Breach of trust — all or nothing?
The Court of Appeal recently handed down judgment in AIB v Mark Redler & Co. The case dealt with two main issues: when does a solicitor have authority to release the advance in a remortgage transaction?; and if the solicitor does act in breach of trust, what is the correct remedy?
AIB lent £3.3 million to the borrowers by way of remortgage. In error, Mark Redler & Co, a firm of solicitors, acting for the borrowers and AIB, paid only £1.2 million to Barclays to redeem its charge, leaving £273,000 outstanding (the balance went to the borrowers). Barclays refused to release its charge so the claimant, AIB, did not get the first charge over the property it had expected. The borrowers defaulted and the property was sold, realising £1.2 million, leaving AIB, as second chargeholder, out of pocket by around £3 million. AIB sued the solicitors, not just for the sum paid to the borrowers by mistake, but for the whole of its advance, alleging that the solicitors had acted in breach of trust…
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