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25 August 2017 | Comment | Article by Richard Locke

Solicitors liable for failing to protect client money from the Mafia

A law firm has been found to be negligent and in breach of trust in the advice it gave hundreds of clients in relation to the purchase of off-plan holiday apartments in Calabria, Italy. The firm failed to warn of suspected Mafia involvement, which was later discovered by police, who seized the properties.

In July 2017, the Court of Appeal made a ruling in Main and others v Giambrone & Law and others [2017] EWCA Civ 1193. This judgment arose out of an appeal by a firm of solicitors against a High Court judgment holding them liable to compensate nearly 200 claimants. The claimants had lost money in what the court termed ‘a disastrous holiday homes venture’ in Calabria in Italy.

The issues for the Court of Appeal to consider in Main v Giambrone & Law were:

  • whether the claimants were entitled to compensation for their lost deposits after the entire development plot was seized by the Italian Financial Police because of suspected money laundering; and
  • whether the losses suffered by the claimants were within the scope of the lawyer’s duties.


The defendant was a firm of Italian lawyers practising in London and Italy. They acted for hundreds of property investors in the UK and Ireland in relation to purchasing “off plan” holiday homes in Calabria, Italy. The defendant stated that it would carry out due diligence into the plots and that they would only release the clients’ deposits upon receipt of a bank loan guarantee from the developer which complied with specific standards. However, despite the fact that the guarantees received did not comply with these requirements, the defendant released the deposits to the builders and promoters of the project. After the deposits had been released, and before the homes had been completed and conveyed to the purchasers, the Italian Financial Police seized the entire development following allegations that the project was a money laundering operation organised by the IRA and Italian Mafia. The purchasers were unable to recover their deposits and brought proceedings against the defendant solicitors seeking to recover their losses. In particular, the claimants argued that the defendant had failed to alert them to the risks of criminal activity in the construction industry in Calabria and failed to undertake adequate enquiries into this issue prior to handing over the deposits.


The Court of Appeal upheld the decision of the High Court and dismissed the defendant’s appeal. In reaching that conclusion, the court considered a number of issues, including:

  • The defendant was under an obligation to receive the deposits from the purchasers and to hold that money on trust until the developers provided compliant guarantees. They were only entitled to release the deposits if the guarantees complied with the relevant Italian decrees. Since the guarantees were not compliant the defendant was in breach of contract by wrongfully paying out the deposit monies that it had undertaken to keep safe.
  • The defendant did not provide information to the claimants, which was central to the decision to purchase the plots. This included the fact that a large percentage of the deposits were being paid as commission to the agent promoting the project; and the fact that Calabria was a “crime-ridden part of Italy” and that the Mafia infiltrated all sectors of Calabria including the construction industry. Indeed, the documents provided by the defendant suggested that everything was above board and the claimants were making safe investments in holiday homes. This failure to warn the claimants about the risks was a breach of duty.
  • Furthermore, the defendant undertook to carry out extensive due diligence into the development project, which included checking that there was valid planning permission. In the event, there was not, and so the defendant was in breach of duty.
  • Accordingly, the loss of the deposit monies suffered by the claimants was clearly within the defendant’s scope of duty. The defendant had explained to the claimants their rights, liabilities and protections under Italian law, and had stated that they would be protected by guarantees which complied with specific requirements. Since the guarantees provided were not compliant, the defendant was liable for the full losses of the deposits suffered by the claimants.


Whilst this decision is unlikely to have wider application due to being very fact specific, it does highlight that solicitors are required to carry out all the steps that they promise in marketing material. For example, in this instance the solicitors had promised to carry out extensive due diligence, and that they would only release deposits when adequate guarantees had been received from the developers. In circumstances where adequate guarantees had not been received, and the solicitors had knowledge of relevant information that was not passed on to the client, they were in breach of duty.

Author bio

Richard is a Partner and an elected partner on the firm’s board of management.  He is also Group Head of the ever expanding dispute resolution team at Hugh James. He conducts major commercial disputes frequently with an international flavour including commercial claims, mining disputes, shareholder and partnership disputes, professional negligence claims, contentious IT disputes, injunctive relief and insolvency.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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