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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Goldberg & Ors v Miltiadous & Ors  EWHC 450 (QB) (15 March 2010)
Cite as:  EWHC 450 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| (1) Mrs BEVERLEY GOLDBERG (2) RS MOTOR SALES LTD (3) MR and MRS FRANK ZANELLI (4) Mr COSTA NICLOAOU
|- and -
|(1) MR MILTON MILTIADOUS (2) MR EVDOKIMOUS CHRISTOU (3) MR SIMON BROUGHAM t/a FOSTER SQUIRES (A FIRM)
Mr Justin Fenwick QC and Mr Jamie Smith (instructed by Beachcroft LLP) for the Defendants
Hearing dates: 2 to 5, 8 and 10 February and 9 March 2010
Crown Copyright ©
Mr Justice Tugendhat :
"Where by any wrongful act or omission of any partner acting in the course of the ordinary business of the firm or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred the firm is liable therefore to the same extent as the partner so acting or omitting to act".
"21... Whether an act or omission was done in the ordinary course of a firm's business cannot be decided simply by considering whether the partner was authorised by his co-partners to do the very act he did. The reason for this lies in the legal policy underlying vicarious liability. The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risks to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.
22 This policy reason dictates that liability for agents should not be strictly confined to acts done with the employer's authority. ..
23 If, then, authority is not the touchstone, what is? … Perhaps the best general answer is that the wrongful conduct must be so closely connected with acts the partner or employee was authorised to do that, for the purpose of the liability of the firm or the employer to third parties, the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm's business or the employee's employment. ...
25 This "close connection" test focuses attention in the right direction. But it affords no guidance on the type or degree of connection which will normally be regarded as sufficiently close to prompt the legal conclusion that the risk of the wrongful act occurring, and any loss flowing from the wrongful act, should fall on the firm or employer rather than the third party who was wronged....
32 ... A distinction is to be drawn between cases ... where the employee was engaged, however misguidedly, in furthering his employer's business, and cases where the employee is engaged solely in pursuing his own interests: on a "frolic of his own", in the language of the time-honoured catch phrase. In the former type of case the employee, while seeking to promote his employer's interests, does an act of a kind he is authorised to do. Then it may well be appropriate to attribute responsibility for his act to the employer, even though the manner of performance was not authorised or, indeed, was prohibited. The matter stands differently when the employee is engaged only in furthering his own interests, as distinct from those of his employer. … Then the mere fact that the act was of a kind the employee was authorised to do will not, of itself, fasten liability on the employer....
39 ... vicarious liability is not imposed unless all the acts or omissions which are necessary to make the servant personally liable took place within the course of his employment".
"… deliberate and dishonest conduct committed by a partner for his own sole benefit is legally capable of being in the ordinary course of the business of his firm".
"(1) the general principle is usefully summarised in Bowstead & Reynolds at paragraph 8-013:
"Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority"
(2) there must be a representation by the principal to the third party (which can be express, or implied from a course of dealing, or made by permitting the agent to act in some way in the conduct of the principal's business with other persons) - see Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd  2 QB 480, Armagas v. Mundogas SA  1 AC 7171 (HL) and Bowstead & Reynolds at paragraph 8-017;
(3) a person without actual authority cannot generally clothe himself with ostensible authority by representing that he has that authority - See Freeman & Lockyer at 505;
(4) since ostensible authority involves a representation by the principal as to the extent of the agent's authority, no representation by the agent as to the extent of his authority can amount to a 'holding out' by the principal – see Attorney-General for Ceylon v. Silva  AC 461 at 479".
THE HISTORY OF THE FIRM
OTHER BUSINESS RELATIONSHIPS BETWEEN MR CHRISTOU AND MR MILTIADOUS
"Think it's time to slow down and focus on one thing at a time otherwise we might stretch so much we snap".
"I decided to concentrate my efforts in looking after the operational side of the Practice, which at the time had increasing cash flow issues. I assisted Mr Christou and Mr Ladopouli when I was requested to, and on a number of occasions attended meetings to discuss such matters as sales and marketing. I recall that the project potentially offered a significant return on capital and I personally looked forward to that return to repay a number of my personal debts".
OTHER COMPANIES ASSOCIATED WITH MR CHRISTOU
THE BUSINESS OF THE FIRM AND THE AUTHORITY OF THE PARTNERS
"[in Recital 3] to practice together as accountants auditors financial advisors and business advisors ("the Business") …. under the style of Foster Squires.
11.1 Each Partner shall (subject to Clause 12.1.2 below) … devote the whole of his time and attention to the Business…"
Business – the profession, trade or business of chartered certified accountants carried on by the partnership under the names 'Foster Squires' …
Investment Partner – a Partner who agrees in writing with the Partners from time to time that his responsibilities will include the carrying out of investment business work as defined by the Regulation…
Lead Investment Partner – the Investment Partner who is from time to time notified to the Regulator as being the Partnership's nominated Partner for the purposes of investment business regulated by the Financial Services and Markets Act 2000…
12 Partner's obligations and duties
12.1 Each Partner shall at all times: … devote to the Business … such time and attention as shall be necessary for the proper performance of his duties…
12.2.5 No partner shall at any time: …conduct any investment business work other than in accordance with a category of authorisation held by the Partnership and (unless an Investment Partner) under the supervision of an Investment Partner".
"The partners have received a draft copy of this report. They have confirmed to us that there are no material errors of fact … in the context of the scope of the report…
The Partnership is a firm of Chartered Accountants that provides accountancy services, financial and investment advice and business growth expertise".
"… we have had a growing requirement for advice on overseas investment opportunities.
With our first hand knowledge and involvement in Cyprus we feel that the Cyprus property market provides excellent opportunities for investment …"
MR AND MRS ZANELLI'S CLAIM
|27.05.00||Payment from Bradford & Bingley||£30,000.00|
|03.07.01||Payment from Bradford & Bingley||£8,750.00|
|04.08.03||Cheque made payable to Mr Christou.||£65,000.00|
|15.09.03||Electronic transfer to Mr Christou's account at Handelsbanken from Abbey National loan.||£125,000.00|
|17.12.03||Mortgage Express loan paid to Ventnor.||£159,000.00|
|12.01.04||Abbey National loan paid to Ventnor.||£120,000.00|
"FOSTER SQUIRES INVESTMENT STRATEGY
It was a pleasure to see you on Friday and thank you for your investment. The strategy is maximum return, with invests made mainly in property assets in the UK and Overseas. As you will appreciate, the value of the investment is subject to property price fluctuations and economic factors within the economy.
We acknowledge receipt of the cheque for £65,000. We keep such funds separate from Foster Squires bank accounts, in order to identify such payments to each individual investor. I will be forwarding you the relevant engagement letters in due course.
As the partner responsible for the investments, feel free to contact me at any time for questions or queries.
I look forward to providing you with a higher return than other investment plans. Our fees will be discussed at each point when a return is paid over to you".
|17.12.03||CHAPS transfer to Richard Howard & Co and onwards to Ventnor||£100,000.00|
|23.05.05||AFTS payment to Tbabit||£50,000.00|
|22.12.05||AFTS payment to Tbabit||£40,000.00|
|22.12.05||£15,000 cash taken by Mr Nicolaou to Mr Christou's home||£15,000.00|
"Thank you for your comments about our service at Foster Squires and your agreement to invest in our investment strategy plan".
|21.02.05||Payment by Ridgeway Cars to Tbabit||-£20,000.00|
|05.04.05||Payment by Tbabit to Ridgeway Cars||+£20,000.00|
|07.04.05||Payment by Tbabit to Mr Nicolaou||+ £20,000.00|
MRS GOLDBERG'S CLAIM