Court of Appeal provides clarity on the Civil Liability Act

The Court of Appeal has, in a joint judgment of Mr. Justice Collins and Mr. Justice Murray (with which Ms. Justice Pilkington agreed) delivered on 6 April 2022 (“the Judgement”), provided significant clarity on the application of the Civil Liability Act, 1961 (“the CLA”) as regards claims for the recovery of debt and that of concurrent wrongdoers.

The background to this case relates to the purchase of a site at Kilpedder in County Wicklow in 2008. The appellants in this case are three brothers, Brian, Kenneth and Maurice McDonagh (“the Appellants”), who borrowed €21.85 million from Ulster Bank (“the Bank”) to purchase a site in Kilpedder with the aim of developing a data centre. Numerous issues, including delays in obtaining planning permission and the subsequent crash in the property market, prevented them from proceeding with the project. The Appellants were unable to meet their repayment obligations and in an effort to resolve matters they entered into a compromise agreement with the Bank in March 2013, which, if complied with by them, would have resulted in reducing their liabilities by almost €20m. Between them, the Appellants breached the compromise agreement in multiple respects and this resulted in the Bank issuing summary proceedings seeking repayment of the entire debt.

Mr. Justice Twomey in the High Court delivered judgment on 6 April 2020 and determined that the Appellants were jointly and severally liable to the Bank in the sum of €22,090,302.64. A further supplemental judgment was delivered by Mr. Justice Twomey on 23 June 2020 dealing with issues that had arisen between the parties relating to the application of the CLA. In the supplemental judgment the judge determined that the CLA does apply to summary debt cases such as this. Further, he was required to address the application of section 17 of the CLA relating to concurrent wrongdoers, the reason being that the Bank had issued proceedings against a third party firm (“the Valuers”) that provided a valuation of the lands to the Bank in 2013 alleging that it was negligent in its valuation of the Kilpedder site on which the Bank relied. Those proceedings settled with the Valuer paying a sum of money to the Bank.

It should be noted firstly that the Judgement dismissed the two appeals brought by the Appellants, save in respect of one ground which did not affect the High Court’s judgment. On the CLA the Court was required to consider the application of the CLA to the Bank’s claim having regard to its settlement with the Valuer. However, in the first instance the Court had to ascertain if it was in a position to determine the issue of whether a claim for debt falls within the provisions of Part III of the CLA at all.

Additionally, the Court had to consider whether sums recovered on a settlement of a claim for damages for an allegedly negligent valuation and a set of debt proceedings have such a relationship as to render the respective wrongdoers ‘concurrent’ for the purposes of Part III of the CLA.

The Court determined as follows:

CLA generally

1. The provisions in the CLA governing concurrent wrongdoers are concerned exclusively with the allocation of responsibility between wrongdoers facing legal action for the recovery of “damages”.
2. A claim for recovery of a debt is not an action for the recovery of damages.
3. The law governing contribution as between or claims as against concurrent wrongdoers has never applied to an action for the recovery of a debt and nothing in the CLA changes that.
4. Even if the CLA could be interpreted in such a way that an action for the recovery of a debt and an action for damages for breach of contract are to be equated so that debt recovery proceedings come within Part III CLA, a claim against a debtor on foot of a loan instrument and a claim against a valuer whose negligence is alleged to have resulted in the granting of the loan are not actions to recover the same ‘damage’.

Specific to this case

5. The debtors’ liability is for the whole of the debt while the Valuer’s liability is (at most) only for the amount of the loan that the lender is unable to recover from the debtor. Accordingly, the liability of the Valuer and the debtor are not concurrent.
6. If the Appellants wanted to make a case that the Valuer was a wrongdoer, it was incumbent on them to adduce some expert evidence that it had acted negligently as alleged.  
7. It is only if the Valuer would have had a contribution liability in excess of what it settled the claim for that any reduction to the Bank’s claim against the Appellants would arise.
8. In the view of the Court there is absolutely no basis on which it could be suggested that the Valuer could have any such liability to the Appellants. Indeed, the Court saw no basis on which the Valuer could be required to make any contribution to the Appellants, given that the effect of such contribution would be to relieve them of a contractual obligation freely undertaken by them and confer a windfall benefit on them insofar as they would be relieved, at least in part, from the obligation to repay monies of which they had had the benefit.

This decision is an important clarification regarding the provisions of the CLA specific to concurrent wrongdoers and claims for debt recovery. The Court has made it abundantly clear that the CLA does not apply in claims for the recovery of a debt. If follows, and was determined by the Court, that concurrent wrongdoer claims do not apply to debt recovery cases and nothing within the CLA, and specifically Part III of the CLA, changes that.

Further, the Judgment is likely to become a significant one when cases involving concurrent wrongdoers are advanced in the Courts as it addresses the basic principles and provides a step by step approach to the issues that need to be considered by the Courts when examining if the relationship between the wrongdoers is concurrent for the purposes of Part III of the CLA.

AMOSS Solicitors acted for the successful Plaintiffs/ Respondents before the High Court and the Court of Appeal.

For further information in relation to this matter, please contact Gavin Simons (Partner), Jerry Burke (Partner) or your usual AMOSS contact.