Claimants in the group action against Giambrone & Law scored a High Court victory this week. The outcome might be bittersweet however, after the firm’s indemnity insurers said there was no money left to claim.
The named partner of Italian firm Giambrone & Law, Gabriele Giambrone, has been told by the High Court that he should have informed clients that property investments could be affected by organised crime.
This is a case that has caused misery for hundreds of claimants for years. Back in 2007 they had seen Italian investment properties advertised in the national press. They opted to invest and it was recommended that they instruct Giambrone to act for them throughout.
Then things started to go wrong. The investors were told they had to put down a 50 per cent deposit, money that was handed over to Giambrone’s firm. The deposits were handed over to Giambrone but then the development was abandoned following police intervention over allegations of money laundering.
It is now known, and recorded by Mr Justice Foskett on Tuesday (7 July) that the Italian lawyer, then registered on the Solicitors’ Regulation Authority’s (SRA) European lawyer list, was out of his depth.
According to Foskett J: “It is possible that he [Giambrone] (as a relatively inexperienced practitioner himself) found his very new firm being inundated with requests to act (which, of course, he had solicited with the active encouragement of the developers and promoters) when the firm’s resources were not sufficient (or not sufficiently experienced) to cope with the demand.
“As a result, either corners were cut or, because he had insufficient experience of what the English solicitor (whose standards he said he set out to adopt) would be required to do in such a situation, the standard of work was inadequate.”
The claimants, having lost their deposits, instructed Penningtons and Edwin Coe to launch a claim for breach of trust. There was no suggestion that Giambrone and his partners were party to any crime, but that they failed to carry out sufficient due diligence so they could withdraw from the investment if things should go wrong.
As the case rumbled on Giambrone had his own regulatory issues to deal with. In February 2013 the Solicitors Disciplinary Tribunal (SDT) ordered his removal from the SRA’s register of European lawyers (7 February 2013).
In June 2013, the firm settled with 66 claimants based in Northern Ireland with no admission of liability made.
Giambrone then went on to launch an appeal against the SDT ruling (21 May 2013). The appeal was rejected.
In this latest ruling Foskett J held that the preliminary contract signed by the investors was wholly inadequate to protect their interests. The firm failed to provide relevant information about payment structures and commissions being paid to the property promoter. As a result the claimants were unable to make informed choices about whether to proceed.
“The risks against which the firm should have protected the purchasers were recognisable risks in all off-plan schemes and the contract did not do enough to protect against them,” the judgment said.
It is a small victory for the claimants. The deposits can be recovered if it is established in any individual case that, but for the breaches of duty, the deposit would not have been paid out. That may be some way off.
As Foskett J called on Giambrone and his professional indemnity (PI) insurers, AIG, to rethink their position, the defendants were already set on appealing.
There could also be a further court battle with AIG, which has told the court that there is simply no money left in the indemnity pot. Giambrone had originally claimed to have £5m in PI cover and according to the judgment the firm had a £3m PI insurance policy in place.
AIG, which has instructed RPC although it is not party to the action, argues that because the Northern Ireland claims were aggregated – that is to say they were counted as one event – all but £37,837.28 has been paid out. If the claimants were to succeed in establishing liability the firm’s partners would be left to pick up the tab.
Foskett J said in February he had ordered costs against the firm of £33,500 to be paid within 14 days. Giambrone appealed for more time to pay his share. The maximum he could pay, he said in an affidavit, was €400 per month.
In the same affidavit he said he spent between €5,000 and €7,500 to travel between his company offices every month as well as paying €800 per month for a Mercedes in Palermo. That aspect of the case was put over for further consideration at a later date.
The court case, meanwhile, is being funded by AIG.
In his July ruling Foskett J seemed perplexed by the position, stating that in the defence funding was unclear and in a number of respects “plainly unsatisfactory”.
He continued: “It is a most unattractive position that every point can be taken by the defendants against the claims brought by the claimants, with the risk to the claimants of having to pay the insurer’s costs if the defendants succeed, but the insurers cannot be made to pay the claimants’ damages or costs if the claimants succeed, the claimants having to rely in that situation upon recourse to the person of Avvocato Giambrone and/or his fellow partners (all of whom claim to be in no position to meet any such liabilities).”
The claimants are stuck in the midst of a legal maze and the case rumbles on.
In a statement Giambrone & Law said: ‘’Naturally, we are very disappointed with and surprised by the judgment. We consider that treached the wrong conclusion on a number of critical issues and we are likely to be appealing on those issues.’’
The legal line-up:
For the various claimants
Penningtons Manches partner David Niven instructed Enterprise Chambers’ Robert Duddridge for the Pennington Manches Claimants
Edwin Coe partner David Greene instructed Radcliffe Chambers’ Shantanu Majumdar for the Edwin Coe Claimants
For the defendants (1) Giambrone & Law (a firm); (3) Allessandra Bellanca; (4) Anna Cinzia D’Arpa; (5) Gabrielle Giambrone
Hailsham Chambers’ William Flenley QC leading Jamie Carpenter of the same set
The second defendant Giambrone Law LLP (In liquidation) was not represented