Main & Orsv (Giambrone & Law (a firm) & Ors

Solicitors who hold a purchaser’s deposit pending a compliant statutory guarantee act as custodians. They must retain the money until the guarantee complies and, if none is supplied, return it when the contract is rescinded. Equitable compensation is assessed with hindsight by reference to loss caused by the breach. The lost deposits were therefore recoverable, and the SAAMCO principles did not exclude recovery because the solicitors guided the clients’ decision-making. An undisclosed commission payment from client money breached the Solicitors’ Accounts Rules 1998 and trust. In an appropriate foreign-purchase retainer, solicitors may also owe enhanced planning due diligence and a duty to warn of known local criminal risks. Those duties remain fact-specific.

One hundred and eighty-five purchasers brought claims against an Anglo-Italian firm and individual lawyers after losing deposits paid for off-plan properties in Calabria. The High Court determined generic issues in Various claimants v Giambrone & Law (a firm) [2015] EWHC 1946 (QB), finding breaches concerning statutory guarantees, client-money withdrawals, due diligence, planning permission and criminal-activity risks. It later granted summary judgment and awarded equitable compensation in Various claimants v Giambrone & Law (a firm) [2015] EWHC 3315 (QB).

The defendants appealed on five grounds: equitable compensation, commission payments under the Solicitors’ Accounts Rules, the scope-of-duty principles in SAAMCO, planning permission and organised crime. The central issues were whether the deposits were recoverable in equity and whether the losses fell within the scope of the solicitors’ duties.

Appeal dismissed. The court rejected all five grounds. The outcome was unanimous, although Underhill LJ disagreed with the majority’s formulation of the planning-permission breach.

1. Giambrone’s obligation was custodial. Its role was to receive the guarantees supplied by the developers and check compliance with Legislative Decree No 122. It had no authority to release the deposits unless compliant guarantees were in place. Since none was supplied, the firm should have retained the money until the contracts were rescinded and then returned it. This distinguished Target Holdings Ltd v Redferns [1996] 1 AC 421 and was consistent with AIB Group (UK) PLC v Mark Redler & Co Solicitors [2014] UKSC 58; [2015] AC 1503. The deposits were therefore recoverable as equitable compensation.
2. Withdrawal of client money to pay VFI’s substantial commission without informing the clients breached rule 22 of the Solicitors’ Accounts Rules 1998 and constituted a breach of trust. Giambrone’s later deliberate concealment of the commission was sufficient to affect its conscience, so the limitation defence failed in relation to that head of claim.
3. The SAAMCO analysis turns on the scope of the retainer, not a simplistic distinction between information and advice. Giambrone was guiding the clients’ decision-making and this was a category 2 case. The disappearance of the deposits was a direct loss within the scope of its duties.
4. The majority held that the retainer and particular circumstances justified an enhanced inquiry into planning validity. Whether that breach caused loss was left for the second trial. Underhill LJ considered that a breach should not be found in the abstract before identifying the further steps required, but accepted that the same inquiry would arise. The court also upheld the finding that Giambrone should have warned clients about organised crime risks in Calabria’s construction sector. That conclusion was fact-specific and did not widen ordinary conveyancing duties in England and Wales.

• Court of Appeal (Civil Division). The court dismissed the defendants’ appeal against the summary judgment and related generic findings: [2017] EWCA Civ 1193.
• High Court, Queen’s Bench Division. Foskett J determined generic issues in [2015] EWHC 1946 (QB) and subsequently granted summary judgment, awarding equitable compensation, in [2015] EWHC 3315 (QB).