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Archive for February 5th, 2013

NAMA’s foreclosure action is continuing at a steady pace into 2013, and today’s edition of Iris Oifigiuil shows that the Agency has had receivers appointed to certain assets of two new and related companies, Castleway International Developments Limited and Castleway Property Management Limited. Both companies are controlled by John McCann of McEnaney Construction fame, a company to which NAMA had receivers appointed in January 2011.

On 30th January, 2013, NAMA had Neil Bannon and Paul Doyle of Bannon to be statutory receivers over certain unspecified assets which secured loans, originally provided by AIB but now acquired by NAMA. The directors of both companies are Rosaleen McCann (78) and John McCann (50).

Remember you can see the list of NAMA’s enforcement actions here and in this regularly updated spreadsheet.

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Paddy’s appeal opens in London this morning, and this blogpost details the basis for his appeal which will be elaborated upon in the Court of Appeal at the Royal Courts of Justice on the Strand in London today.

I must say that if nothing else, these proceedings serve to act as one gigantic worldwide advertisement to potential investors in the Maybourne group, so widely have they been reported, and so peppered with bling – Bono, Tony Blair – and exotica – Arab sheikhs, Middle Eastern royal families, the Malaysians – have they been, that if nothing else, any potential investor would at the very least check the enterprise out to see what all the fuss has been about.

And at the end of the day, it is about three lumps of brick and mortar in central London which generate GBP 5m per annum in profit and which have a decent enough brand, though nothing in the very highest stratosphere of luxurious hotels worldwide. The three hotels are Claridge’s, the Connaught and the Berkeley in central London.

Paddy is appealing the High Court judgment handed down in August 2012, in which Paddy failed for the most part in his bid to have the Barclay brothers machinations with respect to Derek Quinlan’s 36% stake in the Maybourne hotel group, held unlawful. However the High Court action and judgment did stop the Barclays’ locomotive in its tracks, and remember that two years ago, the media – from Property Week to Bloomberg and practically all mainstream media – were reporting that the Barclays controlled 64% of Maybourne. You won’t see that in the media today, following Paddy’s action; the presentation today is that Paddy owns 36%, the Barclays 28% and Derek Quinlan 36% and the Barclays don’t control Derek’s 36%.

So all was not in vain, even at the High Court.

Turning to the appeal itself, there are five stated grounds from Paddy’s perspective, though there is cross-over between some of them. Bear with this, it’s not as convoluted as it first sounds.

1. The High Court judge was just plain wrong when he concluded that the Barclay brothers’ machinations with respect to Derek Quinlan’s 36% stake did not break the so-called pre-emption provisions whereby the original shareholders promised to give the others a right of first refusal if they were ever disposing of their stake.

2. Even if the Barclay brothers machinations with Derek Quinlan’s shares did not break the pre-emption provisions in a strict technical sense, they certainly broke the intention and principles underlying the agreement. After all, Paddy has now ended up with a board dominated by what appear to be Barclay brothers’ interests whereas Paddy originally bought into the Maybourne investment in 2004 when it was really just him, Derek Quinlan and the Green family. The original shareholders were required to deal with each other in good faith, and however you describe the machinations between the Barclays and Derek, good faith towards Paddy doesn’t feature.

3. An agreement between Derek Quinlan and the Barclay brothers on 17th February 2011 constituted a technical breach of the pre-emption agreement.

4. Derek Quinlan’s control of his own 36% stake in the company has been compromised to such an extent, by the fact that the loans secured by the stake have passed to the Barclay brothers and through previous events where banks were entitled to foreclose on the loans, that there are grounds for arguing that in principle, the pre-emption agreement should have been triggered.

5. The High Court judge was dismissive of Paddy’s capacity to acquire Derek Quinlan’s shares in 2011, but Paddy says this conclusion was a load of rubbish (or in legal terms “misconceived”).

So, from Paddy’s point of view, he faces an uphill battle to convince the Court of Appeal that the facts and conclusions relied upon by the High Court judge in the August 2012 judgment were wrong, and that the Judge placed weight on certain matters whilst overlooking others. There will be analysis of the pre-emption agreement again and whether it is reasonable to conclude on the facts available that the pre-emption terms should have been triggered . There will be argument about Paddy’s capacity to fund the purchase of Derek Quinlan’s shares in 2011.

It is worth stressing that Paddy is not appealing the decision of the High Court that NAMA’s sale of the €800m of Maybourne group loans to a company controlled by the Barclay borthers was in conflict with the terms of the loan agreement. That strand seems to have been entirely abandoned. As far as the UK courts are concerned.

Paddy is asking the Court of Appeal to set aside the High Court judgment of August 2012 and instead to judge that Paddy has been unfairly prejudiced by the manner in which the affairs of Maybourne have and/or are still, being conducted. If the Court of Appeal decides in Paddy’s favour, then the relief due to Paddy be remitted to trial. In other words, this has some ways to go, even if Paddy wins.

The hearing is scheduled to last for four days. There might be some additional mud slung, but at this stage, we probably have heard most of the stories about yachts, fine wines and expensive dining.

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