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Stepping back from the whole dishonesty aspect I can understand the rationale behind the judgement. Ultimately the claimant has lost out because the defendant cocked up.

If the defendant hadn't cocked up then the mortgage company would have got its money back via sale of the leasehold or whatever and nobody would have lost out.

When the mortgage payments were no longer made on C's behalf, the mortgage company went after her. That is normal, but if the defendant hadn't cocked up C wouldn't have been in that position anyway.

It seems simple - as a solicitor if you cock up you (or your PIIs) pay for it.