|Defrauded Holiday Home Buyers May be able to Claim Full Compensation|
Buyers of holiday homes abroad who lost their investments through fraud or commercial failure may now be able to recover their entire losses from their solicitors' insurers, following the England & Wales High Court's ruling in the AIG Europe case.
Several thousand British residents have invested in foreign properties that turned out to be worthless, either because they were fraudulently marketed or because the developers went bankrupt in the course of the deal.
Many attempted to recoup their losses by claiming compensation from the solicitors who handled the purchases for them, and who allegedly bungled the financial protection mechanisms put in place to safeguard the clients' money. In one such case, for example, the investors' funds were placed in an escrow account, but were prematurely released and could not be recovered when the development projects failed.
In this case, the professional indemnity insurer, AIG, tried to argue that its total liability to all clients of the law firm concerned was limited to the standard indemnity cover of GBP3 million, because all the clients' claims arose from 'similar acts or omissions in a series of related matters or transactions' and so could be aggregated into one claim. This meant that individual clients were only offered compensation for a fraction of their actual losses.
However, a group of aggrieved investors have pursued litigation against the insurers, claiming full reimbursement. The England & Wales High Court (Commercial Court) has now ruled in their favour, rejecting the insurers' argument as invalid even though the clauses in its policy schedule were commonly used throughout the insurance industry. Mr Justice Teare said the claims could not be aggregated into one claim essentially because they related to several different development projects in different countries – even though they all failed for similar reasons (AIG Europe Ltd v OC320301 LLP & Others, 2015 EWHC 2398 Comm).
Whether the clients' claims against their solicitors are themselves valid is not yet decided. That is still the subject of two actions to be heard in the High Court's Chancery Division.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Aug.25, 2015