The High Court has dismissed a fraud claim arising from a failed Irish-backed property development at 973 Market Street in San Francisco.
Paraic O’Donoghue and Tony Manning sued Seán Murphy, Enda Quigley and Frank Walsh over a July 2014 settlement involving 973 Market Associates LLC, the US company formed to buy and redevelop the seven-storey property.
The project began in 2007 and was financed partly through a US bank loan that eventually rose to about $20 million. By 2008, the development was behind schedule and over budget, while concerns had arisen about construction quality, expenditure records and project management. The financial crash compounded the difficulties.
Joe Cassidy later acquired the bank’s loan note, security and personal guarantees given by investors. By 2014, about $17 million was claimed to remain outstanding. After an unsuccessful mediation, Mr Cassidy agreed to settle all claims against the company and investors for $420,000, provided the company abandoned claims against him and assigned to him litigation against the property vendors.
The plaintiffs alleged that the defendants used their controlling position to sacrifice valuable company claims in return for release from their personal guarantees. The defendants denied this and said the company was bankrupt, could no longer fund US litigation and had little prospect of success in those actions.
Mr Justice Barr accepted the defendants’ account. He found that the shareholders’ meeting on 21 July 2014 had been properly convened and that the settlement resolution was validly passed.
The judge also found that the abandoned legal claims had little or no value. Separate proceedings against the vendors had already failed after an 11-day California hearing, while there was no evidence that the company’s action against Mr Cassidy would have produced a meaningful recovery.
The court held that the settlement benefited the company by ending substantial litigation exposure and did not amount to fraud or oppression, even though the individual investors also secured release from their guarantees.
The plaintiffs’ action was dismissed. The court’s preliminary view was that the defendants should receive their costs, with final orders to follow.