A company in the O'Flynn property development group mistakenly sought permission to build student apartments on a site in Birmingham in England, the High Court heard on Tuesday.
Several companies in the group, led by Michael O'Flynn, are suing former employees Patrick Cox, Liam Foley, Eoghan Kearney and others, saying they made a €12.5 million profit on a student accommodation project on Gardiner Street, Dublin, at the business's expense.
Mr O'Flynn told the court that it was a "mistake" that one of the group's British companies, Victoria Hall Ltd, sought and obtained permission to build 436 apartments on the Birmingham site in 2012.
Another company, Victoria Hall Management Ltd, set up to operate separately from O'Flynn companies whose debts the National Asset Management Agency (Nama) controlled, should have sought permission for the student bloc, Mr O'Flynn said.
“I gave nobody any instruction to do this,” Mr O’Flynn said of the planning application and the fees paid in relation to it.
He added that he was confident that colleagues due to give evidence later in the case would be able to explain more clearly what happened.
Another O'Flynn group company, Grey Willow, ended up as a 10 per cent shareholder in a joint venture with investor Coral Group, which ultimately developed the site.
The defence claims that Nama never knew about this arrangement, while the O’Flynn group says it kept the State agency informed at all times.
Defence senior counsel Paul Gardiner said a statement from the O'Flynn group's former UK finance director, Tony Barry, indicated that Victoria Hall Ltd was always meant to seek permission to build on the Birmingham site.
Mr O’Flynn responded that he believed much of Mr Barry’s “unsworn evidence” was incorrect. The former O’Flynn executive is a witness for the defence.
The Birmingham site actually belonged to the British city’s university, while the O’Flynn group owned a nearby plot. The property business discussed a land swap with the university as the group believed the college’s land was suitable for student apartments.
Nama opposed this swap. O’Flynn group sold its Birmingham site along with one in Coventry to local developer JJ Gallagher. That company sold to the Coral-Grey Willow partnership after the land swap was agreed.
Mr Gardiner argued that the Birmingham site planning issue and the relationship with Victoria Hall Management Ltd were central to Mr Cox’s defence.
The lawyer pointed out that Mr Cox was challenging claims that he had worked for the entire organisation, including Victoria Hall Management Ltd and other individual companies suing him.
His original employer was another O'Flynn UK business, Tiger Developments, which US investor Blackstone subsequently took over.
“He worked as an employee and he worked across all companies, it is impossible to suggest that he did not. That’s without question in my mind,” Mr O’Flynn said in response. “Mr Cox was an employee of Tiger and all companies in the group, and associated companies.”
Mr O’Flynn added that the business paid Mr Cox consultancy fees in response to claims he made for extra work.
O'Flynn executive John Nesbitt originally owned the shares in Victoria Hall Management Ltd, to allow that company maintain the barrier between it and those under Nama's control. However, he surrendered his stake in the O'Flynn group.
Mr Nesbitt and Mr O’Flynn agreed to reach a settlement on the company’s ownership once the group left Nama. Consequently, the plaintiffs maintain, Victoria Hall Management Ltd was an associated company.
Mr Cox, Mr Foley, Mr Kearney and the other defendants deny the allegations. The case continues on Wednesday.