A law firm with offices in Italy and England was under a duty to warn British and Irish property investors of the risks of investing in a part of Italy associated with organised crime, the High Court has ruled.
Mr Justice Foskett said Gabriele Giambrone, managing partner of international firm Giambrone, “when making a pitch for the instructions of foreign clients buying off-plan in an area where there was a risk of organised criminal activity, particularly in the building sector”, should have tried to ensure they were not exposed to these risks.
“I am inclined to accept that Avvocato Giambrone did not himself consider that it was something that needed to be mentioned to the clients from his perspective as an Italian lawyer and someone who lived and practised in an area where, on his own account, there is a fair degree of organised criminal activity,” Foskett J said.
“What he overlooked was that his message was being received by the clients on the basis that he was acting as an English lawyer with an English lawyer’s perspective.”
The Solicitors Disciplinary Tribunal ordered the Solicitors Regulation Authority to withdraw the name of Gabriele Giambrone from its Register of European Lawyers in 2013 and ordered him to pay £70,000 costs.
Delivering a lengthy judgment in Various Claimants v Giambrone & Law (and others) EWHC 1946 (QB), Foskett J said investors purchased ‘off-plan’ apartments in the ‘Jewel of the Sea’ (JoTS) development on the coast of Calabria in 2007 and 2008, with “one or other manifestation of the legal practice” of Mr Giambrone acting for them.
Following delays in construction, the claimants pulled out of their purchases, but lost their deposits.
Foskett J said two groups of claimants, represented by Pennington Manches and Edwin Coe, sought to recover their losses “from Avvocato Giambrone’s and/from him and his partners personally on the basis of alleged failures to act properly in their interests in the transactions”.
The judge stressed that there was “no allegation (and is still no allegation) that any of the defendants were in any way involved in mafia or other criminal activity”.
Foskett J said that “many documents that his firm possessed concerning this and other developments were seized by the Italian police in March 2013 in their investigation, but Avvocato Giambrone and the other defendants are not, I have been told, themselves under investigation”.
He went on: “The possibility of mafia involvement in the Calabrian construction industry is, however, an issue that has arisen in connection with the duties alleged to have been owed by Avvocato Giambrone and his firm to the proposed purchasers.”
Foskett J quoted from defences pleaded by the firm in another legal action relating to the JoTS development, which stated: “What caused the claimants’ loss was their unwise entry into the transaction, relating to the off-plan purchase of property in a notoriously crime-ridden part of Italy without, it appears, taking any financial advice. That was due to their own negligence, not that of their Italian property lawyers.”
Foskett J responded: “Looking at this as an English lawyer would have done (but with knowledge of the risks involved), in my judgment, it was necessary to say something to the effect that a proposed purchaser ‘may have heard’ that the area is generally one where organised crime in the construction industry has been known to be involved on occasions, that it is something that the purchasers should bear in mind, but that the enquiries to be undertaken by the firm will be designed to see if there is any basis for concern in relation to the JoTS development.
“In my view, that would have been a sufficient discharge of any duty to alert the purchasers in this regard.”
He further found that “the preliminary contract was wholly inadequate to protect the interests of the purchasers and there is no doubt that the purchasers were not given certain relevant information (for example, relating to the payment structure for the project and the level of commission going to the promoter) that they ought to have been given in order to make an informed decision about whether to proceed.”
On the issue of due diligence, Foskett J said that although the actual information conveyed was accurate, “overall the information given was not adequate in the circumstances”.
The judge concluded that he was “in no doubt that the deposits can be recovered if it is established in an individual case that, but for the breaches of duty, the deposit would not have been paid out”.
He added: “If the proceedings do continue, and since the question of causation in individual cases has been left to one side, it is impossible to say what the result in any such case would be. However, the conclusions that I have reached establish clearly that relevant breaches of duty have occurred.”
David Greene, the senior partner of Edwin Coe, said: “Hundreds of investors were attracted to buying a holiday home in Calabria unaware of the darker side of the organisation lying behind the development.
“In the event this only became clear on the arrests by the anti-mafia squad in Italy of those involved in the development against allegations that the sale and purchase process was part of a money laundering exercise between former IRA personnel and the Calabrian mafia, the infamous ‘Ndrangheta. The trial of the men arrested is ongoing.
“The proceedings in London are the result of multi million pound claims by investors against the Italian lawyer who acted for them in the transactions. It is not suggested that he, Gabriele Giambrone, was part or knew of the criminal activities lying behind the development.”