Zia Bhaloo QC and Simon Johnson defeat appeal on breach of trust and SAAMCO issues concerning the sale of Italian properties to consumers in the first Court of Appeal case to consider Lord Sumption’s judgment in Hughes-Holland v. BPE Solicitors.


10th August 2017

 

On 31 July 2017 the Court of Appeal dismissed the negligent solicitors’ appeal in the Giambrone litigation.  Zia Bhaloo QC and Simon Johnson appeared for the successful respondents represented by Penningtons Manches LLP.

 

The case concerns the sale of holiday property in Calabria, Italy, to consumers living in the UK and Ireland.  English solicitors, Giambrone & Law (and other manifestations of its practice referred to as “Giambrone”), were appointed to act for the purchasers.  The developments ran into difficulty.  The purchasers were supposed to have guarantees issued by Italian financial institutions to protect the deposits that they paid if the developers entered a specific form of insolvency.  The guarantees were not from the right institutions and ended prematurely.

 

The purchasers sued Giambrone for multiple breaches of duty.  In particular they claimed that Giambrone held their deposits on trust and should not have paid them out without compliant guarantees being in place.  On a trial of preliminary issues Mr Justice Foskett found that Giambrone acted in breach of duty and breach of trust.  At a further hearing the judge gave summary judgment to the majority of claimants by reference to the value of their deposits, as compensation for breach of trust.  Giambrone appealed.

 

The Court of Appeal (Jackson, Underhill and Moylan LJJ; Underhill LJ dissenting on an issue concerning planning permission) dismissed the appeal on all grounds. The judgment is significant for three reasons.

 

First, it contains an informative application of the leading cases of Target Holdings Ltd v. Redferns [1996] 1 AC 421 and AIB Group (UK) Plc v. Mark Redler & Co Solicitors [2015] AC 1503 to the measure of compensation for breach of trust, where the breach also sounded in contract and tort.  Jackson LJ emphasised the critical importance of correctly identifying the duty that had been breached or the obligation that had not been performed.  This exercise enabled the court to pinpoint Giambrone’s role as custodians of the deposits.  The loss flowing from the breach of trust (and the concurrent breach of contract) was the value of the deposits.

 

Secondly, Giambrone provided the first opportunity for the Court of Appeal to consider and apply Lord Sumption’s expert analysis of SAAMCO principles in Hughes-Holland v. BPE Solicitors [2017] 2 WLR 1029.  Jackson LJ’s judgment emphasised that the distinction is not between giving “information” or “advice”.  The wider duty carrying with it responsibility for the consequences of entering into the transaction arises where “it is left to the adviser to consider what matters should be taken into account when deciding whether to enter into the transaction”.  Giambrone had assumed that wider duty.

 

Thirdly, the Court of Appeal confirmed that rule 22 of the Solicitors’ Account Rules 1998 contains an implied duty to seek informed consent before disbursing client money where the disbursement has unusual features (in this case the lion’s share of the deposit went to the promoter, not the developers, unbeknown to the claimants).

 

There were further issues concerning Giambrone’s breach of duty in relation to inadequate planning permission and failing to warn the claimants that Calabria was a “notoriously crime-ridden area”.

 

The Court of Appeal’s judgment is available here

 

The first instance decisions are available here: main judgment and summary judgment

 

Zia Bhaloo QC's profile maybe found here

 

Simon Johnson’s profile maybe found here


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