Legal wrangle: Alice O'Connor lost £35,000 trying to buy an Italian holiday home

When Alice O'Connor put down £35,000 as a 50 per cent deposit on a new-build holiday home in Calabria, southern Italy, she was certain she was on to a terrific deal.

Then aged 51, Alice had been blown away by the views on a visit to the site of the unbuilt Jewel Of The Sea development. Back home in West Kirby, Merseyside, she had carefully checked the paperwork.

Everything looked above board. The second instalment of £35,000 would be due when the apartment was finished, and the documents claimed property prices in southern Italy were expected to triple over the next decade.

The files explained that a firm of bilingual solicitors with a London office would navigate the Italian legal system — a comfort should anything go wrong.

That was nine years ago. What followed is a cautionary tale to anyone purchasing homes abroad.

Artist's impression: The Jewel of the Sea development in Italy Calabria, southern Italy, which was never finished

Under construction: Instead of sun-soaked holidays, the buyers have been left out of pocket and caught in a legal nightmare involving the mafia and a convicted IRA terrorist

To the dismay of Alice and hundreds of other buyers, the Jewel Of The Sea site has never been completed. Instead of sun-soaked holidays, they've been left out of pocket and caught in a legal nightmare involving the mafia and a convicted IRA terrorist.

Alice, like many buyers, had signed up for a tour of Italian holiday homes — in her case at a property show in Blackpool. Construction on Jewel Of The Sea, marketed by a firm called VFI Overseas Property, began shortly after and her apartment was supposed to be ready in around a year.

But unbeknown to Alice, building work ground to a halt in 2008 when problems with planning permission surfaced. Years of delays followed, and when Alice expressed concern to the law firm she was reassured that work was under way.

But her hopes of ever using the property evaporated in 2013, when the development was seized by Italy's financial police.

Building work ground to a halt in 2008 when problems with planning permission surfaced. The site is pictured above in 2012

Wehen Alice expressed concern to the law firm she was reassured that work was under way

Court documents would later show that this was part of an investigation into allegations of money laundering involving the Italian mafia and IRA. It is understood that police are still investigating these allegations.

Unable to recover their deposits, Alice and 184 other buyers took legal action. They were advised to pursue their solicitor, Giambrone Law. As a UK-registered firm, it could be sued in the British courts.

Unable to recover their deposits, Alice and 184 other buyers took legal action

After two High Court cases in London 2015, a judge concluded that there had been a 'breach of trust' in the law firm's advice to buyers.

He said the law firm had not made 'any inquiry' into whether the planning permissions for the site were valid, and had 'deliberately concealed' the level of commissions it paid to VFI Overseas Property out of the buyers' deposits.

The judge found the firm failed to alert buyers 'to the risks of criminal activity in the construction industry in Calabria', which the court heard was 'a crime-ridden part of Italy'.

The judge referred to press reports produced in court, the veracity of which remain unclear, which alleged that one of the bosses of VFI Overseas Property, which was dissolved in 2014, was 'a convicted IRA terrorist'.

There was no suggestion that Giambrone Law was involved in criminal activity. Giambrone Law was ordered to cover the money that buyers had lost. The firm appealed. That meant another two years of delays until the court of appeal ruled in the buyers' favour last month.

But now the buyers are battling the law firm's insurer, AIG. All law firms of its size in England and Wales are required to be insured for at least £3 million to cover claims from clients if they make mistakes.

Viewings arranged: Alice, like many buyers, had signed up for a tour of Italian holiday homes — in her case at a property show in Blackpool

Her hopes of ever using the property evaporated in 2013, when the development was seized by Italy's financial police

But AIG has so far taken the position that the buyers should be treated as one claim. That means they would share the £3 million pot of cash between them, leaving a shortfall of around £4.5 million, including interest owed on the deposits.

The judge also expressed concern that AIG had indicated as long ago as 2013 that 'only about £37,000 of the £3 million . . . remained'.

He presumed that the money had been spent on 'various settlements' relating to the unfinished development.

Alice says: 'When I heard that the mafia could be involved, I was shocked. I thought it was a joke. When we think we've won there's another obstacle.'

Stella Rawson, 74, a retired secretary from Chester, who is fighting to get back her £35,000 deposit, says: 'Instead of enjoying a peaceful retirement in the sunshine, we've ended up with a ten-year legal nightmare. It's sickening when I think about how much I've lost. But we won't give up.'

David Niven, a partner at Penningtons Manches, one of the solicitors representing the buyers, says he will pursue AIG and argue that each client has a separate entitlement to the £3 million insurance pot.

Unbeknown to Alice, building work ground to a halt in 2008 when problems with planning permission surfaced

Court documents showed that the seizure of the development by police was part of an investigation into allegations of money laundering involving the Italian mafia and IRA

'Our clients have suffered enough,' he says.

Giambrone Law ceased to trade in 2009. Gabriele Giambrone, the main solicitor at the firm, was taken off the UK legal watchdog's register of European lawyers in 2013. He has since set up a new firm to advise on Italian legal matters.

He says: 'In 2007, when the firm was still relatively new, Giambrone Law LLP became the target of a complex fraud perpetrated by skilled and devious criminals.

'We were caught in the crossfire of the organised criminals allegedly involved with the IRA and mafia. We stopped working in Calabria when our suspicions about money laundering were alerted.'

He says he has 'repeatedly asked AIG to return the deposits to the clients'.

AIG declined to comment.

l.milner@dailymail.co.uk