Section 11 of the act sets out that two or more persons are concurrent wrongdoers “when both or all are wrongdoers and are responsible to a third person … for the same damage, whether or not judgment has been recovered against some or all of them”.
The issue of what constitutes the same damage has been looked at many times. In Lynch v Beale (1974), a hotel owner sued his architect, builder, and subcontractor for alleged wrongdoing. The High Court ultimately ruled that there were two major causes of structural defects in the building: a foundation failing with consequent settlement at one corner of the building, and the failure of prestressed concrete beams.
There were ultimately three defendants in the case. Each one was found guilty of a different type of wrong, but causing the same damage: the architect was deemed in breach of contract for the design; the building contractor was vicariously liable for the actions of the subcontractor; and the subcontractor was guilty of negligence in his build. All three were found to be concurrent wrongdoers.
The 1% rule (as it is colloquially known) relates to section 12 of the act, which imposes joint and several liability on concurrent wrongdoers. If a concurrent wrongdoer is found to be liable for only 1% of a plaintiff’s loss, it could end up having to pay 100% of the damages awarded to the plaintiff.
In Lynch, the court apportioned one-third of the blame on the architect and two-thirds on the contractor and its subcontractor. As a result of section 12 of the act, the hotel owner was entitled to look to any one of the defendants to recover 100% of the judgment sum.
The reason behind the 1% rule was succinctly stated in the judgment of the Supreme Court in Iarnród Éireann (Irish Rail) v Ireland (1996): “As between defendants, it is provided that there can be an apportionment of blame, but if a deficiency has to be made up in the payment of the damages, it is better it should be made up by someone in default than that a totally innocent party should suffer anew.”
Multiplicity of problems
There have been two significant recent judgments on concurrent liability – the 2020 Supreme Court decision in Defender Limited v HSBC France and the recent Court of Appeal decision in Ulster Bank DAC & Ors v McDonagh & Ors (2022).
Both cases involved a plaintiff who settled with one wrongdoer and then attempted to obtain the remainder of their claim from a concurrent wrongdoer.
Section 17(1) of the act sets out that if a plaintiff enters into a settlement agreement with one defendant, it will discharge the other concurrent wrongdoer’s liability for the same damage if the agreement contains an intention to do so.
However, often settlements will fall to be considered under section 17(2) of the act. This provides that, where a plaintiff and a first defendant are identified together, any claim brought by the plaintiff against a second defendant is reduced by the greater of (a) the amount of the settlement, or (b) the amount stipulated in the settlement agreement, or (c) the extent by which it can be said that the first defendant was culpable for the claim.
Defender
The Bernie Madoff scandal involved the largest private Ponzi scheme of all time, with Defender Limited alone suffering approximately $540-million-worth of losses. Many Irish-based companies were dragged into the resulting litigation.
Defender settled with Bernard L Madoff Investment Securities LLC for roughly 75% of this sum, before bringing an application in the Irish courts to recover the remainder of its losses from HSBC.
Defender alleged that HSBC was negligent in its role as custodian and that it had breached its duty in failing to properly monitor Madoff’s company, despite suspicions that it was acting nefariously.
In the High Court, Twomey J had no doubt that Madoff should be held 100% liable for Defender’s loss and, as such, HSBC’s liability was reduced by 100%.
Defender appealed this decision, arguing that the High Court’s literal interpretation of section 17 was incorrect, and that the true intention of the act was that an injured plaintiff should always be able to recover full damages.
Defender accepted that it was to be identified with Madoff for the purposes of apportioning liability. It argued that such apportionment should proceed in line with the provisions concerning contributory negligence in section 34 of the act, which would require the plaintiff’s award to be reduced by an amount that is “just and equitable”, having regard to the degrees of fault of Defender and HSBC.
The Supreme Court rejected this argument and agreed with the High Court’s interpretation of section 17 – that to assess the reduction of Defender’s claim against HSBC, the court had to examine the level of blame attributable to each party in line with the third limb of section 17(2).
However, the Supreme Court refused to follow the High Court’s conclusion that the only possible outcome was an apportionment of liability of 100% against Defender. Mr Justice O’Donnell found that he could not conclude “with the requisite degree of confidence that there was no prospect of any apportionment of liability and damages other than 100% to 0%”.
The matter was therefore sent back to the High Court and was listed for trial before Mr Justice Sanfey. At 4pm on 14 April 2021, the parties (having been given time to talk on the opening day) informed the High Court that the matter had been resolved by agreement on confidential terms.
McDonagh appeal
This case concerned the purchase of an 82-acre site in Kilpeddar, Co Wicklow. It was purchased by three McDonagh brothers. Ulster Bank financed the purchase with a €21.8 million loan.
The bank argued that it had granted the loan based on a valuation of the lands provided by CBRE. It was asserted that this valuation was inaccurate. Prior to the hearing of the McDonagh case, the bank had sued CBRE for negligence in relation to the valuation of the site and reached a settlement of €5 million.
Mr Justice Twomey delivered judgment in the High Court on 6 April 2020. He found the McDonaghs jointly and severally liable to the bank in the sum of €22,090,302.64. He delivered a supplemental judgment on 23 June 2020 dealing with other issues.
Both decisions were appealed. The Court of Appeal delivered a joint judgment of Mr Justice Collins and Mr Justice Murray (with which Ms Justice Pilkington agreed) on 6 April 2022.
It found that a debt claim against a borrower and a negligence claim against a valuer were not actions to recover the same damage – the borrower’s potential liability being for the whole of the debt, whereas the valuer (at most) was liable only for the portion of the moneys lent that the lender is unable to recover from the debtor. It was found, therefore, that the asserted liability of the valuer and the borrowers were not concurrent.
It was therefore successfully argued by the bank that a claim for recovery of a loan is akin to seeking an order for specific performance of a contractual obligation. The Court of Appeal held that “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 [Civil Liability Act] changes that.”
Not an action for ‘damages’
While the McDonagh decision confirms that the act does not apply to an action for the recovery of a debt, as it is not an action for ‘damages’, the decision is also of interest in finding that (even if the act had applied) in terms of debt, a valuer who produced a negligent valuation and a borrower who was contractually obliged to repay a debt are not concurrent wrongdoers. The case has implications for other professional advisors, in that the issue of the ‘same damage’ must be considered.
It is quite remarkable that an act that is over 60 years old continues to spark debate and create new law. The McDonagh and Defender litigation should remind us all not to become complacent about long-standing legislation. It is also a reminder to practitioners to always consider your client’s case from first principles, to identify their best arguments, and to vigorously pursue them.
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