User:Amymorgann/sandbox/Allied Irish Bank Plc v Maguire, (2016) IESC 57

Allied Irish Bank Plc v Maguire, (2016) IESC is an Irish Supreme Court decision which involved Maguire, the appellant, a firm of solicitors acting on behalf of their client in a conveyancing transaction. The solicitors wrongly sanctioned a loan from AIB bank to be taken against their clients house, however, unbeknownst to AIB, the house was already secured for a loan that had not been paid off as the solicitor had used the monies and incorrectly . The judgment in the Supreme Court overruled the previous High Court decision as that included a punitive element.

Facts of the case

The case of Allied Irish Banks Plc v Maguire was heard by the Supreme court on Appeal from the High Court decision of Peart J. The appeal was heard by Clarke CJ, Charelton J and O’Malley J and the decision was given by Chief Justice Clarke. The respondents, had sanctioned a loan in which the representative solicitor for the clients gave an undertaking that the funds would be used to purchase property and to discharge a loan already held by Anglo-Irish Bank on the property. However, the solicitor fraudulently failed to do so, as the money for the loan was used for other commitments of the appellants’ clients. The facts of this case are exceptional as the loan was sanctioned in 2007 prior to the economic crash and there was a significant drop in the value of the security by 2009 and due to this devaluation caused by economic decline, the calculation of damages was of particular importance for Allied Irish Bank plc. The High Court held that was to be considered a serious breach of professional ethics and awarded the full amount sought by the respondent as well as interest in damages. It was held that it was a complete failure to comply with the terms of the undertaking. The Supreme Court unanimously allowed the appeal and reasoned that the court could not depart from existing principals on compensatory damages and held the case should return to the High court to calculate the damages as the Supreme Court was an inappropriate forum to calculate the correct sum of damages following the new principles set out and the guidance provided by the Supreme court. The decision of the Supreme court was given on the 13th of October 2016. The case is notable for its clarity on the issue of compensatory damages.

Legal Principles Addressed in Allied Irish Bank Plc v Maguire

The legal principle addressed in this case was the compensatory award of damages regarding the sum of the compensatory damages awarded to AIB in the context of the financial crash. Clarke J notes there is a lack of clarity surrounding the calculation of damages using the legal compensatory principle of placing the plaintiff back in the position they were in prior to the Tort. This can be seen in cases referenced by Clarke J such as Solloway v. McLaughlin , one of the earlier cases referring to this legal principle. Referencing Lord Atkin's judgement, Clarke J observed that this case “is clear authority for the proposition that there may be cases where the proper award of compensatory damages must be based on the loss suffered immediately at the time.” He further qualified this principle by referencing McGregor’s book on damages where he is of the opinion that the "soundest approach is to start off with the value at the time of conversion as the prima facie measure” Clarke J then states clearly his interpretation of the principle to be applied in this case as; “A plaintiff, no matter what the wrongdoing, is, at least in theory, entitled to a remedy as soon as the wrongdoing is complete. The fact that it may, in practice, take some time for the claim to be formulated, proceedings brought and the matter come to trial and judgement is obvious. But the starting point should surely be to recognise that the plaintiff was entitled to damages as of the time when the wrongdoing was complete”, therefore, removing the principle from the theory of a conversion of goods as explained by McGregor and towards the compensation of the plaintiff for the wrong in the full amount of the damage at the immediate conception of the wrong.

Development of the law

The case of Maguire is notable for the significant implications that the judgement has on Irish law. In cases of fraud involving a solicitor, Clarke J affirms that there are no “existing authorities clearly establishing a jurisdiction to go beyond compensatory damages”. The Supreme Court in this instance affirmed that merely compensatory damages are available to a plaintiff - in this case where a solicitor had a “flagrant breach of his undertaking and thus of his professional obligations”. This is a clear limit on damages available under Irish law prospectively. In addition, the Court suggested that there would be certain circumstances where an award beyond compensatory damages could be given if the solicitor had acted to retain the wrongful gain for personal benefit, however, this was not at issue in the case as Maguire had undertaken such an action. The issue which was not decided on by the Supreme Court was described as a ​​“difficult question” by Clarke J and in a future case it is likely this question will be answered definitively. Development of the law in this case is highlighted as Clarke J confirms the calculation of losses should occur close to the breach of the undertaking and not at the initiation of the dealings. The Court stated that the loss suffered was a direct consequence of the breach at that time in 2009 and in stating to that effect the court reasoned that the High Court was incorrect in its assessment and the devaluation of the security was unfortunate, yet the law would not put a plaintiff in this case, AIB, in a better position because of a breach than if it was complied with as contracted.

Impact on Irish Law

The legal principles set out in AIB Plc v Maguire have been considered in The Law Society of Ireland v Coleman in which it was held that it is difficult to understand how a party can be entitled to compensation which is of greater market value than the land itself. The precedent set out in AIB Plc v Maguire was also followed in Danske Bank a/s t/a Danske Bank v Thomas Murran p/a Peter O’Connor and Son Solicitors. Clarke J held that a comparison can be drawn between cases where there has been an irreversible conversion of goods and where the claimant requests and secures the return of the goods to cases like Danske Bank in which the breach of an undertaking can be remedied and cases like Maguire whereby the actions of a solicitor resulted in it being impossible to adhere to such an undertaking. AIB v Maguire set out that the standard order where there has been a breach of an undertaking is an order insisting the solicitor to carry out what they had undertaken to do. It also set out that in cases where this order would be inappropriate i.e. in cases of impossibility, the Court has the power to order the solicitor to make good any loss which was applied in Danske Bank.

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