Main and Others (Claimants/ Respondents) v Giambrone & Law (A Firm)and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jackson,Lord Justice Underhill,Lord Justice Moylan |
| Judgment Date | 31 July 2017 |
| Neutral Citation | [2017] EWCA Civ 1193 |
| Docket Number | Case No: A2/2015/4112 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2017 |
[2017] EWCA Civ 1193
Lord Justice Jackson
Lord Justice Underhill
and
Lord Justice Moylan
Case No: A2/2015/4112
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM High Court, Queen's Bench Division
Mr Justice Foskett
TLQ/14/0626
Royal Courts of Justice
Strand, London, WC2A 2LL
William Flenley QC & Jamie Carpenter (instructed by Reynolds Porter Chamberlain LLP) for the Defendants/Appellants
Zia Bhaloo QC & Simon Johnson (instructed by Penningtons Manches LLP) for the Claimants/Respondents
Shantanu Majumdar (instructed by Edwin Coe LLP) for the Claimants/Respondents
Hearing dates: Tuesday 27th & Wednesday 28th June 2017
Judgment Approved by the court for handing down (subject to editorial corrections)
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This judgment is in eight parts, namely:
Part 1 – Introduction
| Part 1 – Introduction | Paragraphs 2 – 12 |
| Part 2 – The Facts | Paragraphs 13 – 31 |
| Part 3 – The Present Proceedings | Paragraphs 32 – 38 |
| Part 4 – The appeal to the Court of Appeal | Paragraphs 39 – 44 |
| Part 5 – Ground 1: Equitable Compensation | Paragraphs 45 – 64 |
| Part 6 – Ground 2: Solicitors' Accounts Rules | Paragraphs 65 – 72 |
| Part 7 – Ground 3: SAAMCO | Paragraphs 73 – 87 |
| Part 8 – Grounds 4 & 5: Planning Permission and Organised Crime | Paragraphs 88 – 97 |
This is an appeal by lawyers practising in England and Italy against a judgment holding them liable to compensate clients who lost money in a disastrous 'holiday homes' venture. The principal issues in this appeal are whether the claimants are entitled to equitable compensation for their lost deposits and whether the losses suffered are within the scope of the lawyers' duties.
There are 185 claimants, who live variously in England and Ireland.
The defendants are a firm of Italian lawyers, who were practising in London and Italy at the material time. The names, membership and status of the firm varied from time to time, but nothing turns on that in this appeal. I shall refer to the firm as "Giambrone".
The moving force in that firm is an Italian advocate, Avvocato Giambrone. I shall refer to him as "Mr Giambrone". Mr Giambrone became registered to practise in England in April 2005. In 2009 restrictions were placed on his practising certificate. Following a decision of the Solicitors' Disciplinary Tribunal in April 2013, Mr Giambrone lost his entitlement to practise in England.
Two Italian companies who feature in the story are RDV Srl ("RDV") and Veco Construzioni Srl ("Veco"). The administrator (i.e. director) of RDV at the material time was Mr Cuppari. The administrator of Veco at the material time was Mr Velardo.
On 20 th June 2005 the Italian Legislature enacted Legislative Decree No 122. I shall refer to this as "Decree 122". The purpose of Decree 122 is to protect purchasers of properties which have not yet been built. Article 2 of Decree 122 provides:
"Upon the conclusion of a contract which has the purpose of the non immediate transfer of ownership or other real right of enjoyment of a property to be built or an act having the same purposes, or at an earlier time the builder is obliged, on penalty of voiding the contract, which can only be enforced by the purchaser, to obtain a surety and consign it to the purchaser, also in accordance with Article 1938 of the Civil Code, for an amount corresponding to the sums and the value of any additional settlement that the builder has received and in accordance with the terms and conditions laid down in the contract, must still receive from the buyer before the transfer of ownership or other real right of enjoyment."
Article 3 of Decree 122 requires that the surety referred to in Article 2 be a bank, insurance company or similar body registered under Article 107 of the Consolidated Law on Banking and Credit ("CLBC").
Some banks, insurance companies and similar bodies are registered under CLBC Article 106, not 107. They have less share capital than organisations registered under Article 107. They are not acceptable as guarantors for the purposes of Article 2 and 3 of Decree 122.
Paragraph 22 of the Solicitors' Accounts Rules 1998 provides:
"Rule 22 – Withdrawals from a client account
(1) Client money may only be withdrawn from a client account when it is:
(a) properly required for a payment to or on behalf of the client (or other person on whose behalf the money is being held);
(aa) properly required for a payment in the execution of a particular trust, including the purchase of an investment (other than money) in accordance with the trustee's powers;
(b) properly required for a payment of a disbursement on behalf of the client or trust;
(c) properly required in full or partial reimbursement of money spent by the solicitor on behalf of the client or trust;
(d) transferred to another client account;
(e) withdrawn on the client's instructions, provided the instructions are for the client's convenience and are given in writing, or are given by other means and confirmed by the solicitor to the client in writing."
From time to time the judgment under appeal refers to paragraph 15 of the Solicitors' Accounts Rules, when clearly the judge meant to refer to paragraph 22. Nothing turns on that slip. Like all counsel, I shall treat every reference to "rule 15" as if it were a reference to rule 22.
After these introductory remarks I must now turn to the facts.
Part 2 – The Facts
In 2006 Veco and RDV were planning to construct luxury apartments on two adjoining sites at Brancaleone in Calabria. That is on the toe of Southern Italy. Veco was planning to build 30 to 40 units on a site by the beach. This is referred to as "the Beach Front development". RDV was planning to build 560 to 570 units on a larger site just behind Veco's land. This is referred to as "the Main Development". Veco and RDV hoped to sell the apartments as holiday homes to people living in the UK and Ireland. The two developments together were known as "Jewel of the Sea" ("JoTS"). RDV and Veco no doubt hoped that this enticing name would boost sales.
Unfortunately, there are allegations that the whole project was a money laundering operation organised by the IRA and the Italian Mafia, in order to recycle the proceeds of IRA criminal activities. I do not know whether those allegations are well founded. The Italian Financial Police are currently investigating the matter. They have taken possession of the entire JoTS development.
Be that as it may, the position in 2006 was that RDV and Veco wished to maximise their returns by selling the apartments before they were built. They therefore made arrangements for two individuals in the UK and Ireland to sell apartments "off plan". Those individuals were Mr Velardo and Mr Fitzsimons. Mr Velardo was a property salesman. According to press reports produced at trial, Mr Fitzsimons was a convicted IRA terrorist.
In November or December 2006 Mr Velardo and Mr Fitzsimons met Mr Giambrone at a property exhibition in London. They told him about the planned JoTS development and said that they needed lawyers to whom they could refer prospective purchasers. Mr Giambrone agreed to accept that role.
In December 2006 Mr Velardo and Mr Fitzsimons set up a company called VFI Overseas Properties Real Estate Agent Ltd ("VFI"). VFI was registered in the Republic of Ireland on 18 th December 2006.
On 3 rd March 2007, VFI entered into two separate written agreements, one with RDV and one with Veco. These were called "JoTS mandates". Under the mandates, VFI (described as "the AGENT") agreed to promote the JoTS development in return for a commission of 31% of the sale prices of the units. Article V of the RDV mandate provided:
"By the signing of the present agreement, V.F.I., Overseas Properties Real Estate Agent Limited gives — and RDV srl takes note – irrevocable mandate to Giambrone & Law International Law Practice, main office in London, to collect in a fiduciary deposit on its own non interest bearing deposit account the deposit and the commission due to the AGENT.
The law firm – "Giambrone & Law" – which undersigns this agreement through its own legal representative Avv. Gabriele Giambrone – takes note and undertakes to release the deposit and the commission due to the AGENT only following a written ratification of the preliminary contract by Mr Antonio Cuppari and the issuing of a regular Invoice from the AGENT to the PRINCIPAL."
Article V of the Veco mandate was in similar, but not identical, terms.
VFI prepared a glossy, coloured promotional brochure. The brochure was couched in inviting terms. It said that by purchasing a property in the JoTS development it would be possible to "live the Italian dream" at the same time as buying a property on the coast at a price which "it is estimated…will triple over the next decade". The brochure also contained the following passage on page four:
"We will provide a full legal package with qualified lawyers and handle all aspects of moving in, including any legal documentation that is required."
The lawyers referred to in that paragraph were Giambrone.
VFI's marketing exercise was highly successful. A large number of people living in England and Ireland agreed to buy JoTS apartments.
Each purchaser paid an initial deposit of €3,000 to VFI. Upon receipt of that money VFI notified Giambrone, who then sent a retainer letter. The retainer letters were all in similar form and included the following passages:
" Re: Purchase of your property in...
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