Thirty years ago Penelope Keith and Peter Bowles enjoyed rampant success in the television series To The Manor Born, a comedy series about a businessman who never seemed to make a mistake before he retired to a mansion in the country.
Two years ago, they reunited for Richard Brinsley Sheridan’s The Rivals, a comedy of manners. Once high-flying property investors, Brian O’Donnell and his wife, Mary Pat, were in the Haymarket Theatre’s stalls one night in early 2011, surely needing a reason to smile.
Just weeks earlier, the Bank of Ireland had secured a judgment from the High Court in Dublin against them for €71,575,991.20, along with a European Enforcement Order Certificate to enforce it in any European Union member state.
A flier from The Rivals is included in the bundles of legal files gathered by the O’Donnells’ legal team as they seek to fend off the bank’s attempt to stop them becoming bankrupt in Britain, as so many others brought low by the economic crisis have done without challenge by any bank.
Besides theatre tickets, the bundles hold receipts from Tescos, dry-cleaning bills, an annual car-parking bill, a TV licence renewal, along with an invitation from the Prince of Wales for a tour of the gardens at Highgrove, his country home in Gloucestershire. The dreary paper trail, laboriously gathered, is necessary for next week’s legal action, since under EU law the O’Donnells must prove that their centre of main interest has been in London since late 2011; not in Dublin, as the bank contends.
Centre of main interest is a nebulous concept. Under the European Commission regulation on insolvency proceedings, EU citizens, except those from Denmark, can open such proceedings in any member state where their centre of main interests lies, even if is not their own country.
However, centre of main interest has never been fully defined to the satisfaction of some. Although courts usually accept it as the country where one earns a living, or conducts business, the question is for how long should one have been established before an application should be seen as genuine.
From the files, it is clear that relations between the sides are poisonous. The documents are littered with references to “not true”, “completely untrue”, or “this, too, is completely untrue”. The O’Donnells are convinced they have been treated egregiously; the bank believes they have behaved falsely.
“Throughout, the O’Donnells have pressed for a speedy bankruptcy in London: Your client has no good answer why our clients’ petitions are not urgent by their very nature,” wrote the O’Donnells’ then solicitor, Edwin Coe Co, to Bank of Ireland in July.
“Your client has, however, demonstrated that delay suits its purpose in its continuing ability to execute the judgment of December 12th in Ireland and elsewhere throughout Europe,” the solicitor Simeon Gilchrist continued.
Bank of Ireland replied on July 5th through London solicitors Berwin Leighton Paisner: “This case is no more urgent than any other bankruptcy case”, adding, “we see no reason why the parties in this case should be treated preferentially in this regard by being allowed to ‘jump the queue’ ”.
In a witness statement, Bank of Ireland executive Des Hanrahan was forthright: “The bank does not oppose the defendants being made bankrupt; however, the bank strongly opposes the defendants being declared bankrupt in England and Wales.”
The issue is not some dry legalism, but one that could dictate much of the rest of the couple’s lives. Under Irish law bankruptcy can take 12 years to complete unless all debts and interest are paid off. In the UK, the debtors could be free after 12 months if they co-operate with trustees.
‘Our home and refuge’
The O’Donnells may no longer appreciate sea breezes at their Gorse Hill, Killiney home, but they still enjoy creature comforts. Their London home stands in a street “that is a step back in time, with gas street lighting and seldom a car to be seen”. It is A Grade II listed eight-bedroom townhouse in Barton Street, Westminster, complete with swimming pool, and has “an exquisite finish throughout”, according to a sales brochure prepared when the property was put on the market for £13 million two years ago.
A brochure prepared at the time by estate agents Foxtons described the property as one with “three stunning kitchens, two study rooms, dining-room, library, media room”, along with eight well-proportioned bedrooms.It was bought by Vico Barton Ltd, a Swiss-registered trust for the couple’s children, in 2007 for £10.5 million. However, today the O’Donnells’ files state that the couple are renting it on a 10-year lease for £4,000 (€5,000) per month – a fraction of the normal local prices charged.
Bank of Ireland executive Des Hanrahan said such a rent offers the owners a return of 0.46 per cent a year; while solicitors, Arthur Cox, he said, have found evidence of only one payment of £4,000 from the O’Donnells’ accounts and, even here, it is not clear to whom the money was sent.
The Barton Street house is not the O’Donnells’ permanent home, he said, since it is clear that London auctioneers Knight Frank have been trying sell it since June 2011. “This adds to the wealth of evidence that this attempted COMI shift is a sham.”
AIB, he said, had appointed receivers to Barton Street in early May, adding that it was “surprising” that Brian O’Donnell had not mentioned that fact in his first witness statement written a month after they were appointed.
The location of the house is just hundreds of yards from one of the Donnells’ biggest property triumphs: the purchase of the department of education’s headquarter in Westminster.
“Whilst it might have been the case that Barton Street had, in the past, simply been our home in London, it became, if only because of the action of our most significant creditor, the Governor and Company of the Bank of Ireland, our home and refuge,” said O’Donnell, in his witness statement.
Throughout the files, the Bank of Ireland disputes O’Donnell’s assertions that Barton Street was his permanent home, though it is used as his address in a “duty of care” agreement in May 2010 when he was listed as the managing agent for the Fatburen offices in Stockholm.
The Stockholm properties were bought earlier by Myrtleville AB, a Swedish limited company but one registered to the O’Donnells’ Merrion Square headquarters, with a €250 million loan from German bank Aareal .
Equally, Barton Street is given as the address for notices in a succession of contracts, including the early 2010 refinancing of part of the debt held on Columbus Courtyard, one of the properties bought by an O’Donnell company, Fourteen Nineteen Two Ltd.
However, Hanrahan noted in his statement that correspondence from Vico Capital to the bank had come from its Dublin address in Lower Baggot Street until late November 2011, though the change of address was given in a letter received on December 8th.
‘I do not have any intention of returning to Ireland’
Defending the conduct of his business affairs, O’Donnell said he had stopped buying property in Ireland in 2004 because of “our concerns that the overheated nature of the market which would become one of the largest property bubbles in the world”.
Deciding no longer to invest there, the couple sought premium offices elsewhere let to highly-rated companies, or State bodies, buying nearly €1 billion worth of them in London, Scandinavia and the United States before the credit crunch in 2008.
London is now home and will remain so, he insisted: “I do not have any intention of returning to Ireland as the economy in Ireland has been destroyed by the Irish banks. The Irish banks lent 160 per cent of their deposit books almost entirely on Irish property.”
In one affidavit prepared in June, one of several included in the file, O’Donnell added: “I have no incentive to return to Ireland other than to occasionally visit my children, some of whom currently reside there.”
Claiming that Bank of Ireland had “severely damaged” his professional and business reputation, he said that “even if the economy were to provide opportunities, which it is unlikely to, I would not be comfortable living there”.
Listing the causes of his bankruptcy, O’Donnell said that the loans he took out from the Bank of Ireland were “backed by best-in-class residential and commercial real estate” and had not been worth more than 65-70 per cent of the assets.
In 2008, markets collapsed. Income from his Stockholm investments was stopped by a lender, Aareal AB, which followed up with a cash-sweep. Similar sweeps by banks hungry for cash followed, “choking off income which largely serviced Bank of Ireland loans”.
“In the midst of the most severe property crash in the Western world, Bank of Ireland refused to co-operate in an orderly management and disposal programme of my real estate interests in a number of jurisdictions.
“(They) chose to enforce their own loans which highlighted the distressed nature of the assets destroyed their own security and the value of potential sales. (It) refused all proposals, such as bond buy-backs and refinancings with other banks.
“In one case (it refused) to release security over a three-year bond to allow a new bank to refinance their debt to provide a pay-down. All proposals as late as February 2012 have been rejected,” he complained.
The handling the Sanctuary office-block sale in Westminster – home of the department of education – illustrates the problem, he said, since it should have been worth between £185 million and £200 million.
“(It) would have released substantial proceeds to pay down debt had an orderly sale been achievable. Rather than wait for an orderly disposal. Bank of Ireland decided to call in my loans and create a media storm which immediately lowered prospective bids to around £165/£170 million.”
In her declaration, Mary Patricia O’Donnell said she had decided “with great sadness” last December after the High Court judgment against them in Dublin that her move to London would “by necessity become a permanent” one.
Under the rules, the couple had to declare all legal actions in which they are involved. Besides the Bank of Ireland, her husband listed actions with Shale Construction, Dublin architects ODOS, Adrian Burke, the Nolan Partnership – with the latter two, he claims, owing more than £200,000.
In a declaration of his assets, O’Donnell listed shares in a French-registered company, Greystoke SA, that he values at £2.9 million, along with a Friends First pension policy worth £172,000 and a series of life policies, totalling £6.1 million. Moreover, he listed a Daimler DS 420 – in reasonable condition, “given that it is 22 years old”, a 1992 Morgan Plus 4 worth £6,000 “that needs works and servicing” and a seven-year-old Bentley Continental that he uses in London, where he rents a car-parking space for £3,500 per year.
The county registrar for Galway subsequently seized the Daimler and the Morgan on April 6th, 2012, at Gortdrishagh.
‘I am not a property developer’
In February, O’Donnell advanced a series of proposals, including one about the Westferry Circus offices, which the couple told the High Court in Dublin last month that they do not own, on foot of a petition from the Bank of Ireland alleging fraud.
Then, a Malaysian pension fund had offered £128 million, which would have left the main lender, Morgan Stanley, short and Bank of Ireland with nothing, though O’Donnell believed that the price could be increased to £135 million with some “soft marketing”.
The February note offers intriguing background on Greystoke SA, which owns Chalet Hermine in Courchevel in France: “When (the house) was constructed, it did not comply in full with planning permissions. There is no French pIanning permission concept of retention. Greystoke SA was unaware of this when it purchased the property. A purchaser of the building will probably need to demolish the chalet, apply for planning permission and reconstruct a new one.”
No buyers are interested. One did make an offer in 2011, but this was lost: “There have been some very low offers from so-called ‘chancers’ that would barely cover the mortgage and produce no surplus whatsoever,” continues the note.
Bank of Ireland should hand back to him, he argues, a series of properties: 84 Ailesbury Road, 61 and 62 Merrion Square and 61-62 Fitzwilliam Lane – once worth €40 million at the height of the boom, but then on the market for just €9 million. With just small investment, O’Donnell could increase the properties’ value to €17 million by 2017 and find enough rent in the meantime to cover interest charges: “Mr O’Donnell believes that he is a far better receiver for Bank of Ireland than anyone else.”
He then put his faith in getting an Individual Voluntary Arrangement – a UK device short of bankruptcy that allows a debtor five years to pay off part of their debts as long as three-quarters of creditors agree.
“If the bank supports such arrangements, (he) would use best endeavours over the following five years to recoup the maximum amount of recoveries for the bank by basically doing what he is good at and what he has been enormously successful at over the last 35 years,” it continued.
In one document, O’Donnell bridles at the notion that he is a property developer, tersely comparing his own investments in “core world-class assets” with the offers to invest in development land in Ireland that he received when he was at his height.
“I am not a property developer and do not have any interest in any aforementioned areas. I am a real estate investor, not a speculator,” he said, adding that his work had been thought “dry” and “boring” when he spoke about it at a Morgan Stanley conference in 2006.
In April that year, Bank of Ireland Private Banking – which was by then increasingly showing up as a bidder for London assets that O’Donnell wanted to acquire – approached him, wanting to increase the business it did with him. They offered, he said, to be supportive and flexible.
A series of loans followed: one for €11.33 million; another for €7.1 million, while in August 2007 the two sides agreed one for €31.35 million. In all of them, the bank made clear that it would come looking for money if loan-to-value ratios were breached.
“My wife and I would never have executed the loan facilities that these proceedings relate to had we known how inflexible and unreasonable (Bank of Ireland) Private Banking would prove to be,” he said.
In a letter in September last year to the bank’s chairman, Patrick Molloy, O’Donnell railed against the actions of executives saying “that the approach being taken is not in anyone’s interests”, particularly since it was coupled with “some very questionable actions and tactics”.
Seeking to flatter Molloy, O’Donnell noted his “long and distinguished career in banking’, adding: “I am sure that you know from your experience that the only way forward is to seek out a commercial solution that realizes the best value possible in a sensible time-frame.”
His strategy, he told Molloy, worked in the sale of the Sanctuary because the bank got €30 million from the deal, he claimed, even though it had said it would “have been satisfied if it recouped €6 million’.
The letter listed a long list of complaints: O’Donnell said he found it “extraordinary and alarming that this has degenerated into some sort of personal vendetta against us as your manager, Des Hanrahan has stated that the bank would ‘get’ me and ‘extract its pound of flesh’ ”.
The O’Donnells had been “thrown out” of their Merrion Square properties. Offers to rent unlet space there had been refused by the bank, while a tenant paying €220,000 a year had been lost because of “bully- boy” tactics by receiver Tom Kavanagh, he alleged.
The prospects for the couple’s country mansion, Gortdrishagh House in Oughterard, particularly rankle O’Donnell: “We have been denied any access to the property to simply retrieve our personal possessions including our clothes and memorabilia on the basis that we do not have receipts! (his emphasis)
“The very sad fact is that (the receiver’s) approach is in effect to let the asset fall into disrepair, an asset which we had painstakingly restored over a period of three years,” he told the Bank of Ireland chairman in a detailed five-page statement.
‘Serious concerns’
In a detailed witness statement last June, Hanrahan, for Bank of Ireland, said it had developed “serious concerns” about the O’Donnells’ financial state from 2008, which led to a series of defaults in late 2008 and early 2009. A belief that the couple were unable to restructure their personal debt and unwilling to sell off properties, he said, had led the bank to conclude that they had “no reasonable prospect” of being able to turn matters around.
Bank of Ireland, he said, was “the largest single creditor of each of the defendants with a total outstanding debt (of £60.6 million) representing approximately 91 per cent of all amounts owed”, including £40 million of secured debt and £20.6 million of unsecured debt.
Rejecting the O’Donnells’ centre of main interest argument, Hanrahan said Brian O’Donnell was a director of five Irish-registered firms, while Mary Pat was a director of four. Resignations from the boards, if they had been submitted at all as the couple claims, had not been filed by then. The bank, he said, had received letters from the couple’s company, Vico Capital, from a Dublin address until November last year. He added that the O’Donnells spoke about their Gorse Hill property as “the house we occupy” as late as last December. The first time the bank knew of the bid to declare bankruptcy in England and Wales came in a letter on January 19th from London solicitors Edwin Coe Co, who acted for a time for the couple, but no longer do so.
On the same day, the O’Donnells wrote to bank executive Steve Kavanagh directing that all future correspondence should be sent to the Barton Street, Westminster address, Hanrahan declared in his witness statement. The overriding majority of the couple’s personal assets were in Ireland, he said, while legal papers were served on them at the Gorse Hill house on four occasions between December 23th, 2011 and January 4th this year.
In a second witness statement dated July, Hanrahan spoke of “the wealth of documentation” the bank held where the O’Donnells’ location was given as Dublin while loans “are all denominated in Euros and are all governed by Irish law”.
The directorship resignations by the O’Donnells, he said, came between February 1st and March 22nd, “which shows the defendants’ strategy” since they were by then preparing to file their English bankruptcy proceeding “five days later”.
Directing the English courts to the O’Donnells’ declarations to the High Court in Dublin, Hanrahan said Brian O’Donnell had been unable to provide consistent answers, while statements in London were filled with contradictions.
Equally, the O’Donnells had provided no evidence of paying taxes in the UK, while numerous payments were made from the couple’s AIB account to two Irish health insurance companies, VHI and Quinn, later Laya Healthcare.
Dismissing Brian O’Donnell’s declaration that he will “earn a living again” from property, Hanrahan said it was “highly unlikely” that he would be “carrying on any business, or will be able to so for the foreseeable future”.
€1bn empire: Dublin, London, Stockholm, Washington... Oughterard
Some of the properties amassed by the O’Donnells as part of their €1 billion empire:
Gorse Hill, Vico Road, Killiney (family home)
85 Ailesbury Road, Dublin
61 and 62 Merrion Square, Dublin
61 and 62 Fitzwilliam Lane, Dublin
Gortdrishagh House, Oughterard
Fatburen office block, Stockholm, Sweden
2099 Pennsylvania Avenue, Washington DC (12-storey office block, close to White House - sold in February this year)
Chalet Hermine , Courcheval, France
15 Westferry Circus, Canary Wharf, London
17 Columbus Courtyard, Canary Wharf, London
8 Barton Street, Westminster
Sanctuary Buildings, 14 -26 Great Smith St, Westminster, (home to UK Department of Education - sold in 2011)
Sons and daughters: Battling bank over Killiney house
The four children of Brian and Mary Pat O’Donnell are also involved in legal proceedings in the commercial court.
They are taking legal action aimed at preventing Bank of Ireland from seizing their family home in Killiney, Co Dublin.
Bank of Ireland is disputing a claim that the family home at Gorse Hill is owned by the children via a trust.
Recent filings at the companies registration office show four companies controlled by the two sons, Bruce and Blake O’Donnell, listed for voluntary strike-off earlier this month – Georgian Corporate Ltd, Vico Capital Ltd, Recess Property Ltd and Menlo Property Ltd.
Bruce O’Donnell (28) has a listed address at Gorse Hill, Vico Road, Killiney, while his brother Blake (29) is listed as resident at Barton Street, Westminster, London.
Blake O’Donnell changed his address from Gorse Hill to Barton Street in February this year.
