The decision of the UK high court to reject Irish property developer Patrick McKillen’s claims that he was improperly barred from buying shares held by financier Derek Quinlan was “blinkered”, the UK court of appeal has been told.
The three-day hearing before the court of appeal in London is the latest round in the battle between Mr McKillen and the billionaire Barclay brothers, David and Frederick, for control of three luxury hotels, the Berkeley, the Connaught and Claridge’s.
Shareholders, including Riverdance creators John McColgan and Moya Doherty, who signed up in 2004 to buy the hotels along with the Savoy, agreed that their shares would first be offered to their business partners, if they decided to quit.
However, the Barclays now have effective control of the company following a 2011 deal with Mr Quinlan, where they took control of his shares, voting rights and his place on the board of the hotels’ holding company, Coroin.
His shares are now listed in a Barclays-controlled company, Ellerman.
Representing Mr McKillen, former attorney general Lord Peter Goldsmith QC said Mr Justice David Richards had been wrong to hold that the arrangements made between Mr Quinlan and the Barclays had not breached the pre-emption agreement.
Lord Goldsmith told Lady Justice Arden, Lord Justice Moore-Bick and Lord Justice Rimer that it “was quite astonishing, dare I even say grotesque, that [Mr McKillen] wasn’t given the opportunity to bid for Mr Quinlan’s shares”.
Pre-emption rights
The deal struck between the Barclays and Mr Quinlan – who have given him £1.86 million (€2.14 million) in loans and gifts, paid his legal costs and covered other debts – was “absolutely deliberate”, in a bid to deny Mr McKillen his pre-emption rights.
If Mr Quinlan’s shares had been divided proportionally between Mr McKillen and the Barclays then the Belfastman, who owns 36.2 per cent of the company, would have won outright control of the properties.
The Barclays claimed during the trial that Mr McKillen could not raise the money to buy his share. If they had really believed that, they would have called “his bluff” but, instead, they did everything possible to deny him the chance to buy them, said Lord Goldsmith.
“If they were so convinced that he could not raise the money, why not put him to the test and let him try? They did not do that. That is very revealing,” said Lord Goldsmith.
‘Unrealistic’
Criticising Mr Justice Richards’ high court ruling, he added: “Our principal complaint is that he looked at this in a blinkered and unrealistic way. He did not did not look at the whole, but dissected this into small steps.”
Mr Quinlan is now heavily indebted to the Barclays and “is not going to be able to pay off his indebtedness”, while the power of attorney that he has given to the Barclays over his shares is unfairly detrimental to Mr McKillen’s interests.
“The present position is not a temporary event. It has continued for two years,” Lord Goldsmith told the three appeal judges. “The Barclays have got everything they wanted. They do not have to do anything else.”
Mr Quinlan’s shares should have come up for sale on two occasions before the Barclays’ involvement after the founder of Quinlan Private Capital failed to meet loan repayments, triggering the clause under the pre-emption rules, he argued.
Meanwhile, Stephen Marshall QC, also representing Mr McKillen, rejected Mr Justice Richards’ contention that Mr McKillen would not have been able to raise money.
