The Application Of The SAAMCo Principle In Cases Of Breach Of Trust: LIV Bridging Finance Ltd V EAD Solicitors LLP

• Published date: 11 August 2020
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Trials & Appeals & Compensation
• Law Firm: Clyde & Co
• Author: Chris Georgiou

The High Court has handed down judgment in LIV Bridging Finance Ltd v EAD Solicitors LLP. This confirms that the SAAMCo principle (as elucidated in the 2018 case of Hughes-Holland v BPE Solicitors) limiting recovery of damages in certain circumstances applies to cases of breach of trust by solicitors.

The case concerned four loans paid over a 10 month period as part of short term bridging facilities for use in the development of land. LIV, the lender, contended that it suffered loss as a result of the solicitors paying away the loan monies in breach of trust without ensuring that they were first secured by a first legal charge over specific properties, contrary to their instructions. Therefore, when the borrowers defaulted, LIV sustained significant losses and sued the solicitors for breach of trust, seeking recovery of the full amounts lost.

The Court only partially granted LIV's summary judgment application since causation and loss were only established in relation to two of the four loans. It was held that the SAAMCo principle operated to limit the recoverable losses by reference to the solicitors' scope of duty.

Equitable compensation for breach of trust is based on the principle of putting the trust back into the position that it would have been in had the trust never been breached (Target Holdings Ltd v Redferns [1996] 1 AC 421).

However, the SAAMCo principle operates to limit damages by reference to the scope of duty owed by a professional. Where the professional's duty is limited to providing information which may form part of a client's decision making process as to whether to enter into a transaction or proceed with a particular course of action, the damages which the client will be entitled to recover will be limited to those which foreseeably arise from the professional having provided incorrect information.

However, where the professional's duty is to advise the client as to whether to enter into a transaction or proceed with the course of action, the damages will not be capped in this way and the principle of restoring the trust into the position it would have been in but for the breach by the professional will apply.

Therefore, an analysis of the duty owed by the professional and the relationship between the professional and their client will be required to establish the extent of the loss flowing from the wrongful conduct.

In Main v Giambrone & Law [2017] EWCA Civ 1193, the Court of Appeal had applied the SAAMCo principle in assessing the...