Various Claimants v Giambrone & Law (a firm) & Ors

Neutral Citation Number: [2015] EWHC 3315 (QB) IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION Case No: TLQ/14/0626 Royal Courts of Justice Strand, London, WC2A 2LL Date: Tuesday 17 th November 2015 Before: MR JUSTICE FOSKETT - - - - - - - - - - - - - - - - Between: VARIOUS CLAIMANTS Claimants and 1. Giambrone & Law (A Firm) 2. GIAMBRONE LAW LLP (IN LIQUIDATION) 3. ALLESSANDRA BELLANCA 4. ANNA CINZIA D’ARPA 5. GABRIELE GIAMBRONE 6. CRISTINA PONCIBO - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Defendants Robert Duddridge (instructed by Penningtons Manches LLP) for the Penningtons Manches Claimants Shantanu Majumdar (instructed by Edwin Coe LLP) for the Edwin Coe Clamaints William Flenley QC and Jamie Carpenter for the 1 and 3-6 Defendants The 2nd Defendant was not represented. Hearing date: 29 October 2015 - - - - - - - - - - - - - - - - Judgment Mr Justice Foskett: Introduction 1. The substantive judgment in this matter was handed down on 7 July at which stage I announced the following: “The judgment handed down contains my decisions on the items in the List of Issues agreed by the parties for consideration at the trial. The List itself appears in Appendix A to the judgment. So far as consequential matters are concerned, I will adjourn the proceedings generally to enable any application for permission to appeal to be made, as well as any other consequential applications. However, I direct - (i) that any application for permission to appeal must be made to me in writing within 10 days of today’s date with permission to any party that wishes to respond to the application to do so in writing within 4 days of the receipt of the application; (ii) that any other consequential applications must be notified to me (with supporting arguments) in writing within 21 days of today.” 2. 3. 4. Various written representations were submitted by the parties in accordance with those directions in which the Claimants sought orders for costs and an “unless order” and the Defendants responded thereto and sought permission to appeal. My hope had been that I would have been able to deal with all outstanding consequential issues before the Long Vacation. However, that proved impossible. In the course of the exchange of the written representations to which I have referred the PMC Claimants and the EC Claimants intimated an intention to apply for summary judgment based upon the findings of breach of trust made in the substantive judgment. The Defendants had indicated that they were seeking permission to appeal in respect of those findings (and other matters). On that basis it seemed to me to be inappropriate for me to consider the application for permission to appeal until I had heard the applications for summary judgment. This view was communicated finally to the parties by email from my Clerk on 14 August. On 2 September I gave directions concerning the summary judgment applications which were to be heard before the end of October and I also indicated that, that having reviewed the material again, I did not think it sensible to make decisions on the outstanding issues in a piecemeal fashion. I would deal with those matters on the basis of the written representations I had received, but after the summary judgment applications had been heard. I heard the summary judgment applications on 29 October. This judgment deals with those applications and the following issues outstanding from the substantive judgment that it was agreed at the hearing on 29 October I should deal with at this stage: (i) the form of the order giving effect to the substantive judgment; (ii) the Defendants’ application for permission to appeal; (iii) the PMC Claimants’ application for an unless order; and (iv) the free-standing application for costs of a strike out application brought by the Defendants to strike out the claims brought by the former clients of Dr Austen Morgan (see paragraph 61 of the main judgment). 5. I will deal with the summary judgment applications first. Summary judgment applications 6. The trial before me earlier this year dealt with certain generic issues. It was not the trial of all issues, though the effect of the judgment was to determine certain matters conclusively (subject, of course, to any successful appeal). Nonetheless, in the absence of settlement in light of that judgment, another trial (or other trials) would have to take place. The purpose of the summary judgment applications is self- evidently to try to short circuit one area where, it is argued, further disputation is unnecessary in all but a very few cases (which are excluded from the current applications). The jurisdiction invoked is CPR 24.2. 7. The relevant part of CPR 24.2 is as follows - “The court may give summary judgment against a … defendant … on a particular issue if – (a) it considers that – … (ii) that defendant has no real prospect of successfully defending the … issue; and (b) there is no other compelling reason why the … issue should be disposed of at a trial.” 8. 9. The area where it is said on behalf of virtually all the claimants that there is no real prospect of defending the issue is in respect of the consequences of my findings concerning breach of trust. For these purposes the PM Claimants fall into two groups: (a) The “Standard Claimants” who seek summary judgment for the full amount of their deposits plus interest; (b) The “Limitation Claimants” who seek summary judgment limited to the amount of commission paid to the promoters plus interest. The “Standard Claimants” represent the bulk of the PM Claimants. The “Limitation Claimants” comprise five claimants (or joint claimants) whose claims were issued more than 6 years after their deposits appear to have been paid away by the Defendants. Although their case is that no limitation defence can apply in respect of them, they are referred to in this way to differentiate them from the bulk of the claimants. The EC Claimants comprise 50 claimants and each claims the return of the deposits paid out when there was no compliant guarantee in place. 10. The submissions have centred on certain paragraphs in the substantive judgment and the Supplemental Judgment which I will identify here without repeating all of them. They are paragraphs 417-420 of the main judgment and the whole of the Supplemental Judgment, most particularly paragraphs 9-11. For convenience, I will set out those latter paragraphs here: 9. Mr Majumdar’s argument is that the terms of the trust that bound the firm in this case were simply that the deposits should not be paid out unless and until a compliant guarantee was in place and that since that situation never arose the proper performance of the trust obligations would never have led to the monies being paid out. Accordingly, he submits that the firm is accountable for the monies thus paid out. As I understand his argument, it is that, trust monies having been misapplied, the trustee (here the firm) must restore the trust fund to the position it would have been in if the firm had performed its obligation: see [90-94] and [134] in AIB v Mark Redler. In the situation where, as I have found, there never has been a valid and effective guarantee, that seems to me to be correct. The practical effect may be no different from simply saying that the beneficiary (here the relevant purchaser) should be compensated directly for the consequences of the breach of trust, but I am prepared to hold that the analysis for which Mr Majumdar contends is correct and that, accordingly, the purchaser was entitled to be put in the position that he/she would have been in if the terms of the trust had been implemented. The final issue is whether, on the basis that there never 10. was a compliant guarantee in place at any stage, the claimants are any worse off given that no event triggering recourse to the guarantees has in fact taken place (see paragraph 133 of the substantive judgment). Mr Flenley’s argument seems to me to be to the effect that a claim for compensation (however formulated) in such a situation is akin to claiming for a lost opportunity when the opportunity has not been lost. I am not entirely sure that he would need to rely upon Target Holdings to establish that no loss is occasioned in such a situation, but it seems to me to be clear that if a claim is asserted for the lost prospect of reclaiming a deposit because there was no valid guarantee, but no triggering event had occurred, the claim would fail. 11. However, at the risk of repetition, I do not see this as the way in which this claim is advanced, whether formulated as a breach of trust or as a breach of a contractual or tortious duty. The claimants say that they were not told, prior to committing themselves to the preliminary contracts, that the guarantees were non-compliant and thus not effective. The issue, therefore, in individual causation terms is whether that fact (possibly in addition to other matters about which, according to my conclusions in the substantive judgment, they ought to have been told, but were not) would have resulted in a decision not to proceed at all or in a re-negotiation of the terms of the preliminary contract to make them more acceptable to the purchaser. If he/she had not proceeded at all, he/she would not have been exposed to the risk of losing the deposit or the re- negotiated terms would have been such as to protect the purchaser more effectively. 11. When preparing the main judgment (having, of course, reviewed for the purpose the extensive material advanced at the trial when doing so), I was of the view that the breach of trust allegation added little to the way in which the Claimants’ case was being advanced and I expressed my initial reluctance to deal with it partly for that reason. In the light of what has happened subsequently, I think I was wrong to take that preliminary view, but that seems to me to be neither here nor there; the fact is that I was persuaded to deal with it and I did so in the Supplemental Judgment. I think I was still of the view at that stage that it added little to the way the case was being advanced (and I had not foreseen then the development in the guise of the summary judgment applications) which explains my expressed reluctance to adjudicate on the issue. Nonetheless I did so and the substance of my decision appears in the paragraphs quoted above. 12. It seems to be common ground (and indeed I am part of the consensus on this issue) that I reached a clear conclusion in paragraph 9 of the Supplemental Judgment that where monies were paid out when there was no compliant guarantee in place (which was the situation in every case), then the firm was liable to restore the trust fund to the position it would have been in if it had performed its obligation under the trust, namely, not to pay out the deposit unless there was a compliant guarantee. I accepted Mr Majumdar’s argument, based upon AIB v Mark Redler, on that issue. 13. The net effect of that conclusion, subject to the argument to which I will turn below, is that any claimant whose deposit was paid away when there was no compliant guarantee in place would be entitled, as a matter of law, to an order that requires the relevant manifestation of Avvocato Giambrone’s legal practice to repay the sum or sums paid away. Unless my acceptance of Mr Majumdar’s argument was arguably wrong, there could be no answer to the applications for summary judgment. The short argument in favour of that approach was set out in certain paragraphs of the witness statements in support of the summary judgment applications respectively by Mr David Niven for the PMC Standard Claimants and by Mr Dominic de Bono for the EC Claimants as follows: “10. … the defendants have not pleaded, evidenced or positively stated in any context that a guarantee issued by an institution appearing on the Article 107 list was issued in favour of any of my clients in the course of their transactions. I believe it to be common ground that none was. 11. applied to the facts of my clients’ cases, are that: Therefore, the results of the court’s findings …, when each of my clients’ deposits was paid out by the (a) defendants in breach of trust; (b) no circumstances have since arisen in which the terms of the trusts would have allowed the defendants to pay out my clients’ deposits; (c) each of my clients is entitled to be put into the position he or she would be in if the trust had been properly performed; and (d) the relevant defendant is liable in each case to account to and/or equitably compensate my client for the wrongly paid out deposit.” “8. It follows from the findings of the court … that in respect of each and every claim in which there was never a guarantee issued by a financial institution registered in the Art 107 list, the relevant defendant(s) acted in breach of trust in paying out any part of the relevant claimant’s deposit. 9. Appropriate equitable compensation therefor amounts to the deposits so paid out plus interest since this reflects the “performance loss” to the EC Claimants on the basis that due performance of the trust would have meant that the Defendants had retained rather than paid out the claimants deposits.” 14. 15. Those assertions are, in my judgment, entirely well-founded given the conclusion to which I came. Since that conclusion was unambiguous, it would have been most surprising, therefore, if I should have intentionally watered it down (or even arguably negated it) in any subsequent part of the Supplemental Judgment. Mr Flenley says that I did and that, until successfully appealed by the Claimants, everyone is bound by the watered down version which, he argues, appears in paragraph 11. He asserts that this position is reinforced because no-one has asked me to change the phraseology of paragraph 11. 16. 17. 18. 19. His argument is that the process of watering down started in paragraph 10 when I said that the issue I articulated in that paragraph was “the final issue” and that I must have taken the view that I needed to consider it in addition to the issue raised in paragraph 9 otherwise there would have been no need for paragraphs 10 and 11. I agree, of course, that these paragraphs were there because I believed my view on the issue articulated in paragraph 10 was invited. However, I saw that issue as entirely separate from the issue that I had dealt with in paragraph 9. Indeed reference to paragraph 3 of the Supplemental Judgment demonstrates that I saw the issue I identified in paragraph 10 as an alternative argument advanced by Mr Flenley (which plainly it was), not as part of his first argument. Having reviewed the way I expressed myself in the light of the way the arguments had been put before me, I am quite clear that (a) my words in paragraph 11 should not be understood to mean that any aspect of my conclusion in paragraph 9 was modified and (b) that all I was doing was trying to illustrate why I did not see how Mr Flenley’s alternative argument based upon the lack of a triggering event for payment under a valid guarantee had any relevance to the claims being advanced. The whole basis of the case advanced by the Claimants in this regard, whether expressed as a breach of trust or as a breach of some other duty, was that had they known that the guarantees were non-compliant they would not have proceeded with the purchase at all or would only have proceeded if more satisfactory terms had been negotiated. If they had not proceeded at all, no deposits would have been paid over and no losses would have occurred. That they were paid out certainly represented a breach of trust, but also constituted a breach of contract and/or tortious duty. What, perhaps, my phraseology might arguably not have made as clear as it might (though I have to say I would have thought it was clear when paragraphs 9 – 11 are read as a whole in the light of the earlier paragraphs) was that it was not necessary to demonstrate that an individual Claimant would not have proceeded with a purchase where breach of trust was relied upon, whereas that would be necessary if breach of contract or breach of a tortious duty was the cause of action relied upon. Mr Majumdar and Mr Duddridge are correct when they say that in paragraph 11 I was simply endeavouring to illustrate why I did not see how Mr Flenley’s argument, articulated in paragraph 10, arose at all in the circumstances of the case. Paragraph 11 had no further significance and was not intended to detract from the conclusion in paragraph 9. So where does this leave the position in relation to the summary judgment applications? Mr Flenley seeks to raise a general response to all the summary judgment applications by reference to section 61 of the Trustee Act. I will deal with that below (see paragraphs 26-44). However, as I have indicated above, unless my conclusion in paragraph 9 of the Supplemental Judgment is arguably wrong, there is no answer to the summary judgment applications of the PMC Standard Claimants or of the EC claimants unless the section 61 argument prevails. Since I do not consider that my conclusion in paragraph 9 is arguably wrong, there will be judgment for those claimants unless I am persuaded that there is an arguable issue under section 61 that ought to prevent the entry of judgment at this stage. I should add the following at this stage for completeness. As I have said, the claim based on breach of trust does not require evidence in any particular claimant’s case that he or she would not have proceeded with the purchase if possessed of knowledge that no compliant guarantee was in place. To that extent, Mr Niven was correct in his second witness statement dated 28 September to say that whether there was evidence about this issue was irrelevant. However, in answer to an argument advanced by Mr Sefton, solicitor for the Defendants, in his witness statement of 24 September, Mr Niven’s second witness statement contained these paragraphs: “4. My clients have already pleaded in their particulars of claim that, but for the acts and omissions of the defendants, they: (a) would not have proceeded further with the transaction; (b) would not have executed their preliminary contract; and (c) would not have paid their deposit to the defendants or, if they had already done so, would have instructed the defendants to return it to them and not to release it to any other party. The Defendants have not pleaded any positive case in response to that, nor reduced any evidence to the contrary. However, whilst my clients do not accept that it is a 5. relevant consideration for the purposes of this application, for the avoidance of doubt I have sought and obtained specific instructions from each of the PM Claimants and each Claimant has confirmed to me that, if they had known at any period before the Defendants transferred their Deposit away that there was not a compliant Guarantee in place, they would have: (a) not allowed such a transfer to take place; (b) made a decision not to proceed with the purchase of the property and (c) requested their deposit back from the defendants before any transfer could take effect.” 20. Mr Flenley made some observations about how quickly this evidence was apparently obtained (which, incidentally, Mr Duddridge explained orally on instructions), but unless he was doubting its veracity (which I do not think he was and rightly so, in my view), it is evidence to be relied upon for the purposes of the summary judgment application if it is relevant unless it is to be discounted on account of a yet further argument advanced concerning disclosure (see paragraph 21 below). As I have said, I do not think the evidence takes this aspect of the case any further because it is not relevant. Mr Flenley also makes an observation that the EC Claimants have not come forward with any such evidence in response to Mr Sefton’s witness statement (see further at paragraph 23 below). Mr Majumdar’s initial (and understandable) first response is that any such evidence is irrelevant. I agree. He does, however, point to the pleadings in the Ballard case (as an example) where at paragraph 48, having pleaded in the preceding paragraphs the non-compliance with the Italian legislation of the guarantee in that case, it is asserted that “had the Claimants been properly apprised of and advised about these matters they would not have executed the Preliminary Contract nor transferred the deposit monies and/or they would have forbidden payment out of the deposit by [the firm]” and the reasons are then given. This pleading is supported by a Statement of Truth signed by Mr de Bono. 21. The disclosure issue that Mr Flenley refers to is encapsulated in his Skeleton Argument at paragraph 9. Although it refers to the position of the EC Claimants, the observation about disclosure relates to all claimants: “The effect of the claimants’ applications is to avoid altogether the process of individual claimants being cross-examined, or having to disclose documents relating to, what they would have done in hypothetical circumstances. The effect of the EC claimants’ position is that they are entitled to judgment for the full amount of their deposits, plus interest and costs, even if it is the position that, at a later trial, the Court would reject their claims that, absent breach of duty, they would have withdrawn from the transactions. The EC claimants are in effect saying that they are entitled to the return of their deposits from the defendants even if the position is that, told that the guarantees were defective in that they were issued by Art 106 rather than Art 107 issuers, they would still have gone ahead with the investments. The EC claimants wish, it appears, to avoid ever having to prove at trial, after disclosure, that they would not have gone ahead in those circumstances. It appears that EC have chosen not to put in evidence in the way that the PM claimants did: PM asserted in Mr Niven’s second witness statement that its clients had confirmed that they would not have gone ahead if told of a non-compliant guarantee being in place. The obvious inference from EC’s decision not to provide such evidence is that EC are unable to do so, because they do not have instructions that, informed that the guarantee in place had been issued by an Art 106 rather than an Art 107 issuer, their clients would not have gone ahead.” 22. For completeness, I should add what he says in paragraph 28 of his Skeleton Argument in relation to the PM Claimants and to what Mr Niven said in paragraphs 4 and 5 of his second witness statement (see paragraph 19 above): “… it would not be right in this case to proceed on the basis that what is asserted by the claimants in support of their claim, presumably each on the basis of a short telephone call from PM, is sufficient to mean that there is no realistic prospect of the defendants establishing the opposite at trial. It is not fanciful to suppose that, at trial, some or all claimants may have difficulty in explaining why it is that they would have been prepared to proceed on the basis of a guarantee from a financial institution which appeared in the Art. 107 list but not prepared to proceed if told that the guarantor was only in the Art. 106 list. There is no explanation from Mr Niven as to why this would have been, whether claimants would have known the distinction between these two kinds of list, or why it would have made any difference to them as to which list the guarantor appeared in.” 23. Seeking to distinguish between the position taken on behalf of the PM Claimants and the EC Claimants in this regard is a forensic position devoid of substance. In relation to the question of disclosure, the principal point is that if no further evidence is required (which it is not for the purposes of the consequences of the breaches of trust), no disclosure is necessary either. Furthermore, the way Mr Flenley seeks to formulate the question that, he says, the individual claimants would have to address is, I am bound to say, a distortion of what the true question should have been. It would have been a total waste of time (and a yet further breach of duty on the part of the Defendants) simply to ask a proposed purchaser whether it would make any difference to them if the guarantee was supported by an institution listed in Article 106 rather than Article 107 without (a) explaining the difference (and there is a difference: see, e.g. paragraph 124 of the substantive judgment) and (b) explaining that unless the institution was listed in Article 107, the guarantee was not compliant with Italian law. In my view, it is completely fanciful to suggest that any proposed purchaser would have been prepared to proceed if told that the guarantee in their case did not comply with Italian law. The importance of the guarantees to all purchasers is apparent from the substantive judgment: I highlight simply as an example paragraph 120 of that judgment. 24. None of the points advanced by Mr Flenley arguably undermine the conclusion that, subject to the section 61 issue, there should be judgment for this group of claimants. (I will deal with the PM Limitation Claimants separately below.) 25. I will deal with the section 61 issue first. Section 61, Trustee Act 1925 26. Section 61 provides as follows: “If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the court in the matter in which he committed such breach, then the court may relieve him either wholly or partly from personal liability for the same.” 27. Whether section 61 could be invoked on behalf of the Defendants in the event that they were found to be in breach of trust was not a specific issue in the generic issues trial. Mr Flenley submits that the Defendants have “not had a chance of defending” the breach of trust allegations by reference to section 61 and says that it would, accordingly, be “pretty much wrong in principle” to grant summary judgment. He submits that since section 61 provides the court with the broad discretion, it is an issue that should not be addressed until there has been a full trial. 28. For completeness I note that the way in which this issue was raised in the pleaded position of the Defendants was as follows (see paragraph 44(4) of the Amended Defence of the 1st, 3rd, 4th, 5th and 6th Defendants): “Further or alternatively the Defendants seek relief from breach of trust pursuant to s. 61 of the Trustee Act 1925 on the basis that it (sic) acted honestly and reasonably and ought fairly and reasonably to be excused from any breach of trust. The alleged breaches of trust did not contribute to any loss suffered.” 29. 30. Having reviewed the transcript of the substantive trial, I have noted that there was some confusion about whether section 61 was to be dealt with as one of the issues. On Day 16 Mr Flenley appeared to accept during his closing submissions (at pp. 2059- 2061) that it was and referred me to his opening Skeleton Argument where the issue was covered. Mr Duddridge’s opening Skeleton Argument also dealt with it in some detail. Mr Majumdar’s opening Skeleton Argument mentioned it briefly. However, as I have said, there was not in fact a specific issue about it in the list of issues and, at the end of the day, no one addressed it directly in the closing submissions made to me. Does that preclude the issue being raised now in the way that it has? I do not think so. The Claimants are entitled, in the light of the substantive judgment, to argue that there is no realistic prospect of the Defendants defending the consequences of the findings of breach of trust that have been made by reference to the exculpatory provisions of section 61. Equally, it is open to the Defendants now to put forward material in response to suggest they have an arguable case for saying that the breaches of trust ought to be excused through the discretion conferred by section 61. 31. 32. All parties have drawn my attention to the decision of the Court of Appeal in Santander UK Plc v R. A. Solicitors [2014] EWCA Civ 183 which is clearly the most authoritative contemporary ruling on how section 61 is to be implemented in practice. The judgments of Briggs LJ, particularly at paragraphs 97-103, and the Chancellor, at paragraphs 105-117, are referred to. The observations of the court were, of course, made in the context of a mortgage fraud. It was never suggested (and I did not find) that the Defendants acted dishonestly in paying the deposits away: see main judgment at paragraph 402. It is, however, common ground that the burden is on the Defendants to show that they acted reasonably in doing so. It is also accepted that the Defendants do not have to demonstrate that their conduct was perfect in order to discharge this burden. In relation to the issue of the causative potency of the breach or breaches of trust in this context Briggs LJ reflected on the competing submissions between paragraphs 21-27 in Santander, and having said at paragraph 25 that it is “too restrictive to apply a ‘but for’ test which disregards conduct, however unreasonable”, said this at paragraph 28: “Between those extremes, it seems to me that some element of causative connection will usually have to be shown, and that conduct (even if unreasonable) which is completely irrelevant or immaterial to the loss will usually fall outside the court’s purview under section 61.” 33. Furthermore, at paragraph 29 he said this: “I would, finally, caution against an over-mechanistic application of the requirement to show the necessary connection between the conduct complained of and the lender’s loss. There may be highly unreasonable conduct which lies at the fringe of materiality in terms of causation, and only slightly unreasonable conduct which goes to the heart of a causation analysis. It would be wrong in my view to allow this purely mechanistic application of a causation-based test for the identification of relevant conduct to exclude the former from any consideration under section 61.” 34. It does not seem to me that it is in any way a mechanistic application of any causation test to say that the deposit monies here were paid away because of the breach of trust: they plainly were so paid. The reality is that once the money was out of the control of each individual claimant, the prospects of recovery in the event that the development was not completed or was substantially delayed were effectively lost. In connection with the reasonableness or otherwise of the firm’s conduct, it has to be said that there is no evidence at all that any member of “the firm” (and certainly none of the individual defendants) addressed at any material stage the fact that the guarantees were issued by Article 106 institutions rather than Article 107 institutions. However, this was a firm that was professing informed and independent representation for non- Italian purchasers of property off-plan in Italy at the standard expected of English lawyers. On that basis, this was, in my judgment, unreasonable conduct at the high end of the spectrum of unreasonable professional conduct even if the reality was (as I have concluded previously: see paragraphs 402 and 404 of the main judgment) that it occurred through the disorganised way in which matters were handled. Disorganised handling was not what the firm was promising and not what the individual claimants were reasonably entitled to expect. They were also led to believe that the firm was insured adequately so that in the event of poor handling of the work leading to loss, the losses would be recouped. Subsequent events have given the lie to that expectation. However it came about, looked at objectively, this was highly unreasonable professional conduct with, as events have proved, a significant degree of causative potency. The only substantive response to this aspect of the summary judgment applications to be found in Mr Sefton’s witness statement of 24 September is the assertion that the outcome of the section 61 issue depended on the facts of each individual case, that the trial was not intended to deal with the individual cases and also that there was “a real prospect of a finding at trial that [“the release of the deposit money based on art 106 rather than art 107 issuers”] amounted to reasonable conduct within the meaning of s.61 and that [the Defendants] ought to be excused, in whole or in part, from liability for it in circumstances where the trigger for payment under an Art 107 guarantee never occurred.” Notwithstanding these assertions, supported by Mr Flenley in his written and oral submissions, I am wholly unpersuaded that there is any real prospect of the Defendants being able successfully to invoke section 61 to absolve them, either in whole or in part, from liability for breach of trust. That applies as much to any residual discretion that section 61 affords as it does to the issue of whether the Defendants could demonstrate that their conduct was “reasonable” within the meaning of the section. The PM Limitation Claimants The last remaining issue in the summary judgment applications relates to the PM Limitation Claimants (see paragraph 9 above). They do not seek at this stage summary judgment for what is, in effect, the return of their full deposit; they seek the commission element of the sum that constituted the deposit that was paid to VFI. Mr Niven explained the reason in his witness statement as follows: 35. 36. 37. 38. “[They] acknowledge that, in order to succeed on some aspects of their claims, they may need to demonstrate, by reference to their own circumstances, the dates on which they acquired certain knowledge relevant to their claims. In those circumstances, they do not apply for summary judgment for the entirety of their deposits, but they do apply for summary judgment in their claims for breach of trust for the sums paid to VFI.” 39. What these claimants seek to do is to rely upon a combination of findings and conclusions that I reached in order to demonstrate that there is no real prospect of the limitation defence advanced by the Defendants in respect of this limited feature of the claim succeeding. Reliance is placed in the first instance upon paragraphs 282-284 of the main judgment which are repeated here for convenience: 282. Mr Duddridge’s argument is that since the individual claimants did not know of the amount of VFI’s commission they were unable to give informed consent to the payment of that commission to VFI and, accordingly, when payment to VFI was made the payment did not comply with rule 15(3) and was in breach of trust. Mr Flenley submits that this involves writing into rule 15(3) the requirement that payment out be made not only with the client’s instructions, but also with the clients’ instructions after the client has given informed consent to payment in the event that the solicitor is aware of any matter which might cause the client to decide not to pay out. Those words, he says, do not appear in rule 15(3) and there is no basis for implying them and that to do so would give rise to all sorts of practical problems. I do not see that this would give rise to insuperable 283. practical problems and there is something very unattractive about the proposition that a client’s money can be withdrawn by a solicitor on the basis of instructions that are not given with a full appreciation of the situation. Doubtless whether there is such a full appreciation may vary from situation to situation, but I cannot see that this should prevent the obligation in principle from arising. 284. Duddridge’s submission. To the extent that it is material in this case, I prefer Mr 40. Mr Niven’s witness statement sets out the basis for the present claim for summary judgment as follows: “It follows that: (a) VFI were payments made in breach of trust; the payments of the Limitation Claimants’ funds to (b) each of the Limitation claimants is entitled to be put in the position he or she would have been in if the trust had been properly performed; (c) the relevant defendant is liable in each case to account to and/or equitably compensate the Limitation Claimant for the sums wrongly paid to VFI; and (d) no limitation defence is available to the defendants for these claims (for which knowledge of the Mandates and the levels of commission was required), as the court has already ruled that there was deliberate concealment of the Mandates by the defendants.” 41. 42. The deliberate concealment that I found established was that the Defendants knew the level of commission payable to the developers from the outset, but did not tell any of the purchasers and deliberately suppressed that fact in the letter of 29 April 2009: see paragraphs 458-460 of the main judgment. That the firm knew the position from the outset only became known by each purchaser when the Mandates were revealed over the passage of time: see paragraph 68 of the main judgment. (I dealt with the question of whether the level of commission ought to have been revealed by the firm to the purchasers between paragraphs 357-396 of the main judgment.) It does seem to me to be plain beyond any doubt in those circumstances that no claimant could bring a claim for breach of trust based upon the payment over of the commission until he or she knew (or ought reasonably to have known) that the firm knew what the level of commission was at a time when the commission was paid. I do not see how the Defendants are able to say (if this is what they are saying) that these claimants knew or ought reasonably to have known about this before the Mandates were revealed. Only then were they in a position to allege breach of trust along the lines set out in paragraph 282 of the main judgment. I can see no arguable grounds for concluding that this assessment is wrong and, accordingly, in my judgment the PM Limitation Claimants are entitled to summary judgment in the limited respect upon which the application on their behalf is advanced. The net effect of all these conclusions is that the Claimants are entitled to summary judgment against the relevant defendants in the manner set out in the applications. I will turn now to the other matters in respect of which my ruling is now sought (see paragraph 4 above). I will leave the issue of the form of the order until last. 43. 44. 45. Permission to appeal 46. 47. 48. 49. There are four broad areas where the Defendants seek to contend that my judgment was wrong: (i) it is said that my conclusions concerning what for this purpose I will describe as “the planning dimension” were wrong; (ii) it is said that I was wrong in my analysis of the SAAMCO issue; (iii) it is said that I was wrong in relation to the issue of whether the Defendants were in breach of trust and/or in my assessment of the issue of any loss arising from such breach of trust; and (iv) it is said that I was wrong to conclude that a breach of trust occurred when a payment of the deposit was made if a purchaser had not given informed consent to the payment. (i) the planning dimension (a) It is contended that I should have answered issue no.71, which reads in part “… what ought [the defendants] reasonably to have known [about the planning permission]?” by saying that I did not know the answer because (see paragraph 198 of the judgment) it was unclear what would have been revealed even if, as I held, the Defendants had an enhanced duty to investigate the state of planning permission in relation to the development. Because, it is said, I found that there was a lack of evidence as to the answer to this question (see paragraph 312) and the Claimants, whose obligation was to plead and prove their case, had failed to prove it, “all claims as to planning permission should have been dismissed”. First, I have no doubt that the firm was under a duty to carry out inquiries into the planning permission going beyond what was on the face of the planning permission for the reasons given in the judgment and I do not consider there is any arguable ground for suggesting that that conclusion was wrong. Since the Defendants accepted that they had not done this there was a clear breach of duty. Second, I do not consider it arguable that an issue such as this (where the agreed issues concerning the planning permission, based upon the pleaded positions of the parties, were expressed in an open-ended fashion and the evidence on both sides did not deal satisfactorily with the details) should result in a win or loss at a generic issues stage on the basis of the alleged failure to discharge the burden of proof on the issue. The actual problems with the planning permission could easily be seen as part of the overall causation issue concerning the breaches of contractual and/or tortious duty - in other words, did the breach of duty found make any material difference? - which so far as those breaches of duty are concerned were left over to a subsequent trial. 50. (b) It is contended that I should not have found that there was an enhanced duty to undertake checks as to planning permission and, as I understand the argument, that I was imposing a strict duty on the Defendants. 51. 52. 53. 54. 55. 56. 57. 58. 59. As the Claimants’ Counsel correctly indicate in their response, I expressly disavowed a finding of strict liability and my conclusion did not have the effect of imposing one. However, this was a case involving a large number of English and Irish purchasers buying properties in Italy “off-plan” and effectively risking their money. The Defendants promised a high level of performance in a great deal of the documentation generated prior to the individual claimants committing themselves to the purchases. In my view, it is unarguable to suggest that merely checking whether the development accorded with the planning permission was a sufficient discharge of the duty of care in those circumstances. (c) It is argued that my conclusions as to the extent of an English conveyancing solicitor’s duty (set out at paragraphs 320-321) “are not based upon any authority, conveyancing textbook, Law Society guidance or expert evidence, and go beyond the standard terms of enquiry suggested by the Law Society’s Conveyancing Handbook” and that they “do not represent the law”. This case has nothing to do with a “standard” conveyancing transaction as I have emphasised in paragraph 51. The Claimants’ Counsel are correct to emphasise that this was an unusual transaction which called for inquiries going beyond what might be required by the standard inquiries recommended in standard transactions. What I suggested in the paragraphs 320-321 did not require expert evidence of English law or conveyancing practice; it represented a straightforward application of common sense to the question of what a client would reasonably expect of a solicitor in such circumstances. The converse is not seriously arguable. (ii) SAAMCO It is said that I should not have found that there was no limit upon recoverable damages as a result of application of the Saamco decision. It is said that I decided (in paragraph 355) that the Defendants “assumed an extensive holistic duty embracing an assumption of responsibility for all the consequences of any difficulty with the transaction, even if caused by matters such as the worldwide economic downturn which … the defendants could not have foreseen.” I have to say that on no possible reading of paragraph 355 of the judgment did I ever reach the expansive conclusion described in paragraph 55. Although I considered Mr Flenley’s sustained argument with care, it remains my clear view that the SAAMCO cap has no part to play in this case. I do not consider the converse reasonably arguable. (iii) breach of trust (a) It is argued that by applying Nationwide BS v Mian, I should have held that the terms of the trust upon which the claimants’ monies were held “permitted the defendants to pay over the claimants’ deposits on receipt of a guarantee which was contractually enforceable, as it was acknowledged all of the guarantees provided in the exemplar cases were, and did not require that the guarantee comply in every respect with Decree 122 of 2005.” I have to say, with respect, that this argument is, to say the least, far-fetched irrespective of what might be said in the Mian case. We are dealing with this particular case and the circumstances in which deposits were paid out in this case. The whole purpose of Decree 122 of 2005 was to provide purchasers of property in Italy “off-plan” with appropriate protection because of the historical inadequacies of the legal position prior thereto. If the guarantee did not comply with it, what possible 60. 61. 62. 63. 64. 65. 66. purpose would the guarantee serve? The argument foreshadowed above has no real prospect of success. (b) It is suggested that it is unclear whether I rejected the Defendants’ argument, based on Target v Redferns and AIB v Redler, that “even if there was a breach of trust at the moment the deposit was paid away, a claimant will have suffered no actionable loss if subsequently provided with a guarantee which would have satisfied the terms of the trust if in place before payment of the deposit.” I am prepared to let the judgment speak for itself, but the Claimants’ Counsel are right to say that since no claimant was provided with a guarantee issued by an Article 107 provider (which is the only way the trust could be satisfied), the proposed ground is entirely academic. (c) It is contended that I should have held that the claimants could not recover compensation for breach of trust, because none lost money as a result of any defect in the guarantees. It is said that I should, in effect, have held that Saamco applied also to the breach of trust claim. It is said that a breach of trust “is not concerned with the provision of advice, but simply with the fact and timing of payment” and that if payment had been made after a wholly compliant guarantee had been provided, the claimants would still have suffered the same loss because their inability to recover their deposits was not due to any defect in the guarantees. It is argued that Lord Toulson’s judgment in AIB v Redler should lead to the conclusion that in a case “where, as here, the solicitor’s role as trustee is subsidiary to his/her role in contract as a solicitor, the remedy for breach of trust should in principle be the same as or very similar to the remedy in contract.” I do not regard these contentions as having any realistic prospects of success. As the Claimants’ Counsel point out, paragraph 9 of the Supplemental Judgment (see paragraph 10 above) is entirely consistent with the proposition that a breach of trust “is not concerned with the provision of advice, but simply with the fact and timing of payment” and that in reaching that position I was applying (rather than departing from) the decision of the Supreme Court in AIB v Redler where it is held that liability and compensation for breach of trust is not the same as for contract and tort. They point out, not unreasonably, that SAAMCO was not even cited to the Supreme Court and that the argument sought to be advanced is a departure from what the law has recently been stated authoritatively to be. (iv) the “informed consent” argument It is argued that there is a real prospect that my finding that, if a client had not given informed consent to a payment of the deposit, there was a breach of trust when the payment is made, is contrary to Millett LJ’s “statement of principle” in Bristol & West BS v Mothew [1998] Ch 1, at 24A-D. The effect of that passage, it is argued, is that it would require express words in the firm’s retainer if it were to be the case that the firm required informed consent to part with clients’ money before informing the clients of the level of VFI’s commission. Since the retainer did not contain such express words it is argued that this was not a term of the trust on which the firm held the claimants’ money. This is endeavouring to create a statement of binding legal principle from a wholly different factual scenario from that involved in the present case. I doubt very much whether Millett LJ had a situation such as that involved in this case in mind. The argument sought to be advanced appears to be a repetition of the argument advanced by Mr Flenley about the construction of the SAR (or at least it is analogous thereto) which I rejected in paragraphs 282-284 of the main judgment for which paragraphs 278-281 form the backdrop. I do not consider that my conclusion can seriously be challenged. Conclusion on the application for permission to appeal 67. 68. For the reasons I have given, I do not think that any of the proposed grounds of appeal have real prospects of success and, accordingly, I refuse permission to appeal. If the Defendants apply to the Court of Appeal for permission to appeal as they have intimated that they propose to do, I would respectfully invite the Lord Justice/Lady Justice considering any application on paper to consider the observations I make in paragraphs 85-87 below in deciding the application and/or how it is considered. The PMC Claimants’ application for an unless order 69. 70. 71. This application arises out of an order for costs I made against the various Defendants following the PTR on 4 February 2015, a few weeks before the trial commenced. I ordered the Defendants to pay 75% of the PM Claimants' costs of the PM Claimants' application dated 29 January 2015 (summarily assessed in the sum of £3000 including VAT) the PM Claimants' costs of the PM Claimants' application for an unless order dated 18 November 2014 (summarily assessed in the sum of £5500 including VAT) and the PM Claimants' costs of the PM Claimants' application for specific disclosure dated 6 October 2014, to be the subject of a detailed assessment if not agreed, with a provision that the Defendants pay £25,000 on account of the said costs. There was, accordingly, an overall liability for the payment of £33,500 within 14 days of that order (in other words, by 18 February). Those sums were not paid and Mr O’Brien’s witness statement of 7 July 2015 traces the history (accurately, as far as I can judge) since the time the order was made until then. He alludes to what I said in the main judgment and paragraph 75 is relevant in this context. My understanding is that nothing has been paid under that order despite Avvocato Giambrone’s offer to pay Є400 per month. I was at one stage under the misapprehension that there was outstanding an application by the individual defendants for an order that they pay by instalments. Had I been asked to make such an order, I would have anticipated the necessity of the Defendants giving disclosure of their personal financial positions and the prospect of their being cross-examined if the claimants had asked for that facility. If it is being maintained on the Defendants’ behalf that the court is bound by the terms of the affidavits filed (whether those originally filed or subsequently), I make it plain that I do not regard myself as so bound. I have considerable reservations about the reliability of what the individual defendants have said about aspects of this case (as will be apparent from the main judgment) and I would not, for my part, accept at face value what they say about their respective financial positions until each had been appropriately scrutinised. However, as I understand it, the risk of my requiring steps such as these to be taken has been obviated by the defendants withdrawing their applications for time to pay. Notwithstanding that, nothing has been paid. Each Defendant is, therefore, in breach (and in deliberate breach) of my order. 72. I have mentioned the failure of Avvocato Giambrone to pay Є400 per month. In their Note in response to this application dated 28 July Mr Flenley and Mr Carpenter said this of that situation: “… the fact that Avv. Giambrone has not paid £300 per month since February 2015 is irrelevant. The PM Claimants did not accept his offer to pay by instalments and he did not promise to do so in the absence of that acceptance. Furthermore, the sum which the PM Claimants now require to be paid is 111 times the amount which Avv. Giambrone offered to pay each month. Had Avv. Giambrone paid £300 every month from March 2015, there would still be £32,000 outstanding.” 73. If that is an accurate reflection of Avvocato Giambrone’s attitude to an order of the English court, it is telling and is similar to the attitude he took to complying with the costs order in the Court of Appeal made in November 2014 (see my ruling of 28 November 2014). 74. What the PMC Claimants sought in their application notice dated 7 July 2015 was an order debarring the 1st, 3rd, 4th and 5th Defendants from defending the claims further if they failed to comply with the order by a date to be determined by the court and that judgment in appropriate terms should be entered. A similar order was sought in respect of the 2nd Defendant in connection with those parts of my order affecting it. 75. 76. 77. The application provoked a response from Mr Flenley and Mr Carpenter (one part of which I have quoted in paragraph 72 above) which described it as “entirely opportunistic” and one that it was “not … proper … to make”. They continued by saying that “assuming it to be dismissed”, then it should be dismissed with indemnity costs. Bearing in mind that their clients had been in breach of my order for over 5 months, I would have expected their instructions to dictate a more apologetic approach. However, the approach is also telling. I will state quite clearly now that I do not regard the application as one that ought not to have been made. There is growing evidence of a fixed resolution on the part of the Defendants, and Avvocato Giambrone in particular, not to heed orders of the court if it is inconvenient for them to do so. Those affected by that attitude are perfectly entitled to ask the court to use whatever part of its armoury seems appropriate to secure a change in that attitude. However, I am now considering the application some 4 months after it was made against the background of having decided (a) that the Claimants are entitled to summary judgment in respect of the breach of trust allegations and (b) that I do not consider that there are grounds for granting the Defendants permission to appeal. If those decisions are not challenged by the Defendants, it is likely that (subject to enforcement of the judgment and any orders for costs that may be made in the meantime) the Claimants will have achieved all that realistically they will be able to achieve in these proceedings. If that is so, the application (though properly made) will become academic. If the Defendants do seek permission to appeal from the Court of Appeal (an application which their insurers are apparently prepared to fund albeit with no liability as to the Claimants’ costs if the appeal is lost) and the Court of Appeal ultimately refuses the application, the same position will obtain. Equally, whilst it will, of course, be a matter for the Court of Appeal if permission to appeal is granted, it is at least possible that some conditions (including financial conditions) will be considered in relation to any such grant. I imagine that, in so far as they are permitted to do so by the Court of Appeal, the Claimants will wish to resist the application for permission to appeal or, as an alternative, to submit that conditions should be imposed given aspects of the history of this litigation that they will contend are unsatisfactory. The position set out generally at paragraphs 71 – 78 of the main judgment would, I anticipate, feature in their submissions. 78. It seems to me, against that background, that it would be somewhat futile for me to grant the PM Claimants’ application at this time. If granted, the Defendants would simply seek to appeal and the Court of Appeal would doubtless consider the position as part of any consideration of whether to impose conditions if permission to appeal was granted. If, as I say, the application for permission to appeal is ultimately dismissed, the Claimants’ position is the same as that indicated in paragraph 77 above. 79. What I propose to do is to adjourn the application generally. If any appeal results in the need for some further trial or trials I (or whichever judge deals with that trial or those trials) will be able to consider whether it is appropriate to make the order sought prior to those trials taking place. The costs of the strike out application brought by the Defendants to strike out the claims brought by the former clients of Dr Austen Morgan 80. 81. 82. The basis of this application is set out fully in the Note prepared by Mr Flenley and Mr Carpenter to which I have referred previously at paragraphs 10-29. Since Penningtons Manches were not involved at this time (see paragraph 67-68 of the main judgment) it has been difficult for them to respond: Mr O’Brien’s letter to my Clerk dated 7 August 2015 indicated the difficulties. He hoped to be in a position to offer further assistance, but no further representations have been forthcoming. The actual amount sought under the costs order is £5270.50, the beneficiary of which order, if made, would be Avvocato Giambrone. It would be disproportionate in the scale of this case to spend too long on considering this. Whilst I have some reservations about making any order in Avvocato Giambrone’s favour given the fact that he is in continuing breach of an order made by me on 4 February 2015, it seems to me that he is entitled to an order in his favour because the pleadings that he was seeking to strike out were plainly not fit for purpose. There is nothing intrinsically excessive about the sum sought and subject, perhaps, to rounding it down slightly to reach a round-figure sum that can be set off against Avvocato Giambrone’s liability (or liabilities) under the order of 4 February 2015, I grant the order sought. The form of the order 83. 84. On 28 September 2015 Mr Duddridge sent my Clerk a draft composite order that, so far as possible, had been agreed between the parties as appropriate for giving effect to my decisions on the substantive issues arising from the trial. That draft composite order seems to me to be appropriate for the purpose. Doubtless it can be altered in the light of the decisions set out in this judgment and an up-to-date version agreed. Since some issues were deliberately left over from the hearing on 28 October, doubtless provision will be made in the order for how they are to be resolved. Observations if this case proceeds further 85. If the Defendants pursue an application to the Court of Appeal for permission to appeal it is not, of course, for me to say anything about the merits of the application other than to draw attention to my own assessment of the proposed grounds to the extent that it is relevant. However, having “lived with” this case since October 2014 I have now a sense of the way this litigation has been conducted. 86. I would make two observations; first, I would merely emphasise the unsatisfactory insurance position referred to in paragraphs 71 – 77 of the main judgment such that the litigation seems to be capable of being conducted on the Defendants’ side with complete immunity as to costs (the individual Defendants claiming impecuniosity, whether such claims are justified or not, when faced with orders for costs incurred when any aspect of the insurance-funded litigation goes against them). Second, I sense that the tactics in this case (going back over many years) have been to delay any potential adverse finding so far as Avvocato Giambrone is concerned whilst the number of firms bearing his name has continued to expand on a worldwide basis. From an outsider’s perspective, this approach appears to have dictated the settlement pattern prior to the cases chosen as exemplar cases coming before me. Indeed there was a settlement of an exemplar case concerning another development in Calabria (the El Caribe development) that I was due to consider as part of the generic issues trial shortly before the trial commenced (see paragraph 9 of the main judgment). Since the judgment was handed down I have sensed that efforts to delay any further adverse consequences for as long as possible have been taking place. 87. Whether those observations are of relevance or value is not for me to say, but it seems right that I should make them.