Some tales told in Coroin hotel trial 'fanciful', says judgment

BACKGROUND:The judge in the McKillen shares case questioned the reality of certainc stories from both sides

FOR MONTHS lawyers thronged Court 26 in the Rolls Building just off Fleet Street in London arguing about the control of three of London’s top hotels.

Yesterday the judgment from Mr Justice David Richards was delivered to a near-empty Court 1, with just a single junior counsel and pair of solicitors, along with the press.

The battle between property developer Patrick McKillen and the billionaire Barclay twins, David and Frederick, has been for the highest of stakes.

Coroin owns the Berkeley, Connaught and Claridges hotels – which were bought, along with the Savoy, when Irish investors were riding high in the international property world.

Mr McKillen argued that the brothers had used “unlawful, or unfairly prejudicial” means to deny him the right to take control of the stake in Coroin held by financier Derek Quinlan.

The principals did not need to attend yesterday’s brief hearing because they had known the outcome since it appeared in the judge’s draft judgment on Wednesday.

That draft included all bar a declaration of the judge’s belief that Mr McKillen could not have afforded Mr Quinlan’s stake, even if he had been given the opportunity to buy it.

The judgment does not make pleasant reading for the Belfast man, whose passion for the hotels is undeniable, even if the judge had doubts about his ability to pay for them.

During the case, Mr McKillen argued that Mr Quinlan had made a secret deal with the Barclays to sell them his shares in order to keep Mr Quinlan afloat.

The deals, particularly one that Mr McKillen alleged had been made verbally in January 2011, were said to have triggered pre-emption rights in the shareholders’ agreement.

So, he argued, he should have had the right to buy a proportion of Mr Quinlan’s shares – which, since he already owns 36.2 per cent, would have given him majority control.

The hotels are successful but are saddled with £660 million worth of debt, that Nama sold to the Barclays last year – a move that infuriated Mr McKillen.

“All the evidence in the case, and there is a good deal of it, shows that indebtedness is too high,” said the judge.

“The evidence consistently suggests that the debt should be reduced to no more than £450/500 million.”

The enmity between the sides was evident, with Mr McKillen and Mr Quinlan ignoring each other at the back of the court-room.

Neither of the Barclays gave evidence, or attended the trial. While press coverage of the trial provoked complaints from all sides, Mr Quinlan’s wife Siobhán expressed delight about the portrayal of her husband’s meeting with a Saudi prince on a yacht in Sardinia.

U2’s Bono, a friend of Mr McKillen, had been brought along to the yacht too, even though he was not involved in the hotels.

The life led by Ireland’s property-rich investors was repeatedly displayed: flights to the Gulf to meet billionaire princes, coffee and cigars in Monaco, and drives in Maseratis.

Equally, the court heard of the role played by former British prime minister Tony Blair, who brokered a deal between Mr McKillen and Qatari investors.

Early this year, the judge said Mr Blair’s “personal intervention” with prime minister of Qatar, Sheikh Hamad bin Khalifa Al Thani, led to the latter agreeing to buy Mr McKillen’s share if the court said he could purchase the Barclays’ interests.

The legal bill runs into millions, though Mr Justice Richards has left the decision on costs – and an appeal – until the courts resume in September.

Nearly 20,000 pages were produced, held in 54 numbered files; while text message records “played a vivid and, sometimes, significant part in the story”.

Some records were missing, because telephones were lost or changed – with most of the missing texts on the side of the Barclays, or their executives, though Mr McKillen had his own gaps.

In the end the judge said he was “not persuaded” by Mr McKillen’s argument that he should draw “adverse inferences” over the holes in the Barclays’ records.

Nama, whose executives John Mulcahy and Paul Hennigan were described “as wholly reliable witnesses”, will be pleased by yesterday’s judgment.

The judge rejected Mr McKillen’s contention that the Barclays had wanted to buy the Nama debt from January 2011 and that they had established a company for that purpose.

The purchase of the debt nine months later, he said, was “not then in contemplation” and it was Nama who suggested it as it wanted the debt off its books quickly.

Mr Quinlan, too, has reasons to be pleased, particularly since the judge believed his denial that the Barclays had agreed to pay him in return for a cast-iron right to buy his shares. Mr McKillen contested a claim that the Barclays had agreed to match an offer of a £25 million fee to Mr Quinlan, made by the Qatari side during talks in July and August 2010.

Given what he had learned about the Barclays, the judge said: “I regard it as fanciful that they would be willing to pay Mr Quinlan ‘fees’ of any amount remotely approaching the sums being discussed.”

The word “fanciful” appears several times in the judgment, particularly in Mr McKillen’s oft-stated belief that Nama could be persuaded to extend the debt for another two years. Such a view, said the judge, “does not bear examination”.

“His evidence, if accepted, on the company’s dealings with Nama in this period suggests that he did not have a grasp on the realities of the situation,” said Mr Justice Richards in the 160-page judgment.

Mr McKillen’s view was that a proposal suggesting Nama be a junior debt-holder for a quarter of the money owing to it was “a brilliant idea”, and he said a letter from Nama a month later could be “seen as positive”: both of these ideas were “fanciful”, said the judgment.

A £500,000 payment made by the Barclays to Mr Quinlan’s wife in October 2010 featured frequently in the case, with Mr Quinlan saying he had agreed then only to tell the Barclays if his shares were to be sold.

Documents seen in court showed that Mr Quinlan had been prepared to pay the sum back once a yacht-berth – valuable enough to clear the amount owing – was sold.

“The deal fell through and Mr Quinlan did not repay the loan. Nor has he since repaid it or been pressed to do so.

“It may be that Mr Quinlan’s request for a loan, rather than a gift, was prompted by personal pride but there can be no doubt that at the time the payment was treated as a loan,” said the judge.