Clarity For Creditors When Settling With Multiple Debtors

• Published date: 05 August 2022
• Law Firm: Maples Group
• Author: Mr Brian Clarke and Kyle Nolan

Settling with one or some of a number of potential wrongdoers can sometimes be fraught with difficulty, particularly due to concerns regarding the application of the provisions of the Civil Liability Act 1961 (the "Act") on contribution between 'concurrent wrongdoers' i.e. two or more persons who are responsible for the same damage. Until now, the lack of clarity regarding applicability of the Act to claims for the recovery of a debt often preoccupied banks and their advisors when considering debt arrangements with certain co-borrowers and/or guarantors and the form of such arrangements.

In a significant judgment delivered earlier this year¹ , the Court of Appeal held that those provisions of the Act do not apply to claims for the recovery of debts. The Court also held that a claim to recover a debt against a borrower and a related negligence claim against a valuer were not claims for the 'same damage' under the Act - thus, those parties could not be considered concurrent wrongdoers.

Consequently, the Court dismissed arguments by the defendant borrowers that a settlement of a claim against a valuer by the bank precluded the bank from pursuing those borrowers for the balance of the debt.

This is a welcome clarification, especially for creditors, although caution should still be exercised when entering into settlements in such circumstances.

Background

Ulster Bank (the "Bank") sought to recover a judgment against the defendants in the sum of '22 million...