A generic approach to stochastic climate modelling is developed for the example of an idealised Atmosphere-Ocean model that rests upon Hasselmann's paradigm for stochastic climate models. Namely, stochasticity is incorporated into the fast moving atmospheric component of an idealised coupled model by means of stochastic Lie transport, while the slow moving ocean model remains deterministic. More specifically the stochastic model stochastic advection by Lie transport (SALT) is constructed by introducing stochastic transport into the material loop in Kelvin's circulation theorem. The resulting stochastic model preserves circulation, as does the underlying deterministic climate model. A variant of SALT called Lagrangian-averaged (LA)-SALT is introduced in this paper. In LA-SALT, we replace the drift velocity of the stochastic vector field by its expected value. The remarkable property of LA-SALT is that the evolution of its higher moments are governed by deterministic equations. Our modelling approach is substantiated by establishing local existence results, first, for the deterministic climate model that couples compressible atmospheric equations to incompressible ocean equation, and second, for the two stochastic SALT and LA-SALT models.