Opening salvos fired in McKillen versus Barclay

PROPERTY DEVELOPER Paddy McKillen sought side payments from a deal to restructure the Maybourne Hotel Group, which would not be handed over to the National Asset Management Agency (Nama), a London court was told yesterday.

The charge was made on the opening day of a four-week case in which Mr McKillen is suing billionaire brothers Frederick and David Barclay, claiming they unlawfully bought a shareholding owned by financier Derek Quinlan.

The Belfast-born developer alleges the Barclays and nine other parties – including Nama and directors of Maybourne, which controls some of London’s finest hotels – have been involved “in a combination to carry out unlawful acts” to injure him.

However, Lord Grabiner QC, representing the Barclays, said Mr McKillen could not come to terms with the reality that he could not afford to own the hotels alone.

He said his clients, who live on Sark in the Channel Islands and who are not coming to give evidence, had been “very keen to secure control of the hotels and to hold them for themselves”.

Mr McKillen “pretends to be the proprietor of these hotels and the talent behind their development” and “tells us all about these grand plans for refurbishment”, said Lord Grabiner, speaking in relation to the strength of enmity now existing between the sides.

Kenneth Maclean – who represents four companies party to the action, Misland, Ellerman, B Overseas Ltd and Maybourne Finance Ltd – said Mr McKillen had tried to organise his own takeover bid without telling other shareholders. He had travelled to Dubai in February 2011 for a meeting with investors, Mr Maclean said, where he was prepared to reduce his shareholding as long as he got a quarter share of the increase in the company’s value, along with a £5 million management fee.

The Barclays, two of Europe’s wealthiest men, bought €800 million of the debt of the hotel group – which controls the Connaught, Claridge’s and the Berkeley – from Nama last year. Mr McKillen claims the Barclays effectively control a number of other companies that are party to the action: Ellerman, B Overseas Ltd and others.

The object of “the scheme” was to “secure control” for the Barclays of Coroin – the company used by Mr Quinlan to buy the London hotels, plus the Savoy in 2004.

Mr McKillen says the Barclays bought debt incurred by Mr Quinlan and that this action prevented him from buying a proportional share of Mr Quinlan’s holding. This deal was in conflict with the articles of association of the company which, he says, require that shares are offered first to existing stakeholders.

This would have given him control of the hotel group. Instead, he claims, his plans for a multimillion-pound development of the hotels have been stymied by the Barclays.

Delivering his opening arguments, Philip Marshall QC, for Mr McKillen, said “a significant payment” had been made to Mr Quinlan’s wife at the end of October, 2010 from a Barclays-controlled account.

Mr Marshall claimed Mr Quinlan would make no profit from selling his share in the company unless he received a separate payment, saying the documentation clearly showed Mr Quinlan sought such a payment.

“There is no single instance in which Mr Quinlan and Mr [Gerry] Murphy [a colleague of Mr Quinlan] have worked to do anything other than to promote the interests of the Barclay brothers.

“At every meeting they voted as the Barclay brothers would like them to vote,” Mr Marshall told Mr Justice David Richards in the High Court Chancery Division, during a hearing which has attracted the services of dozens of barristers and solicitors on all sides.

Mr Quinlan would become a nonexecutive director of a Barclays-controlled Maybourne Hotel Group and receive a director’s fee and bonus: “We submit that this wasn’t the end of the picture in terms of the fee structure that Mr Quinlan was hoping to achieve at this time.”

Mr Marshall rejected a medical certificate stating that David Barclay was too ill to travel because of angina and an inability to concentrate after illness last year, saying he had been prepared “to travel anywhere in Europe” last October to meet members of the Qatari royal family.

Rejecting charges that Mr McKillen, who owns 36 per cent of the hotel group, does not have the money to buy out the others, Mr Marshall said his client’s plans were not “an inchoate arrangement”, insisting that he now had “a full agreement”.