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Developer breached duties and must repay investment money

Posted: 4th June 2014   In: Dispute Resolution

A property developer who breached his legal duties by failing to spend an investor’s money correctly has been ordered to make a full repayment.

The case involved a property developer and an investor who agreed to set up a golf course in France. The investor provided £500,000 to get the project started in July, 2007. The money was transferred into a currency trader account in the developer’s name.

The developer used the money to make various payments which he said related to the golf course. However, in December 2007, he emptied the account paying a large sum to his own personal account and a smaller amount to a business associate.

The investor took legal action to recover his money because little or no progress had been made with the golf course. The developer argued that he had a complete defence because the £500,000 had been invested in the golf development as intended.

The court held in favour of the investor. The judge said the developer had tried to blur and confuse the issues during his evidence. He was unable to explain how the agreed purpose of the investment in the golf course had been fulfilled.

The judge said the law is clear that if money is lent for a specific purpose, the borrower is subject to fiduciary duties to use it for the agreed purpose and no other. If the purpose failed, the money was held on resulting trust for the lender.

The developer was therefore liable to repay £500,000 plus interest.

Please contact John Carter if you would like more information about the issues raised in this article.