Various Claimants v Giambrone & Law (a firm) & Ors

A solicitor’s duty is shaped by the retainer and by any expertise or enhanced service expressly held out. Where solicitors undertake enhanced due diligence for foreign purchasers of off-plan property, they must investigate and report material risks concerning the development, its funding, planning permission, contractual terms and security for deposits. They must provide sufficiently clear information to enable an informed decision. A solicitor holding client money must not release it contrary to the terms on which it is held, including before a compliant statutory guarantee is supplied. The SAAMCO limitation does not apply where the solicitor has undertaken a holistic responsibility to identify and explain the material risks of the transaction.

The claimants were purchasers of apartments in the proposed Jewel of the Sea developments in Calabria. They instructed Giambrone & Law or its successor LLP in connection with off-plan purchases, including due diligence, preliminary contracts, guarantees and payment of substantial deposits. The developments were delayed, planning permissions were suspended, and the purchasers later terminated their contracts without recovering their deposits.

The court tried generic issues arising from exemplar claims. It considered the scope of the retainers, the adequacy of the preliminary contracts and guarantees, the payment of commissions, planning and criminality risks, client-money obligations, the LLP’s assumption of the retainers, limitation and possible remedies. Individual causation and loss were left for later determination.

1. Duty and standard. The defendants were subject to contractual and tortious duties under English law, together with fiduciary and client-money duties. The standard was that of an English solicitor holding himself out as possessing expertise in Italian off-plan transactions. The retainer and representations promised more than routine conveyancing. They created an obligation to undertake enhanced due diligence and to explain its scope clearly.
2. Due diligence. The defendants should have investigated and reported material matters concerning the developers’ lack of track record, the uncertain funding of the development, the validity of planning permission, the risks associated with organised crime in the construction sector, and the legal and practical effect of the preliminary contracts. The promised planning investigation required more than accepting the face of the permission. Appropriate specialist assistance should have been obtained where necessary.
3. Information and advice. The 50% deposit, absence of staged payments, and payment of approximately 31% of the purchase price to the promoter, representing about 62% of the deposit, were matters requiring explanation. The defendants also should have explained the defective guarantees, the obligation to complete despite absence of a certificate of habitability, the restrictions attached to the tourist-residential designation, and the contractual effect of delay provisions.
4. Client money and guarantees. The guarantees were not compliant with Legislative Decree 122/2005 because they were not shown to have been issued by Article 107 institutions and did not necessarily last until completion. Deposits should not have been released without a compliant guarantee lasting until completion. Release in those circumstances constituted breach of trust, as well as admitted breaches of duty in relevant cases.
5. SAAMCO. The defendants’ responsibility was not confined to supplying discrete information. They undertook a holistic duty to identify and communicate the material risks of the proposed transactions. The SAAMCO cap therefore did not apply at this generic stage.
6. Other conclusions. The transfer of the practice to the LLP involved novation by conduct, but did not transfer pre-existing liabilities or release Giambrone & Law. Deliberate concealment of the Mandates postponed limitation under section 32 of the Limitation Act 1980 until discovery or reasonable discoverability. The court declined to determine individual causation and loss, but identified deposits, reasonably incurred investigative expenditure and legal costs as potentially recoverable heads.