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AIB Group (UK) plc v Mark Redler & Co Solicitors
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1 User Commentary

Melanie Davidson (In-house lawyer) 28 September 2015

Case Digest: AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC 58

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Whether Lord Browne-Wilkinson's analysis of the principles of equitable compensation in his speech in Target Holdings Ltd v Redferns [1996] AC 421 should be affirmed, qualified or reinterpreted. And depending on how that is answered, whether the Court of Appeal in the present case properly applied the correct principles to the facts.

Heard before Lord Toulson, Lord Reed, Lord Wilson, Lord Neuberger and Lady Hale.

Judgment was handed down in the case of AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC 58 on 5 November 2014. The case is a useful restatement of the law on equitable doctrines and remedies, and their inter-relationship with common law principles and remedies, particularly in the commercial context, following Target Holdings Ltd v Redferns [1996] AC 421.

This long running litigation arose due to the failure of a solicitors' firm to redeem a prior charge by Barclays Bank over a property. When AIB discovered this they were registered as a second charge over the property, Barclays' taking primacy. On repossession of the property by Barclays, AIB received approximately £300,000 less than it should have done if the breach had not occurred. It therefore sought damages from the solicitors.

Before the Supreme Court AIB ("the Bank") sought to appeal against the Court of Appeal's decision which followed that of the trial judge, His Honour Judge Cook. AIB contended that the Court of Appeal was wrong to treat the breach of trust by the solicitors as limited to the £300,000 of the mortgage advance paid to the borrowers instead of Barclays Bank, to discharge the prior charge over the property.

Dismissing the appeal, Lord Toulson followed Lord Browne-Wilkinson in Target Holdings who found that liability depends on a causal link between breach of trust and loss, and rejected as a fallacy that the measure of liability was fixed at the date of breach of trust.

The two central issues were (i) should Lord Browne-Wilkinson's fundamental analysis of the principles of equitable compensation in Target Holdings be affirmed, qualified or reinterpreted as AIB sought? and (ii) had the Court of Appeal properly applied the correct principles to the facts?

As to the first question Lord Toulson recognised that "it would not in my opinion be right to impose or maintain a rule that gives redress to a beneficiary for loss which would have been suffering if the trustee had properly performed its duties". It would be a backward step for the Court to depart from Lord Browne-Wilkinson's analysis in Target Holdings or to reinterpret the decision as the Bank sought to be done.

On the second issue, Lord Reed concurring, it was determined that equitable compensation and common law damages are remedies founded upon separate legal obligations. The cost of restoring what the bank lost due to the solicitors breach of trust comes to the same as the loss caused by solicitors' breach of contract and negligence. Lord Reed went on to consider the relationship between equitable compensation and common law damages. Compensation, as an equitable remedy, is available when restitution and account of profits are not appropriate. The losses to be made good "are only those which, on a common sense view of causation, were caused by the breach"; see McLachlin J in his dissenting judgment in Canson Enterprises Ltd v Boughton & Co. (1991) 85 DLR (4th) 129 and approved by Lord Browne-Wilkinson in Target Holdings.

Compensation should therefore be assessed at the date of trial, with the benefit of hindsight. The Bank were not entitled to anything more.

Appeal unanimously dismissed.


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