280 Claimants successful in group action against Cypriot building developer

An analysis of a recent High Court judgment in which they appeared as junior counsel. Some 280 Claimants successful against Cypriot building developer that negligently advised about mortgage prior to purchasing property in Cyprus.

Following a 29-day trial, on 8 June 2021 judgment was handed down in the High Court (commercial division) by Sir Michael Burton GBE, finding that some 280 Claimants were successful in a claim for negligent misrepresentation/negligent advice by a Cypriot building developer, Alpha Panareti Public Ltd (“APP”), that had sold apartments/villas that were either shoddily built or never materialised.

During the trial, 14 sample Claimants were heard in evidence and cross examined, as was Mr Ioannou, the director of AP and the experts. They claimed damages against APP and Mr Ioannou for misrepresentation and negligent advice (any claims for breach of contract having been assigned away to Alpha Bank, with whom the Claimants each had a mortgage), and sought to recover the monies they had paid out, their reservation fees and deposits paid to APP, the sums that they have paid to Alpha Bank and other out of pocket expenses.

Legal framework

The case against the Defendants was based upon negligent misrepresentation, pursuant to s. 2 of the Misrepresentation Act 1967. In order to establish liability in respect of the representations, the Claimants had to prove (i) falsity (ii) reliance and (iii) negligence.

For the Scottish Claimants, to whom s.2 1967 Act would not apply, the case was put as negligent misstatement, by reference to Esso Petroleum v Mardon [1976] 1 QB 801.

The judge found in an interim judgment that English law was the proper law of the torts alleged as opposed to Cypriot law, see [2021] EWHC 642 (Comm).

Negligent advice

APP was found to be negligent in its “failure to advise as to the nature, import and effect of the Alpha Panareti Mortgage schemewhich led to spiralling of the indebtedness to the Bank of all the Claimants” (para 9(3)). Further, there was said by the Claimants to be an overriding representation that the purchase of the properties constituted a safe and sound investment.

The judge found that:

“I conclude that the Defendants plainly owed a duty of care in marketing their wonderful new mortgage as a fundamental part of the offering, to put these Claimants on notice of the risks, which should have been obvious to them and their agents, and to include a caveat in their brochures rather than the trumpeted advantages of that special exclusive mortgage arrangement. I conclude that the Defendants by their agents and their literature owed and were in breach of a duty of care to these Claimants in failing to advise of the risk of the Alpha Panareti Mortgage Scheme. As a result of the inevitable risks created by the Swiss Franc mortgage it was not a safe investment, and the Defendants failed to take care that the investment they were recommending was safe and sound.” (para 38, emboldening added)

The Claimants were therefore successful in their claim against APP. Quantification of damages is to be decided at a further hearing.

Our Firm instructed Highgate Hill Solicitors acting for the Claimants as the English law firm in this matter.