The protracted £1.1bn legal battle over three of London's most exclusive hotels resumes tomorrow as Belfast developer Paddy McKillen prepares to cross swords again in court with the billionaire Barclay brothers.
The row over Claridge's, the Berkeley and The Connaught has been raging for two years as the brothers look to add the hotels to their ownership of the Ritz and a host of other assets including the Telegraph newspapers. Mr McKillen lost a lengthy trial against the brothers last year – racking up a legal bill of around £20m – but was granted leave to appeal last autumn and has drafted in Tony Blair's former Attorney General Lord Goldsmith for the three-day Court of Appeal hearing this week.
The complex history of the tug of war over the hotels stretches back to 2004 when Mr McKillen was one of five shareholders in Coroin, which bought the Savoy Hotel Group for €1.1bn (£953m), backed by €800m in debt.
Coroin's frontman was former Irish property poster boy Derek Quinlan. Mr Quinlan promptly sold the Savoy to Saudi Arabian royal, Prince Al Waleed bin Talal and then brought the Berkeley, Claridge's and The Connaught under the Maybourne banner.
The original shareholders fell to three during the next six years, leaving Mr McKillen with 36.2 per cent, Mr Quinlan with 35.4 per cent and the remaining 28.4 per cent with Misland – a Cyprus-based trust that held the stakes of Manchester businessman Peter Green (25 per cent) and stockbroker Kyran McLaughlin.
But in January 2011 the Barclays gained a foothold in Maybourne by buying Misland for £70m. Meanwhile, several of Mr Quinlan's property investments defaulted in the crash and his debts were taken into Ireland's bad bank, Nama. The Barclays seized the opportunity to do a deal with Nama to buy Mr Quinlan's debts, giving them effective control of his stake.
Mr McKillen claimed in the High Court that the Barclay brothers rode roughshod over his "pre-emption rights" to have first refusal on the stakes of any other investors in the hotels that came up for sale, although Mr Justice David Richards rejected this. He also ruled that a "binding written agreement" for Mr Quinlan to sell his stake to interests connected to the Barclays in February 2011 did not trigger pre-emption rights.
Justice Richards supported the Barclay brothers' claim that Mr McKillen did not have the financial firepower to buy up the stakes in the hotels had he been offered the stake, although the developer quickly raised £53m in a rights issue to refinance Mayborne's debts last December.
The appeal will be decided within two months. If he wins, Mr McKillen will be able to add another 20 per cent to his stake, giving him overall control.
Both sides declined to comment.Reuse content