I tried the proposed fix on the lucid package by manually modifying
/etc/cgconfig.conf and restarting the cg services and libvirt-bin.

That appears to fix the reported problem, but it also uncovers another.
The vm attempts to start but fails with the following message:

error: Failed to start domain phobos
error: operation failed: failed to retrieve chardev info in qemu with 'info 
chardev'

-- 
cgroup-bin stops libvirt from starting domains
https://bugs.launchpad.net/bugs/607849
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