B – Breach of trust
18/6/20
LIV BRIDGING FINANCE LTD v EAD SOLICITORS LTD (IN ADMINISTRATION) [2020] EWHC 1590 (Ch)
The claimant sought summary judgment on claims that the defendant solicitors had paid away monies without obtaining security for loans advanced by the claimant. The court summarised the principles to be applied on applications for summary judgment [18] and principles governing the assessment of equitable compensation for breach of fiduciary duty [22]. The solicitors paid out the money in the knowledge that this was contrary to the conditions on which it was held so as to give rise to a breach of trust [33]. Equitable compensation was limited to losses falling within the scope of the firm’s duty to obtain a first charge [35]. In relation to loans where there was no evidence of any likely repayment and the court was satisfied that no loss would have been suffered if security had been provided, summary judgment was given for the full amount of the advances [36]. The court refused summary judgment in relation to loans where there was evidence that more than the sums advanced had been repaid [37] because claims for arrangement fees and interest required investigation at trial [38].
5/11/14
AIB GROUP (UK) PLC v MARK REDLER & CO SOLICITORS [2014] UKSC 58
Solicitors had committed a breach of trust in relation to a remortgage advance by releasing the funds without having an undertaking from to a third party to discharge an existing charge, and without having held back sufficient funds for that purpose. As a commercial matter and in practical terms the transaction had completed when the loan monies were released. In those circumstances in calculating equitable compensation it was right to take into account the fact the lender had obtained a second mortgage and the sum awarded to the lender was rightly limited to the sum wrongly paid to the borrower which should have been used to discharge the third party’s prior charge.
8/2/13
AIB GROUP (UK) PLC v MARK REDLER & CO SOLICITORS [2013] EWCA Civ 45
Solicitors had committed a breach of trust in relation to a remortgage advance by releasing the funds without the necessary third party undertakings to discharge an existing charge, so completion could not be said to have taken place. The breach of trust was committed in relation to the entirety of the remortgage funds, not just the sum wrongly paid to the borrower which should also have been applied in discharge of the existing charge. But in calculating equitable compensation it was right to take into account the fact the lender had obtained a second mortgage and the sum awarded to the lender was rightly limited to the sum wrongly paid to the borrower.
14/11/12
BIEBER v TEATHERS LTD [2012] EWCA Civ 1466
Money originally paid into a client account ceased to be trust money when it was transferred in accordance with an investment agreement into a partnership account. It could not then be regarded as subject to a Quistclose trust. Payment into the partnership account was payment to the client so it also ceased to be client money within the FSA handbook rules. A claim based on breach of trust therefore failed.