Director was not co-liable for company’s negligence
Barclay-Watt v Alpha Panareti Public Ltd  EWCA Civ 1169 concerned a company that marketed luxury properties in Paphos, Cyprus. The company had two directors, one of whom – a Mr Ioannou – was the “driving force” behind the company.
The company and its salespersons marketed properties as investment opportunities that could be purchased with the aid of mortgages provided by a specific bank and denominated in Swiss francs. The marketing literature specifically highlighted the stability of the Swiss franc and, as a result, lower interest rates as attractive features of the investment structure.
However, the company and its salespersons did not alert investors to currency risks involved for non-Swiss residents when borrowing in Swiss francs. This was despite the fact that the Cyprus Consumer Council had previously highlighted currency risk in connection with an investigation into mortgages provided by the bank in question in Swiss francs.
In due course, the value of the Cyprus pound fell substantially against the Swiss franc. As a result, the cost of the mortgages “spiralled”, the investors never received completed properties and, even if they had, any rent from the properties would not have been sufficient to service the mortgages.
The High Court found that the company had acted negligently towards the investors by “trumpeting the supposed benefits of [a] Swiss franc mortgage” but failing to warn them of the risks involved when borrowing in foreign currency.
The investors had also claimed that Mr Ioannou should be held jointly liable with the company as a “joint tortfeasor”, because the marketing scheme had been his “masterplan or brainchild” and that he had micromanaged the company’s salespersons and approved the content of the marketing literature.
However, the High Court dismissed that claim, finding that Mr Ioannou had not been a joint tortfeasor. The investors appealed.
Under English law, a tort is a civil wrong that does not arise from breach of contract. There are numerous torts in English law, including defamation (libel or slander), deceit (a type of fraud), misrepresentation and trespass. In this case, the tort in question was negligence.
A person who commits a tort is termed a “primary tortfeasor” and is liable to pay damages to the person who suffers loss as a result of the tort.
In some cases, a person can be jointly liable for a tort, along with the primary tortfeasor, as a “joint tortfeasor”, even if they did not carry out the actions that amount to the tort itself. For this to happen, the joint tortfeasor must have provided substantial (i.e. more than trivial) assistance to the primary tortfeasor to commit the tort, and both the primary tortfeasor and the joint tortfeasor must have had a “common design” (express or inferred) to carry out the tort.
What did the Court of Appeal say?
The court found that Mr Ioannou had not been a joint tortfeasor (and so dismissed the appeal).
What does this mean for me?
This is a sensible decision which will be of comfort for company directors.