Judges at the Court of Appeal ruled that the law firm Giambrone, which has offices in Rome, Milan and Tunis as well as London and New York, is liable for the full consequences of its failure to advise 185 British and Irish investors about the potential risks of investing in a luxury holiday complex on the coast of Calabria in southern Italy.
Lord Justice Jackson concluded that there had been a “breach of trust” in the law firm’s advice to buyers.
Jackson said that Gabriele Giambrone, the law firm’s managing partner, had suggested that everything was above board and the clients were making safe investments in holiday homes when he knew “perfectly well about Mafia activities affecting all sectors in Calabria, including the construction sector”.
The judge went on to say the clients ”knew nothing beyond what was in the glossy brochures,” and should have been warned of the risks.
He upheld a July 2015 High Court ruling, which found that Giambrone was in breach of duty to the claimants in eight respects, including the failure to tell them about the involvement of the mafia in the region.
As a result the firm was ordered to repay the money that buyers had lost – a decision which the firm has now unsuccessfully appealed.
The case
Construction of the real estate project, called the ‘Jewel of the Sea’ was marketed in 2007 by a firm called VFI Overseas Property through brochures and property shows attended by English and Irish purchasers.
Willing purchasers were referred to the Giambrone law firm to act for them in the conveyancing process.According to the international law firm Clyde & Co, following each referral, Giambrone issued a retainer letter which stated that it was a leading Italian law firm in the UK specialising in Italian real estate and off-plan property acquisitions.
According to the international law firm Clyde & Co, following each referral Giambrone issued a retainer letter which stated that it was a leading Italian law firm in the UK specialising in Italian real estate and off-plan property acquisitions.
The letter specified that the law firm would, among other things, complete due diligence over the development, and would ensure that the developers provided a copy of a specific bank guarantee, mandatory under Italian law, which offered security for the purchasers if the developer became insolvent.
When contracts were signed, each purchaser paid their deposits to Giambrone, which ranged from £30,000 to £105,000.
Giambrone wrote to the purchasers to confirm that they would release the deposit to the developers upon receipt of their signed copy of the preliminary contract and the bank loan guarantee.
Giambrone never received the guarantee from the developers, but still proceeded to release the deposits with 38% going to the developer and 62% going by way of commission to the agents. Giambrone did not inform its clients about the size of the agents’ commission.
Cautionary tale
Unfortunately, the development collapsed. Only a small number of units were completed and problems came to light with the planning permissions, which were suspended in June 2008.
In March 2013, the Italian Financial Police took possession of the entire development due to suspected money laundering amid reported allegations of involvement by the Italian mafia and the IRA.
185 purchasers rescinded their contracts but could not recover their deposits without the bank guarantee, and so decided to pursue their solicitor, Giambrone, which as a UK-registered firm could be sued in the British courts.
One hundred and eighty-five claimants brought claims against the Italian law firm and a trial of generic issues in the civil claim was initially heard in the England & Wales High Court, with the judgment given in the investors’ favour.
There was no suggestion that Giambrone Law was involved in criminal activity, but the firm was ordered to repay the lost deposits.
Court of Appeal judge Lord Justice Jackson said the law firm had not made “any inquiry” into whether the planning permissions for the site were valid, and had “deliberately concealed” the level of commissions it paid to VFI Overseas Property out of the buyers’ deposits.
Jackson referred to press reports produced in court – the veracity of which remain unclear – which alleged that one of the bosses of VFI Overseas Property, which was dissolved in 2014, was “a convicted IRA terrorist”.
It is noted in the judgment that it is not known if the allegations are well-founded and that Italian police are still investigating these allegations.
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