1.5 A preliminary issue was directed to be tried as to whether the Quinns had an "entitlement to rely" on any such alleged breaches in

aid of the claims made concerning the invalidity of guarantees given by the Quinns, and security put in place by them, by which

guarantees and security were said to have been given or put in place in connection with those transactions.

1.6 It is clear that, as with all cases where a preliminary issue is directed to be tried concerning a legal question, the Court is obliged

to accept, for the purposes of argument, that the factual allegations made will be established at trial. That position is, obviously,

without prejudice to the entitlement of the relevant defendant (Anglo in this case) to deny the facts and to reserve its position to

fully contest those facts at trial. However, the underlying contention of Anglo, which led to the decision of the High Court to direct

the trial of a preliminary issue, was to the effect that, even if the factual contentions put forward in their claim by the Quinns

concerning breaches of either or both the MAR and section 60 were to be sustained, then the Quinns still could not succeed. That

contention was based on a legal argument which, in substance, comes down to a contention that the application of relevant legal

principles does not render lending transactions, guarantees or security void or unenforceable even if the relevant transactions are in

breach of the MAR, or are in contravention of section 60, or are connected with transactions which breach those provisions. That net

question is the issue which arose on the preliminary issue.

1.7 The High Court (Charleton J.) ruled in favour of the Quinns in terms which it will be necessary to address in due course (Quinn &

ors v. Irish Bank Resolution Corporation & ors [2012] IEHC 36). Anglo and the Receiver have appealed to this Court against that

finding. In order to more fully understand the precise issues which arise, it is necessary to refer both to some uncontroversial

background facts and to the factual allegations which the Quinns make in these proceedings insofar as they are relevant to the

question which the Court now has to decide.

2. The Factual Background

2.1 Seán Quinn was, of course, the founder and principal of what eventually became a complex set of companies which I will refer to

as the Quinn Group. From September 2005, Seán Quinn began to indirectly purchase an interest in Anglo by means of the purchase of

CFDs. A foreign corporate entity called Bazzely V Consultadoria Economica E Participacoes Sociedade Unipessoal LDA (“Bazzely”),

which was registered in Madeira, was used to facilitate the purchase of the CFDs (it would appear that there were perceived tax

advantages in the investment being made in that way). Funds were transferred to that company from other companies within the

Quinn group in order to facilitate the purchase of the relevant CFDs. Bazzely was, it would appear, owned jointly by the first to fifth

named plaintiffs/respondents ("the Quinn children") although it is not clear that the Quinn children knew of their ownership for some

time.

2.2 Seán Quinn originally, through Bazzely, invested in CFDs in Anglo but also in other companies so that, at that point, the risk was

spread by positions being taken in a number of companies. By the end of 2005, Bazzely held CFDs in respect of six million shares in

Anglo, which amounted to a relatively small percentage of the issued share capital of the bank. Seán Quinn continued to acquire CFDs

in Anglo in 2006 and 2007. Any profits were used to increase existing CFD positions and to fund new CFD positions.

2.3 Bazzely began to dispose of those of its CFD positions which were not linked to Anglo in late 2006. At this time, Bazzely used any

funds realised from the disposal of non-Anglo CFDs to fund Anglo CFDs. The funding for the purchase of the CFD positions during the

period of October 2005 until September 2007 was provided by way of loans from companies within the Quinn Group. The CFDs were

entered into between CFD service providers and Bazzely. However, as Bazzely did not have a bank account, the funds were

transferred to the service providers by Quinn Group Family Properties Limited.

2.4 While the investments in CFDs in Anglo were initially profitable, from June 2007 the share price in Anglo began to fall. As the share

price of Anglo declined, Bazzely was the subject of frequent calls to fund the margin on its CFD positions. On the 11th September,

2007, Seán Quinn and Liam McCafferty of the Quinn Group met with David Drumm and Seán Fitzpatrick, who were the chief executive

and chairman of Anglo at the time. It would appear that Seán Quinn by that stage had arranged for the purchase of CFDs in Anglo

shares which would amount to the equivalent of approximately 24% of the bank’s total issued share capital. Anglo appears to have

been concerned by the scale of the Quinn interest at this stage. The Quinns contend that Dara O’Reilly, who was finance director of

the Quinn Group, maintained regular contract with Elma Kilrane, a representative of Anglo, in the weeks following the 11th September

meeting. According to the Quinns, during such contacts, Mr. O'Reilly and Ms. Kilrane discussed the margin calls for each day, the

number of CFDs held, and the calls that had to be met.

2.5 Over the following months, funds were advanced by Anglo to companies within the Quinn Group to meet the negative margin calls.

The documentation relating to these loans refer, inaccurately it would appear, to “property acquisitions”. Between 20th and 30th

September, 2007, the Quinn group received loans of €100 million from Anglo. In December, 2007, €500 million was advanced by Anglo

to Quinn Finance, a company within the Quinn Group, in order to discharge loans advanced by Quinn Group companies to meet such

margin calls.

2.6 Around this time (it is alleged that this may have been December 17th, 2007), the Quinn children signed many security documents

in favour of Anglo in respect of that €500 million loan. It is said that no legal or financial advice was offered by Anglo, or sought by

the Quinn children, in advance of signing the relevant security documentation.

2.7 It should also be noted that at about the same time, Barlo Financial Services Limited, another Quinn Group company, replaced

Quinn Group Family Properties Limited as the company which transferred the relevant funds to the CFD providers. The substantive

CFD transactions, however, remained between the CFD providers and Bazzely, although the funds were transferred from Barlo

Financial Services.

2.8 Seán Quinn continued to indirectly add to his portfolio of CFDs in Anglo into 2008. Further negative margin calls were made as the

share price continued to decline. A number of new facility letters were sent to Dara O’Reilly during this period and were signed by the

Quinn children. In March 2008, a significant drop in the share prices of Anglo saw Quinn Finance receiving separate loans of €50

million, €20 million, €220 million and €60 million from Anglo. These loans were apparently described by the bank as funding development

projects in Russia and India. The loan funds were transferred to Barlo Financial Services, with the monies then being transferred to

the CFD providers.

2.9 From March or April 2008, it is said that Anglo put pressure on Bazzely to reduce its CFD exposure in Anglo. Margin calls continued

to be made and the closing price of Anglo shares continued to fall.

2.10 In June 2008, it is said that the Quinn Group came under pressure both from banks and from bondholders who had loaned to the

Quinn Group, in the absence of additional funding, to make detailed disclosure of the investment holdings of the Quinn family, including

the CFD positions in Anglo shares. Anglo advanced €200 million to Quinn Finance in order to facilitate the repayment of funds to the

Quinn Group, it is said, in order to prevent negative publicity which might have had a serious effect on the Anglo share price. In a

facility letter of 28th June, 2008, Anglo imposed a pre-condition on the advance of the relevant funds, being that share pledges would

have to be provided by the Quinn children in respect of their shareholding in Quinn Group (ROI) Limited. The details of those share

pledges (in respect of which the Receiver was later appointed) are as follows:-

• a share pledge of the 10th March, 2009 between the third named plaintiff/respondent ("Brenda Quinn") and Anglo in respect of her

shares in Slieve Russell Hotel Ltd.,

• a share pledge dated the 19th December, 2008, between the fifth named plaintiff/respondent ("Seán Quinn Jnr.") and Anglo of his

shares in Quinn Quarries Ltd.,

• a share pledge dated the 19th December, 2008, between the second named plaintiff/respondent ("Colette Quinn"), Seán Quinn Jnr.,

the first named plaintiff/respondent ("Ciara Quinn"), the fourth named plaintiff/respondent ("Aoife Quinn") and the third named

plaintiff/respondent ("Brenda Quinn") and Anglo of their shares in Quinn Group (RoI) Ltd.,

• a share pledge dated the 19th December, 2008, between the same parties of shares in Quinn Finance Holding,

• a share pledge dated 14 January 2003 between the fourth named plaintiff/respondent ("Aoife Quinn") and Anglo in respect of her

shareholding in Quinn Group Properties Limited (the “2003 Pledge”).

2.11 Earlier share pledges, being a share pledge of the 14th January, 2003, between Aoife Quinn and Anglo in respect of shares in

Quinn Group Properties Ltd. and a share pledge dated 6th January, 2005, between Colette Quinn and Anglo of her shares in Quinn

Group Hotels Ltd., are also impugned in these proceedings. While the share pledge dated 14th January, 2003, and the share pledge

dated 6th January, 2005, were in place to support borrowings not associated with meeting margin calls on Bazzely’s CFD positions in

Anglo, both those share pledges are alleged to have remained in place to secure borrowings advanced for Bazzely’s CFD positions.

2.12 In July 2008, it is said that David Drumm of Anglo demanded that the exposure of Seán Quinn connected entities to Anglo be

reduced. Anglo arranged a placing of 10% of Bazzely’s CFD position on the international market through Morgan Stanley, but this was

not taken up by investors. At this time, the total number of Anglo shares represented by CFDs acquired and held by Bazzely is said to

have been 215,619,414 which, it appears, represented approximately 28% of the entire shareholding in Anglo. The Bazzely position in

CFDs in Anglo was mostly unwound into actual shares. A portion of those shares (102,000,000) was purchased by a syndicate of

investors, known as the Maple Ten, who were put together by Anglo. From 14th July to 21st July, 2008, another portion

(108,625,000) of the remaining shares was purchased for the Quinns. The balance of the position was retained as a CFD position until

Anglo was nationalised in January, 2009. The funding for these transactions was met by refunds of €302,748,991 from CFD providers

and additional loans from Anglo of €175,700,517.

2.13 A refinancing occurred in October 2008. It is said that for tax reasons, the Quinns’ shareholding in Anglo was transferred to six

Cypriot companies. Each of these companies was wholly owned by an individual member of the Quinns, although the Quinns claim to

have had no knowledge of their ownership of these companies until September 2010. A total of approximately €498 million was

advanced to the Cypriot companies by Anglo, €175 million of which had previously been advanced by Anglo, with the reminder coming

from a refinancing of a facility to Quinn Finance.

2.14 In October 2008, as part of the arrangement included in unwinding the relevant CFD positions, the Quinns entered into personal

guarantees in order to support the borrowing by the Cypriot companies from Anglo. The personal guarantees executed by the Quinns

in relation to the Cypriot companies are as follows:-

• Ciara Quinn guaranteed the liabilities of Lud Investments Ltd., a company incorporated under the laws of Cyprus to Anglo.

• Colette Quinn guaranteed the liabilities of Moshaid Investments Ltd., a company incorporated under the laws of Cyprus, to Anglo.

• Brenda Quinn guaranteed the liabilities of Opawa Investments Ltd., a company incorporated under the laws of Cyprus, to Anglo.

• Aoife Quinn guaranteed the liabilities of Pahu Ltd., a company incorporated under the laws of Cyprus, to Anglo.

• Seán Quinn Jnr. guaranteed the liabilities of Tarata Enterprises Ltd., a company incorporated under the laws of Cyprus, to Anglo.

• The sixth named plaintiff/respondent ("Patricia Quinn") guaranteed the liabilities of Morboneto Holdings Ltd., a company incorporated

under the laws of Cyprus, to Anglo.

2.15 These guarantees were expressed to be designed to cover the repayment of loan facilities to Anglo and to enable the respective

borrowers to part fund interest on the relevant facility:-

• In relation to Lud Investments Ltd., the amount of the facility was in two parts: the first part was in the amount of €76,040,000

and the purpose of it was said to be to “enable the borrower to repay facilities with the Bank in the name of Ciara Quinn and Quinn

Finance”, and the second part was for €1,303,000, the purpose of which was cited as “to enable the Borrower to part fund interest

on the facility”.

• In relation to Moshaid Investments Ltd. the amount of the facility was in two parts: the first part was in the amount of €76,040,000

and the purpose of it was said to be to “enable the borrower to repay facilities with the Bank in the name of Colette Quinn and Quinn

Finance”, and the second part was for €1,303,000, the purpose of which was cited as “to enable the Borrower to part fund interest

on the facility”.

• In relation to Opawa Investments Ltd., the amount of the facility was in two parts: the first part was in the amount of €76,040,000

and the purpose of it was said to be to “enable the borrower to repay facilities with the Bank in the name of Brenda Quinn and Quinn

Finance”, and the second part was for €1,303,000, the purpose of which was cited as “to enable the Borrower to part fund interest

on the facility”.

• In relation to Pahu Investments Ltd., the amount of the facility was in two parts: the first part was in the amount of €76,040,000

and the purpose of it was said to be to “enable the borrower to repay facilities with the Bank in the name of Aoife Quinn and Quinn

Finance”, and the second part was for €1,303,000, the purpose of which was cited as “to enable the Borrower to part fund interest

on the facility”.

• In relation to Tarata Investments Ltd., the amount of the facility was in two parts: the first part was in the amount of €76,040,000

and the purpose of it was said to be to “enable the borrower to repay facilities with the Bank in the name of Seán Quinn Jnr, Patricia

Quinn and Quinn Finance”, and the second part was for €1,303,000, the purpose of which was cited as “to enable the Borrower to

part fund interest on the facility”.

• In relation to Morboneto Holdings Ltd., the amount of the facility was in two parts: the first part was in the amount of €100,461,000

and the purpose of it was said to be to “enable the borrower to repay facilities with the Bank in the name of Patricia Quinn”, and the

second part was for €1,721,000 the purpose of which was cited as “to enable the Borrower to part fund interest on the facility”.

2.16 In respect of the five of the Cypriot companies whose liabilities were guaranteed by the Quinn children, the amount borrowed

was €77,343,000 in each case. The amount borrowed in respect of Morboneto Holdings Ltd., which was guaranteed by Patricia Quinn,

Seán Quinn's wife and the mother of the Quinn children, was €102,275,357. Aside from those personal guarantees, share mortgages

were also put in place in favour of Anglo from each of the Cypriot companies in respect of Anglo shares owned by the respective

Cypriot companies.

2.17 On April 14th, 2011, Anglo appointed the Receiver as Share Receiver in respect of the share pledges. The details of the share

pledges, in respect of which the Share Receiver was appointed, are outlined above. On his appointment, the Receiver exercised his

apparent right to remove various directors of a number of companies within the Quinn group, specifically those of Slieve Russell Hotel

Ltd., Quinn Group (ROI) Ltd., Quinn Finance Holding, Quinn Group Hotels Ltd., Quinn Group Properties Ltd. and Quinn Quarries Ltd. The

Receiver likewise appointed new directors in their place.

2.18 The principal claim made by the Quinns in these proceedings, for the purposes of the present issue, is an allegation that the

“sole or dominant motivation of Anglo in making these advances [in connection to the CFD transactions] was to support and

maintain its share price”. Further, the Quinns claim that the funds advanced to the Cypriot companies by Anglo in October, 2008,

were for the purpose of the purchase of shares in Anglo. For these reasons, the Quinns allege that the personal guarantees and the

share pledges are unenforceable and are of no legal effect.

2.19 The basis of that contention is the allegation that the loan transactions engaged in by Anglo in relation to the positions

maintained by Bazzely and/or the Cypriot companies, “were tainted by illegality” and/or were “for an illegal purpose”, of which Anglo

was aware.

2.20 Having regard to these factors, the Quinns allege that the shares charges should be declared invalid, unenforceable and of no

legal effect, and seek an order for rescission if necessary. The Quinns also seek declarations that the appointment of the Receiver as

Share Receiver in respect of the relevant shares is invalid, unenforceable and of no legal effect. Further, the Quinns seek an order

setting aside and declaring the appointment of the Receiver as null and void in respect of the shares specified above and restraining

him from acting any further in this capacity.

2.21 Finally, the Quinns seek a declaration that the guarantees entered into by each of them in relation to the Cypriot companies are

invalid, unenforceable and of no legal effect, and, if necessary, they seek an order for rescission of same.

2.22 It is also necessary to say something briefly about aspects of the procedural history which are relevant to understanding how

this issue comes to be before the Court.

3 Relevant Procedural History

3.1 Anglo brought an application before the High Court, in which it was sought that a number of preliminary issues be directed to be

tried. The first issue raised concerned the Quinns' standing or entitlement to rely on the alleged breach of the MAR and/or section 60.

It was that aspect of the application which succeeded. However, it should be noted that, at the same time, Anglo sought but failed

to have a number of further issues tried as preliminary issues. These concerned the legality of the loans to Quinn companies in

dispute, the recoverability, in whole or in part, of such loans, the effect on share charges if the loan is, as a matter of law,

irrecoverable in whole or in part, whether the October 2008 refinancing of the July 2008 facilities or the loans to the Cypriot

companies constituted a breach of the MAR or section 60, whether, if any of the loans or part of the loans advanced pursuant to the

refinancing of October 2008 constituted a breach of the MAR or section 60, same meant that the loan or part of the loan is

irrecoverable by Anglo, and the effect of personal guarantees where such a loan is deemed to be irrevocable in whole or in part.

3.2 As noted, Kelly J., on the 16th of December, 2011, refused to direct the trial of the majority of these preliminary issues. Kelly J.

did, however, direct the trial of the first preliminary issue raised, which concerned the Quinns standing or entitlement to rely upon the

alleged breach of the MAR or section 60. This issue was set out in the following terms in the order of Kelly J. of that date:-

“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?”

3.3 It was this issue with which Charleton J. was solely concerned at the substantive hearing. It was, of course, an issue which Anglo

had requested be tried on a preliminary basis. It follows that, for the purposes of deciding that issue, it was and remains necessary to

assume that Anglo was guilty of the illegality alleged. Anglo denies any illegality but the whole point of the preliminary issue is that

Anglo also argues that the Quinns cannot escape liability on foot of the relevant loans, guarantees and security even if illegality is

proven. In addressing this preliminary issue, Charleton J. was satisfied that “[i]t would be contrary to public policy were the Quinns …

to be shut out from responding to the flagrant illegality which they allege against Anglo and Seán Quinn”. The order of 21st March,

2012 (made at the conclusion of the hearing of the preliminary issue) states:-

“And the Court being satisfied that it would be contrary to public policy were the Plaintiffs in the within proceedings to be

shut out from responding to the flagrant illegality which the Plaintiffs allege against the first named Defendant and the

first named Third Party

And the matter coming before the Court on this day in respect of costs

IT IS ORDERED that the first named Defendant do pay the Plaintiff’s costs of this hearing and the said Order as to costs

be stayed pending the final determination of the within proceedings.”

3.4 The reasons which led Charleton J. to make that order are to be found in his judgment delivered on 23rd February, 2012. I,

therefore, turn to that judgment.

4 The High Court Judgment

4.1 Charleton J., in addressing that preliminary issue, was, of course, concerned with the circumstances in which, as a matter of law,

illegal contracts can be deemed unenforceable. Having examined the relevant jurisprudence, Charleton J. noted the comments of Lord

Mansfield C.J. in Holman v. Johnson (1775) 1 Cowp. 341 at p. 343, in which it was held that an objection that a contract is illegal or

immoral is not sustained for the benefit of the defendant, but rather is founded in the principles of policy (“ex dolo malo non oritur

actio”). In that judgment, Lord Mansfield C.J. further stated that “[n]o court will lend its aid to a man who founds his cause of action

upon an immoral or an illegal act”.

4.2 However, turning to the general principles of illegality and the principles of statutory construction, Charleton J. came to the view

that the rules on the unenforceability of illegal contracts are not simple, and their applicability is not predictable. In some

circumstances, he considered, the legislature makes it clear that the enforcement of a contract which breaches a certain provision of

law is not permitted. Having regard to this fact, Charleton J. stated that the task of the Court was to “ascertain the intention of the

legislature as derived from disparate statutory terms”.

4.3 Charleton J. had regard to the comments of Mason J. (in the High Court of Australia) in Yango Pastoral Co. Pty. Ltd. v. First

Chicago Australia Ltd. (1978) 139 C.L.R. 410 (at p. 429), in which Mason J. commented that there may be cases in which the

“plaintiff stands to gain by [the] enforcement of rights gained through an illegal activity far more than the prescribed penalty” for

committing the illegal act. In that case, Mason J. suggested that the true basis of the principle may be that a court will refuse to

enforce a transaction that has a fraudulent or immoral purpose. In this regard Mason J. was of the view that “the common law

principle of ex turpi causa can be given an operation consistent with, though subordinate to, the statutory intention, denying relief in

those cases where a plaintiff may otherwise evade the real consequences of a breach of a statutory prohibition”. Charleton J. found

that this statement echoes the contrast between the alleged actions of Anglo and Seán Quinn, which involved hundreds of millions of

euro, on the one hand, and the administrative and monetary penalties which would apply for the breach of the law, on the other.

4.4 Having adopted the principles espoused by Kirby J. (again in the High Court of Australia) in Fitzgerald v. Leonhardt (1997) 189

C.L.R. 215 on the proper approach to statutory construction, Charleton J., at para. F5 of his judgment, was of the view that the

question he was required to consider was:-

“whether the legislature in setting up a series of norms in relation to market abuse and financing of the purchase of a

company of its own shares intended to create a self-controlled island of regulation or, instead, wished to influence the

general matrix of litigation through recasting public policy”.

4.5 Charleton J. then considered the application of that general approach to the MAR. The MAR were adopted for the purpose of

giving effect to Council Directive 2003/6/ EC of the 28th January 2003 on insider dealing and market manipulation (market abuse)

(“the Directive”). The MAR were brought into force under s. 30 of the Investment Funds, Companies and Miscellaneous Provisions Act

2005 (“the 2005 Act”). Having reviewed the directive, the MAR and the 2005 Act, Charleton J., at para. G11, was of the view that

the 2005 Act was a directive to the courts to “respond under the illegality principle to contracts which flagrantly breach its

provisions”.

4.6 Charleton J. did not accept the argument put forward by Anglo that the introduction of unenforceability would introduce chaos

into the marketplace or disturb the scheme of regulation which was founded on the legislation. Charleton J. found that “weighing

heavily on the balance” against the success of Anglo’s argument was the removal of a proportionate remedy against Seán Quinn and

Anglo, and additionally, the prevention of unjust enrichment through market manipulation.

4.7 Turning to section 60, Charleton J. found that this section embodies “a fundamental rule of company law” that a company should

not buy its own shares. Section 60(15) provides the penalties for breaches of the rule, but Charleton J. found that these penalties

“are hardly sufficient responses to the situation alleged in this case”. Subsection 14 provides that a transaction in breach of section

60 is voidable at the instance of the company against any person who had notice of the facts which constitute the relevant breach.

On that basis, Anglo argued that the relevant transaction is valid unless the company in question treats it as void. It follows, it was

said, that the illegality rule was deliberately excluded by the legislature. On that question, and having analysed subsections (1) and

(14) of section 60 and the arguments of Anglo, Charleton J. concluded, at para. H6:-

“I am not persuaded that s. 60 of the Companies Act 1963, which forbids a company from purchasing its own shares, or

from offering financial assistance in that regard, is self-contained in its remedies and cannot impact on public policy. In a

case such as that pleaded herein, the general law of illegality of contracts is entitled to respond in an appropriate and

proportionate way so that loss caused through the manipulation of the share price of Anglo to those directly at the

receiving end of that conduct, namely the Quinns, can be appropriately responded to.”

4.8 Finally, Charleton J. held that the Quinns, as plaintiffs, bear the burden of proving the illegality which they allege, its effect on the

share price, and their lack of involvement in the acts alleged.

4.9 Having regard to these factors, Charleton J. concluded, at para. L1, that, on his assessment of the legislation, the situation which

arises in the present case was not one where “a declaration of illegality by statute is to be confined to the remedies which the

legislation promulgating it provides”.

4.10 Against that background, Anglo and the Receiver appealed to this Court. While the Receiver filed written submissions, counsel on

his behalf confined himself to addressing one narrow issue at the hearing of the appeal. That issue was concerned with the question

of whether, even if the Quinns' contention of unenforceability or voidness due to illegality were to be made out, there could be any

unwinding of actions already taken by the Receiver on foot of what was said to be an apparently valid appointment. That issue clearly

only arises in the event that the underlying contention of the Quinns is sustained. Therefore, the principal, and first issue which the

Court was required to address was the competing positions of the parties on the primary question of whether the Quinns are entitled

to rely on the alleged breaches of the MAR and section 60. In that context, I turn to the position adopted by the Quinns and Anglo on

that issue.

5 The Position of the Parties

5.1 Anglo contended that the Quinns do not have standing or are not entitled to rely on the alleged breaches of the MAR or on the

alleged breach of section 60 in their claims for declarations in respect of the share charges and guarantees. Anglo put forward this

contention on a number of bases.

5.2 First, Anglo contended that the statutory frameworks in relation to the MAR and section 60 do not, in contrast to other statutory

codes, expressly provide that transactions in breach of their terms are illegal, invalid or void. Anglo argued that the question to be

determined is as to whether these regimes incorporate “implied remedies” of the kind sought to be invoked by the Quinns.

5.3 In this regard, Anglo contended that it was for the Court to determine whether the MAR and section 60 provide a complete code

by which infringements are to be addressed or whether it has been left open to the courts to impose other sanctions. Anglo

contended that there is no express provision in the MAR or section 60 or any other basis from which it can be implied that there

should be a remedy in the form of a declaration of unenforceability or no legal effect. Indeed, Anglo submitted that such remedy

would be inconsistent with the relevant legislative provisions.

5.4 Second, Anglo argued that the share charges and guarantees on which the Quinns rely are not in themselves unlawful, and

extend to the borrowings of all the companies concerned, not just the borrowings which relate to the allegations of share

manipulation. Anglo submitted that the MAR do not provide that any particular type of transaction is prohibited. Rather, it was said

that the MAR provide that a person “shall not engage in market manipulation” or use inside information and it follows, it was argued,

that while those acts are prohibited, the contracts or transactions themselves are not prohibited.

5.5 Third, Anglo claimed that the share charges, which are the subject of the proceedings, are fully executed and that title has

passed. In those circumstances it was contended that the Quinns now seek to rely on a prohibition against these transactions as a

basis for seeking positive declaratory relief, rather than for the purpose of seeking to resist enforcement of a transaction. Such

positive reliance is said to be impermissible on the basis that illegality is argued to be solely a matter of defence. Anglo argued that

the facts of the present case can, in that context, be distinguished from those which were the subject of the judgment of Knox J. in

Chase Manhattan Equities Limited v. Goodman [1991] B.C.L.C. 897 in this regard.

5.6 Because the share charges have been executed and the Quinns have performed their obligations thereunder, Anglo can, it is said,

exercise its rights pursuant to those share charges without recourse to the courts. In doing so, Anglo relied on the judgment of the

House of Lords Tinsley v. Milligan [1994] 1 A.C. 340 and the judgment of Lord Denning in Singh v. Ali [1960] A.C. 167 which are said

by Anglo to confirm the common law principle that illegality does not prevent the passing of title.

5.7 Fourth, Anglo argued that the contention that the share charges and the guarantees are invalid is inconsistent with the regime of

EU law which underlies the MAR and with relevant general principles of EU Law. The EU regime is contained in the Directive, which

sets out framework principles and relevant implementing measures. Anglo contended that nowhere in the provisions of the Directive is

there a suggestion that private civil law actions are “necessary or desirable”. On the contrary, Anglo argued, the emphasis is on

administrative and public law provisions in order to promote a consistent framework of enforcement and cooperation. This is, in Anglo’s

submission, a feature of the continued centralisation and harmonization of European Financial Services law.

5.8 While Anglo acknowledged that the Directive permits civil sanctions, it is said to be a fundamental principle of European law that a

Member State is not permitted to undermine the provisions or the object and purpose of a directive. Anglo submitted that a civil

remedy which renders transactions pertaining to the purchase or sale of financial instruments invalid, illegal, or unenforceable would

be tantamount to undermining the Directive. Additionally, Anglo claimed that such a remedy would be inconsistent with the principles

of legal certainty and proportionality.

5.9 On these points, Anglo submitted that the trial judge incorrectly suggested that the Court had to determine whether the

legislature wished to influence litigation “through recasting public policy”. Anglo contended that it is the legislation which gives

expression to public policy and, where a comprehensive system of sanctions is provided, there is, Anglo suggested, no room for a

“judicial recasting of public policy” to apply additional sanctions.

5.10 Additionally, Anglo submitted that the trial judge failed to apply one of the principles identified by Kirby J., in the High Court of

Australia in Fitzgerald v. Leonhardt, which states that, in circumstances where legislation provides for detailed sanctions and

remedies for breach of its terms, courts will require good reason to add additional civil penalties not specified in the legislation itself.

Anglo argued that the Court’s view on the inadequacy of sanctions in a particular case cannot answer the question of whether there

is a self-contained statutory framework. Anglo submitted that Charleton J. failed to address the legal consequences arising from the

fact that the security transactions were not of themselves unlawful and that legal title had, therefore, passed to Anglo, meaning

that, it was argued, Anglo is entitled to exercise all rights conferred by the security. Additionally, Anglo submitted that while

Charleton J. acknowledged the general principle that illegality should continue to be used only as a defence, he incorrectly, in the

submission of Anglo, concluded that this principle is not universally applied.

5.11 The Receiver submitted that his appointment and the steps taken by him cannot be affected by an illegality, such as that

alleged by the Quinns, that is, "one asserted positively in respect of the executed transactions.” The Receiver argued that if that is a

question of standing, then the Court should resolve it in favour of Anglo and against the Quinns. The Receiver principally suggested

that even if the arrangements between Anglo and the Quinns were tainted by illegality to the point of rendering the various securities

unenforceable, same could not retrospectively affect the validity of the Receiver's appointment or acts, otherwise valid, carried out

by him as receiver to date.

5.12 In relation to the first argument made by Anglo, the Quinns argued that Anglo committed illegal acts prohibited by section 60 and

the MAR, and that at common law, a contract entered into for an unlawful or illegal purpose is unenforceable. In the present case, it

is argued, the contracts at issue are the loan transactions comprising of facility letters and security for those loans which were

alleged to be for the express and intended purpose of funding margin calls on CFD positions in Anglo shares, in order to allegedly

support Anglo’s share price, and to purchase Anglo shares. These transactions, in the submission of the Quinns, fall within section 60

and the MAR. The Quinns submitted that Anglo is not entitled to benefit from these transactions by taking control of the Quinn Group

and its assets through share charges, as this entitlement is allegedly based on an illegal and unenforceable contract.

5.13 On the basis of the case law, the Quinns argue that there are two separate means by which agreements may be found to be

illegal. First, the Quinns submitted that the share charges and guarantees are tainted with illegality as they are closely connected

with the alleged unlawful loan transactions which had the purpose and effect of maintaining the share price of Anglo, in breach of

section 60 and the MAR. Second, the Quinns contended that, as the share charges and guarantees were entered into for an illegal

purpose and so are unlawful and unenforceable, they offend the common law rules on illegality. The Quinns argued that the

application of this common law principle can be seen in Chase Manhattan Equities Ltd. v. Goodman [1991] B.C.L.C. 897. Additionally,

the Quinns argued that the maxim ex turpi causa non oritur actio prevents Anglo from relying on the share charges in defence of the

Quinns’ claims for declaratory relief.

5.14 Having regard to the contention of Anglo that the MAR constitute a self-contained administrative enforcement regime, the

Quinns argued that the transposition of the Directive must be considered against the 2005 Act. The Quinns submitted that the fact

that the Oireachtas enacted legislation separate to the MAR, which refers to and gives effect to certain aspects of the MAR,

demonstrates that the MAR are not a self-contained administrative enforcement regime.

5.15 The Quinns agued that section 33(3) of the 2005 Act, which states that subsections (1) and (2) of that section “are without

prejudice to any other cause of action which may lie against the person for contravening a provision concerned” signifies a clear

intention to afford remedies to individuals affected by market abuse beyond the confines of the MAR.

5.16 In addition, the Quinns submitted that, contrary to the submissions made by Anglo, the term “cause of action” in section 33(3)

of the 2005 Act does not preclude the conclusion that the transaction is invalid or void. It is said that to seek to set aside

transactions on the basis of illegality is a “cause of action” within the meaning of that subsection. The Quinns relied in that context

on Hortensius Ltd. v. Bishop and ors [1989] I.L.R.M. 294 in which the plaintiff company, having failed to fulfil its obligations under a

mortgage and anticipating the bank acting upon the mortgage and personal guarantee, initiated proceedings on the basis of an

alleged illegality in the transfer of the relevant securities. It will be necessary to return to Hortensius in due course.

5.17 The Quinns further argued that the entitlement to rely on section 33(3), as opposed to section 33(2), is not limited to those who

have acquired or disposed of final instruments, and because of this, this subsection is argued to be in addition to the administrative

regulatory regime monitored and enforced by the Central Bank under the MAR.

5.18 In response to the reference by Anglo to the requirement on Member States to ensure “effective, proportionate and dissuasive”

measures in implementing the Directive, the Quinns argued that the maximum civil penalty for a breach of the MAR is €10 million,

which cannot, it is said, represent an “effective, proportionate and dissuasive” measure in the context of the present case. In those

circumstances, the Quinns argued that the Oireachtas purposely enacted section 33(3) in order to ensure that requirements of the

Directive were met in that persons wronged by “extraordinary cases” of market abuse would not be deprived of an effective remedy.

5.19 The Quinn’s contested the suggestion by Anglo that section 60 is a self contained provision. In this regard, the Quinns argued

that a company such as Anglo can be held to account by persons such as the Quinns for perpetrating an unlawful act. The Quinns

claim that if it had been the intention of the Oireachtas to exclude other persons from holding a company to account for an alleged

breach of section 60, this would have been clearly and expressly stated in the section. The construction of section 60(1) put forward

by the Quinns is said to accord with the common law principle that contracts for an unlawful purpose are unenforceable, as there is

no express qualification as to who is entitled to rely on the section.

5.20 The Quinns accepted that section 60(14) applies to a company only, and so cannot be availed of by the Quinns, but argued that

this does not preclude another party to the transaction from seeking to have a transaction declared unenforceable by virtue of

section 60(1). To adopt the construction advocated by Anglo would, it is said, have the effect of restricting the constitutional right

of access to the Courts. The Quinns submitted that, as they are parties to transactions that allegedly fall foul of section 60(1), they

have standing and are entitled to rely on section 60(1) in support of their claim that the share charges and guarantees pursuant to

those transactions are unenforceable.

5.21 The Quinns further argued that, through section 60(1), the Oireachtas has declared that “as a matter of public policy”, certain

transactions are unlawful, and nothing in the section was said to disarm the court from dealing with breaches of section 60(1) by

applying common law principles applicable to unenforceable contracts.

5.22 The Quinns argued that Anglo cannot raise the issue of whether the Quinns are entitled to have executed transactions set

aside. The Quinns submitted that this issue does not fall for determination according to the order of Kelly J. directing a preliminary

issue to be tried, and that Anglo did not raise that issue in its Notice of Motion for the trial of a preliminary issue. The Quinns

submitted that the issue as to whether legal title has passed is “not an inherent or necessary aspect to the section 60 and MAR

matters for consideration herein”. Furthermore, the Quinns submitted that, if Anglo did apply for such an issue to be determined, it

would not have succeeded as this issue is not, it is said, suitable for determination on a preliminary basis as they asset that it cannot

properly be considered until a finding is made as to whether the impugned security can be set aside.

5.23 Notwithstanding that argument, the Quinns made certain points in relation to the submissions of Anglo. They argued that the

default on €2.35 billions of loans was not a default by the Quinns personally, but rather the default by the companies within the Quinn

Group. Additionally, the Quinns submitted that, if a court finds that the loans were for an illegal purpose, the security for those loans

is unenforceable. The Quinns further argued that, under the doctrine of rescission, the contracts may be set aside whether they are

complete or not, based on fraudulent misrepresentation. The Quinns contested the submission of Anglo that it was entitled to act on

foot of the impugned security and appoint a Share Receiver in circumstances in which Anglo knew that the letters for demand were

sent in respect of what the Quinns allege to be illegal loans, and in which the Quinns were not afforded a reasonable opportunity to

consider the letter of demand and to consider their options.

5.24 The Quinns argued that Anglo cannot place reliance on the House of Lords decision in Tinsley v. Milligan [1994] 1 A.C. 340 as, in

doing so, the Quinns claim, Anglo is attempting to rely on its own purported illegal acts having “knowingly and intentionally operated

an illegal scheme in that regard”. The Quinns also contend that the case of Singh v. Ali [1960] A.C. 167 can be distinguished from the

present case as the parties in that case conspired to affect a fraudulent or unlawful purpose.

5.25 Against the background of those positions I now turn to a discussion of the important legal issues which they raise.

6 Discussion

6.1 It will be necessary to review the jurisprudence from a number of jurisdictions in due course. However, I think it would be fair to

say that the underlying problem, with which all of the case law is concerned, stems from an attempt to reconcile or balance two

competing but potentially equally legitimate principles. On one side there is the understandable reluctance of the courts to be seen to

be coming to the aid of a person in relation to a transaction which was in breach of the law. Old maxims about "clean hands" are at

the heart of the issue. The Latin maxim "ex turpi causa non oritur actio " explains this aspect of the Court's jurisprudence. A party

should not, in accordance with that principle, be entitled to come to court and seek to enforce a transaction which is tainted with

illegality in some form.

6.2 There is, however, another, and potentially conflicting, consideration, which is of considerable importance. Since the early case

law on illegal contracts was developed, the extent of regulation by statute has expanded to an exceptional extent. The number of

regulatory regimes is significant. The areas of life which are subject to regulation are corresponding large. The number of ways in

which a party might be said to be in breach of some element of a regulatory regime is many and varied. Furthermore, the range of

breaches which can arise stem across a spectrum from the minor and technical to the substantive and extremely grave. At one end of

the spectrum, a party may simply not have a licence to conduct a particular activity in circumstances where they were clearly

entitled to the licence concerned, and perhaps had held one in the past, where the failure of the relevant party was simply a short

term oversight in renewing the relevant licence. Strictly speaking, the carrying on of the activity concerned may well, in those

circumstances, be illegal, for the relevant statute may well specify that it is unlawful to carry on the activity concerned without the

relevant licence.

6.3 At the other end of the spectrum, there may be a deliberate and serious breach of important obligations imposed in the public

interest by the relevant regime. Furthermore, it is necessary to recognise that, depending on the nature of the regulatory regime

concerned, all or many parties to a relevant transaction or series of transactions may either be culpable or may be aware of the

illegality concerned, or at least of the facts which render the relevant activity illegal. It must also be kept firmly in mind that the

broad application of the law in relation to illegal contracts also extends to cases where the relevant illegality derives from the ordinary

criminal law. This can, of course, be so even where it might be said that the contract is illegal by statute, for much criminal activity is

now covered by statutory offences. The weight to be attached to the public policy requirement that the courts refrain from enforcing

contracts tainted by illegality is obviously very significant in such cases where they involve serious criminality.

6.4 As a review of the case law will reveal, it has always been acknowledged that the application of a strict rule of unenforceability

can give rise to potential injustice. However, such an approach has, at least in the past, been taken to be justified as being required

as a matter of public policy, both to deter illegality and to prevent the courts from being seen to act in aid of those who might be

found guilty of illegal activity.

6.5 However, there is at least the potential of a real risk of injustice if the courts were to continue to adopt an absolute "hands off"

policy to all cases of illegality by reason of the breach of a regulatory regime. It must be recognised that, where a court decides that

it will not entertain any legal proceedings solely because it can be said that there was some element of illegality about the

transaction which underlies the proceedings concerned, this, in effect, means that, for the parties, the results must lie where they

fall. If, for example, one party has already obtained most of the benefit which it was intended to obtain as a result of the relevant

transaction, but the other party has received little or none, then the consequences of a "hands off" approach by the court is that the

party who is lucky enough to have obtained the benefit of the transaction gets a very significant gain at the expense of the party

who, often as a matter of chance, has not as yet obtained the benefit. That consequence may well have little to do with the degree

of blame which might be said to attach to the respective parties and a lot to do with luck. It may be that such a result can simply be

regarded as a consequence of the parties engaging in a contract which is tainted with illegality. However, in a highly regulated age, it

is clear, also, that there is significant potential for injustice in a system which automatically adopts a hands off approach and which

recognises, as a necessary consequence, that some parties to an illegal transaction may benefit and others lose out.

6.6 But reconciling those two competing principles, that is the reluctance of the courts to become involved in being seen to enforce

contracts which might be said to be tainted by illegality, on the one hand, and the recognition that a complete "hands off" approach

might lead to serious injustice, on the other, is not necessarily an easy task.

6.7 It also needs to be recalled, as a review of the jurisprudence will disclose, that much of the initial development of the law

concerning illegal contracts as a matter of common law was concerned with contracts which were considered by the common law

itself to be illegal as a matter of policy or to involve criminal activity. It is the evolution of the approach of common law courts to the

concept of illegality by statute which gives rise to the competing considerations which I have just sought to address. In that context,

it must also be noted that there have been questions over the precise type of illegality which engages the doctrine of ex turpi causa

so as to render affected contracts unenforceable. For reasons which will be touched on in due course, the modern view would appear

to be that the relevant illegality must either involve a breach of the criminal law or be quasi criminal in nature. However, that, to some

extent, begs the question. Very many regulatory regimes create technical offences or quasi criminal technical breaches for a whole

range of activities. Such measures may well be taken to be a necessary part of the enforcement of the regulatory regime concerned.

However, the wide range of breaches which may give rise to an offence or other public illegality potentially leads to the very difficulty

with which this Court is now faced, being that courts are consequently required to consider whether such breaches ought to lead to

the relevant contracts being treated as unenforceable. In order to gain assistance as to how the questions thus raised should be

answered, it is of assistance to conduct a review of the relevant jurisprudence.

7 The Case Law

7.1 It is important to commence any review of the case law by recalling that the underlying issue, with which this Court is concerned,

is as to whether the Quinns can rely on the alleged illegality of the various lending transactions which are at the heart of these

proceedings to establish that they are not obliged to meet the obligations which would otherwise arise under the guarantees and

security under challenge. The circumstances in which contracts may be regarded as illegal, void or unenforceable in common law

countries are many and varied. There is no unique classification of all of the relevant headings. However, in order to understand the

aspect of the broad area of "unenforceability on the grounds of illegality" with which this case is concerned, it is necessary to start

by saying just a little about the area of illegal contracts as a whole. The authors of Chitty on Contract, 31st Ed., volume 1 suggest,

at para. 16-005, that contracts may be invalidated for any one of five reasons, being: first, that the object of the relevant contract

is treated as illegal by common law or by legislation; second, that the objects are injurious to good government; third, that the

objects interfere with the proper working of the machinery of justice; fourth, that the objects are injurious to marriage and morality;

and fifth, that the objects are, for economic reasons, against the public interest. However, as the authors go on to point out, not all

cases fit neatly into one of the relevant boxes.

7.2 Furthermore, the authors note that contracts may be regarded as illegal either in their formation or in their performance.

Contracts may be regarded as illegal as to their formation when they cannot be performed in accordance with the terms agreed

without committing an illegal act. In contrast, contracts may be illegal as to performance where one or both of the parties intend to

perform the contract in an illegal manner or to affect some illegal purpose.

7.3 The aspect of the jurisprudence in question, with which this Court is now concerned, involves an allegation that relevant

contracts are illegal, and thus, unenforceable by reference to statute. This is said to be so by virtue of the fact that the contracts in

question are alleged to have been intended to give effect to an illegal purpose, being, in the case of section 60, the giving of loans

for the purchase of shares in the lender, and in the case of the MAR, lending designed to unlawfully maintain the share price of Anglo.

7.4 It is important to understand the reason why it is proper to characterise the issues in this case in that fashion. As was debated it

the course of the hearing before us, the contracts which are at the heart of these proceedings are not, in and of themselves,

unlawful in any way. They are contracts to lend money on terms and contracts to provide guarantees or security to back up those

lending transactions. If, for example, identical transactions, including guarantees and security, were entered into for the simple and

straightforward purpose of permitting Quinn entities to purchase shares in the ordinary way in a company wholly unconnected with

Anglo, then no question of illegality would arise. Furthermore, none of the specific types of policy considerations considered by the

common law itself (independent of statute) to render contracts void or unenforceable have been said to exist in this case.

7.5 I am satisfied that, at least in very broad terms, the framework within which the common law approaches these questions in this

jurisdiction is the same as in the United Kingdom and, indeed, other common law jurisdictions such as Australia. However, that broad

framework is not really in dispute between the parties to these proceedings. Rather, it is the precise way in which a court should go

about determining the enforceability or otherwise of a contract which is said to be affected by an illegality imposed by statute that

requires to be considered. In what way should a court approach the public policy question of enforceability while paying proper regard

to the need to avoid being seen to enforce illegality or fail to discourage same while at the same time according appropriate weight to

the policy of the relevant statute? Likewise, the application of that methodology to the statutes in question in this case needs to be

addressed. Against the background of those very general observations I now turn to the case law.

7.6 The doctrine of illegality is often traced back to Holman v. Johnson, although the law thus articulated was well established before

the time of that decision. Indeed, Charleton J. cited that judgment in his decision in this case in the High Court. The principle was put

by Lord Mansfield in the following terms, at p. 343:-

“The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the

mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general

principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the

plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No Court will

lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating

or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country,

there the Court says he has no right to be assisted. It is upon that ground the Court goes; not for the sake of the

defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change

sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for

where both are equally in fault, potior est conditio defendentis.”

7.7 Lord Mansfield, therefore, acknowledged that it was possible that a defendant might obtain what might be seen to be an unfair

advantage by being able to rely on the principle of illegality. However, as has been acknowledged in many other cases, and indeed,

noted by the trial judge in this case, the principle is one of policy rather than being based on attempting to do justice between the

parties.

7.8 However, the more modern approach of the courts of the United Kingdom can be seen from a series of cases over the last 75

years or so. In Archbolds (Freightage) Limited v. S. Spanglett Limited [1961] 1 Q.B. 374 at p.389, Devlin L.J. expressed the approach

in the following terms:-

"The statute does not expressly prohibit the making of any contract. The question is therefore whether a prohibition

arises as a matter of necessary implication. It follows from the decision of this Court in Nash v. Stevenson Transport

Ltd. that a contract for the use of unlicensed vehicles is prohibited. In that case the plaintiff held "A" licences which the

defendant wanted to purchase. But the Act of 1933 provides that licences may not be transferred or assigned, and it

was therefore agreed that the defendant should run the vehicles in the plaintiff's name so that they might obtain the

benefit of his licences. It was held by the court that that was an illegal agreement because the defendant was the

person who was using the vehicles and the plaintiff the person who was licensed to use them; thus the user was not the

licensee. In the present case there was no contract for the use of the vehicle".

7.9 Devlin L.J. went on to note that it did not follow that, because it is an offence for one party to enter into a contract, the

contract itself is void. In that context, the Court reaffirmed the position which had been adopted in St. John Shipping Corporation v.

Joseph Rank Limited [1957] 1 Q.B. 267, a case to which I will shortly turn.

7.10 Next, in Shaw v. Groom [1970] 2 Q.B. 504, the Court of Appeal reiterated the approach previously adopted by the House of

Lords in Vita Food Products Inc. v. Unus Shipping Company Limited (In Liquidation) [1939] A.C. 277, where Lord Wright said, at

p.293:-

"Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are

in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a

wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds".

7.11 Other cases, such as Ailion v. Spiekermann [1976] Ch. 158, and Geismar v. Sun Alliance and London Insurance Limited [1978]

Q.B. 383, are sometimes cited to the same effect. In that later case, it is worth noting that Talbot J., at pp.388 and 389, having

made reference to the speech of Lord Macmillan in Beresford v. Royal Insurance Company Limited [1938] A.C. 586, and the decision

in St. John Shipping suggested that is was of "the highest importance that courts do not attempt to extend the doctrine of public

policy in order to hold that contracts are unenforceable thereby, and that it is necessary to look to the accepted application of that

doctrine and not go beyond that".

7.12 As will be noted by reference to recent Australian authority, a similarly broad approach has been adopted in that jurisdiction as

well. However, a further broad question can well arise as to the extent to which an illegality may affect contracts which are not, of

themselves, illegal, but where there is a connection with illegality.

7.13 Chase Manhattan Equities v. Goodman [1991] B.C.L.C. 897 involved a sale of shares by a person possessing insider information.

Through a sham transaction involving a third party, it was sought to ultimately sell the shares to Chase Manhattan. Knox J. held that

the share sale transaction (which had not, at the time of the proceedings, been completed) was unenforceable against Chase

Manhattan on the grounds of illegality. The statute in question did not, of itself, render the share sale agreement in question void or

unenforceable. Indeed, section 8(3) of the Company Securities (Insider Dealing) Act 1985 provided that no transaction was void or

voidable “by reason only that it was entered into” in breach of the relevant insider trading provisions. A sale of shares was, of course,

itself entirely legal. What made the contract illegal was the fact that the ultimate seller, Mr. Goodman, was in possession of insider

information, and was selling the shares for the purposes of unlawfully benefiting by that information. As noted by Knox J., to enable

Mr. Goodman to enforce the sale share contract against Chase Manhattan would have allowed Mr. Goodman to benefit by his own

unlawful act. Section 8(3) was found to be designed to prevent the unwinding of completed stock exchange contracts and not,

therefore, relevant to the case.

7.14 Those cases are, however, in reality, concerned with slightly different questions. The issue does not concern the question of

whether public policy requires the courts to treat contracts as unenforceable as such, but rather concerns the reach of that policy

requirement. How closely does a contract need to be connected to the relevant illegality in order that it may be treated as

unenforceable, or can completed contracts be reversed? It might be said that these are but other aspects of the basic question.

Does policy require that such contracts be treated as unenforceable, or reversed?

7.15 The current position in the United Kingdom can be seen from the judgments of the Supreme Court in Les Laboratoires Servier

and anor v. Apotex Inc. and ors [2015] 1 All E.R. 671. The substance of the issue which arose in that case was as to whether an

infringement of a foreign patent right constituted a relevant illegality or "turpitude" for the purposes of providing a defence. However,

the Court did review the jurisprudence in respect of illegal contracts generally.

7.16 The principal judgment was given by Lord Sumption. Having traced the doctrine to Holman v. Johnson, Lord Sumption noted, at

para. 14, that this area has given rise to "a large body of inconsistent authority which rarely rises to the level of general principle".

He also noted that the main reason for the disordered state of the case law is the distaste of the courts for the consequences of

applying their own rules, consequences which he noted Lord Mansfield had pointed out two centuries ago. That is, indeed, the

fundamental problem already identified in this judgment. A strict application of a rule of unenforceability in relation to all contracts

tainted by illegality can have consequences which may appear very unjust on the facts of an individual case. That leads to attempts

to find, normally by way of exception, a basis for avoiding the full rigours of the rule in cases where the consequence may appear to

be particularly unjust.

7.17 Lord Sumption went on to consider a strand in the jurisprudence in the United Kingdom which emerged in more recent times,

which sought to redefine the principle as a power vested in the court to be exercised in an appropriate case, rather than as a rule of

law to be applied in all cases save those where there was an established exception or where, in accordance with the established

jurisprudence, the rule did not apply because, for example, the transaction sought be rendered unenforceable was beyond the scope

of the rule. In that context Euro-Diam Limited. v. Bathurst [1990] 1 Q.B. 1 is often cited.

7.18 The relevant line of authority suggested that the court had a power to decline to enforce contracts where it would be "an

affront to the public conscience" to allow the plaintiff to succeed. As pointed out by Lord Sumption:-

"Under this "public conscience" test, the application of the illegality defence was not discretionary in law. But it was

clearly discretionary in nature. In substance it called for a value judgment about the significance of the illegality and the

injustice of barring the claimant's claim on account of it". (See para. 14)

7.19 However, that approach had been clearly rejected in Tinsley v. Milligan. On the question of the proper test, Lord Keith and Lord

Goff, in Tinsley v. Milligan, had suggested a rule which would bar any claim arising out of a transaction which was sufficiently closely

connected to the illegal purpose. Lords Browne-Wilkinson, Jauncy and Lowry adopted a test which barred a claim only if it was

necessary to assert, as part of the plaintiff's claim, facts which disclosed the relevant illegality.

7.20 In commenting on the two possible tests, Lord Sumption suggested the following at para. 18:-

"Both are intended to exclude those consequences of an illegal act which are merely collateral to the claim. Neither

makes the application of the illegality defence dependent on a value judgment about the significance of the illegality or

the consequences for the parties of barring the claim. For present purposes, it is enough to point out that neither test is

discretionary in nature. Neither of them is based on achieving proportionality between the claimant's misconduct and his

loss, a concept derived from public law which is not easily transposed into the law of obligations. On the contrary, Lord

Goff recognised, as Lord Mansfield had before him, that the practical operation of the law in this field will often produce

disproportionately harsh consequences."

Given that the Supreme Court of the United Kingdom was not invited, in Les Laboratoires Servier, to revisit Tinsley v.

Milligan, and, for that reason, did not do so, it must be taken that the majority view in Tinsley v. Milligan as to the

proper test remains the law in that jurisdiction.

7.21 Having reviewed an observation of Lord Hoffman in Gray v. Thames Trains Limited [2009] 1 A.C. 1339 to the effect that the ex

turpi policy is not based on a single justification, but on a group of reasons, together with criticism of the position adopted in Tinsley

v. Milligan by the English Law Commission, Lord Sumption came to the view, at para. 20, that the "discretionary" alternative favoured

by some "makes the law uncertain, by inviting the courts to depart from existing rules of law in circumstances where it is difficult

for them to acknowledge openly what they are doing or to substitute a coherent alternative structure".

7.22 I should not leave the judgment of Lord Sumption without citing what is said at para. 28 of his judgment concerning the nature

of the illegality which invokes the principle of unenforceability. In that paragraph the following is said:-

"Apart from these decisions, the researches of counsel have uncovered no cases in the long and much-litigated history

of the illegality defence, in which it has been applied to acts which are neither criminal nor quasi-criminal but merely

tortious or in breach of contract. In my opinion the question what constitutes "turpitude" for the purpose of the defence

depends on the legal character of the acts relied on. It means criminal acts, and what I have called quasi-criminal acts.

This is because only acts in these categories engage the public interest which is the foundation of the illegality defence.

Torts (other than those of which dishonesty is an essential element), breaches of contract, statutory and other civil

wrongs, offend against interests which are essentially private, not public. There is no reason in such a case for the law

to withhold its ordinary remedies. The public interest is sufficiently served by the availability of a system of corrective

justice to regulate their consequences as between the parties affected."

7.23 Finally, before leaving Les Laboratoires Servier, I should note what is said by Lord Toulson at para. 57 as follows:-

"Servier relies on the often quoted statement of Lord Mansfield in Holman v Johnson in which he said that "The principle

of public policy is this; ex dolo malo non oritur actio." That statement made in 1775 remains a succinct statement of

broad principle, but, as the cases over the last 340 years demonstrate, it does not provide a simple measuring rod for

determining the boundaries of the principle. The case law is notoriously untidy. In deciding whether the principle should

be applied in circumstances not directly covered by well-established authorities, it is right to proceed carefully on a case

by case basis, considering the policies which underlie the broad principle. This has been said in the past by judges at the

highest level."

7.24 Thereafter, Lord Toulson went on to cite the passage from the speech of Lord Wright in Vita Foods already referred to in this

judgment, the comments of Lord Hoffman in Gray v. Thames Trains and also a passage from the judgment of Lord Wilson in Hounga v.

Allen [2014] 1 W.L.R. 2889, where the following was said at para. 42:-

"The defence of illegality rests on the foundation of public policy. 'The principle of public policy is this…' said Lord

Mansfield by way of preface to his classic exposition of the defence in Holman v Johnson (1775) 1 Cowp 341, 343. 'Rules

which rest on the foundation of public policy, not being rules which belong to the fixed or customary law, are capable, on

proper occasion, of expansion or modification': Maxim Nordenfelt Guns and Ammunition Co v Nordenfelt [1893] 1 Ch 630,

661 (Bowen LJ). So it is necessary, first, to ask "What is the aspect of public policy which founds the defence?" and,

second, to ask 'But is there another aspect of public policy to which application of the defence would run counter?'"

7.25 In the light of those considerations, Lord Toulson expressed the view, at para. 62, that the question was whether public policy

considerations merited applying the doctrine of illegality to the facts of the instant case.

7.26 It is clear, therefore, that Tinsley v. Milligan remains the law in the United Kingdom notwithstanding the fact that it has been

criticised, and notwithstanding the fact that it is accepted that the general application of this area of law has been, perhaps,

problematic.

7.27 In Tinsley, Lord Browne-Wilkinson held, in rejecting the stance taken by Nicholls L.J. in the Court of Appeal, that "the

consequences of being a party to an illegal transaction cannot depend … on such an imponderable factor as the extent to which the

public conscience would be affronted by recognising rights created by illegal transactions". Lord Browne-Wilkinson added, at p. 369:-

“Neither at law nor in equity will the court enforce an illegal contract which has been partially, but not fully, performed.

However, it does not follow that all acts done under a partially performed contract are of no effect. In particular it is

now clearly established that at law (as opposed to in equity), property in goods or land can pass under, or pursuant to,

such a contract. If so, the rights of the owner of the legal title thereby acquired will be enforced, provided that the

plaintiff can establish such title without pleading or leading evidence of the illegality. It is said that the property lies

where it falls, even though legal title to the property was acquired as a result of the property passing under the illegal

contract itself.”

7.28 Having examined the authorities which lay down the circumstances in which a legal proprietary interest acquired as a result of an

illegal transaction will be enforced by the courts (Bowmakers Ltd. v. Barnet Instruments Ltd. [1945] K.B. 65, Ferret v. Hill (1854) 15

C.B. 207, Taylor v. Chester L.R. 4 Q.B. 309, Alexander v. Rayson [1936] 1 K.B. 169), Lord Browne-Wilkinson summarised the principles

that emerged from those authorities (at p. 370):-

“(1) property in chattels and land can pass under a contract which is illegal and therefore would have been

unenforceable as a contract; (2) a plaintiff can at law enforce property rights so acquired provided that he does

not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property

right; (3) it is irrelevant that the illegality of the underlying agreement was either pleaded or emerged in evidence:

if the plaintiff has acquired legal title under the illegal contract that is enough.”

7.29 It is correct, as counsel for Anglo accepted at the hearing, that Tinsley has not been expressly followed in this jurisdiction,

although Laffoy J., in Stanley v. Kiernan [2007] IEHC 242, gave some consideration to the approach adopted by Lord Browne-

Wilkinson.

7.30 It is next worth looking at the way in which the general principle has been applied in the United Kingdom. First, it must be said

that there has been recognition that there are some limitations on the extent to which contracts, which may in some way be

connected with illegal activity, can properly be regarded as unenforceable. In St. John Shipping, the Court was concerned with an

attempt by cargo owners to avoid paying monies to a freight company in circumstances where it had been discovered that the

relevant ship was illegally overloaded. Devlin J., in considering the effect of a breach of the statutory prohibition on overloading of the

ship concerned, stated (at p.288):-

“A court should not hold that any contract or class of contracts is prohibited by statute unless there is a clear

implication, or "necessary inference," as Parke B. put it, that the statute so intended. If a contract has as its whole

object the doing of the very act which the statute prohibits, it can be argued that you can hardly make sense of a

statute which forbids an act and yet permits to be made a contract to do it; that is a clear implication. But unless you

get a clear implication of that sort, I think that a court ought to be very slow to hold that a statute intends to interfere

with the rights and remedies given by the ordinary law of contract. Caution in this respect is, I think, especially

necessary in these times when so much of commercial life is governed by regulations of one sort or another, which may

easily be broken without wicked intent. Persons who deliberately set out to break the law cannot expect to be aided in a

court of justice, but it is a different matter when the law is unwittingly broken.”

It is also important to note that Devlin J. pointed out that the principle of illegality:-

"cares not at all for the element of deliberation or for the gravity of the infraction, and does not adjust the penalty to

the profits unjustifiably earned". (See p. 281).

7.31 In addition to the limitations identified in St. John Shipping, the United Kingdom courts have also drawn attention to the fact

that the growth in regulation can result in a range of breaches of regulatory law, some bordering on the innocent. For example, in

Shaw v. Groom [1970] 2 Q.B. 504, a failure by a landlord to provide a tenant with a rent book did not result in the landlord being

unable to obtain payment of rent.

7.32 The fact that non-enforcement may also lead to unjust enrichment was identified by Devlin J., in St. John Shipping, as a factor

to be taken into account where he noted that the consequences of non-enforcement in that case would be that the relevant monies

"will not go into the public purse but into the pockets of someone who is lucky enough to pick up the windfall or astute enough to

have contrived to get it".

7.33 Next, the United Kingdom courts have recognised that it is important to distinguish between statutes which, while prohibiting

certain contracts, may be taken to recognise by implication that the parties are not equally at fault. This may be done, for example,

by imposing a sanction for breach on only one of the parties. Thus, for example, in Anderson v. Daniel [1924] 1 K.B. 138 (at p.147)

Scrutton L.J. said that:-

"When the policy of the act in question is to protect the general public or class of persons by requiring that a contract

shall be accompanied by certain formalities or conditions, and a penalty is imposed on the person omitting those

formalities or conditions, the contract and its performance without those formalities or conditions is illegal, and cannot

be sued upon by the person liable to the penalties".

7.34 However, it seems clear that much of the evolution of the common law as it is understood in the United Kingdom is not so much

concerned with the enforceability of illegal contracts as such, but rather is concerned with the extent to which the consequences of

partly or completely executed contracts, which may be tainted by illegality, can be undone or reversed. That question is, of course,

relevant to one of the issues which potentially arises on this appeal, which concerns the question as to whether the Quinns are

entitled, as moving parties, to seek to have the effect of the various securities which were put in place declared invalid or

unenforceable.

7.35 It is clear that Devlin J., in St. John Shipping, was influenced by the growing extent of regulation. In that context, caution needs

to be exercised against an overbroad rule of illegality which would render unenforceable a whole range of contracts because of an

association with illegality.

7.36 Furthermore, Devlin J. noted an important distinction. First, there may be a contract which has, as he put it, "as its whole object

the doing of the very act which the statute permits". Such contracts can readily be distinguished from contracts which are, in

themselves, entirely lawful, but where some other factor connected with the relevant contract (such as overloading in St. John

Shipping) renders it illegal. It is also of some relevance to note that Devlin J. considered that the true question was really as to what

might be taken to be impliedly found in the statute. Even though the statute is silent on whether a contract of a particular type is to

be regarded as void or unenforceable, it may be much easier to infer that the statutory intention was that a contract may properly be

regarded as unenforceable if the contract is to carry out the very act which the statute itself regards as illegal. On the other hand,

such an inference can much less easily be drawn if the contract is lawful in itself and is only tainted by an indirect illegality deriving

from something outside of the basic four walls of the contractual arrangements.

7.37 Furthermore, some of the case law seems to me to be more concerned with the question of the reach of the principle rather

than its status. It is clear that contracts which are closely connected with the relevant illegality may be unenforceable, but contracts

which are only tangentially connected may remain enforceable, not least because it may be possible for a party who wishes to

enforce such a contract to mount a claim without placing any reliance on the illegality itself.

7.38 Also, it is important to note that there was a significant dissent in Tinsley. I will refer in more detail to that dissent in the

context of the comments made on it by the High Court of Australia. It is, at least on one view, possible to discern something of a

divergence of approach between, on the one hand, the United Kingdom and, on the other, Australia.

7.39 I, therefore, turn to the position in Australia. The Australian courts have given significant attention to the issue of illegal

contracts over the last third of a century. In Yango Pastoral Company Pty. Limited and others v. First Chicago Australia Limited

[1978] 139 C.L.R. 410, Mason J. in the High Court of Australia, said, at pages 429 and 430, the following:-

“However, in the present case Parliament has provided a penalty which is a measure of the deterrent which it intends to

operate in respect of non-compliance with s.8. In this case it is not for the court to hold that further consequences

should flow, consequences which in financial terms could well far exceed the prescribed penalty and could even

conceivably lead the plaintiff to insolvency with resultant loss to innocent lenders or investors. In saying this I am

mindful that there could be a case where the facts disclose that the plaintiff stands to gain by enforcement of rights

gained through an illegal activity far more than the prescribed penalty. This circumstance might provide a sufficient

foundation for attributing a different intention to the legislature. It may be that the true basis of the principle is that the

court will refuse to enforce a transaction with a fraudulent or immoral purpose: Beresford v. Royal Insurance Co. Ltd.

On this basis the common law principle of ex turpi causa can be given an operation consistent with, though subordinate

to, the statutory intention, denying relief in those cases where a plaintiff may otherwise evade the real consequences of

a breach of a statutory prohibition.

Nevertheless, the principle that the court will not enforce a contract at the suit of a party who has entered into it with

the object of committing an illegal act does not avail the appellant in this case.”

7.40 The case in question involved a secured loan which was given in circumstances where it was accepted by the lender, First

Chicago Australia Ltd., that it did not have the proper authorisation required by law for the carrying out of the relevant banking

business.

7.41 Gibbs A.C.J., in the same case, said the following at page 413:-

"There are four main ways in which the enforceability of a contract may be affected by a statutory provision which

renders particular conduct unlawful: (1) The contract may be to do something which the statute forbids; (2) The

contract may be one which the statute expressly or impliedly prohibits; (3) The contract, although lawful on its face,

may be made in order to effect a purpose which the statute renders unlawful; or (4) The contract, although lawful

according to its own terms, may be performed in a manner which the statute prohibits."

7.42 Additionally, Jacobs J. stated, at p. 432:-

“In other cases the prohibition against carrying on a business may not be able to be construed as either an express or

implied prohibition against the making of a particular contract. Nevertheless in such a case the courts may not enforce

such a contract but, if they do not, it is not because the contract itself is directly contrary to the provisions of the

statute by reason of an express or implied prohibition in the statute itself but because it is a contract associated with or

in the furtherance of illegal purposes, for instance, the purposes of a business being carried on illegally…One then enters

the field of contracts not themselves unlawful but made for an illegal purpose. Of these the classic case is Pearce v.

Brooks. The refusal of the courts to regard such contracts as enforceable stems not from a legislative prohibition but

from the policy of the law, commonly called public policy. It is of these contracts that Lord Wright said in Vita Food

Products Inc. v. Unus Shipping Co. Ltd.:

'Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be

void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy

understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and

sufficient grounds.'"

7.43 It is clear that in Australia, a distinction is also made between contracts which have as their central object the doing of

something which is expressly forbidden by statute, on the one hand, and contracts which, though not unlawful in themselves, may be

unenforceable because they are tainted by an unlawful purpose or because of performance in a manner prohibited on the other hand.

7.44 It is also clear from Yango that the Australian courts regard it as important to consider the adverse express consequences

provided for by statute as applicable to the relevant illegality (criminal or administrative penalties or sanctions or express civil

consequences). Where those consequences are considered to be sufficiently serious to meet the policy requirement of achieving the

purpose of the statute, then it may be less easy to infer that the policy requires that contracts be treated as void or unenforceable

in addition. The Australian courts also recognise that, given that the common law doctrine of illegality stems from public policy, it

follows that, as was said by Lord Wright in Vita Food, there may be cases where, "public policy understood in a wider sense may at

times be better served by a refusing to nullify a bargain save on serious and sufficient grounds".

7.45 In Master Education Services v. Ketchell [2008] H.C.A. 38, a case concerning the legality and consequent enforceability of a

franchise agreement which contravened Franchising Code of Conduct and section 51AD of the Trade Practices Act 1974, the High

Court of Australia quoted with approval the comments of Mason J. in Yango in stating (at para. 19) that “[i]n the absence of an

express prohibition in the Act, any such prohibition against the making of an agreement, unless there has been compliance with an

industry code, must be found by a process of implication”. The Court held that it is not to be assumed that the common law sanction

applies to every contravention of a prohibition contained in the statute (at para. 11). The Court found (at para. 30) that the

operation of the 1974 Act in respect of contraventions went beyond that of other regimes which were silent as to the consequences

for the parties in civil law. The Court held that the detailed provisions of the 1974 Act concerning the consequences of non-

compliance with the code did not support the conclusion that the legislature intended that consequences provided by the common

law should follow contraventions of section 51AD.

7.46 Fitzgerald v. F.J. Leonhardt Pty Limited [1997] 189 C.L.R. 215 concerned the recovery of a debt by the plaintiff for boring holes

for water on behalf of the defendant in circumstances where the defendant landowner failed to obtain the appropriate permits

required by statute prior to the relevant holes being drilled. That obligation fell on the landowner, and there was no equivalent

obligation on the party drilling holes to obtain the relevant permit. In that context, Kirby J. stated, at p. 242:-

“The first task of a court is to ascertain the meaning and application of the law which is said to give rise to the illegality

affecting the contract. The law in question may be a rule of the Common Law but nowadays it is much more likely to be

a provision of legislation. The substantial growth of legislative provisions affecting all aspects of the society in which

contracts are made presents a legal environment quite different from that in which the doctrine of illegality was

originally expressed. Courts, in this area, are faced with a dilemma. They do not wish to deprive a person of property

rights, e.g. under a contract, least of all at the behest of another person who is also involved in a breach of the

applicable law. On the other hand, they do not wish to ‘condone or assist a breach of statute, nor must they help to

frustrate the operation of a statute.’ That is why the first function of the court, where a breach of a legislative provision

is alleged, is to examine the legislation so as to derive from it a conclusion as to whether a relevant breach is

established and, if so, what consequences flow either from the express provisions of the legislation or from implications

that may be imputed to the legislators. Little, if any, assistance will be derived for the ultimate task of a court from

examination of the terms of other statutes or judicial classifications of them or by reference to their meaning as found.”

7.47 Kirby J. acknowledged that, in most cases, the relevant legislation “does not expressly deal with the consequences of conduct in

breach of its terms upon a contract which has been fulfilled in some way in breach of a provision of the law”. In such circumstances,

he found that it is necessary to ask whether the legislation “impliedly prohibits such conduct and renders it illegal”. While he agreed

that the courts would be slow to imply a prohibition which interferes with the rights of the parties under contract law in situations in

which the legislation does not expressly provide for a remedy, he suggested that “the duty of courts remains, where legislation is

involved, to give meaning to the imputed purpose of Parliament as found in the words used” and that “[i]t would be artificial to expel

implications from the task of legislative construction where they remain an established feature of the interpretation and application of

legislation generally”.

7.48 However, Kirby J. also cautioned, at p. 244:-

“One principle, however, which tends to reinforce the reluctance of courts to imply a prohibition on a contract, the

formation and performance of which involves some breach of the law, is the conclusion which will often be derived from

the express terms of the legislation itself. Thus, if the legislation provides in a detailed way for sanctions and remedies

for breach of its terms, courts will require good reason to add to those express provisions additional civil penalties, such

as the deprivation of contractual rights, which Parliament has not chosen to enact. Were it otherwise, the parties would

be subject to the penalties (in the present case criminal) expressly provided by the legislation and still more (civil) by

the deprivation of their property (contractual) rights. In a given case, such lost rights might be enormous,

supplementing in a wholly arbitrary way, the defined penalties for which the legislature has expressly provided.”

7.49 Kirby J. also added the following observation, at p.245:-

“It is important to keep the interpretation and public policy questions separate. Logically, the interpretation question

arises first. This is because if, as a matter of interpretation, the contract is illegal as formed, or as performed, it is void

as to those parts affected by the illegality. The secondary question of unenforceability for public policy reasons does not

then arise. The contract is unenforceable but that is because it is void in law.”

7.50 In Nelson v. Nelson [1995] H.C.A. 25, the High Court of Australia held that there is no general proposition that equity will let the

loss lie where it falls in situations where the illegality consists of contraventions of the policy of a statute. As observed by Deane and

Gummow JJ. at p.558, this had been the view of the minority of the court (specifically Lord Goff of Chieveley and Lord Keith of Kinkel)

in Tinsley v. Milligan. The minority in Tinsley stated, with reference to the judgment of Lord Mansfield in Holman v Johnson, that “the

principle is not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair

consequences as between the parties to litigation. Moreover the principle allows no room for the exercise of any discretion by the

court in favour of one party or the other.”

7.51 In his judgment, McHugh J. sought to explain why the doctrine of illegality expounded in Holman was no longer, in his view, the

appropriate formulation to apply. While the underlying policy of that doctrine was still valid, he found that doctrine to be “too extreme

and inflexible to represent sound legal policy in the late twentieth century, even when account is taken to the recognised exceptions

to this dictum” (at p. 611). These exceptions were succinctly outlined by McHugh J. at p 604:-

“But [the dictum of Lord Mansfield in Holman] is subject to exceptions which allow relief to be granted despite the

presence of illegality. First, the courts will not refuse relief where the claimant was ignorant or mistaken as to the

factual circumstances which render an agreement or arrangement illegal. Second, the courts will not refuse relief where

the statutory scheme rendering a contract or arrangement illegal was enacted for the benefit of a class of which the

claimant is a member. Third, the courts will not refuse relief where an illegal agreement was induced by the defendant's

fraud, oppression or undue influence. Fourth, the courts will not refuse relief where the illegal purpose has not been

carried into effect.”

7.52 McHugh J. held, at p.611, that a less rigid approach than that taken by the courts in Holman or Tinsley was necessitated by the

fact that statutory illegality can arise in different forms:-

“First, the statute may directly prohibit the contract or trust. Second, while the statute may not prohibit making the

contract or trust, it may prohibit the doing of some particular act that is essential for carrying it out. Third, the statute

may not expressly prohibit the contract or trust but the contract or trust may be associated with or made in

furtherance of a purpose of frustrating the operation of the statute. Fourth, the statute may make unlawful the manner

in which an otherwise lawful contract or trust is carried out. It would be surprising if sound legal policy required each of

these forms of illegality to be treated in the same way. There is, for example, a vast difference between the

performance of a contract for carriage of goods by ship that is overloaded in breach of the law and the making of a

contract for the carriage of goods where the making of the contract is specifically prohibited.”

7.53 McHugh J. (at p. 612) discussed the circumstances in which the courts could withhold relief because of an illegal transaction. In

his view, the imposition of such a sanction on one of the parties to a transaction which would deprive that party of his or her

property rights only to vest those in another person, who in many circumstances would be a wilful participant in the illegality, could

only be justified if the following two conditions are met:-

“First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with

contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be

disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the

statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the

reference point for determining the seriousness of the illegality; otherwise the courts would embark on an assessment of

moral turpitude independently of and potentially in conflict with the assessment made by the legislature.

Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further

sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to

deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will

provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that

contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their

duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the

statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be

unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach

of the statute or its policy are to be those specifically provided for in the legislation.

7.54 Importantly, McHugh J. held that a court should not refuse to enforce legal or equitable rights simply because they were

connected to an unlawful purpose unless:-

“(a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or

(b) (i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct;

(ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its

objects or policies; and

(iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute

are to be the only legal consequences of a breach of the statute or the frustration of its policies.”

7.55 It is then necessary to look at the case law from this jurisdiction. In Gavin Lowe Limited v. Field [1942] I.R. 86, this Court had to

consider an action in which a plaintiff sued on a cheque paid to buy a cow which turned out to be suffering from tuberculosis. The

defence was that public health legislation made it an offence to "expose for sale" such an animal. The majority (Sullivan C.J.,

Murnaghan and Geoghegan JJ.) permitted recovery on the basis that the relevant legislation did not make it an offence to sell such a

cow but rather only, as a matter of public health, to "expose for sale". The minority (Meredith and O'Beirne JJ.) disagreed, holding, in

the words of O'Beirne J., that "it seems difficult to justify such a construction as would recognise the validity of a contract arising

out of exposure for sale, though the exposure itself is made a criminal offence" (see p.107). It does, however, seem clear that all

members of the Court accepted in principle that a contract might be unenforceable if tainted by the appropriate illegality.

7.56 Costello J., in Hortensius, was concerned with the enforceability of contracts arising out of loans made to the plaintiffs by the

Royal Trust Bank, the benefit of which had been transferred to the defendant Trustee Savings Bank. It was accepted that the

purchase of the loans in question by the Trustee Saving Bank was not authorised by s.3 of the Trustee Savings Bank Act, 1965. The

transaction thus fell to be considered under an alternative possibility, being s.15 of the Trustee Savings Bank Act, 1863. Costello J.

accepted that the Trustee Savings Bank had contravened s.15 of the Trustee Savings Bank Act, 1863 but then considered whether

that illegality rendered the loans unenforceable against the plaintiffs. Costello J. stated, at pp. 301 – 302, the following:-

“At common law the enforcement of certain contracts was regarded as being against public policy and such contracts

were termed ‘illegal’. Illegal contracts included those which tend to injure the public service, or pervert the course of

justice, or abuse the legal process, or are contrary to good morals, or restrain trade. Also included are those whose

objects are clearly illegal, so that a contract which cannot be performed without a breach of the criminal law is

unenforceable at common law. But in this case we are concerned with a statutory provision which prohibits the trustees

from entering into the contracts of 19 December 1983, not a provision which made illegal the objects of the contracts

they entered into. It seems to me therefore that the plaintiffs cannot rely on the common law rules relating to the

unenforceability of illegal contracts to justify the claims for relief made in this action.

It remains then to consider whether on a true construction of the 1863 Act the contracts in suit are void and therefore

unenforceable. Some statutes may expressly declare certain types of contract to be void and unenforceable (without

declaring them to be illegal) as does s. 18 of the Gaming Act 1845 which provides that all agreements by way of

wagering shall be null and void and which prohibits any action brought to recover a sum alleged to have been won on a

wager. Others may prohibit the making of certain contracts and impose penalties for doing so but remain silent as to

the civil rights of the parties to them; it is then a question of the construction of the statute as to whether the contract

entered into between the parties is to be regarded as an illegal one. But in this case the 1863 Act did not make illegal

contracts for the purchase of loans — it prohibited the trustees from entering into such contracts, which is not the

same thing. There is, it seems to me, an important distinction between a statutory provision which makes it illegal for a

trustee to enter into certain types of contracts and a statutory provision which makes certain types of contract illegal.

In the former case (which is what happened on 19 December 1983) what the courts have to consider is what are the

legal consequences which flow from a contract entered into by trustees contrary to the statutory provisions by which

their trust is governed, in the latter case (which is not this case) what the court would have to consider are the

consequences of entering into a contract declared by statute to be an illegal one.”

7.57 It seems fair to say that there has been little modern consideration by the Irish courts of the precise circumstances in which a

contract, said to be tainted by illegality by reference to some form of statutory prohibition, may be considered to be enforceable or

otherwise. While a decision made by the Employment Appeals Tribunal, the case of Lewis v. Squash Ireland [1983] I.L.R.M. 363, can, I

think fairly, be said to represent the orthodox position in this jurisdiction and has also been implicitly recognised by the courts.

7.58 The case concerned the alleged unfair dismissal of a director of the respondent company. The decision focused on a sum of

£2,000 which the appellant director received annually in addition to his annual salary. This sum was treated by the company as an

expense for the purpose of tax evasion, thereby defrauding the Revenue. The Tribunal, having distinguished the case from St. John

Shipping held the illegality did not render the contract of employment void, but that the illegality caused the contract to be

unenforceable.

7.59 In the view of the Tribunal, public policy rendered the illegal contract unenforceable. The Tribunal considered, relying on the

decision of the Tribunal in Newland v. Simons and Willer Ltd. (1981) I.C.R. 521, that the essential question is “Has the employee

knowingly been a party to the deception on the Revenue?”. The Tribunal decided, on a subjective test, that the employee in question

had been party to the deception. The chairman of the Tribunal stated, at 369:-

“It is public policy that the courts and this Tribunal, should not lend themselves to the enforcement of contracts either

illegal on their face or in which the intended performance of obligations thereunder was illegal to the knowledge of the

party seeking to enforce the contract.”

7.60 Since then, of course, the Unfair Dismissals Act has been amended by the Unfair Dismissals (Amendment) Act 1993 so that an

employee now is, notwithstanding a contravention of the type which occurred in Lewis, entitled to redress under the Act in respect of

his/her dismissal. This was observed by Laffoy J. in Re Red Sail Frozen Foods Ltd. (In Receivership) [2007] 2 I.R 361.

7.61 It was held that the amendment to the Unfair Dismissals Act 1977 did not impede an employee from successfully pursuing a claim

under that Act. The Minimum Notice and Terms of Employment Act 1973 contained a similar statutory provision. However, as regards

holiday pay and arrears of wages, which were governed by the Protection of Employees (Employers' Insolvency) Act 1984, there was

no such statutory provision and the common law rules on illegality were found to apply. However, the Department had adopted a

pragmatic approach and made payments to the former employees on the basis of taxed payments to employees. Laffoy J. found that

the Department made this decision either without regard to the issue of enforceability of the contracts of employment or, perhaps,

was satisfied that no issue of enforceability arose. Laffoy J. held that it was lawful for the receiver to pay the arrears of wages and

holiday pay to the Department in the circumstances. It can, I think, be said that Laffoy J. did not demur from the broad approach

adopted in Lewis.

8 The Proper Approach

8.1 In the light of that review of the case law, it seems to me that it is appropriate for this Court, at this time, to consider the

appropriate modern approach to be applied regarding the question of whether, and if so in what circumstances, a court in this

jurisdiction should enforce a contract notwithstanding the fact that the relevant contract may, in some way, have a connection with

illegality.

8.2 A starting point has to be to note that the question which was, at least for the time being, resolved in the United Kingdom in

Tinsley has not been expressly considered in any detail in this jurisdiction in recent times. In my view, this Court is, therefore, free to

consider the proper approach to adopt in the light of principle and precedent. I am also persuaded that there is much to be said for

the criticism identified by Lord Sumption in Les Laboratoires Servier of the approach which sought to turn the principle of illegality

from a rule of law into a power which could be exercised by the court on a discretionary basis depending on the merits of the case.

Whatever may be the disadvantages of the rule of law approach, the uncertainty which would be created by leaving the question of

enforceability up to a very broad consideration by a trial judge on the facts of any individual case would arguably be worse.

8.3 However, the approach adopted in cases such as Euro-Diam sought to solve the problem of attempting to balance, on the one

hand, the public policy requirement that courts not act in aid of illegal activity with, on the other, the injustice to which a "lie where

it falls" approach can give rise by inviting the court to decide each case on its own merits. An alternative approach, which seems to

me to give rise to a much greater degree of certainty, seeks to reconcile the competing principles by having regard to what may be

seen to be the policy requirements of the relevant statute which creates the illegality in the first place. On that basis, a court is

required to assess whether the requirements of public policy, in respect of a particular statutory provision rendering, as a matter of

the public law of the State, a particular type of activity illegal, require that contracts sufficiently connected with that particular type

of illegality are to be regarded as unenforceable. Such an approach requires each statutory regime (or part of a statutory regime) to

be independently assessed to determine whether policy requires particular types of contracts to be treated as unenforceable.

However, such an approach does not mandate the court to take a different view as to whether one particular contract or another

may be regarded as unenforceable by virtue of being in breach of the same statutory provision by reference to, for example, the

severity of the breach concerned or the adverse consequences for the parties. The proper approach, in my judgement, is statute

specific but is not case specific.

8.4 It must also be emphasised that the court must, in deciding whether public policy requires relevant contracts to be treated as

unenforceable in the context of a particular statutory provision, place appropriate weight on the first principle, being the undesirability

of courts being seen to enforce contracts which may be tainted by illegality and thereby failing to discourage such illegality. The

weight to be attached to that principle in the context of an assessment of where the balance lies in relation to any particular

statutory regime may depend on the nature of the statutory regime concerned and the type of activity which is thereby rendered

unlawful. There might well be cases where the nature of the relevant illegality involves very serious criminal activity and where,

therefore, the policy requirement that courts refrain from enforcing illegal contracts may be such as would manifestly override any

other consideration. A contract to commit murder or to rob a bank would be obvious examples. There will, however, be other cases,

not least in the regulatory area, where it may be necessary to assess, in the context of each relevant statutory provision, whether

the policy requirements of the statute concerned, when taken in conjunction with the general policy requirement which leans against

the enforcement of illegal contracts, may lead to a conclusion which favours enforceability.

8.5 However, once it is determined that policy requires that contracts which are deemed unlawful by reference to a particular

statutory provision are to be regarded as unenforceable, no assessment of the merits of the individual case arises. The consequences

lie where they fall. While there might be some uncertainty arising prior to the time when a court has the first opportunity to consider

whether a particular statutory regime renders contracts unenforceable, such uncertainty stems from the silence of the relevant

statute and any uncertainty will be removed once the matter is first determined. The application of the rule, as a rule of law, would

then have been decided to apply in all cases under the relevant statutory provision so as to render appropriate contracts

unenforceable. Likewise, if a court were to determine that contracts were not to be regarded as unenforceable by reference to a

particular form of statutory illegality, then, again irrespective of the merits of any individual case, such contracts would be

enforceable. The focus of the approach must, therefore, to be to determine whether public policy requires, in the context of a

particular statutory provision, that contracts which may be tainted by illegality by reference to that specific statutory provision, are

to be treated as unenforceable. While that approach is not entirely consistent with that adopted by the Supreme Court of the United

Kingdom in Tinsley, it seems to me to be broadly supported by the approach adopted in Australia, and to be more appropriate in

attempting to balance the public policy requirements involved in a highly regulated age.

8.6 If the statute makes clear what the consequences for relevant contracts are to be, then that is an end of the matter. The real

problem arises where, as here, the statute is silent. Neither section 60 nor the MAR say anything directly about relevant contracts

being void or valid, enforceable or unenforceable. The question which arises is, therefore, given that silence, as to what public policy

requires. In that context it is apposite to note the important policy objectives identified as far back as Holman v. Johnson, but also to

have regard to the fact, as noted by Lord Wright in Vita Food Products, that "public policy understood in a wider sense may at times

be better served by refusing to nullify a bargain".

8.7 Finally, as to the broad approach, it is necessary to note that questions may arise as to the extent to which contracts with a

greater or lesser connection with the relevant illegality are to be treated as unenforceable. Clearly that issue does not arise if the

proper conclusion to reach is that public policy does not require unenforceability at all. But where unenforceability arises, a further

question may require to be determined as to just how closely connected to the relevant illegality a transaction may be required to be

in order for it to be sufficiently tainted so as also to be treated as unenforceable.

8.8 But it is one thing to specify that the court must attempt to discern what public policy requires, in the light of the undesirability

of courts enforcing contracts tainted with illegality coupled with the policy of the relevant statutory regime: deciding how, in more

detail, the court should attempt to go about resolving that question in respect of any particular statutory regime is another.

8.9 However, the first two broad principles seem to me to be relatively clear. Those principles are the following:-

"1. The first question to be addressed is as to whether the relevant legislation expressly states that contracts of a

particular class or type are to be treated as void or unenforceable. If the legislation so provides, then it is

unnecessary to address any further questions other than to determine whether the contract in question in the

relevant proceedings comes within the category of contract which is expressly deemed void or unenforceable by

the legislation concerned.

2. Where, however, the relevant legislation is silent as to whether any particular type of contract is to be

regarded as void or unenforceable, the court must consider whether the requirements of public policy (which

suggest that a court refrain from enforcing a contract tainted by illegality) and the policy of the legislation

concerned, gleaned from its terms, are such as require that, in addition to whatever express consequences are

provided for in the relevant legislation, an additional sanction or consequence in the form of treating relevant

contracts as being void or unenforceable must be imposed. For the avoidance of doubt it must be recalled that all

appropriate weight should, in carrying out such an assessment, be attributed to the general undesirability of

courts becoming involved in the enforcement of contracts tainted by illegality (especially where that illegality

stems from serious criminality) unless there are significant countervailing factors to be gleaned from the language

or policy of the statute concerned."

8.10 Where the relevant statutory regime expressly provides that contracts of a particular type or category are considered to be

either void or unenforceable (either in all circumstances or in certain specified circumstances), it is clear that the Oireachtas has

determined that the balance between the two competing principles, which I have addressed earlier in this judgment, is to be resolved

in favour of the "hands off" approach, leaving the consequences to lie where they fall. Doubtless, in such cases, the Oireachtas must

be taken to be of the view that there are sound policy reasons for choosing that option. In certain cases it may be that the activity

which is rendered illegal by statute is considered to be wrong in itself, and that parties engaging in that activity should not be able to

enforce any relevant arrangements entered into.

8.11 If the legislation is clear in that regard, then, in the absence of any question as to the consistency of the relevant legislation

with the Constitution, the courts must adopt the policy choice determined by the Oireachtas and treat any contract coming within

the terms of the legislation itself as either void or unenforceable. There are also obvious reasons why this question should be the one

first answered. If the legislation renders a particular class of contract void or unenforceable then that is the end of the matter. No

other issues arise. All of the case law reviewed is consistent on this point. It is only if the legislation is silent in that regard that the

further issues identified earlier need to be considered.

8.12 The second question is as to whether, even in the absence of an express provision rendering a contract of a particular type void

or unenforceable, the courts should nonetheless treat that contract as being unenforceable as a contract tainted with illegality. It

seems to me that the starting point for a consideration of this aspect of the case has to be to acknowledge that, by definition, in

order for this second question to arise, the relevant contract must not have been expressly declared by statute to be void or

unenforceable by the express terms of the legislation in question. Rather, it is very silence of the legislation on that point that leads

to the second question. On the other hand, all due regard must also be paid to the importance of courts not being seen to

countenance illegality by enforcing contracts which are tainted. As noted in the review of authorities from common law jurisdictions

set out in the preceding section of this judgment, it does, however, need to be acknowledged that the range of matters which can

give rise to some element of illegality in a modern, highly regulated age can be very significant indeed. Furthermore, the connection

between any particular act of illegality and the contract whose enforceability is under consideration can vary. In addition, the

purpose of the statute creating the illegality concerned may or may not tend to be furthered by treating relevant contracts as

unenforceable.

8.13 In those circumstances, it seems to me that the Court must have regard to the fact, although it will not, of course, be decisive,

that the Oireachtas could have, but chose not to, include an express provision rendering a contract of the type concerned void or

unenforceable. The question comes down to one of assessing whether, notwithstanding the absence of such an express provision,

nonetheless the Court should, as a matter of policy, treat the contract as unenforceable by reason of it being tainted with illegality.

8.14 It is, after all, the Oireachtas which, by enacting the legislation in question, has rendered certain activity unlawful. The reasons

for the Oireachtas adopting that course of action may, of course, be many and varied. Thus, the policy behind the legislation in

question may fall into many different categories. But it is precisely because it is the Oireachtas which has decided that a particular

activity is to be regarded as unlawful that it is necessary to assess, and place significant weight on whether the policy of the

legislation enacted by the Oireachtas requires that a particular of contract be treated as unenforceable.

8.15 I now move on to an assessment of the factors which may influence a decision as to whether the second principle requires that

a contract of a particular type should be treated as void or unenforceable. This raises, it seems to me, the more difficult question

with which this Court is now confronted, which is as to the proper approach which the Court should adopt in attempting to assess

whether public policy generally and the policy of the relevant legislative provision requires that particular contracts, or types of

contracts, are to be regarded as unenforceable. It is, perhaps, in that context that it may be said that the approach adopted in,

respectively, the United Kingdom, on the one hand, and Australia, on the other, differs. That difference can, I think, be exaggerated.

However, it can be seen that one aspect of the view of the minority in Tinsley found favour in Australia.

8.16 The original view, stretching back to Holman, was that, as a matter of policy, a court should not concern itself with attempting

to give any effect to a contract which was in any way connected with an illegality. In principle, that illegality could derive from policy

considerations recognised by the common law itself. As has already been noted, illegality can increasingly be found to derive from

statutory prohibitions in one form or another. While it may be said that the original "pure" position adopted in Holman has been

nuanced in both the United Kingdom and Australia, it seems that the way in which the common law has evolved on this topic in those

two jurisdictions has diverged at least to some extent.

8.17 On one view, the evolution of the jurisprudence in the United Kingdom, as evidenced by Tinsley, and even in St. John Shipping, is

more concerned with identifying a proper application of the "pure" position originally identified in Holman or exceptions to that position

rather than modifying the underlying position itself. If the principle is that the courts should not be seen to be involved in giving effect

to any contractual arrangements tainted by illegality, then that principle has no effect on the retention of property obtained by

persons as a result of the completion or partial completion of the contract concerned. Such a party does not have to rely on the

contract tainted by illegality to assert their entitlement to property, title to which has already passed as a result of the transaction

concerned. The "pure" principle does not require that contracts tainted by illegality be reversed. It does not go that far. It simply

suggests that the courts should not get involved in attempting to enforce such contracts. But if they have already been completed,

then enforcement is no longer necessary. The principle would need to go much further, and require the active reversal of the

consequences of a contract tainted by illegality, if it were to be the case that an action could be brought to recover the benefits

which have actually been transferred as a result of a completed or partially completed contract.

8.18 In addition to that aspect of the United Kingdom jurisprudence, there are also the established exceptions to the "pure" rule,

which were summarised in the judgment of McHugh J. in the High Court of Australia in Nelson in a passage already cited. But all of

those exceptions and refinements do, in a sense, leave the basic rule intact. Contracts tainted by illegality should not be enforced by

the courts. That rule may not, strictly speaking, apply where the contract has completed and where, therefore, it may be

unnecessary to have recourse to the courts for its enforcement. Likewise, innocent parties, or those for whose benefit the relevant

statutory regime was created may not suffer.

8.19 But the proposition which has found favour in Australia is that a more nuanced approach to the question of common law illegality

itself is required.

8.20 In a highly regulated age, it seems to me that there may be an argument to the effect that a more nuanced approach is to be

preferred. To treat every contract which might be said to be tainted by illegality as unenforceable, with all the potential for injustice

to individual parties which such an approach would carry, may well not be consistent with modern policy requirements. As noted

earlier, it is important to emphasise that it is open to the Oireachtas to determine whether particular categories of contract are to be

regarded as unenforceable by reference to any aspects of a regulatory regime which the Oireachtas determines warrant such an

approach. But where the Oireachtas has chosen not to expressly require that such contracts not be enforced, does it necessarily

follow that policy always requires that the courts necessarily treat such contracts as unenforceable? There is, of course,

nonetheless, the important policy requirement, which stretches back to Holman, and which is to the effect that the courts should not

lightly be seen to be giving effect to contracts which are tainted by illegality. But modern experience demonstrates that there are

other important policy considerations involved as well. Neither should the courts be readily seen to refuse to enforce otherwise

binding commitments (where not expressly provided by statute) which can lead to injustice and consequences which are significantly

disproportionate to the illegality concerned. Treating contracts as unenforceable in all circumstances can be as likely to lead to a

breach of legitimate public policy requirements as to acting in their aid.

8.21 It seems to me to follow that, at least at the level of general principle, there is a case for a more nuanced approach, which

seeks to identify the criteria by reference to which contracts tainted by illegality are to be regarded as unenforceable. Such an

approach might be said to be mandated by the modern requirements of policy in a highly regulated age.

8.22 This leads to an important question. Legal certainty requires that there must be a reasonable level of clarity about the principles

which are to be applied to determine whether contracts which might be said to be tainted by an illegality are nonetheless to be

enforced. While the application of those principles to particular types of contract may require some analysis and may not always be

easily determined, nonetheless the overall approach should be clear.

8.23 However, it is important to recall that the appropriate overall approach may have to be applied to a very large range of differing

circumstances. In that context, it may well not be appropriate to attempt, in just one case which stems from a particular type of

statutory or regulatory regime, to define with any great precision the overall approach which may be appropriate in all cases including

very different types of situations involving different types of regimes.

8.24 In this context, it is important not to minimise the seriousness of the allegations which the Quinns make in this case. It is also

important to record that those allegations are denied by Anglo, but that, for the purposes of this preliminary issue, the case is being

considered on the assumption that the Quinns will be able to prove what they allege. It is worth reiterating that the reason why that

approach is adopted is because Anglo argues that, even if those allegations are made out, the Quinns still cannot succeed.

8.25 But even when considering the broad category of underlying transaction which is under consideration in this case, being a

lending transaction, it is possible to envisage a very wide range of circumstances, in which such a transaction might be said to be

tainted with illegality. There might, for example, be money lent to a drug dealer in circumstances where it was known to the lender

that the money was to be used for trafficking in drugs. At the other end of the spectrum, there might be lending which is connected

with a transaction where the transaction concerned is in technical breach of a complex regulatory regime and where the lender,

although aware of the facts, might not appreciate that there was a technical problem with the transaction for which the lending was

being provided. A whole range of intermediate cases can be envisaged.

8.26 In those circumstances, it seems to me that it is appropriate to identify some of the issues or criteria which may need to be

considered in the context of determining the enforceability or otherwise of contracts under any particular statutory regime without

necessarily reaching a final conclusion as to whether, and if so in what way, each of those criteria should be applied. It will, however,

in the context of this case, be necessary to reach a more definitive view on those aspects of the criteria which are of particular

relevance to the question of the enforceability or otherwise of contracts which may be associated with alleged breaches of section

60 and/or the MAR. It would be prudent, in my view, to leave over a definitive decision in respect of criteria which are not crucial to

this case to proceedings where the potential application of such criteria would be decisive, and where the focus of the Court's

consideration would be on the application of such criteria to the real issues which arose in such cases.

8.27 In any event, it may not always be possible to provide an exhaustive list of the factors which should be taken into account. An

inevitable consequence of trying so to do will be that the very next case which arises will throw up circumstances not envisaged.

However, a review of the case law, and an analysis of modern conditions, suggests a number of factors which will almost certainly

loom large in any court's consideration. I will address first those criteria which seem to me to be central to the issues in this case,

and which, thus, require definitive determination. I will then turn to a brief consideration of criteria which may be relevant in other

circumstances.

8.28 First it must be recalled that some statutory regimes render specified activity illegal per se. Other regimes render illegal activity

which might ordinarily be lawful, but only in specified circumstances. The most obvious example of the latter is a case where there is

a failure to obtain a necessary permission or licence. However, there may be cases where a type of transaction which is ordinarily

lawful may be regarded as illegal because of the circumstances in which it was carried out, or due to the motives of one or other or

both parties. The activities which are at the centre of the issues in the present case fall into that latter category. There is nothing,

per se, wrong with a bank lending money and taking security for that lending, whether from the borrower or other parties connected

to the borrower. However, where the lending concerned is designed to permit a party to buy shares in the lender, then section 60 will

be breached. Where the lending is connected with activity which amounts to market abuse under the MAR, then the activity generally

may be unlawful.

8.29 As pointed out by McHugh J. in Nelson, there is "a vast difference between the performance of a contract for carriage of goods

by a ship that is overloaded in breach of the law and the making of a contract for the carriage of goods where the making of the

contract is specifically prohibited". As a further refinement, it is important to note that there may be contracts which, by their

nature, and in the circumstances of the case, could only be performed in breach of the relevant law. On the other hand, there will be

contracts which could quite easily be carried out in a lawful manner. There was no necessary reason why the goods in Nelson had to

be carried in an overloaded ship. They could just as easily have been carried in a ship which was well within its limits.

8.30 Somewhat different considerations might, however, apply in a case where the very terms of the contract itself created a

situation where it was, in the circumstances and to the knowledge of both parties, impossible to perform the contract without

breaking the law.

8.31 In passing, it is important to recall, as McHugh J. also noted in Nelson, that the courts will not refuse relief where the claimant

was ignorant or mistaken as to the factual circumstances which render an agreement or arrangement illegal. It is important to note

that the exception thereby created is concerned with ignorance of the facts rather than ignorance of the law. If the claimant knew

what he was doing but did not know that it was illegal, then that will not avail him. If he did not know enough about the facts to

understand that the contract was unlawful, then a different situation may arise. But it is also important to recall that the exception

to which I have referred is one which arises where it is the innocent party who wishes to enforce the contract in question. While a

defendant may be able, in an appropriate case, to rely on illegality as a defence to a claim brought by the other party to a contract

who was aware of all of the facts necessary to establish the relevant illegality, the same defence will not avail a defendant against a

claimant who was not aware of sufficient facts to have knowledge of the illegality imputed to him. A party who knows enough about

the facts so that it must be said that they knew, or ought to have known, that a contract could only be carried out in an illegal

manner will not, under that analysis, be entitled to enforce same.

8.32 While not necessarily decisive in all cases, it seems to me that significant weight must, therefore, be attached to an analysis of

whether the relevant contract is designed to require the parties to carry out the very act which the legislation is designed to

prevent. The first matter which, therefore, a court should consider is:-

"Whether the contract in question is designed to carry out the very act which the relevant legislation is designed to

prevent."

8.33 Next, it seems to me that the court must give all appropriate weight to any express terms of the statute concerned, which might

be taken to state, or necessarily imply, that the remedies or consequences specified in the statute concerned are to be the only

adverse consequences, thus negativing any policy requirement in favour of the imposition of other consequences, such as the

rendering of relevant contracts void or unenforceable.

8.34 In addition, therefore, the court should consider:-

"Whether the wording of the statute itself might be taken to strongly imply that the remedies or consequences specified

in the statute are sufficient to meet the statutory end".

8.35 In like vein, a court must also consider whether the act which the legislation seeks to render illegal is regarded as unlawful from

the perspective of both parties, or of only one party. Thus, it may be unlawful to carry out a particular activity without a licence. But

it may not be unlawful for a person to enter into a contract with an unlicensed service provider. The statutory policy may be clear. It

may be designed to require a licence and, perhaps, to thus ensure that a licence holder is, in the public interest, subject to detailed

regulation. The whole purpose of that legislation may be to protect consumers of the service concerned. But it may be clear that the

policy of the legislation does not place on the consumer any obligation to be satisfied that the service provider holds the necessary

authorisation. Indeed, in many cases, to do so would be to place a disproportionate burden on consumers.

8.36 The overloaded shipping cases are a good example. There was nothing, on any view, unlawful in the activities of the consignor.

The consignor simply entered into a perfectly normal and valid contract for the consignment of goods. It was the activity of the

shipper in overloading the vessel which was illegal. In such circumstances, there would, of course, be no reason in any event why the

innocent consignor should not be able to sue on the contract. The questions of policy which I have sought to address are concerned

with the issue as to whether the party who acts illegally, in that case the overloading shipper, is entitled to sue. On the other hand,

it is also important to note that there will be many cases where both parties act unlawfully by entering into a particular type of

contract.

8.37 Therefore, the court should take into account:-

"Whether the policy of the legislation is designed to apply equally or substantially to both parties to a relevant contract,

or whether that policy is exclusively or principally directed towards one party. Therefore, legislation which is designed to

impose burdens on one category of persons for the purposes of protecting another category may be considered

differently from legislation which is designed to place a burden of compliance with an appropriate regulatory regime on

both participants".

8.38 Finally, insofar as matters of particular importance to this case are concerned, it must also be acknowledged that an important

part of the policy behind the doctrine of illegality is concerned with achieving the purpose of the statute which creates the illegality in

the first place. It is, therefore, necessary to consider whether rendering relevant contracts void or unenforceable might, in some

circumstances, be counterproductive in that context. There will be cases where it is necessary to consider whether, and if so to

what extent, treating the relevant contracts as unenforceable might tend to defeat the very purpose of the statute itself. A case

where it is clear that the policy of the relevant legislation is to protect a particular class of persons will hardly be met by a refusal to

enforce contracts to the further detriment of that very class.

8.39 Thus, in addition, the court should consider:-

"Whether the imposition of voidness or unenforceability may be counterproductive to the statutory aim as found in the

statute itself".

8.40 For reasons which I hope will become apparent when I turn to applying these principles to the facts of this case, it seems to me

that the criteria which I have so far identified are sufficient to resolve the broad issue in this case. It must be recalled that the broad

issue of principle is as to whether a combined consideration of the public policy requirement that the courts should not be seen to

come to the aid of illegality, when coupled with the public policy behind the particular statutory provision which renders the relevant

activity illegal, requires that sufficiently connected contracts be treated as unenforceable. However, a review of the case law from a

number of jurisdictions discloses that there may well be further criteria or factors (beyond those already specified) which can and

should be taken into account in appropriate cases. Without in any way attempting to be exhaustive, I now turn to a brief

consideration of some further factors which might be relevant in this area of the law generally although, for the reasons already

addressed, the views here expressed are necessarily tentative, and will require more detailed consideration in cases in which such

questions might be decisive in order that a more definitive approach might be developed.

8.41 The first such matter which needs to be addressed in that context is to consider the adverse consequences which the statute

itself provides for those who engage in the relevant illegal activity. It must, of course, be assumed that legislation does not deem

certain activity to be illegal without providing for any consequences. What would be the point of rendering activity unlawful if it did

not matter in law whether someone engaged in the activity or not? However, most regulatory regimes provide some form of adverse

consequence in the case of breach. Criminal penalties may be imposed. Administrative consequences may result. For example,

licensed persons or bodies may lose their licence or may have onerous conditions imposed. Individuals may be restricted in their future

activities. Administrative penalties may be incurred although, in this jurisdiction, there may be some limits on the extent to which

administrative consequences which amount to a penalty may be imposed in circumstances which might be considered to involve the

administration of justice.

8.42 That being said, and subject to such constitutional limitations as there may be, persons or bodies found to have acted illegally

may be subject to significant administrative financial penalties or the like. The examples which I have given are not sought to be

exhaustive. The types of consequences which may be expressly provided by statute as flowing from illegality are many and varied,

and are likely to be significantly dependent on the nature of the illegality concerned and the type of activity regulated by the statute

in question. All that needs to be said for the purposes of this case is that a court may well be entitled to take into account the range

of express potential adverse consequences of the relevant illegality in assessing whether it is to be implied that those consequences

are sufficient in themselves to meet the purposes or policy of the statute.

8.43 It may be that an elaborate, significant and proportionate scheme of adverse consequences may be much more likely to lead to

the inference that those consequences are sufficient to deal with the relevant illegality. Limited or minor consequences will more

readily lead to the opposite inference and, thus, to a conclusion that it is required by policy that relevant contracts should be

regarded as unenforceable. In such an assessment, it may well be that a court will be required to be mindful to identify the purpose of

the statute (as inferred from its general structure and terms) and to consider whether it should be inferred that the specific

consequences, set out in the legislation and to be applied in the case of illegality arising under the statute concerned, are sufficient

to meet that statutory purpose.

8.44 It is at least arguable, therefore, that a court may be required to have regard to:-

"Whether, having regard to the purpose of the statute, the range of adverse consequences for which express provision

is made might be considered, in the absence of treating relevant contracts as unenforceable, to be adequate to secure

those purposes".

8.45 Likewise, in carrying out such an assessment, it may be necessary to consider whether the further imposition on the parties

which might be said to flow from treating a contract as void or unenforceable (with its potential for unjust consequences for the

parties or one of them) might be, as McHugh J. suggested in Nelson, "disproportionate to the seriousness of the unlawful conduct". In

other words, the court may have to consider whether rendering all contracts connected with the illegal activity concerned void or

unenforceable would impose an excessive and disproportionate burden on interested parties well beyond that necessary to secure

that same statutory purpose.

8.46 It is important, however, to treat this aspect of the potential criteria with some care. I have already set out the reasons why it

would, on balance, be undesirable to apply a test which required the court to balance the seriousness of the individual wrongdoing in

the case in question with the consequences for the parties in that same case. The question of whether treating relevant contracts as

unenforceable might be considered to be disproportionate must, therefore, be considered in the context of the general application of

the relevant statutory measure and the general sort of circumstances which might be expected to be governed by it. There is no

mandate for conducting a proportionality analysis on an individual case by case basis. There may well, however, be some justification

in inferring the policy requirements of a statute concerning unenforceability from an analysis of general proportionality.

8.47 It is also, therefore, at least arguable that a court may be required to have regard to:-

"Whether the imposition of voidness or unenforceability may be disproportionate to the seriousness of the unlawful

conduct in question in the context of the relevant statutory regime in general."

8.48 In addition, it should be noted that, even where a relevant contract may be unenforceable as and between the parties thereto,

it does not necessarily follow, certainly without further detailed analysis, that every supporting or collateral measure, such as a

guarantee or the giving of security by a party other than a party to the original contract, is to be treated in exactly the same way as

the underlying contract itself, particularly in circumstances where those involved in the connected transaction are unaware of, and

are innocent in relation to, the relevant illegality, and whether those innocent parties may be said not to be beneficiaries of the

arrangements concerned. Whether that question truly arises on the facts of this case is an issue to which it will be necessary to

return.

8.49 It is important, in that context, to note that, for the purposes of the preliminary issue in this case, it must be assumed that, as

they assert, the Quinns were, at the relevant times, unaware of any illegality. Thus, a question potentially arises, in circumstances

such as those which underlie this case, as to whether a party to a transaction which is not itself illegal and which is merely collateral

to illegal activity is necessarily bound by the consequences of such a collateral contract, even though more central contractual

arrangements may be considered to be enforceable notwithstanding illegality under the principles which I have sought to analyse. As

noted above, that question may come into greater focus where the parties concerned have not benefited in any way form the overall

transaction. In that latter context it may well be important to make a distinction between two types of cases. There may very well

be a strong justification for public policy treating such cases differently. On the one hand, it is possible to envisage a case where

someone, wholly unconnected with and innocent of an illegal transaction, gives security for the benefit of, for example, a relative.

8.50 An analysis of the appropriate criteria might result in the conclusion that public policy requires that the underlying transaction

between two guilty parties should nonetheless be enforced, notwithstanding its connection with illegality. But it would not necessarily

follow that an entirely innocent guarantor should suffer to the benefit of a party who was directly engaged in the illegality concerned.

On the other hand, different considerations might well apply where the guarantor was, whether innocently or otherwise, designed to

benefit from the very transaction itself or from closely connected transactions. In such circumstances it might be difficult to see how

public policy required that such a party should potentially gain the benefit of an illegal transaction without having to comply with

obligations entered into as part of the very same series of transactions. However, the precise way in which such considerations might

work out in practice must await a case in which appropriate facts squarely arise, and where a determination of the proper approach

would be decisive to the result. For example, it might well be that "benefit" in this context might properly be seen to be viewed from

the time of the relevant transaction and not with hindsight. A series of transactions from which a party might have expected to

benefit might not be viewed, for these purposes, differently if the expected benefit did not ultimately materialise.

8.51 In one sense, the question of connected transactions involving innocent parties is the opposite of the one raised by the issues

already touched on in this judgment concerning contracts closely connected with illegality. As noted earlier, it may well be necessary,

in cases where the application of relevant criteria leads to the conclusion that some degree of unenforceability must follow, to assess

just how close a connection there must be between the contract or transaction under review and the relevant illegality so that such

a contract might be sufficiently tainted so as to be treated as unenforceable. Such questions are concerned with the reach of

illegality. Those issues are concerned with a situation where an underlying or central contract is to be regarded as unenforceable, and

concern the question of whether collateral or connected contracts may also be unenforceable. But a similar question arises where the

underlying or central contract is enforceable but where there may be circumstances, by reference to the relevant criteria, where it

may be arguable that public policy does not extend so far as to require that all collateral contracts involving innocent parties are

necessarily also enforceable.

8.52 Put in the context of this case, the question arises as to whether, even if it is the case that the underlying lending transactions

entered into between the various Quinn Group companies and other Quinn entities, on the one hand, and Anglo, on the other, are

tainted by illegality under either or both of section 60 and the MAR, but are, nonetheless, properly regarded as enforceable in

themselves, it necessarily follows that security put in place by an innocent party in support of those transactions is also enforceable.

There are, in reality, two questions involved. The first is to consider whether, having applied the appropriate criteria to the issue, the

underlying lending contracts should be regarded as enforceable, it may be taken also to be required by that same policy that such

collateral contracts are likewise to be regarded as enforceable. The second question is as to whether the fact that the relevant

security is already in place, and that Anglo does not, therefore, have to invoke the jurisdiction of the courts to enforce their security,

alters the overall legal situation. It should be noted that it is the Quinns who bring these proceedings seeking negative declarations.

Anglo does not seek any order of the court which is designed to act in aid of the enforcement of their security. I will analyse, in due

course, the nature of the negative declarations sought in this case and the possible effect of that form of action on some of the

issues which require to be determined.

8.53 However, whether those questions, including the question as to whether Anglo, having the benefit of completed security

arrangements, could, in any event, be deprived of its opportunity to seek to enforce those security arrangements provided that they

did not have to invoke a court process, are issues which may not arise depending on the answer to the question of whether the

underlying lending contracts are themselves enforceable or not. If the underlying lending contracts are unenforceable then the

question of whether collateral contracts with innocent parties might be unenforceable even if the primary contract was enforceable

would not arise. Likewise, Anglo would not have to rely on any question concerning the status of concluded security arrangements if

the security contracts themselves are enforceable in any event.

8.54 It is appropriate, therefore, to summarise the considerations which may ordinarily need to be taken into account by a court in

assessing whether it may be said that public policy requires that contracts tainted by association with illegality under that statute

should be regarded as unenforceable.

8.55 In summary, the principal criteria are as follows:-

1. The first question to be addressed is as to whether the relevant legislation expressly states that contracts of a

particular class or type are to be treated as void or unenforceable. If the legislation does so provide then it is

unnecessary to address any further questions other than to determine whether the contract in question in the relevant

proceedings comes within the category of contract which is expressly deemed void or unenforceable by the legislation

concerned. (para. 8.9)

2. Where, however, the relevant legislation is silent as to whether any particular type of contract is to be regarded as

void or unenforceable, the court must consider whether the requirements of public policy (which suggest that a court

refrain from enforcing a contract tainted by illegality) and the policy of the legislation concerned, gleaned from its

terms, are such as require that, in addition to whatever express consequences are provided for in the relevant

legislation, an additional sanction or consequence in the form of treating relevant contracts as being void or

unenforceable must be imposed. For the avoidance of doubt it must be recalled that all appropriate weight should, in

carrying out such an assessment, be attributed to the general undesirability of courts becoming involved in the

enforcement of contracts tainted by illegality (especially where that illegality stems from serious criminality) unless

there are significant countervailing factors to be gleaned from the language or policy of the statute concerned. (para.

8.9)

3. In assessing the criteria or factors to be taken into account in determining whether the balancing exercise identified at

2 requires unenforceability in the context of a particular statutory measure, the court should assess at least the following

matters:-

3(a) Whether the contract in question is designed to carry out the very act which the relevant legislation is designed to

prevent (para. 8.32)

3(b) Whether the wording of the statute itself might be taken to strongly imply that the remedies or consequences

specified in the statute are sufficient to meet the statutory end. (para. 8.34)

3(c) Whether the policy of the legislation is designed to apply equally or substantially to both parties to a relevant

contract or whether that policy is exclusively or principally directed towards one party. Therefore, legislation which is

designed to impose burdens on one category of persons for the purposes of protecting another category may be

considered differently from legislation which is designed to place a burden of compliance with an appropriate regulatory

regime on both participants. (para. 8.37)

3d) Whether the imposition of voidness or unenforceability may be counterproductive to the statutory aim as found in

the statute itself.(para. 8.39)

4. The aforementioned criteria or factors are, for reasons which will become apparent, sufficient to resolve this case.

However, the following further factors may well be properly taken into account in an appropriate case:-

4(a) Whether, having regard to the purpose of the statute, the range of adverse consequences for which express

provision is made might be considered, in the absence of treating relevant contracts as unenforceable, to be adequate

to secure those purposes. (para. 8.44)

4(b) Whether the imposition of voidness or unenforceability may be disproportionate to the seriousness of the unlawful

conduct in question in the context of the relevant statutory regime in general. (para. 8.47)

5. Doubtless other factors will come to be defined as the jurisprudence develops.

8.56 In the light of that general approach, it is necessary to turn to the specific issues of enforceability which arise in this case. I,

therefore, turn to the question of whether the underlying lending transactions can be said to be unenforceable as a result of the

alleged illegality by reference to section 60 and the MAR. I will approach that question separately in respect of the two legislative

measures. However, I should first make a general point applicable to both.

9 Application to the Facts of this Case - A General Point

9.1 On the facts of this case, it is clear that there is no express statutory provision to be found either in the MAR or in section 60

which renders any of the transactions which are the subject of these proceedings void or unenforceable as such. The first question

does not, therefore, really arise in either case.

9.2 The core issue of controversy stems from the proper application of the principles which I have sought to identify as being

applicable to the second question. Taking the two legislative provisions which are at the heart of these proceedings, can it be said

that a proper analysis of the respective statutory regimes leads to the conclusion that, as a matter of policy, a court should regard

contracts which are tainted by any illegality arising under those two regimes as being unenforceable? Answering that question

requires considering the policy of the relevant legislation, but also the important policy requirement which suggests that courts should

be slow to become involved in the enforcement of tainted contracts.

9.3 I have attempted to place the difficult issues which arise in this case in the context of an overall principled framework, for it

seems to me to be necessary to attempt to address the questions which arise in the context of such a framework. However, it must

be emphasised that the analysis of the proper application of those principles will inevitably require a case by case consideration of

any statutory regime in respect of which questions of unenforceability arise. The precise way in which that overall approach will

require to be applied will, therefore, necessarily have to await further cases in which the broad principle is sought to be applied to

other statutory regimes. This case is, after all, only concerned with section 60 and the MAR.

9.4 As previously noted there are, also, further questions concerning the status of guarantees and/or security which might arise in

the event that, in respect of either statutory regime, it is held that lending transactions which may be found to be in breach of either

or both of those regimes are nonetheless enforceable. However, the first question which arises in each case is as to whether the

underlying lending transactions in themselves can be properly regarded as unenforceable in the light of the principles already

identified. I, therefore, turn to that question first in the context of section 60.

10. Section 60

10.1 It seems to me that the section 60 question can be quite easily answered. Section 60 is, in material part, in the following

terms:-

“(1) Subject to subsections (2), (12) and (13), it shall not be lawful for a company to give, whether directly or indirectly,

and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the

purpose of or in connection with a purchase or subscription made or to be made by any person of or for any shares in

the company, or, where the company is a subsidiary company, in its holding company.

[…]

(14) Any transaction in breach of this section shall be voidable at the instance of the company against any person

(whether a party to the transaction or not) who had notice of the facts which constitute such breach.”

10.2 It is true that subsection (1) of section 60 describes relevant lending as being unlawful. However, subsection (14) enables a

company to have a relevant transaction treated as void "against any person (whether a party to the transaction or not) who had

notice of the facts which constitute such breach".

10.3 Section 60 (including subsection (14)) was considered in CH (Ireland) Inc. v. Credit Suisse Canada [1999] 4 I.R. 542. The issues

which arose in that case were quite different to those with which this Court is now faced. However, McCracken J., at p.556,

emphasised that subsection (14) only renders an affected transaction voidable. It would seem clearly implicit that McCracken J. did

not consider that the section rendered any such transactions void.

10.4 It is true, as counsel for the Quinns pointed out, that subsection (14) does not render any such transaction lawful and does not,

therefore, purport to reverse the effect of subsection (1). Nonetheless it seems to me that the section properly recognises the

distinction between a transaction being unlawful, on the one hand, and being necessarily unenforceable, on the other. For the

reasons already analysed in some detail, it does not necessarily follow that because activity is, under statute, unlawful, all contracts

which form part of the illegality are always to be treated as enforceable. The criteria for determining whether such contracts are or

are not unenforceable have already been addressed.

10.5 It is true that lending to purchase shares in the lender itself might be said to involve a contract to do the very thing which the

statute renders unlawful. However, in the context of the issues which arise under this heading, it is important to make reference to

the second criterion already identified. Is there anything in the statute itself which suggests that the legislative intent was that

contracts, even though illegal, were nonetheless to be enforceable?

10.6 Subsection (14) would be entirely redundant if every contract caught by section 60 was to be regarded as unenforceable by

reason of the fact that it is described as being unlawful in subsection (1). For, if every such contract were unenforceable because it

was unlawful, then it would follow that a company would not need to elect to treat it as void but could simply proceed on the basis

that it could never be enforced. On the other hand, it is clearly and necessarily implied by subsection (14) that a company can elect

not to treat a relevant transaction as void. To take any other view would be to entirely disregard the clear language of the

subsection.

10.7 The clear statutory policy must be, therefore, that a company which has been in breach of subsection (1) by giving, for

example, a loan to support a purchase of its own shares, can still elect to treat the loan contract as enforceable and get its money

back, together with whatever interest might apply. Indeed, there might be other terms in the contract which the company may

regard as beneficial and which it may wish to enforce. In those circumstances, it does not seem to me that there is any basis for

suggesting that a company who wishes to recover monies lent in breach of section 60 is precluded from so doing on the basis that

the transaction was illegal or, in the words of section 60(1) "not … lawful". To take a contrary view would be in direct contradiction of

the clear intent to be found in the legislation which is that the consequences for the company (or more accurately those within the

company who are involved in the unlawful transaction) are that they are exposed to a criminal penalty but that the balance between

enforcing an unlawful contract, on the one hand, and the potential injustice of allowing the consequences of that unlawful contract

to lie where they fell (meaning, in many cases, that the company whose officers had abused its position will be even worse off to the

detriment of its shareholders) lies squarely, in the context of this piece of legislation, against treating the contract as void or

unenforceable UNLESS the company exercises the election which the statute confers on it under subsection (14).

10.8 In the light of that analysis, it does not seem to me that any of the other possible criteria identified could alter the ultimate

determination. Given that analysis of subsection (14), how could it be said that the Oireachtas did not intend that the criminal

penalties imposed were not to be sufficient to meet the statutory purpose of discouraging companies providing assistance for the

purchase of their own shares. Likewise, the lending of money for the purchase of shares is not, in itself, unlawful. It is only where the

money is lent for the purposes of purchasing the shares of the lender that there is a difficulty. It is true, as already noted, that the

lending of money for the purchase of its own shares is, in one sense, a contract designed to carry out the very act which the

relevant legislation is designed to prevent. However, in the circumstances of section 60, the weight to be attached to that aspect of

the criteria is entirely displaced by the statutory language itself. While it may not always be the case that one of the relevant criteria

will be determinative, or almost determinative, of the answer as to the true statutory policy, the clear language of section 60(14)

makes the task much easier in this case.

10.9 The proper application of the criteria already identified seems to me to clearly lead to the conclusion that the statutory intent is

that contracts which breach section 60 are, nonetheless, potentially enforceable (unless subsection (14) is invoked) and that the

adverse consequences for those within a company who are found to have acted in breach of section 60 are as specified in the

section itself. I am, therefore, satisfied that, so far as section 60 is concerned, it is clear that the lending contracts between Anglo

and various Quinn Group entities are enforceable against those Quinn Group entities even if Anglo is established to have acted in

breach of section 60 in making the loans concerned. On that basis, it will be necessary to turn, in due course, to the question of

whether a different conclusion could be reached in respect of the giving of security by assertedly innocent parties in support of such

lending transactions. Indeed, a prior question, as to whether that issue has been properly raised in these proceedings at all, will

necessarily have to be addressed first. However, before coming to those questions, it is necessary to consider what the position is in

respect of the enforceability of the underlying lending contracts by reference to the alleged breach of the MAR.

11. Market Abuse

11.1 The starting point has to be to consider the relevant provisions of the MAR.

11.2 First, it is important to identify the type of activity which is rendered unlawful by the MAR. The MAR prohibit activities such as

insider trading and market manipulation. Under Regulation 2, contravention "includes, in relation to any provision, a failure to comply

with that provision" and "contravene" is to be construed accordingly.

11.3 Regulation 6(1) states that “a person shall not engage in market manipulation”. “Market manipulation” is defined in Regulation 2

as:-

“(a) transactions or orders to trade —

(i) which give, or are likely to give, false or misleading signals as to the supply of, demand for or price of financial

instruments or

(ii) which secure, by a person, or persons acting in collaboration the price of one or several financial instruments

at an abnormal or artificial level,

unless the person who entered into the transactions or issued the orders to trade establishes that the person's reasons

for so doing are legitimate and the transactions or orders to trade, as the case may be, conform to accepted market

practices on the regulated market concerned,

(b) transactions or orders to trade which employ fictitious devices or any other form of deception or contrivance, or

(c) dissemination of information through the media, including the Internet or by any other means, which gives, or is

likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or

misleading news, where the person who made the dissemination knew, or ought to have known that the information was

false or misleading”

11.4 As already noted, the MAR themselves are silent as to whether any contracts entered into, which might be said to be in breach

of those provisions or connected with prohibited conduct, are to be regarded as void or unenforceable. In that context, it is

necessary to look at the consequences which the MAR expressly provide for breaches of their provisions. There are a number of

consequences set out.

11.5 First, there are criminal sanctions. These are set out in Regulation 49, which states:-

“(1) A person who contravenes -

(a) any provision of Regulation 5 or 6,

(b) any provision of Regulation 10, 11, 12 (except Regulation 12(7)), 13 (except Regulation 13(3)), 14 (except

Regulation 14(2)), 17, 18, 19 20, 21, 22, 23, 24 or 47, or

(c) a requirement under any provision of Regulation 7,

is guilty of an offence and liable on summary conviction to a fine not exceeding €5,000 or imprisonment for a term not

exceeding 12 months or both.

(2) Each offence under paragraph (1) consisting of a contravention of any provision of Regulation 5 or 6 is an offence to

which section 32 of the Investment Funds Companies and Miscellaneous Provisions Act 2005 applies.

(3) Where the contravention in respect of which a person is convicted of an offence under these Regulations is

continued after the conviction, the person shall be guilty of a further offence on every day on which the contravention

continues and liable on summary conviction to a fine not exceeding €5,000 or imprisonment for a term not exceeding 12

months or both for each such further offence.”

11.6 Section 32 of the Investment Funds Companies and Miscellaneous Provisions Act, 2005 ("the 2005 Act"), referred to in

Regulation 49(2), states:-

“A person who is guilty of an offence created by Irish market abuse law (being an offence expressed by that law to be

an offence to which this section applies) shall, without prejudice to any penalties provided by that law in respect of a

summary conviction for the offence, be liable, on conviction on indictment, to a fine not exceeding €10,000,000 or

imprisonment for a term not exceeding 10 years or both.”

11.7 Then there are potential administrative sanctions. Under Regulation 41, in the case of a breach of the MAR, the Central Bank

may impose the following sanctions:-

“(a) a private caution or reprimand,

(b) a public caution or reprimand,

(c) subject to Regulation 46(2), a direction to pay to the Bank a monetary penalty (but not exceeding €2,500,000

in any case),

(d) a direction disqualifying the assessee from being concerned in the management of, or having a qualifying

holding in, any regulated financial service provider for such time as is specified in the order,

(e) if the assessee is continuing to commit a prescribed contravention, a direction ordering the assessee to cease

committing the prescribed contravention,

(f) a direction to pay to the Bank all or a specified part of the costs incurred by the Bank in investigating the

matter to which the assessment relates and in holding the assessment (including any costs incurred by authorised

officers).”

11.8 Regulation 6(2) states that, having regard to section 33(2) of the 2005 Act, the purpose of regulation 6 (1) is to implement

Article 5 of the Directive. Section 33(2) of the 2005 Act provides for civil liability where there has been a breach of Irish market abuse

law which concerns market manipulation. It provides:-

“(2) If a person contravenes a provision of Irish market abuse law (being a provision the purpose of which is

expressed by that law to be for the implementation of Article 5 of the 2003 Market Abuse Directive) the person

shall be liable—

(a) to compensate any other party who acquired or disposed of financial instruments by reason of the

contravention, and

(b) to account to the body corporate or other legal entity which issued the financial instruments

concerned for any profit accruing to the first-mentioned person from acquiring or disposing of those

instruments.

(3) Subsections (1) and (2) are without prejudice to any other cause of action which may lie against the person

for contravening the provision concerned.”

11.9 A number of general observations can be made. First, the range of activity which is, potentially, rendered unlawful by the MAR,

is quite extensive. As noted earlier, the sort of transactions which may be said to amount to market manipulation are defined in

Regulation 2. They include transactions which mislead the market or which employ deception. They also include the dissemination of

information which may mislead. Thus, the sort of transaction or activity which is rendered unlawful by the MAR is focused on the

consequences of the transaction or activity concerned rather than its nature. It is the effect, or intended effect, of the relevant

transaction or activity on the market for relevant financial instruments which is the primary focus of the legislation. The definition

does not concern itself specifically with the type of transaction or activity which is prohibited.

11.10 Next, it is important to attempt to identify the purpose or purposes of the MAR. Clearly, in narrow terms, the purpose of the

Irish implementing measures is to comply with Ireland's obligations under the Directive. However, that begs the question. What is the

overall purpose sought to be achieved? In that context, it is appropriate to look at some of the recitals to the Directive.

11.11 Recital 12 to the Directive states that the objective of legislation against insider dealing and market manipulation is “to ensure

the integrity of Community financial markets and to enhance investor confidence in those markets”. Furthermore, the recital envisages

that a single directive will ensure the same framework for allocation of responsibilities, enforcement and cooperation throughout the

Community (now the Union). Recital 13 states that the Directive is necessary to avoid loopholes in Community law which could give

rise to wrongful conduct which would undermine public confidence and prejudice the functioning of the markets. The recitals also

acknowledge (at 15) that insider dealing and market manipulation “prevent full and proper market transparency, which is a prerequisite

for trading for all economic actors in integrated financial markets”.

11.12 Clearly, activity carried out in breach of the MAR has a significant potential to injure the interests of those who have invested

in companies whose value or share price may have been affected by the relevant market abuse. In some cases, of course, the

company itself may not be a party to the relevant market abuse, but in many cases either the company or its officials or agents will

have been involved. To the extent that contracts may be entered into as part of a set of arrangements which are found to constitute

market abuse then such contracts will undoubtedly be tainted with illegality. Such contracts may include contracts involving, as one

of the parties, the company whose shares are the subject of market abuse. The real question which arises on this appeal is as to

whether such contracts should be regarded by the courts as unenforceable by reason of being tainted with illegality.

11.13 In that context, it must be noted that there is a very real risk that the consequences of treating such contracts as

unenforceable may be to inflict a second blow on the shareholder value which was sought to be protected by the Directive and by

the MAR.

11.14 It seems clear, therefore, that the primary focus of the MAR is to ensure, to the greatest extent possible, that those involved

in investing in relevant financial instruments can do so without the risk of there being a false market leading to the relevant investors

incurring improper loss. Indeed, the other provisions of the MAR concerning insider trading are directed to the same end. Those who

trade with insider knowledge will gain benefit at the expense of those who invest in the market concerned without that benefit.

11.15 Against that background, it is necessary to apply the criteria identified for assessing whether it must be taken that public policy

requires that contracts connected with market abuse should be regarded as unenforceable. The first criterion to consider is whether

any such contract may be concerned with actually carrying out the very thing which the relevant legislation prohibits. It is possible to

envisage such a contract in the context of the MAR. Two persons entering into an arrangement to the effect that they would

manipulate the market by entering into transactions which breached the MAR would be entering into a contract to do the very thing

which the MAR prohibit. Such a contract would clearly be unenforceable. However, such is not the case here.

11.16 The individual transactions which are said to be unlawful in this case are lending transactions, secured in the manner earlier

described, for the purchase of shares or CFDs. Such transactions are not, in themselves, unlawful. Rather, it is only if it can be

established that the relevant transactions were for purposes prohibited by the MAR that there would be any illegality. Thus, under the

first criterion, transactions in breach of the MAR (as opposed to a contract to engage in activity in breach of the MAR) are not in

themselves unlawful but may be rendered unlawful by reason of their purpose.

11.17 I next move to the third criterion to be considered, which is as to whether the relevant illegality can be said to apply, either

wholly or substantially, to both parties or to only one. There may, indeed, be contracts which are entered into as part of a plan to

manipulate a market in the shares of a particular company where only one party will be culpable. The innocent party who buys or sells

shares in the absence of insider information will have done nothing wrong. However, on the assumed facts of this case (for the

purposes of the preliminary issue) both parties to the underlying lending transactions are clearly culpable. There is no suggestion that

the various Quinn entities which borrowed monies from Anglo for the purposes of the relevant transactions were themselves innocent

of market manipulation. What is said is that the Quinns, being the plaintiffs in these proceedings, were unaware of that fact.

However, so far as the lending transactions themselves are concerned, this is clearly a case where the relevant illegality applies to

both parties.

11.18 However, it is the fourth criterion which is, in my view, of most importance in this case. In that context, it is important to

revisit what the statutory purpose is. It is principally directed towards protecting the interests of those who are investors, or

potential investors, in the very markets which may be abused. In what way, then, would imposing an additional burden on the

investors in a company, whose shares have been subject to market abuse, (which would be the result of rendering unenforceable

contracts which that company entered into) serve the purpose of the statute? Undoubtedly, a company whose share price is

maintained by market abuse transactions may benefit in the narrow sense of being able to maintain an artificially high value.

11.19 But to deprive those shareholders, who have been induced to enter into transactions to purchase the shares of the company

concerned by market abuse, of the benefit of contracts entered into by the company as part of a market abuse scheme, is likely to

only increase the damage done to the very persons whom the legislation is intended to protect. In assessing the policy of the

legislation, it is necessary to consider whether the imposition of the additional consequence of unenforceability of relevant contracts

might be said to enhance or be counterproductive to the achievement of the legislation's objects.

11.20 For those reasons, I am satisfied that the fourth criterion, while not fully decisive, significantly favours the view that policy

does not require that contracts entered into by a company whose shares are the subject of market abuse should be regarded as

unenforceable. I now return to the second criterion, which is as to whether the legislation itself, in its terms, provides any guidance

on the question of unenforceability.

11.21 In the context of that second criterion, there was much focus on s. 33(3) of the 2005 Act which appears to be designed to

preserve causes of action. It will be recalled that s. 33 is principally concerned with creating civil consequences for breach of market

abuse law. Compensation may be awarded and a party may be deprived of any profit gained by unlawful activity. Subsection (3),

however, states that those provisions are "without prejudice to any other cause of action which may lie against the person for

contravening the provision concerned". It is, of course, the case that the underlying actions which might give rise to a breach of the

MAR might also constitute some other form of civil wrong. For example, fraudulent transactions in shares would be actionable under

the tort of deceit. The same transactions might also amount to market abuse. Likewise, the same actions might well amount to

actionable misrepresentation and market abuse. However, it is difficult to see how subsection (3) is concerned with preserving such

causes of action. The subsection is, in its express terms, designed to preserve an action against a person "for contravening the

provision concerned". The phrase "provision concerned" is clearly a reference to a provision of Irish market abuse law, for the earlier

parts of the section are expressly concerned with contravention of a "provision of Irish market abuse law".

11.22 It would be difficult, in any event, to see how the creation of a separate civil claim for loss arising out of market abuse could

have any effect on claims for ordinary torts arising out of the same factual circumstances. If the necessary ingredients of a claim in

fraud or fraudulent misrepresentation are present then it is hard to see how the creation of a separate civil wrong, which would

entitle the relevant party to claim damages for loss arising out of a contravention of the MAR, would affect any parallel claims in tort

arising out of the same circumstances.

11.23 What cause of action is, therefore, intended to be preserved by subsection (3)? The reason why that question is important is

that the Quinns argue that the subsection suggests a statutory intent that parties be entitled to rely on a breach of the MAR to

argue for the unenforceability of a contract tainted by the illegality of market abuse.

11.24 In that context, it is necessary to analyse those aspects of the claim which the Quinns make in these proceedings which are

the subject of the preliminary issue currently before the court. While this question also touches on one of the other issues which may

arise (being that concerning completed contracts) it is of some importance to attempt to properly characterise those aspects of the

Quinns' claim. The substance of the claim is that the various guarantees and securities put in place by the Quinns are unenforceable.

Of course, it must immediately be noted that Anglo has not sought, per se, to enforce the relevant guarantees or securities through

the courts. Anglo has, however, appointed the Receiver on foot of those securities.

11.25 Against that background, it is perhaps appropriate to start by considering the way in which a hypothetical claim in the courts

for the enforcement of securities such as exist in this case might proceed. In the event of a default, the bank holding the relevant

securities might seek to enforce those securities by legal action. In the event that it were said that the transaction, as a result of

which the securities were put in place, was tainted with illegality, then the issue of whether the contract was enforceable would

squarely arise. However, it is well settled in this jurisdiction that, at least in certain cases, a party can seek a so-called "negative

declaration". While the precise parameters of the circumstances in which such declarations can be obtained have not yet been fully

established, the underlying rationale is clear.

11.26 A party may be faced with a claim which it denies. It does not, in itself, make any cross claim. Rather, it simply denies that it

has any liability to the claimant. However, the claimant does not commence proceedings and, in the absence of an ability to apply for

a negative declaration, the relevant party would be left with the claim hanging over them until such time as either the claimant sues

(in which case the matter will be resolved by the court) or withdraws its claim or, indeed, allows the period provided in any relevant

statute of limitations to expire. It is clear that such a situation could create a significant injustice for the party against whom the

claim is made who may be left with the claim hanging over them for some considerable period of time. It is in that context that the

courts have been prepared to allow that party to itself commence proceedings designed to bring clarity to the question of the liability

which that party denies.

11.27 While, however, in such circumstances, the party against whom the claim is asserted will be the plaintiff and the claimant will

be the defendant, it seems to me that that procedural position does not alter the substance of the issue, which is that it is the

claimant who asserts a liability and the plaintiff who denies it. In a case where, whether for reasons of illegality or otherwise, the

contract on which the claim was asserted is unenforceable, it does not seem to me that the result of the case could conceivably

depend on whether the claimant brings proceedings as plaintiff or the person claimed against brings proceedings seeking a negative

declaration. Either the claim is enforceable or it is not. If the person claimed against could resist a claim on the grounds of

unenforceability, I can see no reason why that same party cannot, as plaintiff, successfully obtain a negative declaration to the

effect that the claim is unenforceable.

11.28 But for like reasons, it seems to me that a negative declaration cannot be interpreted as a cause of action in itself. A plaintiff

who seeks a negative declaration does not claim any redress against the defendant. Rather, the plaintiff simply wishes to have it

established in advance of any claim being brought by that claimant that the relevant claim would necessarily fail. For the reasons

which I have addressed, the courts are prepared to entertain such applications because, at least in some circumstances, it might be

considered unfair to require the person claimed against to await, perhaps for some time, a claim being brought, and thus have the

claim hanging over them. But that does not alter the fundamental position which is that the substance of the claim, even in

proceedings involving only a negative declaration, is one where the cause of action lies in the hands of the defendant and the only

relief sought by the plaintiff is to deny that a valid cause of action exists.

11.29 In those circumstances, it does not seem to me that the type of negative declaration sought by the Quinns, in which the

validity of the various guarantees or securities are questioned on the grounds of unenforceability, is a cause of action in itself. It is in

substance an attempt to get the court to declare in advance that any claim which might be brought on foot of those guarantees and

securities would fail on the grounds of unenforceability. I am not, therefore, satisfied that too much can be gleaned from s. 33(3) of

the 2005 Act as to the policy of the statute concerning the enforceability or otherwise of contracts which are said to be tainted by

reference to the MAR.

11.30 In relation to the criteria thus analysed, it seems to me that the weight, in the context of the MAR, to be attached to the

potentially counterproductive nature of treating contracts as unenforceable, is such as outweighs any of the other factors identified.

To say that innocent investors in a company are to suffer an additional loss, in the shape of being unable to obtain the indirect

benefit of the company in which they hold shares being able to recover lent money, as a result of a market abuse scheme would be to

impose an additional penalty on the very persons whom the legislation is designed to protect. On the other side of the equation, the

Quinn entities which were involved in that same market abuse scheme are not only far from innocent parties, but are also not the

parties for whose benefit the MAR were enacted. The MAR were not designed to protect participants in market abuse from any

adverse consequences of their involvement. Rather, they were designed to protect innocent investors from the adverse

consequences of actions by parties which, while undoubtedly including Anglo on the facts of this case, also include the relevant Quinn

entities. I describe those actions as wrongful, clearly, on the basis of the assumption which underlies this preliminary issue, being that

the Quinns will be able to establish a breach of the MAR. But if the Quinns do establish such a breach, then it clearly follows that the

Quinn entities which were involved in the relevant lending transactions were every bit as much guilty of knowing breach of the MAR as

Anglo.

11.31 In the context of the issues which arise in this case then it seems to me that a consideration of those factors is sufficient to

determine that, so far as the underlying lending transactions are concerned, same must be regarded as enforceable as and between

Anglo and the relevant Quinn entities. However, insofar as certain other factors have been identified which might be relevant, I also

propose to touch on the issue of the level of adverse consequences which are provided for in the MAR themselves.

11.32 Insofar as such considerations may be a factor, the Court would be required to assess the consequences which the statute

itself provides for breach. As already noted the rationale behind that approach is that it may be more readily taken that policy

requires that further adverse consequences, such as unenforceability, were required if the express measures set out in the legislation

might not be considered adequate to achieve the statutory purpose. Section 32 of the 2005 Act creates potential criminal penalties

of fines of €10 million or ten years in jail or both in respect of the more serious offences created by that Act relating to market abuse.

Administrative sanctions can include a direction to pay up to €2,500,000 together with the costs of investigation, and also can

involve disqualification from involvement in the financial services industry.

11.33 There is also provision, under section 33(2) of the 2005 Act, for civil liability, whereby a person who contravenes market abuse

law may be required to compensate or account to relevant persons or bodies for losses incurred or unlawful profits made. I will shortly

turn to the proper interpretation of section 33(3) which is of relevance under the second criterion.

11.34 However, for present purposes, it is important to note that the range of possible adverse consequences which are expressly

provided for in the relevant legislation in relation to a breach of the MAR are extremely serious, involving very large financial penalties

(both criminal and administrative), lengthy jail sentences and the payment of compensation to parties who suffer loss. In addition, the

requirement to account for any illegal profits made is also, in my view, of some significance. A person who makes profit by market

manipulation can, therefore, be deprived of the entirety of that profit under the civil remedies section and, in addition, may be subject

to a whole range of criminal, administrative and civil remedies which would impose a very substantial additional burden.

11.35 In assessing whether it should be inferred that the policy of the MAR required that those potential adverse consequences might

be sufficient to achieve the statutory purpose, it is, as pointed out earlier, necessary to look at the legislation from the perspective

of the sort of case which it might generally be expected to address rather than necessarily from the specific facts of the case before

the Court. The issue is one of general application. Does the legislation generally indicate that the express remedies provided for in the

legislation are to be regarded as sufficient? Obviously the sort of activity which might be found to be in breach of the MAR and the

scale, whether in terms of the financial extent of the wrongdoing or the degree to which such wrongdoing might be regarded as

reprehensible, can vary enormously from case to case. Doubtless, any court considering a criminal penalty would take those matters

into proper account. Likewise, the authorities, in considering any administrative consequence, would be required to act

proportionately. Clearly any civil consequences, whether in the payment of compensation or the depravation of wrongful profits,

would necessarily be directly related to the financial scale of the wrongdoing concerned. It follows that the consequences for less

serious wrongdoing, or that involving smaller amounts of money, are likely to be correspondingly reduced and fall below, and doubtless

in some cases well below, the maximum which might arise in more serious cases.

11.36 In considering whether it is to be taken that the package of consequences provided for by statute are sufficient to meet the

statutory purpose, if such are determined to be the sole potential adverse consequences, it is necessary to consider whether those

consequences might be considered sufficiently severe to deal even with serious cases.

11.37 Even in the context of a very severe case involving a large amount of money and particularly egregious wrongdoing, the

potential adverse consequences are very significant. The criminal penalties are severe. The administrative sanctions are very

significant. The potential civil remedies which might be imposed on wrongdoers are open-ended and limited only by scale of losses

which might be suffered or the wrongful profits which might have to be forfeited. It seems to me to follow that the scale of those

consequences would tend to support a view that they are sufficient to meet the statutory purpose. They certainly do not displace

the analysis already engaged in.

11.38 I turn next to another suggested criterion. Is it possible that treating relevant contracts as unenforceable would be

disproportionate to the seriousness of the unlawful conduct concerned? It does not seem to me that this aspect can be readily

assessed in the context of the MAR as a whole. The range of wrongdoing, and culpability for that wrongdoing, covered by the MAR is

extremely wide. As already noted, the criminal, administrative and civil consequences can be determined in a way which is

proportionate to that wrongdoing. But if contracts which are tainted by their association with that wrongdoing are to be treated as

unenforceable then the consequences could vary enormously from case to case. In a situation like the instant one, an inability to

recover substantial monies lent might have a very serious effect on a company which, at least in some cases, might greatly outweigh

or be disproportionate to the scale of the wrongdoing concerned. The problem is that treating a lending contract as unenforceable

simply means that none of the money can be recovered. If the effect of market abuse was to, say, apparently alter the price of

shares by 5%, then treating the entirety of monies advanced as part of the relevant market abuse scheme as unrecoverable might, or

might not, produce a disproportionate result depending on just how much money was expended in supporting the scheme. That

aspect of the potential criteria is, frankly, undecisive in the circumstances of the MAR.

11.39 If the imposition of unenforceability imposes a significant additional deterrence in circumstances where the express statutory

consequences of wrongdoing may not be particularly severe, and if the imposition of unenforceability does not do any harm to that

statutory purpose, then it may well be easy to infer that the legislation contemplates contracts being unenforceable by reason of

illegality connected with the statute. But where unenforceability may actually be counterproductive in the context of protecting the

very persons whose interests the statute is designed to protect, the overall assessment may require to be different, particularly

where, as here, there are very significant sanctions available in any event.

11.40 It must be recalled that, in this part of the judgment, I am dealing with the enforceability of the arrangements between Anglo

and various Quinn Group entities and indeed, the various Cypriot companies who purchased shares in the Quinn Group, for the lending

of monies connected with the various arrangements put in place to unwind the Quinn Group's CFD positions in Anglo itself. In those

circumstances I am satisfied that Anglo's entitlement to be repaid those loans from the relevant entities is enforceable. However, this

is not a case brought by those entities, but rather a case brought by the Quinns, who seek to suggest that guarantees or securities

given by them, as allegedly innocent parties, are unenforceable. For the reasons set out earlier in this judgment, I am satisfied that it

does not necessarily follow that, because an underlying and central transaction may be in breach of the MAR or section 60, exactly

the same considerations of policy would apply to enforceability of a collateral contract (such as a guarantee or the giving of security

for a guarantee) innocently entered into for the purposes of supporting a central transaction which was in breach of those legislative

provisions. However, in considering that point, it is necessary to return to the claim made by the Quinns in these proceedings.

12. The Quinns' Claim

12.1 The statement of claim refers specifically to the alleged illegality of the loan transactions and what is said to be the consequent

unenforceability of the security and guarantees. In that context, para. 103 states that “[f]urther…the loan transactions engaged in

by Anglo, for and on behalf of the positions being maintained by Bazzely, and/or the Cypriot companies, and/or the subject matter of

the said loan transactions were tainted by illegality and/or were for an illegal purpose, of which Anglo was or ought to have been

aware”.

12.2 In relation to the MAR, the statement of claim specifies, at para. 106:-

“…the lending was in support of an illegal objective of market manipulation as prohibited by Regulation 6(1) of the Market

Abuse Regulations and, accordingly, was tainted with illegality or was intended to support an illegal purpose, such that

the said loans are not enforceable.”

12.3 In relation to section 60 of the 1963 Act, the statement of claim specifies at para. 107-110:-

“107. Further and/or in the alternative, the loans were advanced by Anglo in breach of section 60…in that they

involved the giving of financial assistance, within the meaning of that section, by Anglo for the purchase or support

of its own shares.

108. Such lending, prima facie, constituted the commission of a criminal offence on the part of certain officers of

Anglo pursuant to the provisions of section 60(15) of the Companies Act 1963.

109. In the premises, the lending was further tainted by illegality such that the security taken from the plaintiffs

by Anglo ought not to be enforceable insofar as it relates to the plaintiffs.

110. By reason of the matters pleaded above, Anglo is estopped from seeking to rely upon the security taken from

the Plaintiffs in the form of the personal guarantees and/or the share pledges and the purported appointment of

the Share Receiver on foot of the said share pledges is invalid and ought to be set aside.”

12.4 Those seem to me to be the relevant parts of the statement of claim for present purposes. It is against the background of a

claim formulated in that fashion that the trial of the preliminary issue was directed and determined. It is, therefore, in the context of a

claim as thus formulated that this appeal arises. It is by reference to such a formulation of the claim that it is next necessary to look

at aspects of the written submissions made by the parties to this Court.

12.5 In the written submissions on this appeal, Anglo suggests that the Quinns, in the statement of claim, have not alleged that the

share charges or guarantees are themselves illegal, but that they are unenforceable and of no legal effect by reason of the allegedly

illegal loans which they support. Anglo, by reference to the paragraphs of the statement of claim cited (specifically paragraphs 106

and 109), states (at paras. 14- 17 of that submission):

“14. The Respondents plead that the sole or dominant motivation of IBRC in making the advances in connection

with the CFD transactions was to support and maintain its share price. They claim that the funding advanced to

the Cypriot companies by IBRC was for the purpose of the Cypriot companies purchasing shares in IBRC. The

Respondents plead that by reason of the matters pleaded in their Statement of Claim, the Guarantees and the

Share Charges are unenforceable and are of no legal effect.

15. There is no plea that the Share Charges themselves are illegal. It clearly was not illegal for the Respondents

and IBRC to enter into the Share Charges and on their face they are entirely lawful documents. The purpose of

securing loans, even if those loans are alleged to be illegal, is not in itself an illegal purpose. Neither is it alleged

that the Guarantees were themselves illegal.

[…]

19. Accordingly, the Respondents have chosen to source their claims that the various securities are unenforceable

in specific alleged breaches of identified statutory/regulatory regimes. The only illegality pleaded lies in the alleged

breach of specified statutory provisions. This is of critical significance insofar as the issues the subject of this

Appeal are concerned. Central to these issues, and to the viability of that part of the Respondents’ case that

depends upon them, is an easily expressed issue of statutory interpretation: do the provisions relied upon by the

Respondents – the Market Abuse Regulations and section 60 of the Companies Act 1963 – properly construed,

enable or envisage their invocation so as to invalidate security arrangements of the kind in issue in these

proceedings?”

12.5 The Quinns, at paras. 22-23 of their written submissions, dealt with this issue as follows:-

“22. Before considering whether the Quinns have standing and are entitled to rely on s.60 and the MAR it is

necessary to first consider the purpose to which the Quinns seek to rely on those provisions. Both s.60 and the

MAR prescribe unlawful and illegal acts. It is the Quinns’ case that Anglo committed the illegal acts specifically

prohibited by s.60 and the MAR. At common law a contract entered into for an unlawful or illegal purpose is

unenforceable.

23. The contracts at issue herein are the loan transactions. The loan transactions comprise not only of the letters

of facility/sanction but also of the underlying security thereto. The loan transactions impugned in the within

proceedings were for the express and intended purpose on the part of Anglo to fund margin calls on CFD positions

held in Anglo shares thereby supporting Anglo’s share price, and also to purchase Anglo shares as part of the

unwinding of the Bazzely CFD position. Such transactions fall square within s.60 and the MAR and therefore are

illegal. The intention to commit an illegal act was one held by Anglo and not the Quinns. Anglo is seeking to benefit

from these illegal transactions by taking control of the Quinn Group and its assets through the Share Charges. It is

the Quinns’ case that Anglo is not entitled to do so as Anglo’s entitlement is based on an illegal, and therefore

unenforceable, contract.”

12.6 In relation to the legality of the contracts concerning the share charges and the guarantees, the Quinns state, at para. 34 of

the submissions:

“The case-law also makes it clear that where transactions are themselves valid on their face, but are closely connected

with an unlawful purpose or unlawful transactions, the connected transactions will themselves be illegal and

unenforceable. The case of Devine v. Scott Johnston is authority for the proposition that a guarantee in respect of an

illegal loan is itself tainted with illegality and thus unenforceable.

35. In Equuscorp Pty Ltd v Haxton & Ors, Byrne J held in the Supreme Court of Victoria that the offering of certain

investments by a group of companies was a breach of the Companies Code as the group had not prepared and

registered a prospectus in respect of the investment. The Plaintiff was an assignee of loans which were granted in order

to allow a group of investors purchase an interest in the scheme. Byrne J, at paragraph 102 recognised the principle

that the illegality of one transaction could taint and render unenforceable other transactions connected to an illegal

agreement.

36. It is submitted that the authorities admit of two separate means by which agreements may be found to be illegal

upon which the Quinns rely in these proceedings: first, the Quinns submit that the share charges and guarantees are so

closely connected with unlawful loan transactions, the purpose and effect of which was to artificially maintain Anglo’s

share price in breach of s.60 and the MAR, that they themselves are tainted with illegality; second the Quinns plead that

the share charges and the guarantees are unlawful and unenforceable in and of themselves, as they were entered into

for an illegal purpose, and as such, offend the common law rules on illegality.”

There does not seem to be a plea contained in the statement of claim which suggests that the security and guarantees are allegedly

void or unenforceable on a separate and stand-alone basis, as opposed to being invalid by being closely connected to the lending

transactions which are said to be void or unenforceable due to illegality.

12.7 With regard to the unenforceability of the share charges and guarantees, the Quinns state, at para. 78:-

“The Quinns are parties to transactions that fall foul of s.60(1) and therefore have standing and are entitled to rely on

s.60(1) in support of their claim that the Share Charges and Guarantees that formed constituent elements to those

transactions are unenforceable in accordance with common law principle. The Quinns are parties to such transactions in

two contexts. First, they provided the security as required by Anglo so as to enable the drawdown of the loan facilities

connected to the CFD lending. Second, in July 2008 Anglo advanced monies to the Quinns for the purpose of purchasing

shares in Anglo in return for which the impugned Share Charges were relied on, i.e. the July 2008 Transactions.”

12.8 Further, at para. 87 the Quinns state:

“87. Further, had it not been for the illegal lending on the part of Anglo for the purpose of funding CFD positions in

Anglo shares and for the purpose of purchasing Anglo shares (both of which are accepted matters of fact for the

purpose of this application) no liability would ever have arisen in the first place. If a Court finds that the loan

transactions, in respect of which the impugned security is a necessary constituent element, were for an illegal

purpose then, in accordance with common law principles, the security is unenforceable and was unenforceable on

the 14th April, 2011.

88. Anglo seek to contend that because the execution of the impugned security is complete the Quinns are not

entitled to set same aside. Regardless as to whether a contract, such as the impugned security, is complete or

not it can nonetheless be set aside pursuant to the doctrine of rescission. It has always been the position that

completed contracts, including those concerning title to property, can be set aside based on fraudulent

misrepresentation.”

12.9 I have analysed the statement of claim and the position adopted by the parties on this appeal in some detail for the purposes of

determining with some precision the precise questions which were properly before the High Court on the hearing of the preliminary

issue and, therefore, before this Court on appeal. In that context, it is important to make a distinction between two potentially

different allegations. The first type of allegation, which was undoubtedly before the High Court and is before this Court, relies on the

suggestion that the various underlying lending transactions were void for illegality on the basis already explored. As a consequence, it

is said that security put in place to support that lending is so closely connected with the lending concerned that it too is tainted by

illegality, and it too is unenforceable, because the underlying loans themselves are unenforceable.

12.10 A second type of allegation might have been to suggest that, even if the underlying loans were themselves enforceable (on the

grounds that policy did not require unenforceability), then, nonetheless, security put in place to support illegal activity by persons

who are unaware of the illegality concerned might not be capable of being enforced.

12.11 The reason why this distinction is important stems from the analysis already conducted in the course of this judgment which

suggests that policy may require that underlying contracts entered into by parties who had knowledge of a relevant illegality might

nonetheless remain enforceable, but that it was possible, in similar circumstances, that collateral contracts entered into by innocent

parties in connection with such illegal activity might be unenforceable, at least against those parties where the innocent parties

concerned might not also have been expected to benefit by the very series of transactions which are argued to be unenforceable.

12.12 However, it does not seem to me that an argument was ever truly advanced on behalf of the Quinns which suggested that a

distinction might be made between the effect of any illegality on the underlying lending contracts, on the one hand, and on the

security or guarantee arrangements in respect of those lending contracts, on the other. Rather, the case made by the Quinns was

that the underlying lending contracts were unenforceable on the basis of being void for illegality and that security put in place in

close connection with those unenforceable contracts could not, itself, be enforced.

12.13 While there might, therefore, be a theoretical basis on which it might have been possible to consider whether the guarantee or

security arrangements from which the Quinns seek to escape in these proceedings are unenforceable, notwithstanding the fact that

the underlying loans are, for the reasons already analysed, enforceable, that case was never truly made, and it would, in my view, be

inappropriate to address it any further at this stage.

12.14 In that context, it bears noting that the very issue which I have sought to address raises questions about whether, with the

benefit of hindsight, a preliminary issue was really the best way of dealing with the issues addressed in this judgment. Dealing with

questions concerning the enforceability of collateral security arrangements without detailed evidence is far from ideal. It is one thing

to conduct the trial of a preliminary issue on the basis of the facts as pleaded. But where a nuanced view of those facts may be

relevant to the very question of whether a particular legal principle might have application, then the trial of a preliminary issue may

prove an inappropriate vehicle for the resolution of such questions. Furthermore, where, as here, the precise legal principles which are

applicable may themselves be the subject of some debate and, potentially, refinement, and where the application of the principles

ultimately found by the Court to apply may depend, at least on one view, on a very precise consideration of the facts, the trial of a

preliminary issue may again prove less than ideal. Be that as it may, however, a trial of the preliminary issue was directed and

conducted. This Court must, therefore, deal with the results of that exercise and the issues which thereby arise on this appeal.

12.15 However, by way of illustration only of some of the difficulties arising, it should be recalled that, on the Quinns' case, they were

unaware of their beneficial ownership of the relevant Cypriot companies until well after the underlying lending transactions were put in

place. Indeed, it is difficult to see how the Quinns could otherwise claim to have been unaware of the illegality which they allege, for

anyone who was familiar with those Cypriot companies at the relevant time would have to have known that the purpose of those

companies was to acquire a significant shareholding in Anglo with money provided through loans from Anglo, in circumstances where

the overall purpose was to unwind what might have been perceived to be an excessive and difficult position taken in relation to CFDs

in Anglo by the Quinn Group.

12.16 But it seems likely that, viewed from the perspective of the time, the Quinns were also to obtain by those same transactions a

valuable interest by means of becoming beneficial owners of companies which would, themselves, have a significant shareholding in

Anglo. In that context, it may well not matter that, as events have turned out, that shareholding has proved to be worthless. But,

viewed from the perspective of the time, it might be necessary to consider whether the relevant borrowing might well be seen to

have formed an inherent part of a series of transactions, as a result of which the Quinns were designed to acquire a significant

indirect beneficial interest in an apparently valuable financial institution. For the reasons already analysed, such considerations could

be relevant in determining whether transactions collateral to enforceable lending might themselves be regarded as unenforceable.

12.17 There was, of course, no reference to any such matters in the context of the preliminary issue either before the High Court or

before this Court. The absence of any reference to such matters simply goes to illustrate that the case made on behalf of the Quinns

was confined to saying that the underlying lending transactions were unenforceable and that the security and guarantee

arrangements put in place, in what was said to be a close connection with the allegedly unenforceable lending transactions, were

themselves, therefore, unenforceable. Finally, for completeness, I should record that, in giving the above illustration, I am mindful of

the fact that not all of the security or guarantee arrangements entered into were directly associated with the transactions which are

at the heart of these proceedings. Some of the guarantee/security arrangements were, as noted earlier, in existence prior to any of

the events with which this case is concerned.

12.18 Given that I have concluded that no case was properly made for the independent unenforceability of guarantee or security

arrangements, it seems to me that it is unnecessary to consider the further argument put forward on behalf of Anglo concerning the

fact that the relevant guarantee and security was already in place. As noted earlier, Anglo suggests that, even in the event that a

contract is void or unenforceable for illegality, actions completed under the contract may not be reversed by the Court. Such is said

to be the “lies where it falls” nature of the consequences of an illegal contract. At the level of general principle, the position adopted

by Anglo on this point is entirely consistent with the jurisprudence.

12.19 If I had, however, concluded that the security arrangements in question were themselves unenforceable by virtue of their close

connection with illegal contracts, it would have been necessary to consider whether any such unenforceability would permit the

Quinns to undo the security and to prevent Anglo from exploiting the security in a way which did not require Anglo to invoke the

jurisdiction of a court.

12.16 However, I have concluded that the underlying lending contracts are enforceable, notwithstanding their illegality. I have further

concluded that the Quinns never made a case which suggested that the security arrangements might be unenforceable, even if the

underlying lending transactions were enforceable. On that basis, I am forced to conclude that, on the case as it has been pleaded

and run to date, it can only be held that the relevant security arrangements are enforceable. This is so because the underlying loans

themselves are enforceable and no alternative case has been made. In those circumstances, the question of whether it might be

possible to undo executed security just does not arise.

13. Conclusions

13.1 On that basis it seems to me that, in the light of the case made by the Quinns to date, they are not “entitled to rely” (in the

words of the preliminary issue directed to be tried) on any of the alleged breaches of either section 60 or the MAR in aid of the claims

which they make concerning the invalidity of guarantees given by them and security put in place in respect of underlying lending

transactions said to be in breach of those provisions.

13.2 It follows that, in my view, the appeal should be allowed and the result of the preliminary issue should be determined in the

manner described in the preceding paragraph.