Andrew James Barclay-Watt & Others v Alpha Panareti Public Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Phillips,Lady Justice Andrews |
| Judgment Date | 19 August 2022 |
| Neutral Citation | [2022] EWCA Civ 1169 |
| Docket Number | Case No: CA-2021-001933 & CA-2021-000691 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 1169
Lord Justice Males
Lord Justice Phillips
and
Lady Justice Andrews
Case No: CA-2021-001933 & CA-2021-000691
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Sir Michael Burton GBE (sitting as a Judge of the High Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul Parker (instructed by Spector Constant & Williams) for the Defendants/Appellants
Stephen Nathan QC and Nicholas Yell (instructed by GSC Solicitors LLP) for the Claimants/Respondents
Hearing dates: 26 & 27 July 2022
APPROVED JUDGMENT
Remote hand-down: This judgment was handed down remotely at 10.30am on 19 August 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This is an appeal from a decision of Sir Michael Burton GBE in which he held that the first defendant, Alpha Panareti Public Ltd (“APP”) was liable to the claimants as a result of its marketing of luxury properties in Cyprus, but that the second defendant, Mr Andreas Ioannou, a director of APP and the driving force behind the marketing plan, was under no personal liability for doing so. APP appeals the finding of liability against it, while the claimants cross appeal, contending that the judge ought to have held Mr Ioannou personally liable as an accessory to the wrongdoing of APP in accordance with the principles set out by the Supreme Court in Fish & Fish Ltd v Sea Shepherd UK [2015] UKSC 10, [2015] AC 1229.
The trial before Sir Michael Burton extended over 29 days and was the trial of liability of eight sample claims out of a total of some 280 claims by purchasers of apartments and villas at three development sites in the Paphos area, at St Nicolas, St George Hills and Arcadia Gardens, for which planning permission was given in 2005, 2007 and 2007 respectively. APP was the developer of the properties, which were marketed and sold to the claimants between 2005 and 2007. However, the economic downturn following the financial crisis intervened and there were substantial delays in completing the developments. St George Hills was largely completed by December 2011 and St Nicolas by April 2013, while Arcadia remains only 30–60% completed. None of the claimants received completed properties.
This led to litigation against numerous defendants, most of which has now been settled, with APP and Mr Ioannou the only remaining defendants. The claims against them were claims in tort for misrepresentation and the giving of negligent advice, any claims they may have in contract having been assigned pursuant to settlement agreements reached with other defendants. They seek to recover the monies paid out to purchase the properties, including reservation fees and deposits, the sums paid to Alpha Bank Cyprus (“the Bank”) pursuant to loan agreements for the purchase of the properties, and other out of pocket expenses.
The facts
The claimants were individuals resident in the UK who were persuaded to put most, if not all, of their personal savings into what was for them an unusual investment. They were not sophisticated investors and did not have a detailed understanding of financial matters.
APP is a property developer in Cyprus and was the developer of the three sites in question. The judge described Mr Ioannou as the managing director of APP, although there was some evidence that this is not a term recognised in Cyprus. At all events, he was one of only two directors, the other being his father, and was the driving force behind the company. In particular, the plan for the marketing of the properties to UK residents, which involved the recruitment of a network of salesmen, the production and supply of literature and DVDs, and a programme of training sessions for salesmen in the UK and in Cyprus, was his plan and his responsibility. He was closely involved with all aspects of marketing the properties.
The properties were marketed through contractual arrangements entered into by APP, initially with a company called Universal Vacations Realty Limited (“UVR”), and later with another company called Rosebery Overseas Property Ltd or ROPUK Ltd (“ROPUK”). These described UVR and ROPUK as the agents of APP for the purpose of selling the properties, with APP undertaking to provide all necessary promotional material, and ROPUK in particular agreeing to use its best endeavours to achieve the maximum possible sales. APP agreed to pay UVR and ROPUK a commission of 8% of the purchase price of any property sold through them. There was an incentive scheme for the individual salesmen.
It was UVR and ROPUK who recruited the salesmen. These were independent financial advisers who, for the most part, had previously given financial advice to the claimants. It was this which enabled the salesmen to target potential purchasers who were likely to show interest in purchasing the properties, which gave them access to those purchasers in their homes, and which enabled the salesmen to take advantage of the relationships which they already had with potential purchasers. Thus APP was in a sense “piggy-backing” on those previous relationships of trust while carrying out what the judge described as a “hard sell”. As the judge put it at [14]:
“It is clear to me, having heard the evidence from the Claimants that they were indeed daunted [i.e. by the proposed investment in a property in Cyprus], and that their concerns were set to rest by the salesmen, who were only selling to them the Defendants' properties. The fact that some of them may also have previously given other advice to the Claimants in respect of mortgages and pensions was only the springboard to the hard sell of the Cyprus properties, in accordance with their training by APP and with the DVDs and brochures, armed with which they were not simply canvassers, as the Defendants suggest.”
What was sold to the claimants was a package involving the purchase of an apartment or villa (or in some cases, more than one) as an investment, with a view to its being let to tourists in Cyprus. Apart from payment of a deposit of 15% of the price, the purchase would be funded by a loan from the Bank secured by a mortgage on the property, with money being drawn down from the Bank to pay for the construction of the property as the work progressed; income from letting the property would enable the investment to “wash its face”, as rental payments would match or exceed the sums payable by way of mortgage outgoings.
It was an important feature of the marketing of the properties that they were “armchair” investments, which would be easily lettable with rent receipts covering the cost of the mortgage. The mortgage was described in brochures and on the APP website as the “Alpha Panareti Mortgage Scheme” (or “Alpha Panareti Housing Loan”) and was said to be “exclusive” to customers of APP, at a low cost which was made possible by borrowing the funds in Swiss francs:
“… if you do not wish to purchase a property outright, an Alpha Panareti Housing Loan is available at an interest rate of approximately 2.75%. This is possible by denominating the mortgage in Swiss francs (CHF), a practice becoming more popular in the UK. Switzerland is a low inflation economy and a haven for foreign currency.”
Another APP document provided to salesmen emphasised the benefit of this Swiss franc mortgage:
“Mortgages are managed in Swiss francs by Alpha Bank. … The Swiss franc is used because it is exceptionally stable by comparison with other currency, allowing a low interest rate.”
The judge found that the availability of a cheap mortgage in Swiss francs was (in the words of one witness) a “big selling point” of the package offered to prospective customers:
“34. The Defendants plainly set out to induce and purportedly advise potential customers in their homes, in accordance with the training (attended also by representatives of the Bank) given to the agents and sub-agents; and the exclusive Alpha Panareti Mortgage Scheme was an integral part of that package.”
However, for UK residents to borrow money in Swiss francs involved a currency risk. This risk was well summarised in a decision of the Cyprus Consumer Council dated 24 th October 2016, following an investigation into the business practices of the Bank:
“In this case, the Bank granted mortgage loans in … Swiss francs, i.e. in a currency other than the currency of the country where consumers, mostly residents of Cyprus or the UK, receive their income. Loans in foreign currency involve risks stemming both from the fluctuations of the exchange rates between two currencies [and] the interest rate fluctuations. These risks may result in a significant financial charge on the borrower, due to the increased payable instalments and unexpired loan capital. This is particularly true for mortgage loans that have long repayment periods. Thus, it is significantly affecting the ability to repay the loan and thus the economic data relied upon by the consumer to decide on whether to conclude a loan agreement and under what conditions. Furthermore, the average consumer does not have the necessary technical, specialised knowledge of foreign exchange and interest rate risk assessment.”
All of this, the judge found, should have been obvious to APP and its salesmen. That was so irrespective of a circular letter to all banks in Cyprus from the Central Bank of Cyprus dated 11 th October 2006, which the judge found was likely to have been provided to APP at a training session for salesmen in October 2006, attended by Mr Ioannou. This circular drew attention to a large increase in...
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