Businessmen battle for €50m profits from K Club scheme
Estate agent says he’s owed fortune from luxury housing development
Published 08/04/2008 | 00:00
A prominent property developer and an estate agent are locked in a multimillion euro court battle over profits from a luxury housing complex on the grounds of the exclusive K Club hotel and golf course.
Estate agent Arthur French and property developer Seamus Ross were involved in a joint venture to build the exclusive Ladycastle housing scheme at the famous golf resort, but Mr French told the High Court yesterday he is still owed millions by Mr Ross's company, Menolly Homes.
He insists the "true profit'' from the development is about €46.4m and that this should have been split between him and Mr Ross.
Instead, he claims profits for the development were "significantly understated'' at €28.9m, with the additional €17.4m being "wrongfully paid'' or permitted to be paid or diverted by Mr Ross to Menolly.
He alleges that Menolly overstated construction costs, misallocated fees and charged a "management'' fee of some €3.6m.
Menolly had been unable to explain "serious irregularities'' on the face of documents submitted by it, he claims.
The proceedings, being taken by Mr French, of Churchfields, Straffan, Co Kildare, against Mr Ross, of Barberstown House, Clonsilla, Dublin, and against Menolly Homes and Brisa Developments Ltd, both of Main Street, Lucan, Co Dublin, were yesterday admitted to the list of the Commercial Court.
In the action, Mr French is seeking damages or an account of profits for alleged breach of contract and of fiduciary duty.
Mr French operates the estate agency French Estates and claims he secured an option to purchase lands at Ladycastle, part of the K Club grounds.
He sought a partner for a residential development on the lands and claims he entered an agreement with Mr Ross, principal beneficial shareholder of Menolly Homes.
Mr French claims the agreement provided that the net profits from the development would be divided equally between him and Mr Ross, although the profits might be drawn through Menolly, in Mr Ross's case, and through French Estates, in Mr French's case.
Brisa was incorporated as the legal vehicle to effect the development and the lands were sold to it (Brisa) for €21m, on foot of an agreement of June 30, 2003, Mr French claims.
Menolly constructed the development and Mr French said it was anticipated, prior to construction, that the development would yield a profit of €49.7m.
It was completed in September 2006.
Because of concerns about expected profits, Mr French says he sought financial information about the development from January 2007.
Draft financial statements for the year ended June 2007 disclosed a profit of €29.98m. Mr French says that figure confirmed his concerns and he ultimately issued a demand under the Companies Act to obtain certain information.
Mr French appointed KPMG as reporting accountants to him and it concluded the profits had been "significantly understated'' because the construction costs as presented were not reasonable and/or were not properly incurred.
Mr French also claims that "serious irregularities" appeared on the face of documents presented to KPMG which, he claims, Menolly was unable to justify or explain. Of 761 invoices received, some 306 (totalling €14.99m) related to other unrelated construction contracts with third parties or did not refer to any specific project, he claims. Invoices from nine separate suppliers appeared to be in the same handwriting and invoices from different suppliers used a Menolly Enterprises stamp, he also claims.
In the absence of a proper contractual basis and an explanation for the "irregular invoices" and the costs of building generally, KPMG, having examined the documents supplied by Menolly, assessed the true profit from the development as €46.4m.