The pair had been planning a joint development in Marbella, on the south coast of Spain, but the scheme has been scuppered by local planning officials.
Now Mr Magnier has launched legal action against Laing O’Rourke, claiming its Explore Investments subsidiary failed to pay a £3 million sum owed to him in September.
Explore entered into a deal with the Irish businessman in December 2006 to buy half of a site owned by two of Mr Magnier’s companies – Daltwo Holdings and Marbetwo Holdings – for £11 million.
The plan was to construct some 30 villas over the two parcels of land.
Laing O'Rourke paid the initial £2.6 million sum, however failed to make the remaining payments after planning permission fell through.
Following a report in The Times which said Mr Magnier may seek a winding-up order against the company, the top 5 UK contractor has claimed no wrongdoing in regards to the failed agreement.
It has said it plans to vehemently fight any action by the businessmen, who is the seventh richest man in the Republic.
According to Laing O'Rourke, the deal to develop the 3.6 ha parcel was no longer viable because local planners had approved just two villas for the site.
A spokesman said that Explore Investments was a special-purpose vehicle set up by Laing O’Rourke for the project and, seeing the scheme would not be going ahead, it would likely be wound up anyway.
He said: “The Laing O’Rourke Group confirms that it will be providing in full for the €3 million loan due from its subsidiary, Explore Investments (No 2) Limited, following a judgement entered against Explore Investments by an Irish court.
"This provision will have no material affect on the Group trading results for the year.”