Ulster Bank DAC v McDonagh (No.2)

• Jurisdiction: Ireland
• Judge: Mr. Justice Twomey
• Judgment Date: 23 June 2020
• Neutral Citation: [2020] IEHC 311
• Docket Number: [2018 No. 5922 P]
• Court: High Court
• Date: 23 June 2020

BETWEEN

ULSTER BANK DAC, PAUL MCCANN

AND

PATRICK DILLON

PLAINTIFFS

AND

BRIAN MCDONAGH, KENNETH MCDONAGH

AND

MAURICE MCDONAGH

DEFENDANTS

(NO. 2)

[2020] IEHC 311

Twomey J.

[2018 No. 5922 P]

THE HIGH COURT

COMMERCIAL

Summary judgment – Liability – Loan – Plaintiff seeking summary judgment – Whether s. 17(2) of the Civil Liability Act 1961 relieved the defendants of liability for the non-repayment of the loan which they got from the plaintiff

Facts: The High Court, in the principal judgment delivered on the 6th April, 2020 (Ulster Bank v McDonagh [2020] IEHC 185), found that, subject to clarification regarding the application of the Civil Liability Act 1961, the first plaintiff, Ulster Bank, was prima facie entitled to judgment in the sum of €22,090,302.64 against the defendants, the McDonaghs, arising from an unpaid loan taken out by the McDonaghs in respect of the purchase of the Kilpeddar site in Co. Wicklow for the development of a data centre. In the principal judgment, the Court disagreed with the claim by the McDonaghs that s. 17(2) of the 1961 Act meant that Ulster Bank could not claim from the McDonaghs the difference between what it had received from CBRE and the total damage suffered by it. It also disagreed with the claim by the Bank that the provisions of the 1961 Act, regarding the effect of settlement with concurrent wrongdoers, do not apply to claims for unpaid debts. The Court found that, in principle, the 1961 Act could apply to the circumstances of this claim. In light of the Court’s conclusions, when delivering the principal judgment, the Court sought supplemental submissions from the parties regarding whether in the particular circumstances of this case, CBRE, which had provided a valuation report on the Kilpeddar site, was a concurrent wrongdoer with the McDonaghs for the purposes of the 1961 Act in respect of the unpaid loan, and if so, whether CBRE had a liability for the loss caused to Ulster Bank in excess of €5 million (the sum CBRE had paid in settlement of the claim against it by Ulster Bank), so as to reduce (pursuant to s. 17(2) of the 1961 Act) the judgment sum being sought by Ulster Bank from the McDonaghs.

Held by Twomey J that: (i) the Court had no evidence to conclude that CBRE was negligent in relation to its issue of a valuation report on the Kilpeddar site; (ii) even if the valuation report was held to be negligent, the Court had no evidence upon which to conclude that the report was the cause of the non-repayment of the loan by the McDonaghs or the cause of more than 18% of the damage/loss suffered by Ulster Bank as a result of the non-repayment of the loan; and (iii) even if the valuation report was held to be negligent and CBRE was held to have caused some of the damage/loss suffered by the Bank, the Court had no evidence upon which to conclude that CBRE was sufficiently blameworthy (relative to the McDonaghs) for the non-repayment of the loan, such as to justify a finding that CBRE should be held liable for 100% of the loss/damage suffered by the Bank or indeed more than 18% of that loss/damage. Accordingly, Twomey J held that the McDonaghs had failed to discharge the onus upon them to establish that s. 17(2) of the 1961 Act relieved them of liability for the non-repayment of the loan of over €20 million which they got from Ulster Bank.

Twomey J held that Ulster Bank was entitled to judgment without any deduction arising as a result of s. 17(2) and it would hear from the parties in relation to final orders and other matters arising from this judgment and the principal judgment.

Judgment in favour of the plaintiffs.

JUDGMENT of Mr. Justice Twomey delivered on the 23rd day of June, 2020

Introduction

1 This judgment is supplemental to the principal judgment delivered on the 6th April, 2020 ( Ulster Bank v. McDonagh [2020] IEHC 185) and should be read in conjunction with that judgment. The same definitions as are used in the principal judgment are used in this supplemental judgment. In the principal judgment, this Court found that, subject to clarification regarding the application of the Civil Liability Act, 1961, Ulster Bank was prima facie entitled to judgment in the sum of €22,090,302.64 against the McDonaghs arising from an unpaid loan taken out by the McDonaghs in respect of the purchase of the Kilpeddar site in Co. Wicklow for the development of a data centre.

2 In the principal judgment (see para. 340 et seq.), this Court disagreed with the claim by the McDonaghs that s. 17(2) of the 1961 Act meant that Ulster Bank could not claim from the McDonaghs the difference between what it had received from CBRE and the total damage suffered by it. It also disagreed with the claim by the Bank that the provisions of the 1961 Act, regarding the effect of settlement with concurrent wrongdoers, do not apply to claims for unpaid debts. This Court did however find that, in principle, the 1961 Act could apply to the circumstances of this claim.

3 In light of the Court's conclusions, when delivering the principal judgment, this Court sought supplemental submissions from the parties regarding whether in the particular circumstances of this case, CBRE, which had provided a valuation report on the Kilpeddar site, was a concurrent wrongdoer with the McDonaghs for the purposes of the 1961 Act in respect of the unpaid loan, and if so, whether CBRE had a liability for the loss caused to Ulster Bank in excess of €5 million (the sum CBRE had paid in settlement of the claim against it by Ulster Bank), so as to reduce (pursuant to s. 17(2) of the 1961 Act) the judgment sum being sought by Ulster Bank from the McDonaghs.

4 Paragraphs 319 to 354 of the principal judgment outline the Court's analysis of the 1961 Act issue. It is not proposed to repeat that analysis herein, but it is helpful to note that, in broad terms, the unpaid loan sought by Ulster Bank from the McDonaghs was €27 million, prior to the Bank's receipt of the settlement sum of €5 million from CBRE, which thereby reduced the unpaid loan to £22 million (the sum sought in these proceedings by Ulster Bank from the McDonaghs). In percentage terms, the €5 million paid by CBRE of the outstanding loan of €27 million equates to approximately 18% of the loss or damage suffered by the Bank. However, it is crucial to note that this settlement between Ulster

Bank and CBRE was made without any finding of negligence against CBRE for its valuation of the Kilpeddar site or any admission of liability by CBRE in this regard, since Clause 2.1 of the Settlement Agreement states that:

“the Parties agree to settle these proceedings without any admission of liability by any Party.”

The first issue to deal with therefore in this supplemental judgment is whether CBRE, which settled the claim against it by Ulster Bank by paying 18% of the loss suffered by the Bank, is a concurrent wrongdoer with the McDonaghs in respect of the damage caused to the Bank (i.e. the non-repayment of the loan by the McDonaghs) for the purposes of the 1961 Act.

Applying s. 17 of the Civil Liability Act 1961 Act to the circumstances of this case

5 In its supplemental submissions, the Bank claims that even if this Court is correct in concluding that as a matter of principle the 1961 Act applies to the non-payment of debts (which the Bank disputes), on the facts of this case there is no evidence that CBRE is a concurrent wrongdoer. It also submits that even if CBRE were a concurrent wrongdoer, its liability for the unpaid loan is an extremely small percentage and thus nowhere near the 18% which it has already paid. On this basis, it claims that the 1961 Act has no impact on the liability of the McDonaghs for the remainder of the unpaid loan, namely €22 million and so judgment should be entered for this amount.

6 In their submissions, the McDonaghs claim that judgment should not be entered against them for €22 million arising from their failure to repay the loan on the grounds that CBRE is a concurrent wrongdoer with the McDonaghs in relation to the unpaid loan pursuant to s. 17(2) of the 1961 Act. As noted in the principal judgment, assuming that CBRE is a concurrent wrongdoer, then under s. 17(2) of the 1961 Act, in order to ascertain whether Ulster Bank is entitled to judgment for the full amount of its loss from the McDonaghs, the Court is required to engage in an exercise whereby it assumes that the McDonaghs have paid the Bank's claim in full and then considers what amount the McDonaghs would be entitled to recover from CBRE. The relevant part of s. 17(2) states:

“the claim against the other wrongdoers [the McDonaghs] shall be reduced […] to the extent that the wrongdoer [CBRE] with whom the release or accord was made would have been liable to contribute if the plaintiff's [Ulster Bank's] total claim had been paid by the other wrongdoer [the McDonaghs].” (Emphasis added)

Applying these provisions of s. 17(2), the McDonaghs claim that if the McDonaghs had paid the Bank's claim of €27 million in full, the McDonaghs ‘would have been’ entitled to all of that sum from CBRE, as the McDonaghs claim that CBRE was the party who was 100% liable for their failure to repay the loan.

Onus of proof

7 As a preliminary matter, the McDonaghs submitted that because the obligation is upon a plaintiff to prove its case (which the Bank has done, as evidenced by this Court's finding in the principal judgment that the Bank is entitled to judgment, subject to clarification of the 1961 Act issue), the Bank must in addition show that CBRE's liability for the damage suffered by the Bank is no more than 18% or €5 million, so as to entitle the Bank to judgment of €22 million. If it fails to establish this further requirement, the McDonaghs claim that the Bank has failed to prove its case.

8 However, the onus on a plaintiff in a claim for an unpaid debt such as in this case, is to prove its case that the debt was extended to the...