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Breach of Trust: AIB v Redler update

Print publication

16/10/2013

In AIB v Redler & Co [1], the Court of Appeal decided that, although solicitors had acted in breach of trust by failing to obtain a first legal charge against a property in favour of their client, losses were limited to the additional security that a first legal charge would have provided.

You can find the full facts of the case by clicking here but, in summary, AIB sought to recover its full shortfall loss of £2.4m from the solicitors on the grounds that the advance should not have been released in circumstances where there was a failure to redeem the existing charge fully and to secure AIB a first legal charge. AIB argued that in releasing the advance, Mark Redler was in breach of trust and that it was entitled to have the trust fund restored. The property in question was later sold and the sale proceeds were applied firstly to redeem the first charge of Barclays, and then in reduction of AIB’s mortgage. The Court of Appeal held that release of the advance was in breach of trust but that the loss suffered by AIB as a result was only the amount that had to be paid to Barclays to redeem its first charge, as AIB would otherwise have recovered that sum.

AIB has now been granted permission from the Supreme Court to appeal against the ruling, and will again attempt to recover its £2.4m shortfall from the solicitors.

Walker Morris will report on the outcome of the appeal once it has been handed down.

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[1] AIB v Mark Redler & Co [2013] EWCA Civ 45

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