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Mortgages.

The editor of this section of the site is Nigel Clayton of Kings Chambers, Leeds and Manchester. Nigel also maintains the specialist website dealing with mortgages at www.legalmortgage.co.uk


There are two cases this month:
  • Solicitors - A firm of solicitors acted in breach of trust in parting with a mortgage advance when acting on instructions to obtain a first legal charge. Compensation was assessed as the loss in value of the lender’s security, not the whole amount of the advance.

  • Charging orders - Despite the debtor’s wife having registered home rights under the FLA, it was appropriate to order the sale of property on the application of a judgment creditor who had charging orders. There was no other means of satisfying the debt.


Solicitors

Breach of trust – equitable compensation

AIB Group (UK) Plc v Mark Redler & Co
[2014] UKSC 58

Summary

A firm of solicitors acted in breach of trust in parting with a mortgage advance when acting on instructions to obtain a first legal charge. This was due to the fact that they failed to obtain either a redemption statement, or an undertaking from the first chargee to discharge its charge on completion. The equitable principles of compensation required the court to have regard to causation and remoteness. Compensation was assessed as the loss in value of the lender’s security, not the whole amount of the advance.

Facts

S arranged to re-mortgage their property, then valued at £4.25m with AIB for £3.3m. A firm of solicitors, MR acted on behalf of both S and AIB. AIB required that an existing charge to the existing lender (L1) was discharged on completion. L1’s charge secured borrowings of about £1.5m on two accounts.

On completion MR telephoned L1 and was given a redemption figure which they paid to L1 and paid the balance of AIB’s net advance to S. MR failed to notice that the redemption figure only related to one of the two accounts and so was insufficient by nearly £300,000 to redeem L1’s charge. They admitted negligence. AIB’s charge was not registered until almost ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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