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  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:
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:
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.