Leggett & Ors v Giambrone Law LLP (In Liquidation)

A judgment in default conclusively establishes liability, but the claimant must still prove the recoverability, causation and amount of each head of loss at the damages assessment. Losses caused by reliance on negligent or contractual legal advice may include deposits, related expenditure, financing costs and the loss of a reasonably foreseeable alternative investment opportunity. Loss of rental income from an alternative viable investment is not too remote where the adviser knew the client was seeking an income-producing investment and the evidence establishes a real chance of that alternative. Damages may be assessed by percentage chance. Recovery must avoid double counting, but deposits and lost rental income may both be recoverable where they represent different losses.

Forty-three claimants sought damages from Giambrone Law LLP after investing in the proposed Jewel of the Sea development in Calabria. Judgment in default had been entered against the LLP, with damages to be assessed; the claims against the other defendants had been struck out. The defendant did not participate in the assessment hearing.

The claimants alleged breaches of contract, negligence, fiduciary duties, misrepresentation and deceit by the legal practice that advised them. The issues included whether losses incurred before the transition from Giambrone & Law to the LLP were recoverable, whether deposits and reservation fees were caused by breach, whether lost rental income from alternative investments was too remote, and whether loan interest involved double recovery.

1. Assessment following judgment in default. Liability was conclusively established by the judgment in default, but damages remained to be proved. The court retained jurisdiction to determine quantification, causation and remoteness, provided the issue was consistent with the judgment in default. The court applied a common-sense effective-cause approach.
2. Liability for pre-transfer breaches. Where a claimant had first instructed Giambrone & Law and was later told that the practice would trade as the LLP, the LLP was liable for relevant contractual breaches occurring before the transfer. The court accepted and applied the corresponding ruling in the earlier Jewel of the Sea litigation, which had remained intact on appeal.
3. Deposits and expenditure. Deposits paid in reliance on the Firm’s retainer, advice or failure to advise were recoverable. Travel costs incurred independently of breach were not recoverable, but later trips undertaken to investigate or address the failed investment were caused by breach and recoverable. Legal fees incurred after the defective Report on Title were also recoverable in full where no sound-advice component could be identified.
4. Reservation fees. Recoverability depended on the documents and chronology. Fees paid after the retainer, or which could have been refunded under express contractual terms, were recoverable. Where the fee had become non-refundable before the retainer, the claimants recovered for loss of a chance. On the evidence, that chance was assessed at two-thirds.
5. Alternative rental income. The claim was properly characterised as the loss of the opportunity to invest in an equivalent viable development, rather than lost profits from the defective development itself. On the particular evidence, the loss was reasonably foreseeable, flowed naturally from the breach and was within the Firm’s contemplation. Each claimant had lost a real and substantial chance, assessed at 75%, of obtaining equivalent rental income. The expert’s figures were adopted.
6. Loan interest and double counting. Interest on loans used to fund deposits was recoverable where evidenced and within the Firm’s knowledge and contemplation. It could not be recovered for the same period and amount as interest arising under the alternative-investment hypothesis. Deposits and lost rental income were nevertheless distinct losses and could both be recovered. Judgment was entered for the sums assessed, with interest under section 35A of the Senior Courts Act 1981. Costs were awarded to the claimants, but not on the indemnity basis.

The judgment describes an earlier first-instance decision in the related Jewel of the Sea litigation, [2015] EWHC 1946 (QB), which was unsuccessfully appealed to the Court of Appeal, [2017] EWCA Civ 1193; the present proceedings concerned a different group of claimants and the subsequent assessment of damages following judgment in default.