Ireland: Damages For A Breach Of Undertaking

Last Updated: 5 December 2016
Article by Peter Bredin

Most Read Contributor in Ireland, July 2017

The Irish Supreme Court has recently considered the compensation to which a lender is entitled from a solicitor who misapplies monies advanced on foot of an undertaking. The court concluded that compensatory damages were payable to the lender.

The undertaking in this case was given by a firm of solicitors to Allied Irish Bank plc. The solicitors had undertaken to discharge from the AIB loan a debt owed to another lender, so that AIB would have a first ranking charge against the relevant property.

AIB advanced the loan in June 2007 on foot of its standard form solicitor's undertaking. In breach of the undertaking and of professional ethics, the solicitor concerned applied the AIB loan to another project in which the borrower was involved, rather than repaying the prior lender's loan. None of the partners in the firm had any role in the wrongdoing.

AIB sought to enforce the security which the solicitors had undertaken to put in place and discovered the breach in early 2009. By that time, Irish property values had collapsed.

The solicitors argued that AIB's losses over and above the value of the security arose from making a bad loan, rather than the solicitor's failure to comply with the undertaking.

At first instance, the High Court ordered the solicitors to repay to AIB all sums which had been advanced on foot of the undertaking, plus interest. It did so in the exercise of the inherent jurisdiction of the High Court in matters concerning the conduct of solicitors.

Having reviewed relevant authorities, the High Court had concluded that there could be cases involving conduct so grossly careless or egregious that the court would be entitled to order payment of the entire sum which was the subject of the undertaking, and not simply a lesser sum in respect of loss actually occasioned by the breach of undertaking. In the Supreme Court, Clarke J did not reach the same conclusion. He found that the position on the authorities was not fully clear as regards departing from compensatory damages where there has been a breach of undertaking.

Without deciding the issue, Clarke J hinted that there might be cases where awarding more than compensatory damages would be warranted, for example, where monies are misappropriated by a solicitor for his or her own benefit. In this case, however, there was no benefit to the solicitor personally or to his firm in breaching the undertaking.

The main types of damages that can be awarded are:

  • compensatory damages awarded as compensation for and measured by the material loss suffered by a plaintiff
  • aggravated damages awarded when the motives and conduct of the defendant aggravate the injury to the plaintiff
  • exemplary damages awarded to reflect the proper indignation of the public and to reflect disapproval

The Supreme Court remitted the case back to the High Court for the calculation of damages, with the following guidance:

  • It would be too simplistic to calculate damages by reference to the agreed value of the property in January 2009 (€650,000, when AIB called in the loan, having discovered that it in fact had no security) or the date of trial.
  • The true measure of AIB's loss should start with the value of the security at some time soon after the breach of undertaking (which occurred in June 2007). The court should determine the value of the security lost within a realistic timeframe after the breach of undertaking. This would not necessarily be when AIB might have – in the ordinary course of events – come to enforce its security.
  • The court should consider whether AIB – as the holder of a second ranking charge on the property – would have obtained some value for that security after discharging the prior lender's loan. If so, credit should be given in the calculation of the loss of the value of AIB's security.

The Supreme Court was fully cognisant of the huge devaluation of the security as a consequence of the collapse in the property market. By deciding that damages should be calculated by reference to the loss of the value of the security at a time soon after the breach of undertaking (2007) and rather than a later date (for example, 2009), the damages to be awarded by the High Court will not be reduced by the collapse in property prices.

Since the enactment in 2010 of regulations prohibiting solicitors from providing undertakings in commercial property transactions, there is less scope for a case like this to arise in future. This judgment will, nonetheless, be a useful addition to case law on the quantification of damages in cases involving a breach of a promise, whether an undertaking or a contract.

Allied Irish Bank plc v Maguire & others (Unreported, Supreme Court, 13 October 2016) [2016] IESC 57

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.