Property developer's battle over top London hotels

Posted: 10th August 2012

ClaridgesA property developer has failed in a High Court battle for control of three of London’s most famous hotels. Patrick McKillen was fighting Sir David Barclay and his twin Sir Frederick over control of a £1 billion company which owns Claridge's, the Connaught and the Berkeley hotels.

All three men were investors in Coroin Limited, the company which owns and manages the hotels. During a trial that lasted more than two months, Mr McKillen claimed that the company’s affairs had been conducted in a ‘manner unfairly prejudicial to his interests’.

The Barclay brothers disputed Mr McKillen's claims and said his allegations were designed to ‘tarnish’ their reputations and ‘embarrass’ them. Mr Justice David Richards has now dismissed two sets of proceedings brought by Mr McKillen.

In his ruling, the judge said that Mr McKillen was ‘the last man standing of a consortium of investors who purchased the hotels in 2004’. He has a 36.2% shareholding in Coroin which heads the group of companies owning the hotels.

In January 2011 a company controlled by the Barclay brothers acquired indirectly a 24.78% interest in Coroin, which has since increased to 28.36%. The remaining shares are owned by another member of the original investment consortium whose holding is fully charged to companies controlled by the Barclay brothers to secure indebtedness.

The judge said: ‘The Barclay brothers have made no secret of their aim to obtain control of the company. There is nothing wrong in this aim, provided that unlawful means or means which are unfairly prejudicial to the interests of other shareholders are not used to achieve it.

‘Mr McKillen alleges that the Barclay brothers or companies controlled by them have used unlawful or unfairly prejudicial means, comprising principally breaches of contract by shareholders and breaches of duty by directors of the company appointed by them.’

Those allegations formed the basis of two sets of proceedings brought by Mr McKillen. In the first, he alleged that the affairs of Coroin had been conducted in a manner unfairly prejudicial to his interests as a shareholder. He had sought an order that shares in Coroin held by companies associated with the Barclay brothers be sold to him, which would have given him control of the company.

In the second set of proceedings, Mr McKillen sought ‘damages in tort for conspiracy to cause loss by unlawful means and for inducing breaches of contract’.

Dismissing both sets of proceedings, the judge said that alleged breaches of a pre-emption clause and other provisions of a shareholders agreement had not been established, nor had it been shown that the conduct of the affairs of Coroin had been unfairly prejudicial to Mr McKillen.