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 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]:

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:

Another APP document provided to salesmen emphasised the benefit of this Swiss franc mortgage:

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:

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:

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 foreign currency lending which the Central Bank had observed during the first eight months of 2006 and pointed out that this exposed borrowers to interest and foreign exchange risks. It called upon all banks to advise their clients about these risks and, if the borrower decided to proceed, to obtain a signed statement confirming that he understood the risks.

The judge found, however, that none of the claimants was ever warned about these currency risks, which they did not understand.

In the event there was a substantial fall in the value of both sterling and the Cyprus pound against the Swiss franc, so that the cost of the mortgages spiralled; as the claimants never received the completed properties, there were no rent receipts, but even if there had been, these would not have been sufficient to enable the bank’s loan to be repaid. The fall in the value of sterling led to what the judge described as “the increasing and overwhelming indebtedness of the Claimants to the Bank”.

The claimants alleged that APP had made (or was responsible for) numerous misrepresentations and negligent advice in the course of marketing the properties. These were distilled to nine heads of claim for the purpose of the trial, all but one of which were rejected by the judge. For the purpose of this appeal it is sufficient to mention two of them.

The first, which succeeded, was that in trumpeting the supposed benefits of the Swiss franc mortgage, APP had failed to warn the claimants of the foreign currency risks which they were undertaking by borrowing in Swiss francs when the anticipated rental income would be in Cyprus pounds or sterling. The judge found that, in marketing the mortgage as a fundamental part of their offering, APP owed a duty of care to put the claimants on notice of the currency risks, and that they were in breach of this duty. It is this decision which APP challenges on its appeal.

The second head of claim, which failed, described as the “lettability” representation, was that APP had represented that the properties were lettable to tourists on short-term lets. The claimants’ case was that this representation was untrue because the developments needed (and could not obtain) a licence from the Cyprus Tourism Organisation in order for such letting to be lawful. Having considered evidence of Cypriot law, the judge concluded that the properties could be let on short-term lets to holidaymakers from Cyprus or the European Union (then including the UK), which represented 82% of the tourist footfall in Cyprus, but they could not be let to non-EU residents for periods of a month or less. In those circumstances the judge found, applying Avon Insurance Plc v Swire Fraser Ltd [2000] EWHC 230 (Comm), [2000] CLC 665 at [17], that the representation was substantially correct; and that in any event neither the claimants nor any reasonable person would have regarded the fact that they were only lettable to 82% of the potential market as a reason not to enter into the purchase contract. The claimants seek to challenge this conclusion by a Respondents’ Notice in the event that APP’s appeal on the currency risks issue succeeds.

For APP Mr Paul Parker advanced four grounds of appeal. In summary:

The judge was wrong to regard the salesmen who persuaded the claimants to buy properties as agents of APP in making the representations which they made. Rather, the purpose of the arrangements between APP and the salesmen was for the salesmen to make their client lists available to APP; the salesmen owed no fiduciary duties to APP, and had only an execution-only function.

Even if they were agents of APP, the salesmen had no authority to sell the Bank’s loan product as if it were APP’s own product; it was the Bank’s product and it was the Bank, not APP, which had provided training to the salesmen about it.

The judge’s conclusion that the currency risk of a loan in Swiss francs was obvious was unsupported by any evidence and was at least subconsciously influenced by the hindsight experience of the global recession caused by the 2008 financial crisis; accordingly the judge was wrong to hold that APP owed a duty to warn the claimants about this risk.

The judge was wrong to place heavy reliance on the contents of the Central Bank circular because there was no evidence that its contents were communicated either to APP or to individual salesmen.

Developing these grounds, Mr Parker relied on the different kinds of agent described in Bowstead & Reynolds on Agency, 22^nd Ed (2021) at para 1-001, and on the warning in the majority judgment in UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] EWCA Civ 1567, [2017] 2 Lloyd’s Rep 621 at [89] “against forcing into an agency relationship a relationship better explained in some other way, in particular where the supposed agent is already an agent of another party to the contemplated transaction”. He submitted that the salesman here were no more than “canvassing” agents, with no power to affect APP’s legal relations with the claimants, and whose only role was to introduce the claimants to APP, not to make representations or to give advice on behalf of APP; and that, to the extent that they did have any advisory role so far as the mortgage was concerned, their failure to advise about the currency risks should not be attributed to APP.

The way in which the properties were marketed and the respective roles of APP and the salesmen who engaged directly with the claimants on its behalf were central issues at the lengthy trial before the judge. The appeal challenges the judge’s findings that the statements made by the salesmen in promoting these properties, and in particular in extolling the benefits of the Alpha Panareti Mortgage Scheme, involving as it did a loan denominated in Swiss francs, were statements which APP authorised and encouraged the salesmen to make. This is a challenge to findings of fact which, in my judgment, is hopeless. It was APP which entered into contractual arrangements intended to maximise sales of the property which described UVR and ROPUK as its agents; which incentivised the salesmen by generous commission payments; which devised promotional materials emphasising (among other things) the benefits of a cheap loan which could be achieved by borrowing in Swiss francs; and which organised training sessions for the salesmen.

After setting out these features of the marketing of the properties, the judge put it this way:

This was a finding of fact which the judge was entitled to make. Whether the salesmen owed any fiduciary duty to APP is irrelevant, just as it is arid to debate whether the salesman fell within one category of agent rather than another. What matters is that they were sent out by APP to maximise sales by (among other things) emphasising the benefits of a cheap loan in Swiss francs, with APP trading on the benefit of the salesmen’s existing relationships with the claimants.

It is unrealistic to submit, as Mr Parker did, that it was the Bank and not APP which undertook responsibility for warning the claimants about the currency risks. Whether or not the Bank had any responsibility for doing so (and I note that the claimants’ claims against the Bank have been settled on terms of which we are not aware), it was APP which included the promotion of this “exclusive” mortgage in the material provided to salesmen as a key part of the overall package for the sale of the properties. It makes no difference that the detailed explanation of the working of the mortgage at training sessions organised and attended by APP was given by representatives of the Bank.

The complaint that there was no evidence that the currency risk was obvious to APP and to the salesmen (who were after all experienced independent financial advisers) is without substance. The fact is that it was obvious, and this should have been understood by APP and the salesmen.

This is confirmed by the terms of the October 2006 circular from the Central Bank of Cyprus. Contrary to Mr Parker’s proposed interpretation of that circular, the Central Bank had not suddenly appreciated that borrowing in a foreign currency gave rise to a currency risk; rather, it was concerned about the recent high volume of such borrowing which meant that this already apparent risk was being run to a much greater extent than hitherto, in circumstances where some borrowers would not appreciate the risk which they were running. If necessary, therefore, the circular demonstrates that the judge’s view of the obviousness of the risk was not affected by hindsight.

Contrary to the final ground of appeal, the judge did not place heavy reliance on the terms of the circular. Rather, he stated in terms that it was unnecessary to do so (emphasis added):

It is impossible for this court to say that the judge was not entitled to reach these conclusions. I would therefore dismiss the appeal.

It is therefore unnecessary to decide whether the claimants are entitled to challenge the judge’s conclusion on the lettability issue. However, as we heard argument on that question, I propose to decide it.

Initially the claimants sought to challenge the judge’s conclusion by serving a Respondents’ Notice in which they acknowledged “that, in accordance with CPR 52.13(3), White Book Paragraph 52.3.2 and Wolff v Trinity Logistics USA Inc [2018] EWCA Civ 2765, [2019] 1 WLR 3997 at [89], they need permission from the Court of Appeal to appeal against the dismissal of their claim for misrepresentation as to lettability by the Judge”. I considered that application for permission on paper and refused it on the ground that an appeal would have no real prospect of success.

Despite that discouragement, Mr Stephen Nathan QC for the claimants submitted that they are entitled to pursue this argument without needing permission because they are seeking to do no more than to uphold the judge’s order. He acknowledged, however, that this submission could only succeed if Wolff was wrongly decided.

I would reject this submission for three related reasons, which can be briefly stated. First, we are in my judgment bound by Wolff and any change to what that case decided should be made by the Rules Committee. In a judgment with which Lord Justices Longmore and Newey agreed, Sir Timothy Lloyd held as follows:

That paragraph precisely describes this case.

Second, I see no reason to think that Wolff was wrongly decided. Mr Nathan submitted that it is inconsistent with the earlier case of Compagnie Noga d’Importation et d’Exportation SA v Australia & New Zealand Banking Group Ltd [2002] EWCA Civ 1142, but I do not agree. Noga was concerned with a different issue, whether it is possible to appeal against a finding of fact. It has no bearing on the present issue.

Third, in substance the claimants’ challenge to the judge’s conclusion on the lettability issue does amount to seeking to vary the judge’s order. The order which the judge made in this case was that “there be judgment for the Claimants against Alpha Panareti with damages to be assessed”. What that means can only be understood by reference to the judgment in which one cause of action (i.e. failure to advise as to the currency risks of the Swiss franc mortgage) succeeded and all other causes of action (including the lettability misrepresentation claim) failed. The order can only mean that judgment is given on the cause of action which succeeded, not the causes of action which failed, and that damages are to be assessed accordingly. If the claimants’ challenge to the judge’s dismissal of their lettability misrepresentation claim were to succeed, they would need a different order, ordering damages to be assessed for that claim also. While it may be that the damages for both claims would be the same, that is not necessarily so, and in any event they are different causes of action.

I conclude, therefore, that the claimants are not entitled to run this case without permission, which has been refused. I would add that we heard no oral submissions as to the merits of the lettability case, but I see no reason to change the view which I formed when refusing permission that the claim would not have any real prospect of success.

The judge dealt with the issue whether Mr Ioannou should be held personally liable with extreme brevity. I set out in full what he said about this issue:

This is, with respect, not as clear as it might have been. In particular, it does not distinguish clearly between the two ways in which the claimants put their case.

The first way in which the claimants put their case against Mr Ioannou was that he personally was in breach of a duty to warn them about the currency risks. The judge rejected that case, finding that there was no assumption of responsibility by Mr Ioannou personally, and that this claim against him therefore failed, applying Williams v Natural Life Health Foods Ltd. Williams was a case in which the individual defendant (D2) was the managing director and principal shareholder of the corporate defendant (D1). The claimants dealt with D2, who provided them with a brochure advertising his experience in the health food trade and played a prominent part in preparing misleading financial projections. The claimants sued D2 for misrepresentation, saying that he had assumed personal responsibility to them. Mr Justice Langley and the Court of Appeal held D2 liable, but the House of Lords reversed this decision. Giving the only reasoned speech, Lord Steyn held that in order to establish the personal liability of an individual acting on behalf of a company, there had to have been such an assumption of personal responsibility by him as to create a special relationship between him and the claimant:

He added that an objective test must be applied to this issue, with the primary focus being on exchanges crossing the line between the parties. Moreover, it was necessary to prove that the claimant had relied upon the individual defendant’s assumption of personal responsibility:

Applying these principles, it was held that although the company had held itself out as having expertise, and had made clear that this expertise derived from D2’s experience, this was insufficient to amount to an assumption of responsibility by D2 himself. This would be so even in the case of a small one-man company where, almost inevitably, it will be the managing director who is possessed of the qualities essential to the functioning of the company and who acts on behalf of the company. But this does not by itself convey that the managing director is willing to be personally answerable to the customers of the company.

In the light of the judge’s findings that there was no assumption of personal liability by Mr Ioannou and that it would not have crossed the claimants’ minds that there was, the claimants no longer pursue this first way of putting their case against Mr Ioannou. It follows that he is under no personal liability as a primary tortfeasor – or to put it another way, because assumption of responsibility by the defendant and reliance by the claimants are essential elements of the tort, that Mr Ioannou himself did not commit any tort in this case.

The second way in which the claimants put their case is that Mr Ioannou is liable as an accessory to the tort committed by APP. The leading case on accessory liability in tort is the decision of the Supreme Court in Fish & Fish v Sea Shepherd. The claimant’s vessel was rammed by a vessel commanded by D3, who was both the founder of D2 (a United States conservation society) and a director of D1 (an English conservation charity). D1 held legal title to the attacking vessel as the registered owner, but the beneficial owner and operator of the vessel was D2. In order to establish jurisdiction against D2 and D3, the claimant had to show that it had a claim against D1. This was the subject of a preliminary issue, the issue being whether D1 was liable as an accessory in circumstances where it had passed on the names of some volunteers willing to take part in the operation and had been involved in raising funds to support it, but had otherwise played no effective part in the commission of the tort. The majority of the Supreme Court held that the role played by D1 was of minimal importance in the commission of the tort and that the judge had been entitled to conclude that it was therefore not capable of being liable. Despite disagreeing on the application of the legal principles to the facts, however, the members of the court agreed what those legal principles were. I can take them as stated and explained by Lord Neuberger:

It is worth noting three points at this stage. First, Lord Neuberger emphasised the fact sensitive nature of the issue and the need to keep accessory liability within reasonable bounds. Second, the torts in question in this case were torts of strict liability, trespass to goods and conversion. Third, the case had nothing to do with whether an individual director or senior manager would incur personal liability as an accessory to torts committed by the company in circumstances where he had no liability as a primary tortfeasor.

The claimants’ case, advanced by Mr Nathan, is that the three conditions for accessory liability described by Lord Neuberger and other members of the Supreme Court were satisfied in this case: (1) Mr Ioannou assisted in the commission of an act by APP, his assistance being substantial and not merely trivial; (2) he did so pursuant to a common design between him and APP to sell as many properties as possible by marketing them through the network of salesmen who were intended and directed to promote the merits of taking a mortgage in Swiss francs; and (3) the way in which the properties were marketed constituted a tort committed by APP against the claimants because of their failure to warn them about the currency risks. Mr Nathan pointed to the judge’s findings as to Mr Ioannou’s substantial involvement in all aspects of marketing the properties. He submitted that there can be, and was here, a common design between a director and his company (cf. Ottercroft Ltd v Scandia Care Ltd [2016] EWCA Civ 867). He acknowledged (at any rate in this court) that a company director who does no more than participate in board meetings would not thereby incur a personal liability, but submitted that this is a narrow exception and that the role of Mr Ioannou in the present case went far beyond this.

For Mr Ioannou, Mr Parker sought to foreclose argument on this issue by submitting that the judge had made findings of fact when saying (at [60]) that “This is not a case of a joint tortfeasor ancillary to another independent party, such as in Fish & Fish Ltd v Sea Shepherd UK …” and (at [61]) that there had been no participation or involvement by Mr Ioannou “in ways which go beyond the exercise of constitutional control of APP”. However, such a shortcut is not open to Mr Ioannou. These were the judge’s conclusions, not findings of fact.

Mr Nathan submitted that they were unreasoned conclusions. Certainly the reasoning is very brief, but this may be too hard on the judge. It may be that what the judge is saying at [62] is that, in the circumstances of this case, the absence of any assumption of responsibility by Mr Ioannou is fatal to both the ways in which the claimants put their case against him.

Mr Parker submitted also that Mr Ioannou’s role in approving the content of marketing material and attending training sessions for salesmen amounted to no more than his exercise of control over the business of APP in accordance with the company’s constitution. On the judge’s findings, Mr Ioannou had not taken deliberate or active steps to conceal the currency risks from prospective purchasers such as the claimants and, that being so, it would not be right to characterise his conduct as assisting in the commission of a tort. This was a case of a negligent omission, the negligent failure to include a warning about the currency risks, which was a very different situation from that considered in Fish & Fish v Sea Shepherd UK. Although the judge had dealt with the matter briefly, he had reached the right conclusion.

On the judge’s findings of fact, Mr Ioannou personally was fully involved in the plan to market the properties as the driving force of APP, as I have already described, albeit that he had no personal contact with any of the claimants, whose dealings were with the salesmen recruited by UVR and ROPUK pursuant to the contractual arrangements negotiated between them and APP. It is also important that the basis on which APP was held liable was that it negligently failed to ensure that the claimants were warned about the currency risk which they were undertaking. It was not suggested, and in particular it was not suggested to Mr Ioannou in cross examination, that he consciously and deliberately prevented the salesmen from giving this warning, merely that the failure to do so was negligent. It was a case of negligent failure to warn, not deliberate deceit.

When considering the personal liability of an individual director or senior manager of a company as an accessory to a tort committed by the company, it is necessary to have in mind a number of basic principles, as explained in the cases to which I shall refer. One such principle, going back to Salomon v A. Salomon & Co Ltd [1897] AC 22, is that individuals are entitled to limit their liability by incorporating a company, which is a distinct legal entity, to carry on their business. As Lord Macnaghten put it at page 51:

He continued at p.52:

Another principle is that a tortfeasor should be liable for his tortious acts and should not escape liability merely because he is a director or officer of a company. That principle, however, is more concerned with whether an individual whose conduct incurs personal liability should have a defence by reason of his status as a director or officer than with whether conduct should incur personal liability in the first place.

The need to strike a balance between these two principles has been recognised in the cases. In MCA Records Inc v Charly Records Ltd [2001] EWCA Civ 1441, [2002] BCC 650, Lord Justice Chadwick (with whom Lord Justices Simon Brown and Tuckey agreed) said this:

Again, therefore, as in Fish & Fish v Sea Shepherd UK, the need to strike a balance on the facts of each case between competing principles was emphasised.

As I have already explained, the way in which the claimants in Williams put their case was that the individual defendant, D2, was liable having assumed responsibility for the negligent advice given in the corporate defendant’s financial projections. That case was rejected for the reasons explained above. In the House of Lords, however, the claimants sought for the first time to run an alternative case that D2 “had played a prominent part in the production of the negligent projections and had directed that the projections be supplied” to the claimants, so as to incur personal liability as a joint tortfeasor. Lord Steyn held that this case, which had not been run in the courts below, was not open to them. However, he went on to reject it on its merits, at pages 838H to 839A, in a section of his judgment which is admittedly obiter, but with which nevertheless the other members of the House of Lords agreed:

Much the same could be said in the present case. If Mr Ioannou is liable as an accessory to the tort committed by APP, many directors and senior managers who are heavily involved in the marketing of investments by the companies for which they work will find themselves incurring personal liability for negligent but non-fraudulent failures by those companies, even though (as the judge found in the present case) those individuals assume no responsibility to the purchasers of such investments and have no direct contact with them, and even though the purchasers do not in any way rely on any such assumption of responsibility by those individuals.

Nevertheless, Mr Nathan submits, by reference to the cases which I shall now consider, that this is the conclusion which the law demands. The judge listed these cases at [60] of his judgment (with the exception of the last, Lifestyle Equities CV v Santa Monica Polo Club Ltd [2021] EWCA Civ 675, [2021] Bus LR 1020, which was only decided after he had reserved judgment), but did not attempt to analyse them.

The first such case is MCA Records v Charly Records, to which I have already referred. It was a claim for copyright infringement in which it was alleged that the individual defendant (“JY”) was the moving spirit behind the corporate defendants and was personally liable for their acts. Mr Justice Rimer held that JY was not liable for some of the activities of the corporate defendants, but was personally liable for having procured or participated in copying and issuing to the public recordings which infringed the claimant’s copyright. An appeal was dismissed.

Lord Justice Chadwick referred to previous authority (e.g. Rainham Chemical Works Ltd v Belvedere Fish Guano Co Ltd [1921] 2 AC 465 and C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317) in which it had been held that an individual may be jointly liable with a company which he controls, or of which he is a director or officer, if he directs or procures the commission of the tortious act in question. But he recognised, in the passage which I have already cited, that it may be a difficult question, involving issues of policy and the striking of a balance between different principles, to determine whether there is such liability on the facts of any given case. He addressed what Lord Steyn had said in Williams as follows:

Thus Lord Justice Chadwick rejected a somewhat ambitious submission that Lord Steyn had held that a director could never be liable as a joint tortfeasor with the company. Rather, he had held that there was no accessory liability on the facts of Williams because the nature of the particular tort in issue in that case was such that only those who were party to the special relationship giving rise to the assumption of responsibility upon which liability depended could be liable as a joint tortfeasor with the company.

In what has become an oft-cited passage, Lord Justice Chadwick went on to recognise the danger of attempting to formulate general principles, but nevertheless ventured four propositions as follows:

I respectfully agree that there are dangers in attempting to formulate what may come to be regarded as prescriptive principles of general application in this fact sensitive and policy-driven area. There are, perhaps, even greater dangers if, having sounded this warning, an appellate court goes on to do just that. It is, however, important to note that Lord Justice Chadwick was careful to say at [51] that he was dealing with cases “in the field of intellectual property”.

This passage was cited and applied by Mr Justice Pumfrey in Koninklijke Philips Electronics NV v Princo Digital Disc GmbH [2003] EWHC 2588 (Pat), another case of copyright infringement. Mr Justice Pumfrey added:

On the facts, Mr Kuo’s activities extended beyond participation in board meetings. He was the business manager of the company, in control of its commercial decisions, and had given an indemnity to the company’s customer, the effect of which was to encourage it to continue to infringe in the United Kingdom. On this basis, Mr Justice Pumfrey concluded at [23] that the case was “near the line”, but that Mr Kuo’s close involvement with the daily actions of the company were sufficient to show that he had worked to bring about the continued importation of infringing goods into the United Kingdom so as to be liable as a joint tortfeasor with the company.

Contex Drouzhba v Wiseman [2006] EWHC 2708 (QB) was a misrepresentation case where the representations made by a director on behalf of the company were fraudulent. Mr Justice Irwin cited the same passage from MCA Records v Charly Records, and referred also to what Lord Justice Chadwick had said about Lord Steyn’s approach in Williams. He added:

I respectfully agree. That different considerations apply in the case of fraud is unsurprising. It illustrates that the liability of a director or senior manager may differ according to the nature of the tort in question.

Societa Esplosivi Industriali SpA v Ordnance Technologies (UK) Ltd [2007] EWHC 2875 (Ch), [2008] 2 All ER 622 was a claim for infringement of the claimant’s design right. The individual defendant (D3) was the sole director and shareholder of the corporate defendant (D1). Applying MCA Records v Charly Records, Mr Justice Lindsay held that D3 had shared a common design with D1 and was personally involved in the commission of the tort to an extent sufficient to render him personally liable as a joint tortfeasor. Dealing with the requirement for a common design, he placed some emphasis on the fact that what Lord Justice Chadwick had said in MCA Records v Charly Records was concerned with intellectual property cases and that infringement of design right was a tort of strict liability:

Finally, in Lifestyle Equities CV v Santa Monica Polo Club Ltd, the Court of Appeal was concerned with infringement of registered trade marks and passing off. It was held that two directors of the company, who had respectively taken “a close, active and personal part in bringing about the activities found to infringe” (see [20]) and who had been “very hands-on, managing the day-to-day running of” the infringing business” (see [22]), were jointly and severally liable with the company. Their conduct was “deliberate and intentional in the sense that they obviously knew and intended that the company should do the things which in fact have turned out to be infringements” (see [25]).

As in other cases in this field, it was relevant that the tort was one of strict liability. Lord Justice Birss (with whom Lord Justices Moylan and Nugee agreed), said that:

There was, therefore, a two-stage analysis. The first stage was to consider, applying ordinary principles of accessory liability, whether the individual defendants’ participation in the tortious conduct was sufficient to render them liable as joint tortfeasors. In the case of these torts of strict liability involving positive conduct infringing the claimant’s monopoly rights, that question was answered affirmatively. The second stage, which Lord Justice Birss went on to consider by reference to MCA Records v Charly Records, was whether the individual defendants’ status as directors of the primary tortfeasor afforded them a defence. The existence of these two stages is also apparent from what Lord Justice Birss went on to say after citing from the judgment of Lord Justice Chadwick:

At this second stage, the defence available to a director (which is not available to a senior manager) is a narrow one, albeit not necessarily limited to voting at board meetings:

The recognition that the director’s “constitutional role” defence may extend wider than voting at board meetings may be an echo of what Lord Justice Lewison said in Ottercroft Ltd v Scandia Care Ltd, a case about interference with the claimant’s right to light. In that case too, MCA Records v Charly Records was cited. Lord Justice Lewison continued:

Mr Nathan submitted that Lifestyle Equities Ltd v Ahmed was an authority conclusively in the claimants’ favour in the present case. However, it is important to note that Lord Justice Birss spelled out that he was dealing with intellectual property cases, albeit he also said that he could see no difference between these and other cases. He did not, however, refer to Williams or to what Lord Justice Chadwick had said about it:

It is apparent from this review of the authorities that judges have recognised that the question whether a director or senior manager should be held personally liable as an accessory to a tort committed by a company is a fact sensitive question. As Mr Parker submitted, the facts of the present case are far removed from those in which directors or senior managers have been held liable. That does not itself answer the question which we have to decide, but it does mean that care is needed in considering how much assistance can be derived from these cases.

Judges have also made clear that the question of personal liability can be a difficult (or “elusive”) question, requiring the balancing of competing principles. For that reason, judges addressing this question have been careful to make clear that statements of legal principle must be understood in the context in which they are made. That context necessarily includes the nature of the tort with which the courts have been concerned in any particular case. Statements of principle which have been made in the context of strict liability torts (whether trespass and conversion as in Fish & Fish v Sea Shepherd UK or intellectual property torts as in MCA Records v Charly Records and the cases which have followed it) are not necessarily directly applicable to the tort in the present case, liability for which is dependent on the assumption of responsibility by the primary tortfeasor.

In particular, so far as the authorities are concerned, it has never been suggested that what Lord Steyn said, albeit obiter, about accessory liability in Williams was wrong. Rather, it has been held that it was applicable to the particular tort in issue in that case, which depended on an assumption of responsibility -- but that is also the nature of the tort with which we are concerned in the present case. Williams is therefore compelling persuasive authority against the personal liability of Mr Ioannou in this case.

In my judgment such a conclusion is also in accordance with the principles that accessory liability ought to be kept within reasonable bounds and 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. It does not offend against the principle that a person should be liable for his own torts because Mr Ioannou, who did not have personal dealings with the claimants or assume any responsibility towards them, did not himself commit any tort.

Here, the business of developing and marketing the properties was the business of APP, not Mr Ioannou. Similarly, the commitments which it entered into, including the contracts by which it sold the properties to the claimants, were the commitments of APP and not of Mr Ioannou. It is not suggested that Mr Ioannou undertook any personal liability under those contracts. Nor is it any longer suggested that he himself committed any tortious act (hence the judge’s rejection of the “assumption of responsibility” case and the claimants’ decision not to pursue that case on appeal). The judge found that it would not have occurred to any of the claimants that Mr Ioannou had assumed any responsibility towards them. Rather, the suggestion is that Mr Ioannou, without incurring liability as a primary tortfeasor, was an accessory to the tort committed by APP. But if that is so, it is difficult to see why any director or senior manager who is heavily involved in a company’s marketing of an unsuitable investment should not incur personal liability for a negligent but non-fraudulent failure to warn of the risks of that investment. So to hold would drive a coach and horses through the concept of a limited liability company.

It is significant in this regard that it could not be suggested that Mr Ioannou had undertaken any contractual responsibility to the claimants. That would run directly counter to Salomon v Salomon. Rather, the liability which it is sought to impose on him is liability in tort, but it is liability for a tort arising out of a relationship memorably described by Lord Devlin in the leading case of Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465 at page 529 as “equivalent to contract, that is, where there is an assumption of responsibility in circumstances in which, but for the absence of consideration, there would be a contract”. It should not be surprising, therefore, that the principle of limited liability which shields a director or senior manager from personal liability in contract should also apply in the case of a tort, liability for which depends on the existence of a relationship which is equivalent to contract.

In cases such as Fish & Fish v Sea Shepherd UK itself and the intellectual property cases referred to above it was relatively straightforward to apply the tests for accessory liability described by the Supreme Court. That is less so in the present case. Even leaving aside the artificiality of saying that there is a common design between a company and the individual who acts as its driving force (albeit that the possibility of such a common design is recognised by the cases), what was the common design in this case? Certainly Mr Ioannou intended that APP should market the properties through the salesmen who were recruited for that task and that this included the promotion of the benefits of the Swiss franc mortgage. To that extent it can be said that there was a common design which they both shared. But the act or omission which made this conduct tortious was the failure to warn about the currency risks of that mortgage. Since, on the judge’s findings, there was no conscious decision not to include such a warning, it is difficult to say that there was a common design not to do so. The fact that there was no warning renders the company liable because the company was in a relationship with the claimants whereby it assumed responsibility towards them, but Mr Ioannou was not in such a relationship and the need for such a warning did not occur to him.

It can perhaps be said that there was a common design between APP and Mr Ioannou to market the properties in the way in which they were in fact marketed, and that this did not include any warning about the currency risks, but to hold that this amounts to a common design sufficient to incur personal liability as an accessory appears to lead to an unduly wide view of the personal liability of directors and senior managers in such cases. While the possibility of apportioning responsibility in contribution proceedings between the company on the one hand and directors and senior managers on the other goes some way to mitigate this difficulty, it is not a complete answer, not least if the company becomes insolvent. In that case, to impose liability on the directors and senior managers would be (as Lord Macnaghten put it in Salomon v Salomon) to expose them to “the harsh provisions of the bankruptcy law”.

For these reasons I would hold, at the first stage, that Mr Ioannou did not incur personal accessory liability in this case.

It is therefore unnecessary to consider, at the second stage, whether he would have a defence that he was going no further than carrying out his constitutional role as a director of APP, as Mr Parker submitted and as the judge held. I would observe, however, that although in one sense the entire business of a company is conducted by, or under the authority of, the directors, and that it was not suggested that Mr Ioannou’s conduct was in any way unauthorised, it is clear that the “constitutional role” defence is intended to be of narrow application. Moreover, it would be an unacceptable anomaly if a senior manager doing what Mr Ioannou did would incur personal liability as an accessory but a director would not. It would be equally anomalous if personal liability were to depend on the formality of a board resolution (or a power of attorney) authorising the conduct in question. Indeed, it appears that Mr Ioannou may have been operating in some respects under a power of attorney, but this was not mentioned by the judge and there appears to have been no evidence about its scope. However, it is unnecessary to explore these issues further.

I would dismiss both APP’s appeal and the claimants’ cross-appeal. APP is liable to the claimants in damages for the failure to advise them about the currency risks of the Swiss franc mortgage. Mr Ioannou is not.

I agree.

I also agree.