AIB Group (UK) Plc v Mark Redler and Co Solicitors: CA 8 Feb 2013

The defendant firm of solicitors had acted for the claimants under instructions to secure a first charge over the secured property. They failed to secure the discharge of the existing first charge, causing losses. AIB asserted breach of trust.
Held: The bank’s appeal failed. However, the judge was wrong to treat the breach of trust as limited to that part of the mortgage advance which was paid to the borrowers instead of being used to discharge their liability to Barclays on the second account. the solicitors had no authority to release any part of the funds advanced by the bank unless and until they had a redemption statement from Barclays coupled with an appropriate undertaking which enabled them to be sure that they would be able on completion to register the bank’s charge as a first charge over the property.
Where the breach of trust occurred in the context of a commercial transaction such as the present, Target Holdings established that equitable principles of compensation ‘although not employing precisely the same rules of causation and remoteness as the common law, do have the capacity to recognise what loss the beneficiary has actually suffered from the breach of trust and to base the compensation recoverable on a proper causal connection between the breach and the eventual loss’.
Given the law, and, on the facts, Patten LJ said: ‘If one asks as at the date of trial and with the benefit of hindsight what loss AIB has suffered then the answer is that it has enjoyed less security for its loan than would have been the case had there been no breach of trust. If [the solicitors] had obtained from Barclays a proper redemption statement, coupled with an undertaking to apply the sums specified in the statement in satisfaction of the existing mortgage, then the transaction would have proceeded to complete and AIB could have obtained a first legal mortgage over the Sondhis’ property. But although that did not happen, AIB did obtain a valid mortgage from the Sondhis which they were eventually able to register as a second charge and use to recover part of their loan from the proceeds of the security in priority to the Sondhis’ other creditors. Even had there been no such mortgage they would have been subrogated to Barclays’ first charge insofar as they discharged part of the Sondhis’ indebtedness by the payment of the andpound;1.2m. In my view all of these are matters to be taken into account in considering what loss has ultimately been caused by the solicitors’ breach of trust. In the light of the judge’s findings it is not open to AIB to contend that but for the breach of trust it simply would have asked for its money back.’
Arden, Sullivan and Patten LJJ
[2013] EWCA Civ 45
England and Wales
Appeal fromAIB Group (UK) Plc v Mark Redler and Co (A Firm) ChD 23-Jan-2012
The claimant bank sought damages from the defendant solicitors, saying that they had paid on mortgage advance moneys but failed to deliver as promised and required, a first mortgage over the property purchased. The solicitors had failed to discharge . .
CitedTarget Holdings Ltd v Redferns (A Firm) and Another HL 21-Jul-1995
The defendant solicitors had acted for a purchaser, Crowngate, which had agreed to buy a property from a company called Mirage for andpound;775,000. Crowngate had arranged however that the property would first be passed through a chain of two . .

Cited by:
At CAAIB Group (UK) Plc v Mark Redler and Co Solicitors SC 5-Nov-2014
Bank not to recover more than its losses
The court was asked as to the remedy available to the appellant bank against the respondent, a firm of solicitors, for breach of the solicitors’ custodial duties in respect of money entrusted to them for the purpose of completing a loan which was to . .

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Updated: 30 April 2021; Ref: scu.470899