Corporate liability but no individual director liability for misrepresenting a Cypriot property investment scheme (Barclay-Watt v Alpha Panareti Public Limited and anor)

02 Sep 2022

Dispute Resolution analysis: The Court of Appeal has upheld the decision at trial that a Cypriot property development company is liable for losses caused to individual investors by way of misrepresentation but the individual director of that company is not liable as an accessory.

Barclay-Watt v Alpha Panareti Public Limited and anor [2022] EWCA Civ 1169

What are the practical implications of this case?

In this appeal and cross-appeal against the decision of Sir Michael Burton following a lengthy trial, the Court of Appeal has upheld in full the trial judge’s decision. The judgment offers guidance on two distinct areas, one substantive and one procedural. On the substantive question, the Court of Appeal has confirmed that claims for accessory liability against the directors of corporate tortfeasors should be confined to fairly narrow grounds. Applying the decision of the Supreme Court in Fish & Fish v Sea Shepherd [2015] UKSC 10, the Court of Appeal emphasised that “it should be possible to carry on business by means of a limited liability company without exposing the individuals carrying on that business to personal liability.” Procedurally, the Court of Appeal has confirmed that Wolff v Trinity Logistics USA Inc [2018] EWCA Civ 2765 is correctly decided. Where a Claimant proceeds to trial on two alternative grounds, succeeding on one and failing on another and the Defendant appeals, permission is required for the Claimant to appeal against the rejection of the failed ground of claim. A cross-appeal on such a basis cannot properly be described as merely an attempt by the Claimant to uphold the trial judge’s order.

What was the background?

The Claimants were UK residents who were persuaded to invest substantial personal savings in a scheme by which three sites in Cyprus were being developed. One Defendant, Alpha Panareti Public Limited (“APP”) is a property developer in Cyprus and was the developer of the three sites. The other remaining Defendant was Mr Andreas Iannou, a director of APP and the driving force behind the marketing of the scheme. Planning permission was given for the sites in 2005 and 2007 and properties were marketed and sold to the individual UK residents between 2005 and 2007. Following the economic downturn after the financial crash problems were encountered and none of the Claimants received completed properties. One site was completed by December 2011 and another in April 2013. The other site remains only 30-60% complete. At a trial before Sir Michael Burton lasting 29 days, 8 sample claims out of a total of 280 brought by purchasers of the properties were tried. Many Defendants settled and all that remained by the time of trial were claims in tort for misrepresentation and the giving of negligent advice. The Claimants sought the return of monies paid out to purchase the properties, including reservation fees and deposits. These sums had been paid out to Alpha Bank Cyprus. The Claimants also claimed in respect of various out of pocket expenses. One of the main attractions of the scheme to investors was found to be the Swiss franc mortgage arrangement offered. Borrowing Swiss francs created a currency risk, however, which meant borrowing costs could spiral in the event that there was a substantial fall in both Sterling and the Cyprus pound against the Swiss franc. This risk ultimately materialised. The Claimants claims focused first on the failure to warn them of the currency risk (which would have been obvious to the Defendants) when trumpeting the benefits of the Swiss franc mortgages and second on a representation that the properties were lettable to tourists on short-term lets. The trial judge found that APP owed a duty which it breached to notify the Claimants of the currency risk. He rejected the second part of the claim, concluding that the properties could be let to holidaymakers from Cyprus and the EU on short term lets but not those from outside the EU. The representations made were substantially correct. APP was held to be liable in respect of the first part of the claim but Mr Iannou avoided liability altogether as an accessory to the wrongdoing of APP. APP appealed against its finding of liability and the Claimants cross-appealed the finding that Mr Iannou was not liable as an accessory.

What did the court decide?

The Court of Appeal dismissed both APP’s appeal and the Claimants’ cross-appeal. APP’s principal grounds of appeal were swiftly dismissed. The trial judge had been entitled to find as he did that the various salesmen who represented to the Claimants the virtues of the Swiss franc mortgages were acting on behalf of APP and APP was under a duty to warn the Claimants of the currency risks associated with it. The Claimants were refused permission on paper to appeal against the trial judge’s finding that APP was not liable in respect of the representations as to the ability to let the properties. Orally, the Claimants argued that permission was not required, however, conceded that this submission required the Court of Appeal to conclude that Wolff v Trinity Logistics USA Inc [2018] EWCA Civ 2765 was wrongly decided. The Court of Appeal declined to do so, arguing that this could only be achieved by the Rules Committee amending CPR Part 52. If a Claimant asserts two claims against a Defendant, one of which succeeds and the other fails, if the Defendant then appeals against the judgment, the Claimant requires permission to appeal against the dismissal of the other ground of claim at trial. In relation to the personal liability of Mr Iannou, the Claimants raised two grounds. First, they argued that Mr Iannou was in breach of his own personal duty to warn the Claimants about their currency risks. Applying Williams v Natural Life Health Foods Ltd [1998] 1 WLR 890, liability required both the assumption of responsibility by Mr Iannou and reliance thereupon by the Claimants. In light of the trial judge’s findings of fact this was not pursued on appeal. The second basis for claiming personal liability against Mr Iannou was that he was an accessory to the tort. They argued that the three elements of the test set out by the Supreme Court in Fish & Fish v Sea Shepherd [2015] UKSC 10 were met. These were (1) assistance by Mr Iannou in the commission of APP’s tort, (2) assistance given as part of a common design between him and APP and (3) the marketing of the properties constituting a tort against the Claimants. After reviewing those authorities, the Court of Appeal concluded that no accessory liability should be imposed on Mr Iannou. Mr Iannou’s actions consisted of no more than operating a business through a limited liability company and there was no personal assumption of responsibility.

Case details

  • Court: Court of Appeal, Civil Division
  • Judges: Lord Justice Males, Lord Justice Phillips and Lady Justice Andrews
  • Date of judgment: 19 August 2022

Article by Phillip Patterson – first published by LexisNexis


Phillip Patterson

Call: 2008


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