THE MARRIOTT company operating Dublin's Shelbourne hotel has claimed the hotel owners sent accountancy firm KPMG in to conduct an "attempted smash and grab raid" on the luxury hotel's records for the purpose of future litigation against Marriott.
Michael McDowell SC, for Marriott, argued the hotel owners were seeking documents and records, including staff details, to which they were not entitled under the 20-year management agreement negotiated in 2006.
The hotel owners were well aware of problems in the financial systems at the hotel prior to sending in KPMG at one day's notice in September, he said, because Marriott had advised them of the problems.
Mr McDowell said problems arose from the departure of the hotel's financial director, who had "buckled under stress", and his assistant, who left to care for a terminally-ill relative. The Marriott group had installed a 20-member taskforce to address matters, he said.
The court heard KPMG ultimately went into the Shelbourne on October 3rd and left on October 22nd. The owners claim Marriott refused to co-operate with KPMG while Marriott claims it provided books and records to KPMG consistent with its obligations under the management agreement but went beyond its contractual obligations by making hotel staff available to help answer queries from KPMG.
In an affidavit, Joanna Chugh, of Marriott, said KPMG "did not disclose to us at that time that they were, in reality, preparing their client's case for litigation".
Cian Ferriter, for the owners, said Marriott had not disputed there was a serious breakdown in the financial controls systems in the Shelbourne in 2007 which continued into 2008. It was also not disputed Marriott was still piecing together the 2007 financial position, the taskforce was still in place and there were "no less than six re-statements" of the accounts for the hotel since August last.
Mr Ferriter said the owners wanted to terminate the management agreement with Marriott.
He said the owners needed access to the books and records of the hotel to determine, among other matters, VAT liabilities they had incurred as a result of Marriott's "mismanagement", before determining whether they had to remain "in bed" with Marriott for the next 18 years.
The owners were not ruling out the possibility of future litigation against Marriott, said Mr Ferriter.
Mr Justice Peter Kelly yesterday reserved judgment on an application by the hotel owners - Shelbourne Hotel Holdings Ltd - for an order requiring Torriam Hotel Operating Co Ltd, an arm of the international Marriott group, to give them access to the hotel's books and records pending the outcome of court proceedings to terminate the hotel management agreement.
Torriam denies any default has occurred justifying termination of the management agreement and wants a stay on the application so the dispute may be referred to arbitration. It also argues the hotel owners have unrealistic expectations relating to the return on their investment of €265 million in the 262-room hotel, amounting to what Marriott has described as an "unprecedented" €1 million per room for a luxury hotel in the same range.
Marriott claims the owners have demonstrated "a lack of understanding" of the realities of returns on investment in the luxury hotel industry. On the basis of the investment, the Shelbourne would have to have an average room rate of more than €300 when the average room rate for luxury hotels in Ireland is some €170, Marriott claims.
It also claims the hotel is the market leader for group business, has a growing market share and won the award for Irish Hotel of the Year in 2007. However, the negative publicity resulting from the court proceedings was causing damage, it has also said.
