The Court of Appeal has upheld an order requiring Michael Hughes to pay €62,863 to former business partner Mark Foran following the collapse of a planned housing development at Crannagh Beg in Athlone.
Foran, Hughes, William Flood and landowner Joseph Hughes formed a partnership in 2006. They obtained planning permission that November for 212 houses, six retail units and related facilities on Joseph Hughes’s lands. An Bord Pleanála overturned the permission in December 2009, bringing the proposed development to an end.
Before that happened, the partnership borrowed about €1.26 million from ACC Bank in 2008. Foran and Flood each took €250,000 from the partnership to complete unrelated property purchases in Dubai. Both later sold those properties at profits of about €230,000 each. Foran also borrowed a further €100,000 but ultimately repaid his partnership borrowings in full.
ACC later sued all four partners for €853,223.96. The case settled for €390,000 after negotiations led by Foran. Foran paid €260,000 and Flood’s mother paid €130,000 on her son’s behalf.
Foran then sought contribution from his former partners. The High Court ordered Hughes to pay €62,863 and Flood to pay €138,112.
Hughes argued on appeal that Foran had breached fiduciary duties by arranging borrowing well beyond the partnership’s needs and by failing to account to the partnership for his Dubai profit. However, he did not challenge the High Court’s factual finding that he knew about and consented to the loans for the Dubai investments.
Mr Justice Binchy held that this consent was decisive. The court found no unusual undisclosed risk in the transaction and no authority for the proposition that a partner who borrows partnership money with the other partners’ consent must surrender profits subsequently made with it.
Foran’s obligation was to repay the loan, which he had done. The appeal was therefore dismissed, leaving the €62,863 High Court order in place.