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The €57m case of why a project isn't called home

WHEN a well-known Dublin couple were persuaded to sell their lovingly refurbished period home to businessman Denis O'Brien, it was clearly an offer they couldn't refuse.

The year was 2000, the property market was about to take off, and the £7.1m the emerging tycoon paid for No 6 Raglan Road made headlines. Peter White, the auctioneer and former restaurateur, and his wife, Alicia, may well have viewed the price tag as an endorsement of the work they had done in restoring the property from a shabby house of flats into a comfortable family home. They had entertained many famous people, rented the mews at the bottom of their garden to visiting celebrities, and never heard a word of complaint.

So when they sold to Denis O'Brien, who made a €285m fortune the same year when he sold his shares in his mobile phone company Esat Digiphone, the Whites believed they were handing over a comfortable family home.

Imagine their reaction when three years later, the Whites found themselves drawn into Denis O'Brien's dispute with the Revenue Commissioners over a €57m tax bill arising from the share sale, which hinged on the state of their former family home.

Their decor was picked apart, their feature sunken floor was described as ugly and dangerous, and according to Mr O'Brien, the house wasn't fit for occupation.

Despite this catalogue of criticisms, Mr O'Brien's beef was not with the Whites but with the Revenue Commissioners which was pursuing him over a disputed €57m capital gains tax liability in the year 2000/2001. The case turns on whether or not 6 Raglan Road, which Mr O'Brien bought in May 2000, was available to him as a permanent habitable residence in Ireland in that tax year that would make him liable for tax. The Revenue said it was, and assessed him for capital gains tax here. Mr O'Brien said it wasn't: he had moved to Portugal with his family in February of that year, Raglan Road was an investment, and an "uninhabitable" one at that.

He appealed the assessment in 2003 and the Appeals Commissioner, Ronan Kelly, found in Mr O'Brien's favour. But Revenue was unhappy with his decision and the case was referred to the High Court.

There are 57 million reasons why this case is important, both for Mr O'Brien and for the State. But according to the details made public in the High Court last week, the case also offers a salutary lesson on how one man's palace can be another man's "project".

The Whites bought 6 Raglan Road at auction in 1985 for £140,000 and set about turning it into their family home. It was a seven-bedroom red brick Victorian home which at the time was let in flats and had a coach house at the bottom of the garden. The Whites were prominent figures on the Dublin social scene. Mr White's family owned the auctioneering firm White Auctioneers, and they later opened the restaurant, White's on the Green, which inspired their publisher son Trevor's interest in food criticism.

Over time, they spent between £250,000 and £400,000 on refurbishment of 6 Raglan Road. When they were later asked to give evidence to the Appeals Commissioner about the condition of the property, they described in detail the work they had carried out. They stripped out the partitions to restore the original proportions and installed an Aga in the kitchen downstairs, complemented by gas and an electric hob. The English firm, Smallbone, came over to fit the kitchen units and Mrs White arranged to for a second "service kitchen" beside the dining room for entertaining at home. They laid a Travertine stone floor in the basement, the kitchen and sun room, and a membrane was laid to prevent damp. They had the windows seen to, the wiring replaced, and gas and storage heating installed.

The Whites seemed proud of their home. Peter White said "they had many famous visitors and none of them complained about the decor or the condition of the house". Mrs White said they were happy living there, describing the house as warm and comfortable.

They certainly had no thoughts of leaving when they were first approached in the summer of 1999 by agents acting for a mystery client. Over several months, they were contacted by no fewer than four estate agents, each one claiming to act for a particular client who was "very anxious" to buy their home. Eventually, one of the agents wrote to Mr White to ask whether his client could view the house. The Whites agreed.

Denis O'Brien and his wife turned up for a viewing, and were impressed enough to buy it. Terms were eventually thrashed out. At first, they agreed on a house swap as part of the deal. The Whites would move into Denis O'Brien's family home at 77 Wellington Road, in part exchange for 6 Raglan Road. But that didn't work out, and they agreed a cash deal of £7.1m in May 2000, to Parteney, a company controlled by Mr O'Brien. The Whites took the Aga and the kitchen fittings with them, as they were not part of the sale.

The deal was one of the record house sales of that year. The Whites divided their time between another home in Ireland, and properties in France and England.

Meanwhile, the new owners of 6 Raglan Road planned extensive improvements. After selling his business on the stock exchange, the O'Briens rented out their home on Wellington Road, and moved to Quinta do Lago in Portugal in February 2002.

According to the Appeals Commissioner's report, everything of sentimental value came with them: photographs, wedding album, Mrs O'Brien's collection of CDs and DVDs, the children's toys and the clothes that they outgrew were stored there. Mr O'Brien brought his books and business files. The children went to school there, friends wrote to them there; it was their home.

Portugal was home; Raglan Road was a project.

Mr O'Brien told the Appeals Commissioner that he had been investing in properties since the mid-Nineties, particularly in Dublin 2 and 4. His wife also had an interest in property. She told the Appeals Commissioner in 2003 how she had built on two sites in Portugal, which she later sold for a profit and she had also been involved in buying property in Ireland. Refurbishing property was her "passion", she said. And Raglan Road was a chance for her to "indulge her passion".

Neither she nor her husband had any immediate plans of actually living there, though. Mrs O'Brien said she could potentially envisage living there at some stage in the future while Mr O'Brien said he never contemplated living there in the condition in which he bought it. He described how masonry fell in the hallway when you walked through the front door and from the walls when you closed the doors.

A string of engineers and architects involved in renovating the property were also brought in to give evidence to the Appeals Commissioner. John Meagher, an architect with De Blacam & Meagher, said he found it "dark, damp and dreary", "run down" and "neglected". The heating was "totally inadequate", the wiring was "unsafe" and it needed to be replumbed. And that was not all. He described the sunken circular space in one room to be not only "ugly" but "completely dangerous".

In his view, the house was "totally unsuitable for habitation because of the ad hoc wiring and plumbing arrangements" and it would not have been possible to live there while they were being changed.

The Appeals Commissioner also heard evidence of rising damp; that 38 of the 60 windows in the property needed to be completely replaced; and of "dangerous" areas where concrete brackets had deteriorated and bits of masonry had fallen off.

Another architect, John Gibney, highlighted some damp and windows sealed with tape to exclude draughts, although he disagreed with Mr Meagher's view that the sunken area was dangerous. He also agreed that the photographs taken by Mr White in 2000 showed "pleasant decoration" that was up to the standard that would be expected of a period house.

Within a month of the sale closing, the builders were in. Work continued throughout the following year, right up to the beginning of 2002. After that Mrs O'Brien took a lease on the property – presumably from Parteney – in February 2002. By then, according to the Appeals Commissioner, the house was finished to "exacting and high quality specifications". The furnishings included some Georgian pieces from their previous home on Wellington Road. According to the Appeals Commissioner, they lived here only when they were back in Ireland. They vacated it for good on March 13, 2003.

And in July of that year, Ronan Kelly heard Mr O'Brien's appeal of the €57m tax assessment over three days. The Whites disputed this depiction of their house as an "uninhabitable" wreck.

The Appeals Commissioner found in favour of Mr O'Brien, so he wasn't liable for the tax bill. But the Revenue argued the Appeals Commissioner should have decided whether his personal and economic interests lay closer to Ireland or Portugal, and Mr Kelly referred his decision to the High Court.

Ms Justice Mary Laffoy will now decide if he was correct.

Irish Independent