The Supreme Court yesterday dismissed AIB's appeal in this eagerly awaited decision concerning the measure of loss for breach of trust by solicitors paying away mortgage monies.
The bank claimed its solicitors had to "reconstitute the trust fund" after the solicitors paid an incorrect redemption figure leaving the bank with a second charge rather than a first charge. When the property was sold after the borrowers defaulted the bank was left with a loss of £2.5m. If the first charge had been redeemed at the outset the bank would still have made a substantial loss. The sum paid to discharge the first charge when the property was sold was only £273,777.42 and that was the sum awarded to the bank at first instance. The bank's appeal to the Court of Appeal was unsuccessful.
Dismissing the appeal, Lord Toulson said, "in my opinion it would not be right to impose or maintain a rule that gives redress to a beneficiary for loss which would have been suffered if the trustee had properly performed its duties".
The Supreme Court's decision represents a firm affirmation of the "common sense" reasoning in Target Holdings and its implications will be the subject of further posts on this blog.