Former Nakheel chief files breach of contract lawsuit

Chris O'Donnell, who left his job as Nakheel chief executive this month, has filed a breach of contract lawsuit against the developer.

A lawyer for Mr O'Donnell filed the case on Wednesday at the Dubai World Tribunal, the special court established to hear cases involving Dubai World and its subsidiaries. No further details were available yesterday, but the lawsuit could expose rifts between one of Dubai's biggest government-backed developers and the Australian who ran the company for five years.

Nakheel announced on June 8 that Mr O'Donnell left the company "after completing his contract terms". He was replaced by Sanjay Manchanda, the company's chief financial officer.

"Nakheel does not comment on legal proceedings," a company spokesman said.

Jonathon Davidson, the lawyer representing Mr O'Donnell, declined to comment.

The claim filed with the Dubai World Tribunal will not be made public until Nakheel formally responds, a Tribunal spokesman said. No claim amount was listed in the filing.

Mr O'Donnell oversaw the company through its greatest triumphs and eventual restructuring. Many of the company's major projects, including Palm Jumeirah and The World, were already in development when he joined the company in 2006.

He previously served as the managing director of the Investa Property Group, one of Australia's largest listed commercial property companies.

Mr O'Donnell represented Nakheel in the media and at public events. As recently as 2008 the company was still announcing ambitious projects, such as the 1km-tall Nakheel Tower.

But when the global economy sank, Nakheel struggled under the weight of US$10.5 billion (Dh38.56bn) of debt.

Mr O'Donnell's role in the company had diminished in recent months, industry executives say. Few members of the construction community were surprised by his departure.

Once a frequent subject of interviews, he rarely spoke in public in the past year. In March, Mr O'Donnell was not reappointed to the board as part of a wider management shake-up.

The Dubai World Tribunal is handling a wide variety of cases involving Nakheel, including several suits filed by the developer against owners of parts of the The World, the ambitious collection of man-made islands.

The developer is demanding payments from several owners, including Josef Kleindienst, an Austrian developer who is one of the owners moving forward with plans to build on the islands. Nakheel's claim against the developer is valued at Dh199 million, according to the Dubai World Tribunal's files.

"There is a difference of opinion between ourselves and Nakheel … on the amount due for the islands … and the time frame in which this is due," Mr Kleindienst told the Financial Times this week. "We look forward to finding a solution on the matter that is stopping our progress."

Nakheel is in the final stages of restructuring its debt. This week the company announced it had reached agreements with more than 95 per cent of its trade creditors, which will allow it to issue a $1.63bn Islamic bond, or sukuk.

Under terms of the restructuring plan, Nakheel will pay creditors 40 per cent in cash and 60 per cent with the sukuk. Industry observers expect the sukuk to be issued next month.

kbrass@thenational.ae