AIB has lost a supreme court action in London after it sued a firm of solicitors for nearly €3 million (€3.8 million) lost in a loan given to a couple that had been secured on their family home, even though Barclays Bank already held mortgages on the property.
The couple borrowed £3.3 million in June 2006 from AIB secured by a first legal charge on their home and AIB told solicitors, Mark Redler & Co, Barclays debt had to be paid off before the loan was handed over.
Barclays had told the solicitors it was owed £1.5 million. However, the solicitors later mistakenly understood that a redemption figure of approximately £1.2 million given by Barclays related to the couple’s total liability, rather than the bill due on one mortgage.
Second charge
This bill was paid by the solicitors, who then handed over the remaining part of the loan, minus expenses, to the couple, even though over £300,000 was still due to Barclays on the second charge.
“[The solicitors] were at fault because they should have realised from the information supplied by Barclays that the figure related only to one account,” the court ruled yesterday.
Barclays “naturally” refused to release its charge unless the outstanding debt was paid in full, the court noted in its ruling, adding that the borrowers promised to pay but then “failed to keep their word”.
In a High Court action, AIB claimed the solicitors should repay the £3.3 million loan, less the amount it had recovered. Redlers argued it only owed AIB about £275,000.
The solicitors, the bank alleged, had breached trust, fiduciary duty and contract law, along with being guilty of negligence.
The solicitors admitted that they acted negligently and in breach of contract but denied the other allegations and they claimed relief under section 61 of the Trustee Act 1925 if found to have acted in breach of trust.
Three fallacies
The supreme court ruled AIB’s claim for full compensation was based on “three fallacies”, since it did not accept that Redler had “misapplied” the full loan, but only the portion that was paid directly to the couple, rather than Barclays.
