You’d be forgiven for thinking that the law is quite dull. But, the recent case of Main and others v Giambrone & Law and others has more drama than Sky Atlantic’s Riviera…
UK, Ireland and Calabria, Italy. 185 claimants have, unluckily, purchased off-plan luxury apartments in the Jewel of the Sea Development. The law firm that advised them, Giambrone, has been ordered to compensate them for their lost deposits.
Giambrone has appealed.
The Jewel of the Sea development (JOTS): now possessed by the Italian Financial Police, who’re investigating allegations that it was a cover for a money-laundering operation organised by the Italian Mafia and the IRA.
Giambrone & Law (Giambrone): the Anglo/Italian law firm that advised the buyers
185 claimants: the unhappy buyers who purchased the apartments, and lost their deposits
Act I, Scene i: claimants’ expectations
Giambrone made a fundamental mistake – it promised, and didn’t deliver.
It promised the buyers that it’d: <!--[if !supportLineBreakNewLine]-->
- carry out extensive due diligence into the development
- only release deposit money after receiving a bank loan guarantee, complying with Italian legislation
- assure its clients that the holiday homes were safe investments.
Act I, Scene ii: reality
Giambrone actually: <!--[if !supportLineBreakNewLine]-->
- checked that ‘apparently’ valid planning permissions were in place
- released deposit money without guarantees
- didn’t tell the buyers how much commission they were paying
- didn’t tell the buyers of the risk of the Italian Mafia being involved in the Calabrian construction industry.
Act I, Scene iii:
The Italian Financial Police seized the Jewel of the Sea Development, suspecting money-laundering and Mafia involvement.
The buyers lost their deposits. They took Giambrone to court to get them back, and won.
The final scene
During appeal, Giambrone argued that it shouldn’t have to compensate buyers for their lost deposits. Even if it’d complied and obtained compliant planning permission, the buyers wouldn’t have got their deposits back. Its failure had caused no loss.
The court rejected this, saying Giambrone was obliged to look after the deposits indefinitely. If it hadn’t received a guarantee, the contracts would’ve been undone – and Giambrone would’ve had to have returned the money.
What’s more, the amount of compensation Giambrone would’ve had to pay was the same as the amount it’d have to pay for breaking the contract anyway.
Giambrone then tried to use a historic case, South Australia Asset Management Corporation v York Montague Limited , to avoid paying compensation. It claimed that its only duty was to provide information – and so this should limit the amount of compensation the buyers could get.
But, the buyers didn’t have any knowledge of Italian law or conveyancing processes. Giambrone decided what information it gave them. The court ruled that Giambrone was, therefore, guiding their decisions – and that their loss was its responsibility.
Giambrone also argued that it only had to check that ‘apparently’ valid planning permissions were in place. The court rejected this, based on Giambrone’s promises to carry out extensive due diligence and ensure that planning permissions were valid.
Lastly, Giambrone argued, it didn’t have to warn the buyers that Calabria’s construction industry was at risk of criminal activity. The court rejected this too.
This case is very fact-specific. It probably won’t apply widely.
But, there’s a powerful lesson to be learnt: if they don’t want to breach their duty to their clients, solicitors must keep the promises they make.