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

Facts

• AIB Group (UK) Plc made a loan secured by a charge over a property, with the terms requiring the solicitor, Mark Redler, to secure a valid charge.
• Redler breached trust by failing to secure the valid charge as required by the loan agreement.
• The central dispute concerned whether the measure of AIB's loss should be the full value of the trust property or only the loss actually caused by the breach.
• The solicitor’s failure to secure the charge resulted in diminished security for AIB, but the decline in property value also contributed to the bank's loss.

Issues

1. Whether equitable compensation for breach of trust should be determined by the full value of the trust property or by the actual loss directly caused by the breach.
2. Whether a causal link between the trustee’s breach and the beneficiary’s loss is necessary to establish liability.
3. Whether losses resulting from intervening factors, such as market fluctuations, should be recoverable from the trustee.
4. Whether the principles governing breach of trust should align with causation principles from tort and contract law.

Decision

• The Supreme Court held that equitable compensation is not punitive but aims to restore beneficiaries to the position they would have occupied absent the breach.
• The loss for which compensation could be awarded was limited to the difference between the value of the security actually obtained and the value if the charge had been properly secured.
• The Court distinguished between misapplication of trust property (requiring restoration of the value) and cases of improper administration (limited to loss directly caused by the breach).
• The Court rejected arguments based on hypothetical scenarios and limited recovery to losses directly attributable to the solicitor's breach.
• Losses caused by external or intervening factors, such as market decline, were not recoverable from the trustee.

Legal Principles

• Equitable compensation for breach of trust requires a direct causal link between the breach and the loss.
• Trustee liability is not absolute; compensation is proportionate and not punitive.
• Foreseeability and remoteness limit the scope of recoverable losses—the loss must not be too remote or caused by extraneous events.
• Trust law is aligned more closely with causation principles from tort and contract law, emphasizing actual as opposed to hypothetical loss.
• The distinction between misapplication of trust property and improper administration is critical to assessing liability and compensation.

Conclusion

The Supreme Court in AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC 58 clarified that equitable compensation for breach of trust is based only on losses directly caused by the breach, ensuring trustees are liable for actual—not speculative—losses, and reinforcing a pragmatic and causation-focused approach in trust law.