Court of Appeal Decision and the Application of the Civil Liability Act to Debt Recovery Claims

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The recent Court of Appeal decision of Ulster Bank DAC and Ors v McDonagh and Ors [2022] IECA 87, has provided clarification that the Civil Liability Act, 1961 (the ‘CLA’) does not apply to debt recovery cases as they are not considered actions for “damages.”

In brief, Ulster Bank DAC (“the Bank”) provided funding in the amount of €21.85 million to the McDonagh Brothers (“the Appellants”), to purchase a site in Kilpedder, County Wicklow in 2008 for the development of a data centre. CBRE were engaged at the time of lending to provide a valuation of the land to the Bank.

The Appellants defaulted on the loan repayments to the Bank and the Bank issued proceedings for recovery of the debt. The Bank also issued proceedings against CBRE for negligence on foot of their valuation. The case against CBRE settled for €5million. The bank applied this sum against the McDonaghs’ loan in reduction of their overall debt.

The Appellants argued that their liability should be further reduced under section 17(2) of CLA on the basis that CBRE was a concurrent wrongdoer with whom a compromise had been reached. The court found that the valuer, CBRE, was not a concurrent wrongdoer within the meaning of the CLA and further, that the CLA does not apply to debt matters in any event.

The court outlined four key points in determining this:

  1. The provisions of 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, but an order in the nature of specific performance of a contractual obligation;
  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; and
  4. Even if a claim for a debt could be construed as a claim for damages, 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’.

The case has provided clarification on the application of the CLA as regards to claims for the recovery of debt and that of concurrent wrongdoers and has made it clear that the CLA does not apply to debt recovery claims.

If you wish to further discuss this topic, please contact Sarah Coughlan on sco@ofx.ie or Ray Murphy on ray.murphy@ofx.ie