Court of Appeal holds solicitors liable for £5 million deposits lost in ‘disastrous’ holiday homes venture

Posted: 31/07/2017

The Court of Appeal has today upheld the High Court’s decision that a law firm was negligent and in breach of trust in the advice it gave hundreds of UK-based buyers in their purchase of off-plan luxury apartments in a now abandoned development in Southern Italy, holding it liable to compensate for the loss of significant deposits in excess of £5 million.

Giambrone, a firm of Italian lawyers practising in London and Italy at the time the project was conceived, had been approached by the developers to act on behalf of prospective purchasers. The development, located in the Calabria region, was named Jewel of the Sea. It was not completed within the timescales set out in the contract, and has since been seized by the Italian financial police in relation to allegations of a £400 million money-laundering operation organised by the Italian Mafia and the IRA. Additionally, Gabrielle Giambrone (senior partner at Giambrone) was sanctioned and struck off as a Registered European Lawyer by the Solicitors Regulation Authority in 2013 in connection with these claims.

Group action professional negligence specialists at Penningtons Manches have been acting on behalf of over 100 of the claimants in their claim against Giambrone to help them recover the monies lost in the failed transactions. In each case the sum lost is 50% of the purchase price of the property. The High Court had agreed that the preliminary contract was inadequate to protect the interests of the purchasers and that they were not given enough relevant information, particularly in relation to the payment structure of the project and the level of commission going to the promoter. The Court of Appeal has decided, in the first case of its kind against solicitors, that Giambrone is liable for the full consequences of their failure to properly advise purchasers of the risks of the purchase, including the risk of Mafia involvement.

However, the fight to recover the lost deposits continues as Giambrone and their professional negligence indemnity insurers AIG say that there is no insurance money left for outstanding claimants. The next step for the team at Penningtons Manches is to pursue AIG and argue that each client has a separate entitlement to the £3 million indemnity insurance, the minimum amount  which solicitors are required to hold.

Penningtons Manches partner David Niven, who leads the team acting on the case, said: “We are delighted with this decision – our clients have been battling to recover substantial sums for nearly ten years. We hope that AIG will provide compensation without any further delay as our clients have suffered enough.”

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