Belfast Telegraph

Friday 26 December 2014

Property developer Paddy McKillen faces £20m bill for failed legal bid

Paddy McKillen
Paddy McKillen

Property developer Paddy McKillen faces a legal bill of up to £20m following his failed legal action against the billionaire Barclay brothers over the ownership of three high-profile London hotels.

Details of the costs in the case, which took three months in the London High Court, have emerged as the Belfast-born developer said that he was going to appeal the judgment.

Last month, Judge David Richards ruled against Mr McKillen after he sued David and Frederick Barclay, the owners of the Telegraph media group, over their attempts to take over Coroin, the £1bn company which owns Claridge's, the Connaught and the Berkeley hotels.

Mr McKillen owns 36.2% of the company and the Barclays 28.36%. Financier Derek Quinlan's share of 35.5% is in the control of the Barclays after the brothers secured the shareholding from the Republic’s ‘bad bank’ Nama last year.

The Irish businessman had claimed Mr Quinlan's share should have been offered to him under a clause in the shareholders' agreement of the company — a pre-emption agreement.

The judge said there were no agreements made between the Barclays and Mr Quinlan which breached the pre-emption provisions. Yesterday it emerged that the legal costs for the Barclay side — including those of Mr Quinlan — would amount to £16m. Coupled with Mr McKillen's legal fees, of about £4.6m, this brings the total to more than £20m.

However, the figure will be examined by a costs judge and may end up significantly less for Mr McKillen. In the meantime, he must pay £6m within 42 days.

During the hearing, the judge said Mr McKillen had accepted that he would have to pay the costs but rejected an application by the developer for a reduction in fees as he had been successful in some areas of his action.

Barristers for the Barclay side yesterday described the lengthy legal action as a “patchwork of flimsy allegations”, a “tortuous process” and an attempt to damage the twins' need for privacy.

A spokesman for Mr McKillen last night said he would be appealing the verdict to the Court of Appeal within 21 days.

Rise of the Belfast boy whose gamble to fight Barclay brothers for hotels didn’t pay off

By David Elliot

Notoriously secretive, Belfast native Paddy McKillen built up an impressive list of property assets during the 1980s, initially in Dublin, Belfast and Cork before adding addresses in London, Europe and Asia to his portfolio.

Mr McKillen is a dapper, trim and quiet man of 5ft 6ins who is 56 years old.

His wife Maura and four children, one a 13-year-old adopted Vietnamese orphan, live in Los Angeles.

Mr McKillen spends much of his time travelling between the Far East, the west coast of the US and Ireland, using commercial airlines.

For flights within Europe it is said he sometimes charters a jet from a company in which he is a shareholder. Restoring the Mayfair hotels at the heart of the legal fight is his passion.

What brought them into the High Court is a dispute over the ownership of three of London's most exclusive hotels: the Connaught, Berkeley and Claridge's.

They are owned by Coroin, a company set up by Derek Quinlan, a former Dublin tax inspector, after he had outbid a Saudi prince to acquire the Savoy Group for £750m in 2005.

Quinlan and his co-investors, including Mr McKillen, sold on the Savoy and renamed the rest the Maybourne Group.

Business was going well and Mr McKillen was able to refurbish the Connaught and start renovating Claridge's.

But some shareholders were badly hit by the Irish property crash and Ireland's ‘toxic bank’ Nama stepped in.

It took over the £660m of loans provided to Maybourne in 2006 by Anglo Irish Bank and Bank of Ireland.

The Barclays involvement only emerged in January 2011 when they acquired a holding company controlled by Sir Philip Green's family which owned 25% of Maybourne for £70m.

They then acquired the loans taken out by Mr Quinlan against his 35% stake, and another, smaller share, taking their ownership to above 50%.

They made payments of “millions” to Mr and Mrs Quinlan, which Mr Quinlan said were “unconnected”.

They approached Nama to take over Maybourne's loans, and tried to buy AIB's loans to Mr McKillen secured against his 36% stake.

The essence of Mr McKillen's case is that the brothers acted unlawfully by seeking to sidestep a shareholder agreement giving other investors the right of first refusal over shares being sold by the original investors.

Under this agreement, he claimed he is entitled to enough of Mr Quinlan's stake to give him more than 50% shareholding.

The court hearings became very personal and several witnesses, including Mr McKillen, were given a hard time.

Mr McKillen lost the case last month and is now facing payment of court costs which could amount to £20m.

Still, he hasn’t given up the fight for control of the hotels.

Mr McKillen said he was heartened by the court's confirmation that the pre-emption rights enshrined in the shareholders' document can and will help him to win the overall and ongoing war for control of the three most precious jewels in the Maybourne Hotel Group crown.

The rights mean that Mr Quinlan cannot sell his shares in the hotel group without first offering them to Mr McKillen, and he intends to buy them back.

“We are absolutely delighted that the judge confirmed that. It is rock solid and it is sacrosanct,” he said shortly after the court case.

“It's enshrined in the shareholders' document and it makes it clear that Derek Quinlan cannot sell or transfer his shares. Under pre-emption I have to be offered those shares.”

Mr McKillen said he doesn’t regret joining with Mr Quinlan and other investors in 2004 to buy the famous London hotels, given the role the former high-flying financier has now come to play both as an ally and as a key witness for the Barclay brothers in the recent court proceedings.

“I never look back on a deal, I look forward. What has happened has happened. My aim going forward is to protect the assets and the staff, protect our guests and to protect my shareholding,” he said. “Let's move forward. My aim is to get my just allocation. If the Barclay brothers don't think I have the resources, then test me out.”

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