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Candy’s CPC Group Wins Trial Against Qatari Diar (Correct)

(Corrects recipient of e-mail in ninth paragraph, clarifies amount in seventh of story that was published June 25.)

The real-estate investment arm of Qatar’s sovereign-wealth fund wrongfully backed out of a deal to redevelop London’s landmark Chelsea Barracks site after the plan was opposed by Prince Charles, a judge ruled.

Qatari Diar Real Estate Investment Co. breached its contract with U.K. developer CPC Group Ltd., controlled by real- estate entrepreneur Christian Candy, and must pay damages in an amount to be determined later, Judge Geoffrey Vos ruled today. CPC is seeking as much as 81 million pounds ($121.1 million).

Vos backed CPC’s claim that the site plan application was withdrawn in June 2009 because the emir of Qatar, Sheikh Hamad Bin Khalifa Al-Thani, wanted to avoid upsetting the Prince of Wales, who had complained about the site’s modern design. The judge disagreed with claims that Qatari Diar acted in bad faith.

Qatari Diar “was between a rock and a hard place, and was doing the best it could in difficult circumstances” Vos said in the ruling. “The parties’ suspicions of one another have turned out to be rather exaggerated.”

Christian Candy declined to comment after the ruling.

A joint venture of CPC and Qatari Diar paid 959 million pounds for Chelsea Barracks in January 2008. In November of that year, Qatari Diar bought out CPC’s stake for an initial payment of about 38 million pounds and agreed to make 81 million pounds in deferred payments, CPC said.

While CPC will eventually receive as much as 81 million pounds under the contract, it lost a bid to receive an early payment of 68.5 million pounds. Damages, in addition to the contract payment, may be awarded by the court later.

‘They Have Failed’

CPC “wanted earlier payment of a sum potentially due to them under a contract and they have failed,” Qatari Diar said in a statement. “Further consideration due will be paid as and when planning consent for the Chelsea Barracks redevelopment is obtained.”

In his ruling, Vos said Prince Charles’s intervention was “unexpected and unwelcome” for the parties. The prince, in a March 2009 letter to the Qatari prime minister, said his “heart sank” when he saw the site plan, court records show. The heir to England’s throne also gave the emir alternative plans to consider.

“The effects were, I suspect, exacerbated by the inevitable publicity which followed,” Vos said of Prince Charles in the ruling.

Witnesses

While Vos found Qatari Diar didn’t exit the application process in bad faith, he said that its Chief Operating Officer, John Ward, said “something that was simply not true” in testimony about the process for creating a new proposal.

“This untruthfulness manifested itself on several occasions,” Vos said in the ruling.

The judge also questioned the “veracity” of another Qatari witness, Jeremy Titchen, when the development director gave testimony about an e-mail that referenced Prince Charles.

“I do not accept Mr. Titchen’s complete denial of most of this conversation,” Vos said. Titchen was otherwise an “almost completely truthful witness,” Vos wrote.

The contract allowed Qatari Diar to withdraw the planning application if London Mayor Boris Johnson indicated he would ask the city council to refuse it. Vos disagreed with Qatari Diar’s claim that Johnson intended to do so.

CPC lawyer Neil Kitchener said the company would consider Vos’s suggestion that the developer and Qatari Diar find a way to work together on the project.

“That is something CPC is keen to explore,” Kitchener said in a statement.

E-Mails

Internal Qatari Diar e-mails uncovered after last month’s trial proved the emir of Qatar wanted the Chelsea Barracks plan scrapped to avoid upsetting the prince, CPC lawyer Anthony Stephen Grabiner argued.

The internal e-mails, which didn’t affect the ruling, also showed that Qatari Diar considered ignoring the prince’s opposition, saying the prince had failed to stop other developments he didn’t like, including the Shard skyscraper -- which will be London’s tallest -- and the One New Change office complex near St. Paul’s Cathedral.

Grabiner also claimed that Qatari Diar “deliberately destroyed” relevant e-mails while its law firm, Herbert Smith, failed before last month’s trial to search a server in London that held messages deleted from another server in Doha. The recovered e-mails showed that Qatari Diar’s witnesses lied during the trial, CPC claimed.

Vos said the e-mails didn’t prove Qatari Diar engaged in bad faith. Joe Smouha, Qatari Diar’s lawyer from Essex Court Chambers, has denied those allegations.

The Chelsea Barracks development was planned to include mixed-use buildings of between five and 13 stories, comprising 638 residential units, as well as hotel space, a community center, retail units and restaurants, court papers show.

The case is CPC Group Ltd. v. Qatari Diar Real Estate Investment Company, case no. 4260/09, High Court of Justice, Chancery Division (London).

To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net.

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