The Birmingham insurance team of Mills & Reeve has enjoyed its first ever outing - and victory - in the Supreme Court.
Defending Stafford law firm Mark Redler & Co Solicitors, Mills & Reeve succeeded in changing centuries of law relating to equitable compensation for breach of trust by a solicitor.
The Supreme Court hearing was streamed live on Sky and the judgment is available to watch on YouTube.
The case was brought by AIB Group (UK), seeking to recoup a £3.3 million loan.
While the majority of an existing charge was redeemed when the loan completed, about £300,000 was not, due to a genuine and honest mistake, and that money passed to the borrowers.
When the borrowers later defaulted, AIB were left with a shortfall and, rather than seek recovery of the remaining charge only, AIB sought to recover its entire loss and to rely on breach of trust.
In AIB Group (UK) v Mark Redler & Co Solicitors, the five presiding judges unanimously ruled compensation should be equitable, and any loss suffered must have been actually caused by any breach.
Since the claimed loss, which is the entire loss on the loan, did not result directly from the breach of trust, the solicitors could, and should, only be responsible for loss caused by the prior mortgage of £300,000 remaining against the title.
Neil Frankland, a partner in the insurance team at Mills & Reeve, and senior solicitor Andrea Lynch, acted for Mark Redler & Co.
Mr Frankland said: “The insurance team was set up 15 years ago and this is our first outing in the Supreme Court.
“The decision is very significant for law firms and their insurers. Its effect is that solicitors who act negligently but who still achieve the underlying commercial objective or transaction will be able to argue that a common sense approach to causation ought to be applied.
“The decision is a victory for common sense and is really good news for the legal profession.”