LIV Bridging Finance Ltd v EAD Solicitors LLB

Summary judgment may be granted where the defence has no realistic prospect of success and no compelling reason requires a trial. The court must avoid a mini-trial, but may decide a short point of law or construction where the evidence and submissions are sufficient.

Equitable compensation for breach of trust restores the trust fund for loss caused by the breach. Common-law remoteness and foreseeability rules do not apply, but causation remains necessary. Where a solicitor’s duty is limited to obtaining specified security and confirming that it has been obtained, recovery is confined to loss within that duty’s scope. A claimant cannot recover hypothetical losses, contractual interest or fees unsupported by the evidence.

LIV, a bridging-finance lender, claimed damages and equitable compensation from EAD, its former solicitors, alleging that loan monies were paid away without the first legal charges required by the loan arrangements.

LIV applied for summary judgment. EAD admitted essential parts of the case concerning the Second and Fourth Loans, but disputed aspects of the First and Third Loans and relied on factual issues concerning the transactions, the parties’ relationships and the quantification of loss.

The central issues were whether EAD had realistic prospects of defending liability, whether there was a compelling reason for a trial, and how equitable compensation should be assessed under the principles governing breach of trust and the scope of the solicitor’s duty.

1. Summary judgment. Applying Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and the related authorities, the court had to determine whether EAD’s defence was realistic rather than fanciful, without conducting a mini-trial. The court could consider the reasonably expected trial evidence, but a fuller factual investigation was required where it might affect the outcome. A short legal or construction issue could be decided summarily where the evidence was sufficient.
2. Liability. EAD had no realistic prospect of disputing the First and Third Loans in the absence of evidence from Mr Gorman or a relevant colleague. The contemporaneous documents and accounting evidence established that EAD had held and paid away LIV’s money without obtaining first charges. The payments were made knowingly contrary to the instructions and conditions on which the money was held, amounting to breaches of trust within Bristol and West Building Society v Mothew [1998] Ch 1.
3. Equitable compensation. Under Target Holdings Ltd v Redferns [1996] 1 AC 421 and AIB Group (UK) plc v Mark Redler & Co [2015] AC 1503, compensation is calculated by reference to the loss caused to the trust fund by the breach. The common-law concepts of remoteness and foreseeability do not govern, but causation remains essential.
4. Scope of duty. Following Hughes-Holland v BPE Solicitors [2018] AC 599 and the persuasive reasoning in Main v Giambrone & Law [2017] EWCA Civ 1193, EAD’s duty was limited to obtaining first charges and confirming that they had been obtained. LIV could recover loss within that duty, but not all losses which might have arisen on the assumption that the transactions had been properly secured.
5. Disposition. Summary judgment was entered for LIV in the sum of £250,000, representing the losses on the Second and Third Loans. The claims concerning the First and Fourth Loans required investigation at trial. Interest and consequential matters, including costs, were reserved for determination on written submissions.