How the O'Donnell property empire crumbled
Thirty years ago Penelope Keith and Peter Bowles enjoyed rampant success in the television series To The Manor Born, a comedy series about a businessman who never seemed to make a mistake before he retired to a mansion in the country.
Two years ago, they reunited for Richard Brinsley Sheridan’s The Rivals, a comedy of manners. Once high-flying property investors, Brian O’Donnell and his wife, Mary Pat, were in the Haymarket Theatre’s stalls one night in early 2011, surely needing a reason to smile.
Just weeks earlier, the Bank of Ireland had secured a judgment from the High Court in Dublin against them for €71,575,991.20, along with a European Enforcement Order Certificate to enforce it in any European Union member state.
A flier from The Rivals is included in the bundles of legal files gathered by the O’Donnells’ legal team as they seek to fend off the bank’s attempt to stop them becoming bankrupt in Britain, as so many others brought low by the economic crisis have done without challenge by any bank.
Besides theatre tickets, the bundles hold receipts from Tescos, dry-cleaning bills, an annual car-parking bill, a TV licence renewal, along with an invitation from the Prince of Wales for a tour of the gardens at Highgrove, his country home in Gloucestershire. The dreary paper trail, laboriously gathered, is necessary for next week’s legal action, since under EU law the O’Donnells must prove that their centre of main interest has been in London since late 2011; not in Dublin, as the bank contends.
Centre of main interest is a nebulous concept. Under the European Commission regulation on insolvency proceedings, EU citizens, except those from Denmark, can open such proceedings in any member state where their centre of main interests lies, even if is not their own country.
However, centre of main interest has never been fully defined to the satisfaction of some. Although courts usually accept it as the country where one earns a living, or conducts business, the question is for how long should one have been established before an application should be seen as genuine.
From the files, it is clear that relations between the sides are poisonous. The documents are littered with references to “not true”, “completely untrue”, or “this, too, is completely untrue”. The O’Donnells are convinced they have been treated egregiously; the bank believes they have behaved falsely.
“Throughout, the O’Donnells have pressed for a speedy bankruptcy in London: Your client has no good answer why our clients’ petitions are not urgent by their very nature,” wrote the O’Donnells’ then solicitor, Edwin Coe Co, to Bank of Ireland in July.
“Your client has, however, demonstrated that delay suits its purpose in its continuing ability to execute the judgment of December 12th in Ireland and elsewhere throughout Europe,” the solicitor Simeon Gilchrist continued.
Bank of Ireland replied on July 5th through London solicitors Berwin Leighton Paisner: “This case is no more urgent than any other bankruptcy case”, adding, “we see no reason why the parties in this case should be treated preferentially in this regard by being allowed to ‘jump the queue’ ”.
In a witness statement, Bank of Ireland executive Des Hanrahan was forthright: “The bank does not oppose the defendants being made bankrupt; however, the bank strongly opposes the defendants being declared bankrupt in England and Wales.”
The issue is not some dry legalism, but one that could dictate much of the rest of the couple’s lives. Under Irish law bankruptcy can take 12 years to complete unless all debts and interest are paid off. In the UK, the debtors could be free after 12 months if they co-operate with trustees.
‘Our home and refuge’
The O’Donnells may no longer appreciate sea breezes at their Gorse Hill, Killiney home, but they still enjoy creature comforts. Their London home stands in a street “that is a step back in time, with gas street lighting and seldom a car to be seen”. It is A Grade II listed eight-bedroom townhouse in Barton Street, Westminster, complete with swimming pool, and has “an exquisite finish throughout”, according to a sales brochure prepared when the property was put on the market for £13 million two years ago.
A brochure prepared at the time by estate agents Foxtons described the property as one with “three stunning kitchens, two study rooms, dining-room, library, media room”, along with eight well-proportioned bedrooms.It was bought by Vico Barton Ltd, a Swiss-registered trust for the couple’s children, in 2007 for £10.5 million. However, today the O’Donnells’ files state that the couple are renting it on a 10-year lease for £4,000 (€5,000) per month – a fraction of the normal local prices charged.
Bank of Ireland executive Des Hanrahan said such a rent offers the owners a return of 0.46 per cent a year; while solicitors, Arthur Cox, he said, have found evidence of only one payment of £4,000 from the O’Donnells’ accounts and, even here, it is not clear to whom the money was sent.
The Barton Street house is not the O’Donnells’ permanent home, he said, since it is clear that London auctioneers Knight Frank have been trying sell it since June 2011. “This adds to the wealth of evidence that this attempted COMI shift is a sham.”
AIB, he said, had appointed receivers to Barton Street in early May, adding that it was “surprising” that Brian O’Donnell had not mentioned that fact in his first witness statement written a month after they were appointed.
The location of the house is just hundreds of yards from one of the Donnells’ biggest property triumphs: the purchase of the department of education’s headquarter in Westminster.
“Whilst it might have been the case that Barton Street had, in the past, simply been our home in London, it became, if only because of the action of our most significant creditor, the Governor and Company of the Bank of Ireland, our home and refuge,” said O’Donnell, in his witness statement.
Throughout the files, the Bank of Ireland disputes O’Donnell’s assertions that Barton Street was his permanent home, though it is used as his address in a “duty of care” agreement in May 2010 when he was listed as the managing agent for the Fatburen offices in Stockholm.
The Stockholm properties were bought earlier by Myrtleville AB, a Swedish limited company but one registered to the O’Donnells’ Merrion Square headquarters, with a €250 million loan from German bank Aareal .
Equally, Barton Street is given as the address for notices in a succession of contracts, including the early 2010 refinancing of part of the debt held on Columbus Courtyard, one of the properties bought by an O’Donnell company, Fourteen Nineteen Two Ltd.
However, Hanrahan noted in his statement that correspondence from Vico Capital to the bank had come from its Dublin address in Lower Baggot Street until late November 2011, though the change of address was given in a letter received on December 8th.
‘I do not have any intention of returning to Ireland’