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Business Analysis & Features

Barclay brothers in hotels dust-up

The secretive duo are battling in the High Court with a rival businessman over the ownership of three of London's luxury hotels. Mira Bar-Hillel reports

As he pores over many hundreds of pages of final legal submissions in the case of McKillen v Barclay Brothers, filed yesterday after 25 days of hearings, Chancery Division judge David Richards is bound to consider the personalities involved. He might well conclude that Belfast-born Paddy McKillen and Hammersmith-born Sirs David and Frederick Barclay have this in common: they are all self-made tycoons from humble beginnings, and they are all fiercely protective of their privacy.

But the differences are palpable. The Barclays, now 77, owners of the Telegraph newspapers and the Ritz Hotel, have built themselves a massive fortress on the island of Brecqhou, from which they seldom emerge. Mr McKillen, on the other hand, rarely sleeps in the same bed two nights in a row as he travels between his various property interests. Which makes him very familiar with the hotel world.

And, while Mr McKillen appeared and subjected himself to some rough cross-examination, the Barclays did not turn up. "Sir Frederick was capable of attending for cross-examination but has not been prepared to attend trial to have his evidence tested," Mr McKillen's counsel claimed to the court.

Sir David's son and heir apparent Aidan Barclay also declined to appear before Mr Justice Richards, although he was able to give oral evidence tothe Leveson Inquiry during the same period.

What brought them into the High Court is a bitter 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 Maybourne Group. Business was going well, and Mr McKillen was able to refurbish the Connaught and start renovating Claridge's in style. 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 per cent of Maybourne, for £70m. They then acquired the loans taken out by Mr Quinlan against his 35 per cent stake, and another, smaller share taking their ownership to above 50 per cent. 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 per cent 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 claims he is entitled to enough of Mr Quinlan's stake to give him more than 50 per cent shareholding. The court hearings became very personal and several witnesses, including Mr McKillen, were given a hard time.

Mr McKillen's closing statement accuses the Barclays of unlawfully seeking to sidestep a shareholder agreement and other corporate misconduct. But his real concern is that he fears the Barclays will sell the three hotels to the highest bidder. This, he says, would be at the expense of a great London tradition and at a price inflated by his years of hard work on the buildings.

His lawyers also accused Aidan Barclay of deleting text messages relevant to the legal proceedings. Mr McKillen admitted deleting texts but argued they were not relevant.

The brothers deny any wrongdoing and claim the case was brought to embarrass them into a settlement. "It is clear that these serious allegations have been made for tactical reasons, to try to embarrass Sir Frederick and Sir David and to tarnish their reputations."

Final submissions continue this week, following which it is expected that the judge will take a few weeks to reach his decision.

The tycoons who are at loggerheads

Sir David and Sir Frederick Barclay:

Sir David Rowat Barclay and Sir Frederick Hugh Barclay, 77, are identical twins. Their media empire includes the Telegraph titles. After setting up as painters and decorators they ran a tobacconists but Frederick was allegedly made bankrupt. They started buying old boarding houses in London and converting them into hotels. They were knighted in 2000 for their support to medical research. For the last decade, since settling on Brecqhou, they have been at loggerheads with residents and authorities of Sark. Sir David's son Aidan runs their UK operations.

Paddy McKillen:

Mr McKillen is a dapper, trim and quiet man. He is 56 years old and 5ft 6ins. 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 is his passion.