Case No: TLQ/09/0416
Neutral Citation Number: [2010] EWHC 450 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 15/03/2010

Before :

THE HONOURABLE MR JUSTICE TUGENDHAT 
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Between :

	(1) Mrs BEVERLEY GOLDBERG (2) RS MOTOR SALES LTD (3) MR and MRS FRANK ZANELLI (4) Mr COSTA NICLOAOU	Claimants	
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	(1) MR MILTON MILTIADOUS (2) MR EVDOKIMOUS CHRISTOU (3) MR SIMON BROUGHAM t/a FOSTER SQUIRES (A FIRM)	Defendants	

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Mr Geraint Jones QC and Mr Marc Glover (instructed by Direct Public Access Rules) for the Claimants
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
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Judgment
Mr Justice Tugendhat : 
1.	The Claimants have each lost large sums of money as a result of the fraud and, as they claim, breach of duty, of the Second Defendant (“Mr Christou”) which came to light on 27 February 2006. They claim as damages for the negligence and deceit respectively: £81,225.29, £295,937.27 and £695,317.22.
2.	The Defendants are all Chartered Certified Accountants. The Defendants became partners under the name Foster Squires (“the firm”) by an agreement dated 22 March 2005 (“the 2005 Agreement”). But the events upon which the Claimants rely occurred over a period of time, commencing with a payment made by the Third Claimant (“Mr Zanelli”) at the end of May 2000. So it will be necessary to recite the previous relationships between the Defendants, which I do below.
3.	On 6 August 2008 the Claimants commenced these proceedings for damages for negligence and deceit against all three defendants. The First and Third Defendants (“Mr Miltiadous” and “Mr Brougham”) have defended these proceedings, but Mr Christou has not. He did not acknowledge service or file a defence, and judgment for damages to be assessed was entered against him on 17 December 2008. It is not likely that any money will be recovered under that judgment.
4.	The Claimants each allege that Mr Christou advised them to invest, and that in reliance on that advice they did invest, the sums in question, and that as a result they have suffered loss. The advice was, in substance, that what he was recommending was without risk to them. The Claimants allege that this advice was in breach of the duty of care he owed to them, and thus at least negligent. They also allege that the advice was in each case a false and dishonest representation of fact, and that he thereby intended to, and did, induce them to pay to him the money in question, and that they have lost that money as result. The Claimants allege that Mr Christou gave the advice, and made the representations in his capacity as a partner of the other Defendants, and in the course of the ordinary business of the firm, so that they are liable under the Partnership Act 1890 s.10, set out below. 
5.	Mr Miltiadous and Mr Brougham admit that the Claimants each have a good claim in deceit against Mr Christou. In other words, they admit that Mr Christou made fraudulent representations to each of the Claimants by which he intended to and did induce them to pay to him the money in question, which has not been repaid. Mr Miltiadous and Mr Brougham do not accept that the Claimants have a good claim for breach of any duty of care: they do not accept that what Mr Christou said to each of the Claimants amounted to advice, as distinct from a fraudulent misrepresentation. And as to both causes of action, Mr Miltiadous and Mr Brougham deny that Mr Christou was acting with authority of any kind (whether actual, implied or ostensible) from them, or that he was acting in the course of the ordinary business of the firm. There is no plea of contributory negligence.
6.	One reason why the claim in deceit was not in dispute was that Mr Miltiadous and Mr Brougham themselves claim to be victims of fraudulent misrepresentations and other breaches of duty owed to them by Mr Christou. The most significant of these is that on 18 April 2005 Mr Christou caused the firm’s bankers to pay to him personally, without the knowledge or consent of themselves, a sum of £225,000 which the bank had agreed to lend under a facility made available to the firm. Mr Miltiadous and Mr Brougham say that they did not discover this had happened until November 2005. Mr Miltiadous and Mr Brougham say that when they did discover it, Mr Christou dishonestly represented to them that he intended to repay it to the partnership in January 2006. They continued to trust Mr Christou even after that discovery in November 2005. But the £225,000 was never repaid. I refer to this in more detail below. All the witnesses agreed that Mr Christou appeared to be a trustworthy and capable accountant and businessman. 
7.	Thus the main issue in this case in respect of all three Claimants is whether Mr Miltiadous and Mr Brougham are liable in law for the acts of Mr Christou. It is not alleged that either of them was personally party to any advice or misrepresentation given or made to any of the Claimants. Most of the evidence was directed to the issues of whether Mr Christou had actual, alternatively ostensible, authority to give advice, or make representations, on behalf of the firm, and whether the Claimants were intending to deal with Mr Christou as a partner in the firm, or personally.
8.	In the case of the Second Claimant (“RS”), there is an issue as to whether it has title to sue, or whether the payments, or some of them, made to Mr Christou were made by Mr Costa Nicolaou (“Mr Nicolaou”) personally.
9.	The case is complicated by the fact that at all material times Mr Miltiadous and Mr Christou were working together not just as accountants within the firm, but also as businessmen or investors in connection with a number of property development projects carried on in Cyprus. These businesses were carried on from the offices of the firm, in so far as they were carried on in England. Mr Miltiadous and Mr Christou are both of Greek Cypriot extraction. They visited Cyprus regularly, on some occasions together, for both family and business reasons. 
10.	I have been informed that there are many others who claim to be victims of Mr Christou’s fraud, but who are not parties to this action. They are listed as creditors in the documentation for the Voluntary Arrangements entered into by the firm and by Mr Miltiadous personally. I have been told that none has been paid anything in respect of their claims.
11.	Mr Miltiadous in his witness statement states that the fraud was what is commonly called a Ponzi scheme. Mr Jones said the same in opening the case. In such a scheme the victims are promised large returns on money paid to the fraudster. The fraudster initially appears to fulfil his promise by making payments to the victims. But in fact the payments to the early victims are funded by money received from later victims. When the supply of potential victims ceases, the scheme collapses. 
12.	It may be that a Ponzi scheme was an element of Mr Christou’s fraud in this case. But there is more to it than that. As appears below, Mr Christou was engaged in his profession as an accountant, and he was engaged, also with Mr Miltiadous, and with the families of both of them, in what I understand to have been genuine property development businesses in Cyprus. I have heard evidence that there were cash flow problems with at least one of those businesses in late 2005.

THE CLAIMANTS
13.	The fact that Mr Nicolaou and Mrs Zanelli are also of Greek Cypriot extraction was the reason why Mr Christou came to know them, and no doubt one reason why they trusted him and sought his advice. 
14.	Mr and Mrs Zanelli were Mr Christou’s first victims in time. Mrs Zanelli came to know Mr Christou’s wife, Mrs Christou, as a friend. Mrs Christou spoke highly of her husband’s abilities and success in life, and Mr and Mrs Zanelli came to know Mr Christou socially in that way. Mr Christou first told Mr Zanelli of an investment opportunity in May 2000, and it was at the end of that month that Mr and Mrs Zanelli made to Mr Christou the first payment of £30,000 to Mr Cristou which was drawn from (and represented most of the money in) a building society account in the name of Mr Zanelli. That was before Mr Christou became a member of the firm. He was at that time with another firm CC Panayi & Co (“CCP”). Mr Zanelli claims that he received further advice from Mr Christou in respect of that and other money, and he made further payments to Mr Christou, in May 2001 and subsequently when Mr Christou was a partner in the firm.
15.	Mr Nicolaou or RS was the second victim in time. Mr Nicolaou and RS had been clients of Mr Christou for some years, and were clients of the firm. Mr Christou carried out the audit and accountancy work, and work in relation to tax and other matters, which forms the general business of accountants. Mr Nicolaou had met Mr Christou in about 1996. RS was incorporated on 16 September 2002. Mr Nicolaou had been a client of Mr Christou when Mr Christou was with CCP. RS was formed with the advice and assistance of Mr Christou, and signed a retainer letter with the firm dated 30 September 2002. In late November 2003, at a meeting in the firm’s offices, Mr Christou informed Mr Nicolaou that he had an investment opportunity involving land in Cyprus. On 17 December 2003, on Mr Christou’s direction, Mr Nicolaou caused a payment of £100,000 to be made to a firm of solicitors in respect of a company called Ventnor (UK) Ltd. This was one of a number of companies in which Mr Christou was involved and the affairs of which were conducted from the firm’s offices.
16.	The First Claimant (“Mrs Goldberg”) was the last in time of the three Claimants to become the victim of Mr Christou. Since 1 December 2003 she had been employed by the firm as a secretary. Her duties were, or became, mainly to act as the personal assistant of Mr Christou. She went to him for advice because he was her employer. She first sought his advice in April 2005. That related to the values of some shares in a private company. It was in July 2005 that she approached him for advice on the money from her divorce settlement, and she paid a cheque of £70,000 to him on 21 July 2005. She left her employment with the firm at the end of March 2006.
17.	Each of the Claimants was, in different ways, a vulnerable victim. Mrs Goldberg had divorced recently, and the money she paid to Mr Christou was a capital sum received as a major part of the settlement with her former husband. She still had one dependent child, and her earning capacity was modest, as Mr Christou was, of course, well aware. 
18.	Mr Nicolaou was, and still is, running a successful business as a dealer in cars. He owns and runs the business jointly with his younger cousin Mr Vourloumis. Mr Nicolaou started life as a mechanic and built the business himself. He had also carried out some successful business acquisitions in property. But he left school young, and has acquired little formal knowledge of financial matters. The money he caused to be paid, or paid, to Mr Christou was money not presently required for the purposes of the business.
19.	Mr Zanelli ran a sandwich bar. His father had built up that business. But his father spoke little English, and was ageing, and the responsibility for running the business fell largely on Mr Zanelli. Mr Zanelli had originally worked as a panel beater, but gave up that work for reasons of health. He worked very long hours in the bar for little remuneration. In addition he had exceptional family responsibilities, both for a sister, and for the children of himself and Mrs Zanelli. One of these has special needs. Mrs Zanelli had worked as a secretary in a bank. But neither of them had any knowledge of financial matters, or any time to devote to such matters. The money they paid to Mr Christou included money received from their parents, and represented the assets of the family. Mr and Mrs Zanelli became friends of Mr Christou. They were impressed by the appearance of wealth and success of Mr Christou. 
20.	None of the Claimants knew each other personally before Mr Christou went missing at the end of February 2006. But Mrs Goldberg, as Mr Christou’s assistant, knew the names of the other two Claimants.
21.	I heard evidence from each of the personal Claimants, and from Mr Nicolaou on behalf of the Second Claimant (of which he is a director and shareholder). I also heard evidence from Mr Miltiadous and Mr Brougham, and from a number of other witnesses, but not Mr Christou. Thus the only evidence of what Mr Christou said to each of the Claimants was the evidence of the Claimants themselves. This evidence was not materially in dispute. Other witnesses, in addition to those mentioned later in this judgment, were June Greenwood, Richard Marks and Aiden Norris. 
22.	Ms Greenwood was a former employee of the firm. She described the work of the firm, including arrangements for filing and handling the post. 
23.	Mr Marks was employed by Barclays Bank in 2005, dealing with Premier account holders. 
24.	Mr Norris was another person who came to know Mr Christou socially. In his case it was through their children attending the same primary school. Mr Christou mentioned to Mr Norris that he was a partner with the firm, and that he gave investment advice on behalf of the firm. He is a victim of the fraud but not a claimant in this action.
THE LAW
25.	The elements of the cause of action in deceit which the Claimants must establish are: that Mr Christou has made a false representation, knowing it to be untrue or reckless as to whether it is true or false, that he intended the claimant to act in reliance on it, and each claimant did so act and as a result suffered loss.
26.	The elements of the cause of action in negligence which the Claimants must establish are: that Mr Christou has given to each of them financial advice, and in doing so has failed to show a reasonable level of care, that he intended each claimant to act in reliance on it, and each claimant did so act and as a result suffered loss.  
27.	Little turns on what Mr Christou did with the money received from the Claimants, and neither party has referred to that in any detail. This is a claim for damages, not a claim for restitution. So there has been no tracing of the money paid. For the claims in deceit to succeed against Mr Miltiadous and Mr Brougham it is not necessary that Mr Christou should have induced Mrs Goldberg to pay money to the firm. What matters is the statement of his opinion that the investment was of low risk, and whether that statement was made in circumstances which bring the case within s.10 of the 1890 Act.
28.	And although Mr Christou gave to the Claimants a number of Promissory Notes, there is no claim brought on these notes. The fact that the Promissory Notes were given by Mr Christou personally, and that the payments were credited to the accounts of companies controlled by Mr Christou is relied on only indirectly. Mr Fenwick submits that these matters indicate that the Claimants understood that Mr Christou was not acting for the firm, or in the ordinary course of the business of the firm. 
29.	Each Claimant who succeeds in showing the elements of either or both of deceit or negligence can succeed against Mr Miltiadous and Mr Brougham only if the requirements of the Partnership Act 1980 s.10 are satisfied. That provides:
 “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”.
30.	In particular, each Claimant must therefore establish as additional elements of his or her claim that the wrongful act or omission of Mr Christou was done by him acting in the course of the ordinary business of the firm or with the authority of his co-partners.
31.	For the interpretation of s.10, both sides referred to the speeches of Lords Nicholls and Millet in Dubai Aluminium Co Ltd  v Salaam [2002] UKHL 48; [2003] 2 AC 366. In that case there was no holding out by the principal, and no direct assumption of responsibility by the principal to the victim. The statements of the law are in that context.
32.	Lord Nicholls said:
“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”.
33.	Mr Jones also draws attention to the statement of Lord Millett at [130]:
“… 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”.
34.	In the present case the Claimants do also rely on ostensible authority. I gratefully adopt the summary of the law from Hamblen J’s judgment in Nayyar v Denton Wilde Sapte [2009] EWHC 3218 (QB) as follows [134]:
“(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 [1964] 2 QB 480, Armagas v. Mundogas SA [1981] 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 [1953] AC 461 at 479”.
35.	The Claimants rely on the statement on the firm’s writing paper that the partners were authorised to give financial advice. They also rely on the fact that Mr Christou was permitted by his partners to use the firm’s offices for the conduct of the business of 3View (see para 59 below) and other companies conducting business in which either Mr Christou alone of the partners, or Mr Christou with Mr Miltiadous, had an interest, and in which Mr Christou gave investment advice to those from whom he was soliciting investments.
36.	Of the three Claimants, only RS was a client of the firm independently of the matters giving rise to this claim. But all three claim to have dealt with Mr Christou in his capacity as a partner of the firm, and on the firm’s premises. There are documents bearing the firm’s name. Some of these (which refer to “Foster Squires Investment Strategy”) were typed by Mr Christou and are not on the firm’s standard stationery, although RS and Mr Zanelli could not know that fact. 
THE HISTORY OF THE FIRM
37.	When Mr Brougham became a partner in the firm in March 2005, there was already a partnership under the same name, Foster Squires. This had existed since 1 May 2001, pursuant to a partnership agreement dated 19 January 2001 (“the 2001 Agreement”). That partnership had been between Mr Miltiadous, Mr Christou, and third person, a Mr Leighton. Mr Brougham in effect replaced Mr Leighton who retired in January 2005. 
38.	Mr Miltiadous and Mr Christou had first met in 1987, when they were studying. In April 1991 Mr Brougham had become a partner in the firm of Charles Wakeling & Co. In 1992 and 1993 Mr Miltiadous had first trained with, and then been employed by, the firm of Goldsmith & Co. He there met Deborah Wix, who subsequently married and became Deborah Andrea (“Mrs Andrea”). In 1995 Mr Miltiadous qualified as an accountant and his friendship with Mr Christou became closer. In 1996 or 1997 Mr Miltiadous and Mr Christou discussed partnership. Mr Christou was with CCP at the time, where he became a partner. While at CCP he met Pany Andrea (“Mr Andrea”), who was training at CCP. In January 1998, Mr Miltiadous left Goldsmith & Co and became a sole practitioner. In July 1999 he entered into a partnership with Mr Leighton under the name Leighton Milton & Co. Mrs Andrea left Goldsmith & Co and was employed by Leighton Milton & Co. In February 2000 Mr Miltiadous and Mr Leighton acquired the business and name of Foster Squires. It was following this history that Mr Christou became a partner of Foster Squires pursuant to the 2001 Agreement. In April 2004 Foster Squires acquired the business of a sole practitioner, Mr Ross, who had practised under the name H Ross & Co.
39.	In February 2005 there was discussion about a possible merger between Charles Wakeling & Co and Foster Squires. That would have required a payment to buy out the share of the other partner in Charles Wakeling & Co, a Mr Johnson. Mr Christou arranged, and Mr Miltiadous, Mr Christou and Mr Brougham agreed, with their bank, in the name of Foster Squires, a loan facility in the sum of £225,000 to enable the merger to take place. It was recorded by the bank under the description “Loan re purchase of Charles Wakeling & Co Practice”. But Mr Johnson decided not to proceed, and the loan was not required by the firm. Mr Brougham and Mr Miltiadous understood that the loan was not drawn down. 
40.	Instead of the merger, Mr Brougham purchased a 25% share of Foster Squires and became a partner. The remaining 75% was then held by Mr Miltiadous and Mr Christou in equal shares. Mr Miltiadous had previously held a greater share than Mr Christou, but Mr Miltiadous agreed that from then on their shares should be equal. Such was the relationship between Mr Miltiadous and Mr Christou that Mr Miltiadous explains that in effect he gave away to Mr Christou the equivalent of about 5% or 6% of the partnership.
41.	When Mr Brougham joined the firm he was informed of business interests outside the firm between Mr Miltiadous and Mr Christou. There was a side letter. But Mr Brougham only knew of 3View at the time, and came to learn of other companies in February 2006
42.	When Mr Leighton left, and Mr Brougham joined the firm, Mr Miltiadous was the senior partner only in the sense that he had been a partner for the longest time. Mr Christou became the managing partner, responsible for the financial management of the firm. Mr Christou dealt with bankers and other relationships of the firm, and Mr Miltiadous got on with looking after the affairs of his clients. Mr Christou had the support of Mr Andrea in looking after his clients. At that time Mr Miltiadous was aware that Mr Christou had by then acquired what seemed to be a valuable property portfolio in his personal capacity.
43.	In November 2005, apparently by an error, the bank sent a statement of account to Charles Wakeling & Co showing that the facility had been drawn down on 18 April 2005 into an account in Mr Christou’s name. It was when this bank statement was forwarded by Mr Johnson to Mr Brougham that Mr Brougham learnt what had happened. He and Mr Miltiadous challenged Mr Christou. They learnt that previous bank statements had been sent to Mr Christou by the bank.  He explained to them that he needed the money for a property deal that was going through and that he would repay the money. Mr Brougham states in his witness statement that he was not happy about what had happened, but he trusted Mr Christou to keep his promise and he asked Mr Christou not to do anything like that again. Mr Miltiadous states that Mr Christou identified the property deal as being with someone in Potters Bar, and agreed that he would reinvest in the firm the profit from the deal “on a 50:50 basis” and that the loan repayments would be treated as drawings by Mr Christou from the firm. 
44.	In cross-examination Mr Miltiadous said that he was not annoyed when he learnt this. He just went along with what Mr Christou said. He said that he should have confronted Mr Christou but he did not do anything. He said in evidence that he was embarrassed that he did not delve in to what had happened. They had a conversation, Mr Christou said he had identified a deal, and that he would put the money back as soon as it came back, which would be in January. Mr Miltiadous did not enquire further.
45.	Mr Brougham stated in his evidence that he was extremely displeased when he learnt about the £225,000. But he said that when he talked about it with Mr Miltiadous he did not display any emotion, but simply wanted to talk to Mr Christou about it. Mr Brougham was aware that Mr Christou had property dealings in the UK and Cyprus. But he never learnt where the money had gone.
46.	In December 2005 Mr Andrea and Mrs Andrea, who were by then married, were invited to become partners in the firm, and in that month they invested about £240,000 in the firm. In order to find this money they had to take out loans and mortgage their home. They too are victims of Mr Christou. They have not recovered the money they invested. 
47.	They were told by Mr Miltiadous and Mr Christou that Mr Christou had personally received from the firm’s bank the £225,000 which the bank had agreed to lend to the firm, but they were not told that Mr Christou had taken that without the knowledge or consent of the partners. Mr Christou told them, as he told Mr Miltiadous, that the money would be repaid to the firm in January 2006, and they believed him. The money of Mr and Mrs Andrea was used on Mr Christou’s direction to pay VAT and other taxes owed by the firm. 
48.	In cross-examination Mr Miltiadous said that at first Mr and Mrs Andrea were not told that Mr Christou had taken the money without the consent of his partners, but that they did become aware of it. He was vague on this.
49.	Mr Andrea in his evidence stated that he was told that Mr Christou had borrowed £225,000 which he was due to repay to the firm in January 2006. But he was not told that Mr Christou had drawn down that sum without the consent of his partners. Mr Andrea did not discover that fact until February 2006, well after he and Mrs Andrea had invested their own money in the firm, and after Mr Christou had disappeared. In cross-examination Mr Andrea did not appear to be upset about this, as I would have expected him to be. He said he trusted Mr Christou.
50.	Mrs Andrea in her evidence said that part of the reason why the firm needed them to join was to provide money to help with the firm’s cash flow. She and her husband were aware that Mr Christou had drawn down £225,000. But they were not told that Mr Christou had drawn it down without the consent of his partners. Mrs Andrea then said that it did not matter who had drawn down the money, why or on what authority. All that mattered was that Mr Christou was promising to repay it. All that mattered was that she and her (then future) husband were being offered a partnership and that they trusted Mr Christou and Mr Miltiadous. She said that at one point Mr Andrea had doubts as to whether to put the money into the firm, but that they decided to go ahead.
51.	I noted that neither Mrs Andrea nor Mr Andrea seemed as concerned as might be expected about the circumstances in which they had been invited to invest so large a sum of money. They remain in partnership with Mr Miltiadous to this day, and appeared to be on very good terms with him. This seemed puzzling to me. This contributes my impression that I may not have been told the full story about these matters.
52.	Mrs Goldberg stated in her witness statement that she had had a conversation with Mr Christou in about the middle of January 2006. He said to her that it was going to be necessary for him to relocate to Cyprus. Mrs Goldberg also stated that she mentioned this to Mr Miltiadous, saying that it was a shame that Mr Christou was moving abroad. She states that Mr Miltiadous turned white and asked her where she had heard this information. When she told him that Mr Christou had told her, she stated that Mr Miltiadous became agitated, and said that she was not to mention it to anyone else in the firm. Mr Miltiadous said that that conversation did not take place, and that Mrs Goldberg was mistaken about it.
53.	I prefer the evidence of Mrs Goldberg on this point. I think that the incident did take place as she describes. This too contributes to my impression that Mr Miltiadous may not have given a full account to the court of what he knows, and knew in January 2006, about the activities of Mr Christou.
54.	Mrs Goldberg also stated that in February 2006, after it was apparent that things had gone wrong, but before the police had arrived at the firm’s office, Mr Miltiadous told Mrs Goldberg to go through the files of Mr Christou’s companies. So much is common ground. The difference between Mrs Goldberg and Mr Miltiadous is that Mrs Goldberg states that Mr Miltiadous asked her to remove and hand to him documents that carried Mr Miltiadous’s signature. Mr Miltiadous states that he asked her to look for anything related to him, but not to remove anything. Mr Jones did not press the point with Mr Miltiadous, and I am unable to make a finding as to which version is correct. The position is the same with another incident recounted by Mrs Goldberg relating to a visit to Mr Christou’s home and the office that he kept there.
55.	In March 2006 Foster Squires entered into a Partnership Voluntary Arrangement. On 26 May 2006 Foster Squires ceased trading and on 1 June 2006 a new partnership was formed under the name Bramil Associates. The partners are Mr Brougham, Mr Miltiadous, and Mrs and Mr Andrea. In June 2006 Mr Christou was declared bankrupt.
OTHER BUSINESS RELATIONSHIPS BETWEEN MR CHRISTOU AND MR MILTIADOUS
56.	In addition to their professional relationship, Mr Miltiadous gave evidence that he had had a number of personal financial dealings outside the scope of the partnership agreements in force from time to time, both for himself personally, and with Mr Christou. 
57.	Mr Miltiadous had his own property interests, that is about half a dozen properties which provided a rental income, which he hoped would pay for themselves over twenty years and provide a pension.
58.	In mid 2004 Mr Christou had lent Mr Miltiadous £25,000 for a short time to enable Mr Miltiadous to finance the purchase of an investment property. That money was repaid in November 2004. Mr Miltiadous later borrowed £5,000 from Mr Christou, and that money was outstanding in February 2006, and has not been repaid.
59.	In November 2004 3View International Properties Ltd was incorporated in England and 3View Cyprus Properties Ltd was acquired off the shelf in Cyprus. I refer to them as 3View. This followed discussions between Mr Miltiadous and Mr Christou about Mr Christou’s property businesses in Cyprus (see below). Mr Christou explained to Mr Miltiadous that he would like Mr Miltiadous to be involved “as a reward for holding the fort at Foster Squires so he [Mr Christou] could visit Cyprus more and more frequently”. Mr Miltiadous declined that offer and wished Mr Christou well. 
60.	Later Mr Christou made another offer to Mr Miltiadous. Mr Christou invited Mr Miltiadous to join him in a new venture to acquire a hotel called Elena in Limassol with Andrew Ladopouli, a chartered surveyor working with a well known firm. Mr Miltiadous describes what Mr Christou said to persuade Mr Miltiadous to participate in this venture: it was “a unique opportunity”, the first conversion of a hotel to apartments, a high rise where none had been allowed before. It required the present owner’s bank, Bank of Cyprus to be patient. In the event the Bank of Cyprus did not co-operate, and there were cash flow problems that became serious in late 2005, and the hotel was sold elsewhere. But at the time the proposal seemed exciting to Mr Miltiadous and Mr Ladopouli. Mr Miltiadous accompanied Mr Christou on a visit to Cyprus in October 2004 and again, this time in the company of Mr Ladopouli, in November. They looked at the Elena site and other sites.
61.	Between these two visits to Cyprus Mr Miltiadous, Mr Christou and Mr Ladopouli decided to incorporate or acquire a company in each country, both including the words 3View in their names. The object was to purchase land in Cyprus for residential development and resale. For the English company, the directors were Mr Miltiadous, Mr Ladopouli and Mr Christou, and Mr Miltiadous was the company secretary. He does not recall any share certificates being issued, but the shareholding was to be 40% for Mr Christou, and 30% each for Mr Miltiadous and Mr Ladopouli. Mr Christou arranged for the English company to have a £300,000 loan facility with the bank, secured on the matrimonial homes of Mr Miltiadous and Mr Christou. 
62.	Mr Miltiadous states that a further £300,000 was also injected into the English 3View company by himself and Mr Christou. This involved the participation in some form of a company called Townhouse Property Company Ltd, in which a Mr Luigi Buonanno had an interest, and a Promissory Note. Mr Christou introduced Mr Buonanno to Mr Miltiadous as one of Mr Christou’s clients. In effect, the funds were borrowed from Mr Buonanno, and Richard Howard & Co gave advice as solicitors. For the Cyprus company, the directors were to be the same, but the company secretary was to be Mr Christou’s father in Cyprus.
63.	Mr Miltiadous states that 3View acquired two sites in Limassol, 3View Court (for CY£195,000) and Juliana Court (for CY£265,000). A loan (of CY£163,000) was taken out from Bank of Cyprus to assist with the purchase of Juliana Court. The plan was to sell properties through 3View. After initial visits to Cyprus to set up these arrangements, Mr Christou assumed sole responsibility for all the operational matters on these projects with the assistance of his father, and Mr Miltiadous concentrated on the business of Foster Squires. Mr Leighton was unable to work at this time due to ill health.
64.	In April 2005 Mr Miltiadous visited Cyprus again. He had arranged to make the visit in the company of Mr Christou. It was on 18 April, just before that visit on 21 April, that Mr Christou secretly drew down the loan of £225,000 into his own account.
65.	On 21 April Mr Christou met Mr Miltiadous at the airport in London, where Mr Miltiadous also found (without having been warned in advance) that he would be travelling with George Sparsi and Michael Cuschieri. Mr Miltiadous did not know, but soon discovered, that they were to be new investors in 3View. Mr Miltiadous already new Mr Sparsi through friends and relations. He ran a dry cleaning business and had been a client of Mr Christou for some ten years. Mr Cuschieri ran a marketing communications business which had become a client of Foster Squires in 2004. When Mr Miltiadous had an opportunity to speak to Mr Christou in private, Mr Christou explained that not only these two, but Mr Cuschieri’s brother Mark would also become investors in 3View. Mr Miltiadous learnt much later to his surprise that Mr Sparsi had invested £200,000 before joining the trip to Cyprus in April. 
66.	In cross-examination Mr Miltiadous accepted that he must have understood that Mr Christou had spoken to these two investors and persuaded them or encouraged them to become shareholders.
67.	On 26 May 2005 all these men met at Hadley Wood Golf Club to discuss the project. An issue arose as to whether Mr Michael Cuschieri was to charge for his services to 3View in marketing. Mr Christou and Mr Miltiadous considered that he should not do so. If he was going to do so, then so should Mr Christou, since he was doing most of the work and Mr Miltiadous was “holding the fort at the practice”. Mr Miltiadous’s involvement was to free up time for Mr Christou so that Mr Christou could run the business projects. In the event, details of the shareholdings and other matters were never reduced to an agreement before the end of February 2006. 
68.	Mr Norris attended a meeting at Hadley Wood Golf Club. Mr Christou had given investment advice to Mr Norris, which was similar to the advice which the Claimants say was given to them. He too has suffered a loss. He is not a claimant, but he has a similar interest to the Claimants.  He had met Mr and Mrs Zanelli socially through Mr Christou.
69.	Mr Norris said that Mr Christou told him that the firm gave investment and financial advice. Mr Christou mentioned investments in property. Mr Norris understood that any investment would go through the firm. Mr Norris said that he had been invited to the meeting, but was not a client of the firm for accountancy services. Mr Norris said he was invited by letter or e-mail from the firm (a document which was not in evidence). As he understood, he was invited as someone making an investment on the advice of the firm. 
70.	Mr Miltiadous agreed that he was introduced to Mr Norris at Hadley Wood, but he said that he did not know why Mr Norris was there, and he did not enquire. 
71.	Mr Norris in his statement had not given a date for this meeting, and in cross-examination of him it was suggested that the meeting at the Golf Club was probably on 26 May. No other date was suggested to him. When Mr Miltiadous gave evidence he was cross-examined by Mr Jones on the basis that there was only one relevant day at the Golf Club. Mr Miltiadous said: “I think that I have seen him at the golf day”. 
72.	On the basis of that evidence, when I circulated this judgment in draft, these paragraphs of the draft judgment referred only to 26 May. And I stated that I found the evidence of Mr Miltiadous surprising. I stated that I thought it likely that Mr Miltiadous did know that Mr Christou was likely to be encouraging Mr Norris to invest money, or that he chose not to enquire.
73.	Following circulation of the judgment in draft, Mr Smith submitted that I should have taken into account that there was another quite separate event at Hadley Wood which Mr Norris might have attended, but which might not have been attended by those individuals who attended on 26 May (all of whom were interested in 3View), but rather by other people invited by Foster Squires. The point made was that if that were the position, then the evidence of Mr Miltiadous (that he did not enquire why Mr Norris was there) would be less surprising. 
74.	This submission goes beyond the “proposed corrections or amendment” which are contemplated by CPR Part 40 Practice Direction E para 4.2.. The primary purpose of this is to enable any typographical or similar errors in the judgments to be notified to the court. The circulation of the draft judgment in this way is not intended to provide an opportunity to any party (and in particular the unsuccessful party) to reopen or reargue the case, or to repeat submissions made at the hearing, or to deploy fresh ones.
75.	Nevertheless, I reconsidered the witness statements of Mr Norris and Mr Miltiadous and the transcripts of their evidence. Having done so, it appears to me that this submission depends upon evidence as to there having been another meeting at the Golf Club which was not put before the court. Accordingly, on the evidence that was before the court, I remain of the view that the evidence of Mr Miltiadous was surprising. But if I had taken a different view as to the Golf Day occasion on which Mr Norris met Mr Miltiadous, as Mr Miltiadous accepted they had, then it would not have affected the conclusions I have reached in this judgment.
76.	On 1 June 2005 it appears from a cheque signed by Mr Christou that Tbabit (see below) paid £30,000 to the firm. In cross-examination Mr Miltiadous said that he believes that in March 2005 Mr Christou withdrew that sum from the firm, and this was the repayment. He was not aware of it at the time.
77.	In June 2005 the firm was overdrawn at the bank to the extent of about £220,000 on an account in its name, and there was a further overdraft of the firm in the name of the three partners “trading as H Ross & Co” in a sum in excess of £70,000.
78.	On 12 to 15 June 2005 Mr Miltiadous made another visit to Cyprus in connection with 3View’s business. There were also meetings at Mr Sparsi’s shop and Mr Christou’s home.
79.	On 3 August 2005 Mr Christou signed a cheque drawn on Tbabit in favour of Mr Miltiadous for £5,000. Mr Miltiadous explained that that was a loan to himself personally from Mr Christou personally. He was not concerned that the cheque was drawn on the account of a company.
80.	In September 2005 Mr Miltiadous was pursuing a property development of his own. He bought a property in Haringey. Mr Christou provided to Mr Miltiadous a cheque drawn on Tbabit in the sum of £10,000. After refurbishing the property Mr Miltiadous made it ready to let in January 2006 and refinanced the purchase. He was then in a position to repay the loan of £10,000, but has not done so because of the events that have occurred.  However, at Mr Christou’s request, he did pay £5,000 to a builder employed by Mr Christou on one of Mr Christou’s projects.
81.	On 3 October 2005 the Bank of Cyprus e-mailed Mr Christou to tell him that the bank had recently changed its lending policy for the construction industry. The bank would make a loan for which 3View had applied in sums and on conditions which were set out in that e-mail. On the next day Mr Christou sent an e-mail to Mr Miltiadous, to which Mr Miltiadous replied. It appears that Mr Christou was forwarding the message from the Bank of Cyprus. Mr Miltiadous wrote:
“Think it’s time to slow down and focus on one thing at a time otherwise we might stretch so much we snap”.
82.	Brochures were prepared for 3View and were available in mid 2005, some of them being on display in the firm’s offices.
83.	There were then arranged a number of promotional meetings for 3View. On 8 and 9 October 2005 one was held at a hotel in High Wycombe. Brochures advertised 3View Court and Juliana Court. There was also promotion of Katerina Court (see below) and a number of plots of land owned by Mr Miltiadous’ father and Mr Sparsi’s father. The purpose of the exhibitions was to attract purchasers in the UK for the land owned by these various owners in Cyprus. The exhibitions were not seeking investments to be made in the property owning companies. 
84.	There was another exhibition on 12 November in Manchester and a third in Leeds on 13 November 2005. At these Mr Christou invited a young lady who was a friend of his family to act as organiser and host. She is Christina Ford, and she gave evidence. She stated that she was told by both Mr Christou and Mr Miltiadous to bring into any sales conversation with interested members of the public that 3View had the benefit of being associated with a reputable firm of London accountants through whom they could receive advice on tax matters. She was challenged on this evidence. Mr Miltiadous said that he did not recall saying any such thing to her. She accepted that it was a casual conversation, but she gave firm replies that Mr Miltiadous had told her this. I accept her evidence
85.	The last exhibition for 3View was held at Alexandra Palace in London on 10 and 11 December 2005. This was not exclusive to 3View, but 3View appeared as one of a number of exhibitors promoting sales of properties in Cyprus.
86.	It was about this time that Mr Miltiadous and Mr Brougham learnt that Mr Christou had drawn down the £225,000 referred to in paras 6 and 43 above. 
87.	At about this time, on 18 October and 17 November 2005, there were other marketing events arranged, at the Apollo Suite in Cockfosters. These were each referred to as a Foster Squires “Property Seminar”. I shall return to these later.
88.	 Mrs Goldberg (and occasionally other Foster Squires employees) provided secretarial and administrative services to 3View. Mr Miltiadous states that it was the intention in due course that her time would be charged for by Foster Squires to 3View. Foster Squires also provided to 3View a postal address, telephone and fax facilities, storage, and other office services.
89.	Nevertheless, Mr Miltiadous states in his evidence that his and Mr Christou’s participation in the affairs of 3View was “entirely separate from our role as partners in Foster Squires”.
90.	It was in December 2005 that Mrs Andrea and Mr Andrea paid to the firm the sum of £240,000. 
91.	On 4 January 2006 Mr Miltiadous signed as a witness a Promissory Note executed by Mr Christou in favour of Mr Christos Louka. Mr Christou promised to pay the sum of £150,000 on 28 January, just over three weeks later. The Promissory Note appears to be drafted by the solicitors whose name appears on it, The Howard Partnership Ltd. 
92.	Mr Miltiadous explained in evidence that he counted Mr Louka as one of his closest personal friends.  Mr Miltiadous said that when he signed the Promissory Note he, Mr Miltiadous, understood that Mr Louka had loaned money to Mr Christou and that Mr Christou had promised to return it with what he called “an interest figure or return that amounted to I think £20,000  more than he’d borrowed”. Mr Miltiadous said he did not know what the loan was for, but he did know that Mr Christou had a number of deals on the go at any one time. He thought the deal involved a Mr Kallis, but he did not enquire.
93.	The dates on which Mr Christou was due to repay the £150,000 to Mr Louka and the £225,000 to the firm were both by the end of January, as Mr Jones reminded Mr Miltiadous in cross-examination. Mr Miltiadous said that he was not curious or alarmed about this transaction by which Mr Christou borrowed from Mr Louka on these terms at a time shortly after he, Mr Miltiadous, had found out about the £225,000 which Mr Christou had taken without consent and shortly before the time at which Mr Christou had promised to repay that £225,000 to the firm. It was a concern, but not a major concern. And he wanted to stay out of any deal between Mr Christou and Mr Louka. He said that when he had introduced Mr Christou to Mr Louka he had told Mr Louka: “You decide if you want to be involved in anything that he may have: it is between the two of you”.
94.	Another company of which Mr Miltiadous was a director was Logica Properties Ltd. The bank documents of that company show that £30,000 was received by it on 10 January 2006 and paid out to Tbabit Ltd on 16 January. The instructions to the bank to make the payment out are signed by Mr Miltiadous. In evidence Mr Miltiadous said that that represented part of the money advanced by Mr Louka.
95.	Mr Miltiadous mentioned his property business relationships with Mr Christou in his proposal to his creditors dated and signed 11 August 2006. After referring to the visits he had made to Cyprus he wrote:
“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
96.	The details of the companies with which Mr Christou was associated are of little significance to the issues that I have to decide. But a number have been referred to in the evidence and some explanation is required.
97.	On 14 November 2002 Tbabit Properties Ltd (“Tbabit”) was incorporated. The shareholders and directors were Mr Christou and John Cox. It had apparently held substantial assets (£286,569 on 30 November 2003), according to the abbreviated accounts for the year ended 30 November 2004, although shareholders funds were stated to be negative figures of £2,515 and £8,158 at the end of the years to 30 November 2003 and 2004 respectively. These accounts were signed by Mr Christou and dated 24 January 2006. The accountants were Foster Squires, and Mr Miltiadous states that the accounts were prepared by Mr Andrea. Mr Miltiadous states that the firm’s address was the registered office (and, I understand, the only office) of Tbabit. Mr Miltiadous states that mail for that company “would always have been left for [Mr Christou] as one of the directors”.
98.	There was another company, Tbabit Cyprus Ltd, which Mr Miltiadous understood was developing a property in Cyprus in association with Mr Christou’s father, who lived in Cyprus. The property was known as Katerina Court.
99.	On 7 November 2003 Ventnor (UK) Ltd “Ventnor” was incorporated. Mr Miltiadous states that Mr Christou, Mr Ladopouli and Ventnor Holdings Ltd were directors. Foster Squires were the accountants. The last accounts are dated 15 June 2006 and are in respect of the year ending 31 August 2004. They were prepared by Mr Andrea and signed by Mr Christou. In Mr Miltiadous’s evidence in chief he states that Mr Ladopouli is a Chartered Surveyor, who had been a childhood friend of Mr Christou. Mr Miltiadous goes on to say that he was aware that Mr Christou was involved with Mr Ladopouli in companies called Townhouse Estates Ltd (“Townhouse”) and Jet Investments Ltd (“Jet”), both of which companies owned properties which were let to tenants (as was another property owned personally by Mr Christou). Mr Miltiadous goes on to say that it was in about 2004 that he became aware of a company called Ventnor. He understood this to be an offshore trust in respect of which Mr Christou and Mr Ladopouli were taking advice from a solicitor Richard Howard. 
100.	Mr Miltiadous went on in his evidence to say that these properties and companies were all interests that Mr Christou operated outside his practice as an accountant, and Mr Miltiadous was full of admiration for the fact he was apparently able to manage his property interests as well as devote such energy to the practice of the firm. He noted that the partnership agreement specifically permitted the partners to have outside business interests. I take that to be a reference to clause 12.1 of the 2001 Agreement. That provides for partners to be engaged in other business with the consent of all the other partners, such consent not to be withheld in specified circumstances. Mr Miltiadous stated that he knew that Mr Christou had a number of outside interests in companies or properties but could not say, and could not have said, what the details were.
101.	Mr Miltiadous said that when bank statements arrived for these companies (Jet, Townhouse, Tbabit and Ventnor) he recognised them as being Mr Christou’s business and placed the post unopened on Mr Christou’s desk.
THE BUSINESS OF THE FIRM AND THE AUTHORITY OF THE PARTNERS
102.	The Claimants claim that the business of the firm included giving financial and investment advice and that Mr Christou was at all material times authorised to give such advice.
103.	It is the case of Mr Miltiadous and Mr Brougham that the business of the firm included the giving of certain types of investment advice, but that Mr Miltiadous alone was authorised to give such advice. Mr Miltiadous states that he alone was licensed to give such advice, first by the ACCA and then by the FSA.
104.	The 2001 Agreement was the first to which both Mr Miltiadous and Mr Christou were parties. By it the parties agreed:
“[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…”
105.	On 9 April 2003 the FSA wrote a letter addressed to Mr Miltiadous and the firm. It is said to be in response to a letter requesting a variation of the Part IV permission for Foster Squires. The letter contains a written Notice that the FSA has “decided to vary the permission of Foster Squires … to delete the regulated activity … managing investments”. 
106.	There has been no disclosure of any licence from the FSA to Mr Miltiadous alone (as distinct from one to the firm) and both Mr Miltiadous and Mr Brougham accepted that there had been no such licence.
107.	The Scope of the Permission Notice issued by the FSA on 9 April 2003 includes as the Regulated Activity in respect of all Customer Types: “Advising on Investments (except on Pension Transfers and Pension Opt Outs)”. It also includes a requirement not to hold or control client money.
108.	Neither Mr Miltiadous nor Mr Brougham suggested that there was ever any agreement between the partners, or any direction given to Mr Christou, that Mr Christou should not be authorised to give investment or financial advice.
109.	There 2005 Agreement provides that its commencement date is 1 March 2005. It includes the following provisions:
“Definitions…
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”.
110.	There is no written agreement as contemplated in the definition of Investment Partner. It follows that only Mr Miltiadous was an investment partner and he was the Lead Investment Partner. 
111.	On 28 October 2005 BDO Stoy Hayward LLP (“BDO”) addressed to the firm’s bank a report.  “The Independent Business Review of Foster Squires” which BDO had undertaken at the request of the bank. The covering letter to the bank, and the report, include the following statements:
“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”.
112.	Mr Miltiadous said in cross-examination that he did not recall reading through a draft and being asked to comment on it.  But I find he is mistaken as to this. Little turns on the point.
113.	Mr Miltiadous also gave evidence that he did in fact give to clients some financial or investment advice, but on a limited basis.
114.	At all material times the letter paper of the firm bears the printed words “Regulated by the FSA in the conduct of investment business”. An example is a letter dated 16 January to Mr Zanelli.
115.	The website of the firm included under the Welcome message a description of the firm’s business in the terms used by BDO in their report: “accountancy services, financial and investment advice and business growth expertise”. It also included other references to helping clients with their “private financial affairs” and “Financial modelling and strategic investment advice”.
116.	In cross-examination Mr Miltiadous accepted that the 2001 Agreement correctly described the business of the firm. But he said that he, and he alone, gave such advice. Mr Fenwick submits that it was the common understanding of Mr Miltiadous and Mr Christou that Mr Miltiadous alone should give such advice. 
117.	Mr Miltiadous, Mr Brougham, Mrs Andrea and Mr Andrea and another secretary, Ms Poliviou all gave evidence that to their knowledge only Mr Miltiadous of the partners gave such advice. 
118.	Mr Brougham gave unchallenged evidence there are a small number of files of the firm recording investment advice given by Mr Miltiadous, together with the appropriate documentation, but not for any other partner. 
119.	Mr Christou did not have a formal qualification for giving investment advice, as Mr Miltiadous had. But it is not said that a formal qualification for each partner is required before they may give financial or investment advice.
120.	Mrs Goldberg gave evidence that Mr Christou did give investment advice. She spoke of her observations of Mr Christou’s activities which she made as his personal assistant and of the documents she prepared or handled in that capacity. 
121.	There were files for Tbabit and 3View and other companies kept at the firm’s offices. She typed letters dealing with the payment of utility bills for the various companies whose operations were conducted from the firm’s offices.
122.	Mrs Goldberg was aware that Mr Christou and Mr Miltiadous were both involved in companies together. Mrs Goldberg believed she had completed the paperwork for the incorporation of 3View. She recalled meetings at the firm’s offices concerning Cyprus. Property investment brochures were displayed at the firm’s offices. She recalled Mr Christou giving advice to a client about a property investment in Spain. When the seminars were held in 2005 she prepared lists of people to be invited. Some of those listed were Mr Miltiadous’ clients and some were Mr Christou’s. Others were not clients of the firm.
123.	Mrs Goldberg typed letters for the companies of which Mr Christou was a director, including ones bearing the names 3View, Jet, Townhouse and Ventnor, and possibly Tbabit. She used the firm’s writing paper at least initially, although in some cases the companies acquired their own paper at a later stage. She made up fax paper for them when she was asked to send a fax. She filed copies in the file of the company concerned.
124.	She knew that Tbabit had an account in which investment funds were placed, because Mr Christou told her to ring the bank often to find out when funds were coming in so that they could then be paid out. She recalled payments in of £50,000 and £200,000. She recalled money being transferred to Cyprus, which she understood to be for the purpose of property development in the case of 3View. Mr Christou’s father often rang from Cyprus and she spoke to him. Mr Christou’s father would ask about transfers of money, and after that Mr Christou would make transfers. She understood that Mr Christou’s father had opened the office of 3View in Cyprus. She understood that Mr Miltiadous Mr Christou, Mr Ladopouli and Mr Sparsi were involved in that business, but that Mr Brougham was not. She also recalled money being transferred to a client of the firm called Mr Philippou. She understood that the monies being paid into the Tbabit account were for investment, because she could not see what else they could be. She did not ask questions. Amongst the clients of the firm who she identified as being involved in the property businesses were Mr Cox, Mr Ladopouli and Mr Buonanno. She described the relationship between the companies and the firm as all very incestuous. She recalled payments into Tbabit’s account occurring after meetings between Mr Christou and the individuals concerned, who included clients of the firm, and she inferred that the individuals were making investments. It appeared obvious to her that Mr Christou must be giving financial advice in those and other meetings. 
125.	Mrs Goldberg also attended the seminar held at the Apollo. As to that she said that it was supposed to be about pensions, but it was very much with 3View in the background.  It was very much promoting property investment in Cyprus. Clients of the firm had been invited and she recalled Mr Christou talking to them about Cyprus being a good place to invest. Mr Marks also gave evidence that the event he attended at the Apollo was primarily geared towards the firm introducing and attempting to interest those present in property investment opportunities in Cyprus. So much so that he felt embarrassed at having brought clients to attend on the understanding that they were to hear advice on self administered pensions schemes (SIPPs).
126.	Mrs Goldberg was not challenged as to the factual evidence that she gave on these matters. She was challenged as to her interpretation of what she saw and heard. I accept Mrs Goldberg’s evidence on these matters. I also accept that the inferences she drew were probably correct. It is probable that Mr Christou was advising clients of the firm to invest money in one way or another in property businesses in Cyprus, and some of them accepted this advice and paid money which was credited to a Tbabit bank account.
127.	There are a number of documents. In an e-mail dated 14 November 2005 headed “Property Seminar … 17th November” Mr Christou referred to setting aside time for the firm and its clients. The e-mail was sent to Mr Miltiadous amongst others.
128.	The invitations to the Property Seminars were in the form of letters typed by Mrs Goldberg and signed by Mr Christou and Mr Miltiadous jointly, followed by the words “Foster Squires”. Some bear Mr Miltiadous’s initials in the reference. The letters are headed “Property Investment in Cyprus”. The letter dated 28 September 2005 is typical. It includes:
“… 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 …”
129.	Mr Miltiadous said of these letters that each partner thought of which clients might be interested in attending. Mr Brougham came up with a list as well as himself and Mr Christou. Mr Miltiadous agreed that although there were other speakers attending, including one from Standard Life, the seminars were very much a Foster Squires event. 
130.	There are other documents relating to property seminars. The evidence leads to the conclusion that Mr Miltiadous encouraged and approved of Mr Christou  offering investment advice on behalf of the firm about property in Cyprus. These seminars were after the events upon which the Claimants base their claims. But they demonstrate the activities of Mr Christou, and Mr Miltiadous’ participation in those activities. They lend support to the evidence of Mrs Goldberg as to what Mr Christou was engaged in. 
131.	I infer that Mr Christou was engaged in giving investment advice to similar effect, albeit not in the context of seminars, to clients of the firm and to others with a view to promoting the property businesses in Cyprus in which he, and to a lesser extent Mr Miltiadous, were both involved.
132.	There is nothing in the 2001 Agreement that amounts to any limitation upon any partner in the firm, and in particular upon Mr Christou, to the effect that he is not authorised to carry on any part of the business of the firm, including investment and financial advice. Nor was there anything to suggest to any member of the public, or any client, that the authority of any partner was limited in that way. I find that for the period to which that agreement relates, namely 1 May 2001 to 28 February 2005, Mr Christou was authorised to give investment advice in the course of the business of the firm.
133.	For the period covered by the 2005 Agreement, namely from 1 March 2005, the position is different. There is no written agreement that Mr Christou’s responsibilities should include the carrying out of investment business work as defined by the Regulations. I find that for this period Mr Christou was not authorised to give investment advice which was investment business work as defined by the Regulations. But if there was any investment business work that he could carry out other than as defined by the Regulations, then he was authorised to carry out such work.
134.	I find that if a client asked someone other than Mr Christou for financial advice then they would be directed to Mr Miltiadous for that advice. But I also find that Mr Christou did give such advice. I find that Mr Brougham did not know that Mr Christou was giving financial advice, but that Mr Miltiadous did know. Moreover, although Mr Miltiadous knew in general terms that Mr Christou was giving advice with a view to the recipients of that advice investing in the property businesses in which Mr Christou and Mr Miltiadous were involved, as well as in those in which Mr Miltiadous was not involved, Mr Miltiadous chose to turn a blind eye and not to enquire from Mr Christou to find out exactly what he was doing. Mr Miltiadous was also aware of the general advice that Mr Christou gave to the public and to clients at the various seminars late in 2005. None of these seminars is of any direct relevance to the Claimants’ claims, since they occurred after the Claimants had each received and acted on Mr Christou’s advice. But Mr Miltiadous’s reaction to what Mr Christou was doing late in 2005 helps me to make the findings that I do make in relation to the whole of the period during which Mr Christou was a partner of Mr Miltiadous.
135.	I also find that Mr Miltiadous had neither the inclination, nor the practical ability, to exercise any control over what Mr Christou did. He acquiesced in, and agreed to, whatever Mr Christou did or wanted to do. 
136.	Mr Brougham had very little idea of what Mr Christou was actually doing, or what Mr Miltiadous was doing with Mr Christou. Mr Brougham said that as far as he was concerned, he relied on Mr Christou not to give financial advice and to say to anyone who asked for financial advice that he could not give it. However, Mr Brougham was aware of the property seminars and of the fact that Mr Christou was giving information about investing abroad in property. Mr Brougham knew of 3View, but regarded it as very much the business of Mr Christou and Mr Miltiadous. Of the other investors in Mr Christou’s companies, he knew of them as clients of the firm, if that is what they were, but not otherwise.
137.	Mr Brougham never attempted or expected to exercise any control over what Mr Christou did. Neither Mr Miltiadous or Mr Brougham said or did anything to impose any limitation upon Mr Christou’s authority (other than in the terms of the 2005 Agreement). No limitation upon the extent of Mr Christou’s authority was ever drawn to the attention of any actual or potential client. Mr Brougham explained that this was because he did not expect Mr Christou to give advice. But whatever the reason, there was nothing to dispel the impression given on the firm’s writing paper and elsewhere that the partners were authorised to give financial advice.
138.	In my judgment it is in the ordinary course of the business of an accountant to express a view as to the risks associated with an investment.
MR AND MRS ZANELLI’S CLAIM
139.	There is no dispute that Mr and Mrs Zanelli made the following payments to Mr Christou or his companies:
Date	Event	 Debit Amount	
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	
		£507,750.00	
140.	Mr Zanelli agreed that he had made a further payment of £15,000, but that is not the subject of a claim because it was repaid. 
141.	All of the payments other than the first £30,000 were made during the period of the 2001 Agreement. And the advice complained of in relation to the £30,000 was also given during that period.
142.	Mr and Mrs Zanelli also mention, but do not make a claim in respect of, a further £12,000. The payment in May 2000 was at a time when Mr Christou was working at CCP. There is no claim against Mr Miltiadous and Mr Brougham in relation to the payment made on the advice given in May 2000. Mr Christou had advised Mr Zanelli to invest £30,000 in the business of a friend for a period of one year at a return of £1,000 per calendar month payable with the capital at the end of the term. Mr Christou advised Mr Zanelli that there was no risk. Mr and Mrs Zanelli made that investment. 
143.	However, in about May 2001, at the end of the 12 month period when Mr and Mrs Zanelli expected to receive back the sum of £42,000, Mr Christou said that the original £30,000 had been repaid, together with the interest, and was held by the firm, available to be re-invested. By this time Mr Christou was a partner of the firm, and Mr Zanelli met Mr Christou at the firm’s offices. Mr Christou advised that that £42,000 should be invested in a property to be acquired and divided into flats. He said this was a safe investment. He said that the property was located at Vine Hill in London. Mr Christou showed some plans to Mr Zanelli. The acquisition was to be through a company Townhouse. Mr Christou told Mr Zanelli that he would be one of a number of investors who were clients of the firm. The property was to be acquired at a cost of £240,000, and Mr Christou advised Mr Zanelli to invest a further sum in that venture.  That is the sum of £8,750 withdrawn from an account in the name of Mrs Zanelli. It was paid by cheque to Mr Christou. Mr Zanelli said that he went to the firm’s offices to hand the cheque to Mr Christou. Mr Christou explained that because the firm was not incorporated a cheque could be made payable to a partner as well as to the firm itself. 
144.	Mr Christou invited Mr Zanelli to become a client of the firm for accountancy services to the sandwich bar business but Mr Zanelli declined. His father had engaged accountants, and Mr Zanelli did not wish to upset that relationship.
145.	Mr Zanelli received no payment in respect of this investment, but he did receive verbal reports from time to time from Mr Christou. In about February 2003 Mr Christou reported to Mr Zanelli that the profits on the Vine Hill venture were sufficient to allow the purchase of another property, this time in Highbury. No further money from Mr Zanelli was required for this.
146.	Mr Fenwick submits that where the money was paid to Mr Christou or to a company controlled by Mr Christou, that demonstrates that Mr Zanelli understood he was dealing with Mr Christou personally and not the firm. Mr Zanelli’s evidence is that he understood he was dealing with the firm. I accept his evidence. 
147.	Mr Fenwick’s submission seems to me to confuse the claims in negligence and deceit, which are advanced against his clients, with claims in restitution or on the Promissory Notes, which are not advanced. The fact that as an accountant, and a partner in the firm, Mr Christou was advising that Mr Zanelli pay money to, or invest in, his own companies demonstrates a conflict of interest. It does not demonstrate that, in giving the advice, Mr Christou was acting otherwise than on behalf of the firm or in the course of the ordinary business of the firm.
148.	The evidence of Mr Zanelli went further in that he maintained that Mr Christou told him that the investments were managed through the firm. It was put to him that he must have understood that the company which was to buy and develop the properties was owned by individuals other than the partners in the firm. There is a diagram which Mr Zanelli agreed he was shown. It appears to refer to Mr Buonanno and Mr Christou as each holding an equal share in Townhouse. Mr Zanelli was confused when asked questions as to what he understood the investment to be. That is not surprising, given his lack of experience in these matters. I accept that Mr Zanelli did believe that the firm was to manage the investments. But in my judgment it would make little difference if he had not believed that.
149.	There is an issue of causation in relation to the initial payment of £30. Since Mr Christou was not a partner of the firm when the £30,000 was paid over, the loss will be recoverable against Mr Miltiadous only if I find that the £30,000 would probably have been repaid to Mr Zanelli in about May 2001 when Mr Christou was a partner in the firm with Mr Miltiadous (but not yet with Mr Brougham). In my judgment it probably would have been repaid. Mr Zanelli himself gave evidence of a sum of £15,000 which had been repaid. And Mrs Goldberg received a sum of £14,250 from Mr Christou. Mr Zanelli received substantial sums after May 2001. I think it unlikely that he would have refused repayment to Mr Zanelli if Mr Zanelli had insisted upon it in May 2001.
150.	Mr Zanelli’s evidence is not easy to follow as to how he came to give Mr Christou the cheque for £65,000 drawn on the Bradford & Bingley bank account in favour of Mr Christou personally. In his statement he said that Mr Christou mentioned to him that he had a short term investment in the UK, that it would be repayable in 2006, and that it would be invested in Ventnor UK Ltd. There is a further document relating to this which Mr Zanelli received shortly after he had made the payment. 
151.	On 4 August 2003 Mr Christou wrote to Mr Zanelli on the firm’s writing paper with the firm’s nam printed immediately underneath his signature. The paper bears the words “Regulated by the FSA in the conduct of investment business”. The letter reads as follows:
“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”.
152.	This is one of the letters which Mr Miltiadous and Mr Brougham say is not in the ordinary form of documents issued by the firm. There was no such thing as the Foster Squires Investment Strategy. I accept that evidence. But there is no dispute that the letter was received by Mr Zanelli.
153.	As Mr Fenwick noted, the terms of the letter differ considerably from Mr Zanelli’s evidence as to what was said to him about the £65,000 by Mr Christou. In cross-examination Mr Zanelli said that Mr Christou gave the same explanation as before as to why the cheque should be payable to himself personally: in a partnership a cheque to the firm could be made payable to a partner. Mr Zanelli understood that the funds would be paid into an account with the firm and then distributed from there. He received no engagement letter, such as was promised in the letter of 4 August. And there was no subsequent discussion about fees.
154.	Notwithstanding the differences between what Mr Zanelli said about the £65,000 and the letter of 4 August, I accept that Mr Zanelli did understand that he was paying that money to an account of the firm and that he was doing so on the advice of Mr Christou given as a partner in the firm. Mr Zanelli was also told that the investment was to be in property.
155.	In September or October 2003 Mr Christou telephoned Mr Zanelli at his sandwich bar and spoke to him of a long term investment and of the Foster Squires Investment Strategy. He mentioned a property company which the firm managed on behalf of clients. He mentioned that one of the two shareholders wanted to sell his shares. Mr Zanelli did not ask for names or details. It was arranged that he was to attend the firm’s offices on what turned out to be the first of three visits about this time. 
156.	There are a number of documents relating to the payments that Mr Zanelli subsequently made.
157.	On 8 September 2003 Abbey wrote to Mr and Mrs Zanelli with an offer of an additional loan secured on 65 Mayfield Avenue in the sum of £125,000. That is the family home. On 15 September Abbey paid this sum into an account in the name of Mr Christou with Handelsbanken.
158.	On 10 October 2003 Mr Zanelli received another letter headed Foster Squires Investment Strategy and signed by Mr Christou over the name of the firm. It referred to a discussion they had had at the office. Mr Christou wrote that Ventnor was the holding company of Jet and Townhouse. He referred to a loan from Mr Zanelli. He also said that Mr Zanelli’s “existing property investments” in Vine Hill and Beresford were to be transferred to Ventnor “as your initial investment of £50,750 has increased and is to remain within the portfolio”. I take that to be a reference to the £42,000 plus the £8,750.
159.	On 12 December 2003 Mrs Zanelli signed a form of consent to solicitors authorising payment of sums paid from Mortgage Express to Mr Zanelli and confirming her understanding that there would be a mortgage on their property at Holden Road. On 16 December 2003 Mr Zanelli gave instructions for payment of those monies to Ventnor (UK) Ltd. The advance from Mortgage Express was £159,597.
160.	On 20 December 2003 Abbey made a further offer of a loan secured on Mayfield Avenue in the sum of £120,000.
161.	On 16 January 2004 Mr Christou sent a further letter signed by him over the firm’s name and headed “Foster Squires Investment Strategy”. This letter is not on headed paper and resembles a file copy, although it is signed. It referred to the above sums (£125,000 paid in to the Handelsbanken account and the £160,000 and £120,000 paid into Ventnor (UK) Ltd). Attached was a spreadsheet headed with the firm’s name and the title “Investment Summary”. It recorded a total investment of these three sums, plus the £65,000. The £125,000 is said to have been invested in “Cyprus Developments” and the other sums in “UK Developments”.
162.	Mr Zanelli received 14 monthly payments following these investments. On dates in and between January 2004 and December 2004 he received sums of about £1,400 in most cases. Two cheques were not paid and were replaced by other cheques that were paid. One unpaid cheque was drawn on Ventnor (UK) Ltd and the other on Tbabit Ltd.
163.	On his first visit to the firm’s office Mr Zanelli was introduced to Mr Miltiadous. Mr Zanelli said that he was introduced as someone interested in investing in property. Mr Miltiadous’ evidence is that he does not recall this. I see no reason to doubt Mr Zanelli’s evidence. In the light of my other findings, I do not think that Mr Miltiadous would have been surprised at being introduced to Mr Zanelli as a person who was interested in investing in property. So it would not be surprising if he had forgotten this incident.
164.	On that first visit Mr Christou advised Mr Zanelli to mortgage the two properties that he and his wife owned, Mayfield Avenue and Holden Road. This was what he would require to obtain a half share in a company that would be worth £455,000. On the second visit Mr Zanelli said he was shown a diagram of the company structure and a presentation on Mr Christou’s computer showing the rental return. He did not understand what he was being told, but trusted Mr Christou because he was a partner in what appeared to be a well established and respectable accountancy practice which he believed was to manage the investments. Mr Zanelli said to Mr Christou at the time that he felt it was beyond his capability whereupon Mr Christou replied that he would work out a repayment scheme, but could offer it to another client. A week later Mr Christou contacted Mr Zanelli to arrange the third meeting at the firm’s offices. He said he had worked out that it would be possible for the investment to generate enough income to enable Mr Zanelli to meet the monthly mortgage payments.
165.	It was following that that Mr Christou arranged for Mr Zanelli to meet mortgage brokers, to whom Mr Christou introduced Mr Zanelli as a client of the firm. Mr Christou told Mr Zanelli that he would receive a share certificate in Ventnor (UK) Ltd, but he never did.
166.	As to the £125,000 invested in Cyprus, Mr Christou told Mr Zanelli that this too was a land project in which the firm was involved. That was the money paid to Handelsbanken.
167.	Throughout the period following the making of these payments Mr Zanelli believed that the investments were being managed by Mr Christou in his capacity as a partner in the firm.
168.	The substantive case for Mr Miltiadous and Mr Brougham in relation to these investments is that again they were payments made, not to the firm, but to Mr Christou’s companies or to himself personally. Therefore Mr Zanelli must have understood that he was dealing with Mr Christou personally and not with the firm. For reasons already given, in my judgment that confuses the claims based on the advice, which are advanced, and claims for repayment of the money, which are not. In any event I  accept Mr Zanelli’s evidence that he was told by Mr Christou and believed that the investments were managed by the firm.
169.	The claims in deceit and negligence are both made out in respect of all the payments made by Mr and Mrs Zanelli. If, as I find, Mr Christou’s advice was plainly investment advice, it was obviously in breach of his duty of care to them. The contrary is not argued. As a result they suffered loss. Mr Christou could not have believed, and did not believe, that the investments which he said were safe or short term, were safe or short term. That is a statement of opinion, and it is a statement of an opinion which he could not, and did not hold.
170.	The advice and the misrepresentation were both given in the ordinary course of the business of the firm. It was advice of a kind that Mr Christou was authorised to give pursuant to the 2001 Agreement. 
171.	Further, Mr Zanelli was one of a number of persons who came to the firm’s offices and to whom Mr Christou gave advice and encouragement to invest in the property schemes in which he, and to a lesser extent Mr Miltiadous, were both involved. Mr Miltiadous knew that that was happening. No restriction on Mr Christou’s authority was communicated to Mr Zanelli. On the contrary, by not intervening in what he knew Mr Christou was doing in this way, Mr Miltiadous held out Mr Christou as having the authority to give the advice he did give. 
172.	I would also hold that the advice and misrepresentations given to Mr and Mrs Zanelli, as well as to the other Claimants, was so closely connected with acts that Mr Christou was authorised to do, that those acts of his may fairly and properly be regarded as done by him while acting in the ordinary course of the firm’s business.
173.	There is no issue as to the amount of the claim of Mr and Mrs Zanelli. In addition to the sums invested and interest at the rate of 1% above Bank of England base rate for the relevant periods, there is also a claim for the amounts paid in interest on the mortgages, and fees associated with the mortgages, less the sums received.
RS’S CLAIM
174.	RS’s claim relates to 4 payments 
Date	Event	 Debit Amount	
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	
		£205,000.00	

175.	The first of these four payments was made during the period of the 2001 Agreement, and the remainder during the period of the 2005 Agreement. Unlike the other Claimants, RS was a client of the firm in respect of its accountancy and auditing services. 
176.	Mr Miltiadous and Mr Brougham did not dispute that (subject to an issue as to title to sue) RS was deceived by Mr Christou into parting with that sum of £205,000. There is no issue on causation.
177.	There is a signed engagement letter dated 30 September 2002. Mr Nicolaou stated in evidence that he did not read this or other documents at all closely. The letter has one half page out of a total of nine which is headed “Investment Business”, and which refers to advice on the acquisition and disposal of investments. It does not assist the case of RS, in so far as Mr Nicolaou does not claim to have relied on the letter. But it does not undermine his case either. There is nothing in the letter indicating any limitation on the authority of Mr Christou. The engagement letter was sent together with a covering letter of the same date, both of them on the firm’s standard writing paper, and included the statement that it was authorised to conduct investment business.
178.	There is an issue on the pleadings as to the title of RS to sue in respect of the sum of £100,000 paid in December 2003. The Defence is that title to make the claim, if any, lies with Mr Nicolaou personally. This point was the subject of some debate during the hearing, and in the end nothing turns on it so far as Mr Miltiadous and Mr Brougham are concerned. It concerns only Mr Nicolaou and his fellow shareholder and director. During closing speeches it became clear that there is no reason why Mr Nicolaou should not be joined as a claimant, and if he were to be, Mr Fenwick accepted that there would be no defence that could succeed against him which is not also relied on against RS. On 9 March 2010 I gave permission for him to he joined as Fourth Claimant
179.	Mr Nicolaou had known Mr Christou since 1996, and he had been a client of Mr Christou in respect of his personal and business affairs while Mr Christou was at CCP. He had followed him as a client when Mr Christou became a partner in the firm. Mr Christou had advised on the incorporation of RS which was on 16 September 2002. That company had been a client of the firm since that date. Much of the routine work for the company was done by Mr Andrea from the time when Mr Andrea became a trainee, but Mr Christou came to the various premises from which Mr Nicolaou traded from time to time to collect or deliver papers. At the time of incorporation Mr Christou advised and assisted Mr Nicolaou on VAT and other matters associated with setting up a business. He introduced Mr Nicolaou to Barclays and was instrumental in arranging the company’s overdraft. Mr Nicolaou knew his trade, but had no experience with dealing with financial and investment matters.
180.	In 2003 Mr Vourloumis became interested in joining Mr Nicolaou. Mr Christou advised on how that could be arranged. Mr Vourloumis bought a 50% share in the company and became a director. Mr Christou advised on the value that he should pay for the shares. 
181.	RS has paid the firm over £4,000 a year for a full advisory service.
182.	Apart from his business with cars, Mr Nicolaou had purchased three investment properties in addition to his home. He had no other experience of investments.
183.	There were other payments passing between RS or Mr Nicolaou and Mr Christou. The one referred to in Mr Nicolaou’s witness statement is a payment of £55,000 made by RS to Jet on 21 November 2005 which was repaid by Tbabit on 1 December 2005.
184.	As to the payment of £100,000 in December 2003, Mr Nicolaou states that it arose from a meeting at the firm’s offices in late November. He said that Mr Christou mentioned a transaction in Cyprus involving land development. Mr Nicolaou also stated that the partners in the firm frequently discussed such development projects. In cross-examination he was unable to give precise answers in relation to any partner other than Mr Christou. If Mr Miltiadous had participated in the discussion I think Mr Nicolaou would have been able to give more precise answers, and I think it unlikely that any partner other than Mr Christou did participate.
185.	Mr Christou said to Mr Nicolaou that if he had any free capital Cyprus would be a good place to invest. He said the fund would be invested for a year and would give a return of approximately the equivalent of 30% payable at the end of the term. Mr Nicolaou knew that Mr Christou was familiar with Cyprus property. He discussed the matter with his cousin and they decided that they had £100,000 for which they had no present use in the business.
186.	On 17 December 2003 Mr Nicolaou followed Mr Christou’s instructions as to payment and transferred the £100,000 to the account of Richard Howard & Co solicitors with reference to Ventnor Ltd. There is a letter dated 19 December 2003 relating to the £100,000 paid on 17 December 2003 which is in all material respects identical to the form of letter sent to Mr Zanelli on 4 August 2003 (and, as in the case of Mr Zanelli, I accept that it is not in a standard form used by the firm).The first sentence is different and reads:
“Thank you for your comments about our service at Foster Squires and your agreement to invest in our investment strategy plan”.
187.	Mr Nicolaou did not receive an engagement letter such as is referred to in the letter of 19 December 2003.  Mr Nicolaou stated in evidence that he had not read the letter beyond noting that it was a receipt for the £100,000.  Mr Christou had told him that 30% was guaranteed and that the money would be invested in Cyprus. He understood that Foster Squires were taking the risk, and any return over 30% would be theirs.
188.	On 10 December 2004 Mr Nicolaou received a letter from Mr Christou on the firm’s writing paper, signed over the name of the firm. It is headed “Investment Summary” and stated that it enclosed “your investment summary and the valuation of your funds held”. The enclosed document was in the form of a spreadsheet headed with the firm’s name. It listed two payments of £100,000.The one on 19 December 2003 is said to have been invested in “Cyprus Development”. Against the date 10 December 2004 there appears £100,000 under “Funds Invested” and £130,000 under “Valuation”. There is a notation “Next valuation statement due 9 December 2005”.
189.	Mr Nicolaou stated that in May 2005 he visited the firm’s offices. Mr Christou told him that if the company had additional spare funds he advised that it should invest a further £50,000 in Foster Squires Investment Strategy. It would attract the same 30% return. After discussing it with his cousin, he arranged to make the transfer on 23 May to the account of Tbabit Properties Ltd. He understood that Tbabit was being used as vehicle by the firm for property investments.
190.	On 25 May 2005 Mr Christou wrote a letter in the same form as the others. It is headed “Foster Squires Investment Strategy” and acknowledges receipt of £50,000 paid into Tbabit on 23 May 2005 adding “This sum will be added to your investments on the 17 December 2003”. The attached Investment Summary states that it has been invested in “Cyprus Development” and gives the total investment value as £180,000.
191.	In late 2005 Mr Nicolaou attended a seminar at the Apollo suite to which Foster Squires invited him. He describes his impression of it in terms similar to that of other witnesses, namely that it was a presentation on behalf of 3View with the professional support of the firm.
192.	In late 2005 Mr Christou contacted him and said that there were cash flow problems with the development in Cyprus. He asked for £55,000 for a few days. Mr Nicolaou agreed to provide the money on confirming that it was only for a few days. The money was repaid.  The repayment was initially stopped, and was then made by Tbabit.  
193.	In December 2005 Mr Christou made another similar call, asking for the same sum. Mr Nicolaou said he could only spare £40,000 at that point, and would let him have £15,000 after the sale of a car. The £40,000 was paid to Tbabit and the £15,000 was paid later in cash to Mr Christou at home.    Mr Nicolaou said that he did not want to make these payments, but he felt that he had to in order for the development to finish. He said they were not loans to Mr Christou. He had paid the money to a solicitor initially, not to Mr Christou. He would not have lent these sums to Mr Christou. He invested them because he trusted Mr Christou as an accountant and partner in the firm.
194.	Mr Nicolaou’s witness statement (and his oral evidence in chief) did not mention the following movements of money between him or RS and Tbabit. 
Date	Event	Amount	
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	
195.	Asked about these in cross-examination, Mr Nicolaou said that they were short term loans. RS has a turnover of £2.3m and carries a lot of cash for short periods. It had nothing to do with the investments, and there was nothing in writing.
196.	Mr Fenwick submits that any reliance by Mr Nicolaou was on Mr Christou as an individual, and not on advice given as a professional person for the firm. He refers to the absence of the documentation that should have existed and the absence of any fees or charges. He submits that the sums not mentioned in Mr Nicolaou’s witness statement demonstrate a pattern of dealing between them as individuals.
197.	I accept the evidence of Mr Nicolaou in general. Some of his evidence was confused. In part this was due to his unfamiliarity with matters outside his business experience. In part it was a matter of memory. But I accept that Mr Christou did advise Mr Nicolaou to make the investments, and did make the representations that Mr Nicolaou claims he made, and that Mr Nicolaou relied on the advice and representations as coming from Mr Christou as a partner in a firm of accountants. He could not have believed, and did not believe that the investments were good ones for RS or Mr Nicolaou. The claims in deceit and negligence are made out in respect of RS and Mr Nicolaou as they are in respect of Mr and Mrs Zanelli.
198.	The advice and the misrepresentation were given at the firm’s offices and in the ordinary course of the business of the firm. Nothing had been said to Mr Nicolaou about any limits on the authority of Mr Christou. He had attended a seminar at the Apollo in October or November 2005, before making the final payments in December. Mr Miltiadous was there and did hold out Mr Christou as authorised to encourage investment in properties. Mr Nicolaou thought that he was paying the money to be managed by the firm. But even if he had not thought that, the identity of the payee is not an essential element for the claims in negligence and deceit. I refer back to paras 166 and 167 above.
199.	There is no issue on the amount of the liability. Interest is payable at 1% above Bank of England base rate.
MRS GOLDBERG’S CLAIM
200.	Mrs Goldberg left school and began work aged 16. She held a number of positions as secretary or personal assistant. By the time she and her husband separated in 2003 they had been married for 27 years. During that time she worked part time, resuming full employment after the separation. She was employed by the firm as from 1 December 2003.
201.	As part of an amicable agreement on their separation, she received a capital payment of £85,000.  She also received some shares in a private company. 
202.	Mrs Goldberg first approached Mr Christou for advice in April 2005. She asked his advice on the value of the shares she owned. He advised her to write a letter to the other shareholder with some questions, and he dictated the form of letter.
203.	Mrs Goldberg asked Mr Christou for this advice because she had no experience in such matters and because she knew (as I have found) that Mr Christou had given investment advice to clients of the firm. She went to Mr Christou because he was the partner in the firm with whom she had the best working relationship. All the conversations between Mrs Goldberg and Mr Christou took place at the firm’s offices.
204.	In July 2005 she approached Mr Christou for advice a second time and for the same reasons. She told him that she had an amount of money to invest short term and sought his advice on a worthwhile investment. She told him she would require the funds in six months, as by that time her husband would have ceased to provide financial support for the family and the money would be required to supplement her income. Mr Christou said he would give the matter some thought and get back to her.
205.	Two weeks later Mr Christou asked Mrs Goldberg if she still wanted to invest her capital sum. He said there was a large land deal in Cyprus in which she could invest. She understood that land was to be bought and immediately resold at a profit. He showed her a map. He assured her that it was definitely a short term investment and would provide a good return. She trusted him as a person and she trusted the quality of the advice. This was because he was a partner in the firm.
206.	They spoke again on a third occasion. Mrs Goldberg repeated that the sum she was considering investing constituted her entire life savings and that it was to be returned in six months for the reason stated above. She told Mr Christou that if there was even the remote possibility of risk then she would not want him to take the funds. He assured her that the investment would be totally secure and the he would procure the grant to her of a charge on the land as an additional comfort. He said that she was being offered an exceptional investment because this was to be a reward to her for the excellent work she was doing for the firm. He said her salary did not represent her true worth to the firm and this would be the best way for the firm to thank her.
207.	He explained the return on the investment would be the equivalent of about 20% for the three months, and that it would be the same again for a further three months. This was based on the anticipated return on the property investment.
208.	She arranged the transfer of £70,000 from her personal bank account to a bank account of Tbabit, in accordance with Mr Christou’s instructions. These instructions did not surprise her. She was familiar with that company. She knew its affairs were managed from the firm’s offices and that other investment funds had been paid into it. On the day of the transfer Mr Christou handed to her a promissory note made by himself and he promised that the charge on the land would be forthcoming.
209.	In October 2005 she received a payment of £14,250 from Tbabit drawn from the same account. Mr Christou told her it was the profit share attributable to her investment. She continued the investment for a further three months, expecting to receive the return of her capital at the end of that period, together with a further £14,250. When she received the £14,250 she took the opportunity of asking for the promised charge on the land. He told her he was about to go to Cyprus and would arrange for it to be issued while he was there. Meanwhile he handed to her a second promissory note
210.	At the end of December 2005 Mrs Goldberg asked Mr Christou for her money to be returned. He said 28 days notice was required. She was content with that. No further payment has been made to her.
211.	She asked Mr Miltiadous to repay the money. He refused and the relationship between them deteriorated. She left her employment with the firm.
212.	There was little challenge to this account in cross-examination. Mrs Goldberg said that she thought that she became a client of the firm when Mr Christou advised. But it became clear that she was confused as to what exactly the arrangement was that she had made with Mr Christou. She was not sure whether it was a loan, or what it was. She did not know how the return he told her to expect would be generated. And she accepted his explanation for why it was so generous. She had worked hard for the firm. She knew that investment advice was sometimes paid for indirectly, such as by commissions, and in any event, as an employee she did not expect to be charged. She rejected the suggestion that his was a personal arrangement between him and her. She said it was an arrangement with the firm, made at the firms’ offices with the partner of the firm whom she regarded as her employer. She would not have made the arrangement in other circumstances. She knew that she had not received any formal letter from the firm. But this did not trouble her.
213.	Mr Fenwick submits that as Mr Christou’s secretary, Mrs Goldberg knew the procedures of the firm. She did not receive a file as a client, or a letter of the kind that is normally sent to a new client. She knew that Mr Christou had ventures of his own. The true analysis of what Mrs Goldberg described in evidence is, he submits, that she made a short term loan to one of Mr Christou’s companies, and she did not and could not have believed that Mr Christou was giving her professional investment advice as a partner in the firm.
214.	 I do not find Mrs Goldberg’s account of events surprising. Her understanding of the position was reasonable in the circumstances. She had sought his advice because she trusted him and because she regarded him as her employer. In those circumstances it is not be expected that she would question or challenge him on his advice. I accept her evidence. There was nothing about which she ought to have been surprised in his not opening a file for or sending her a formal letter. Whether or not the correct procedures were followed is not the point. Her understanding was in my judgment entirely correct: he was advising her about her investments in his capacity as the partner in the firm for whom she was accustomed to work. 
215.	If, as I find, Mr Christou’s advice was plainly investment advice, it was obviously in breach of his duty of care to her. The contrary is not argued. As a result she suffered loss. Accordingly the claim in negligence is made out.
216.	The elements of the tort of deceit are also made out. Mr Christou could not have believed, and did not believe, that the investment which he said was safe was safe. That is a statement of opinion, and it is a statement of an opinion which he could not, and did not hold.
217.	In my judgment the act of Mr Christou in advising Mrs Goldberg to invest her money as he did was clearly in the course of the ordinary business of the firm. It is true that he ought not to have been giving advice at all given the terms of the 2005 Agreement relating to the giving of investment advice. But Mrs Goldberg could not have known of the restriction upon Mr Christou’s actual authority arising from the agreement between the partners. No limitation upon his authority had been communicated to her. On the contrary, by the form of the writing paper, and by the conduct of Mr Miltiadous in permitting Mr Christou to encourage clients and others to invest money in the property deals which he was carrying on, the firm, and in particular Mr Miltiadous, held him out as having authority to give such advice to Mrs Goldberg. I refer back to para 167 above.
218.	The amount of the loss claimed is £70,000 less the repayment in October 2005 of £14,250, making a net claim of £55,750. This part of the claim succeeds.
219.	In addition there is a claim for interest at 7%. Mrs Goldberg claims this rate as the rate she would have earned on a low risk investment of £70,000 from 28 July 2005 to 28 October 2005 and on £55,750 for the period after 28 October 2005 to the date of judgment. This is in issue. No evidence or argument has been adduced to support the figure of 7%. For the Defendants it is submitted that a proper rate would be 1% above Bank of England Base Rate. That is the rate that will be applied to the judgment.
CONCLUSION
220.	The claims of all three Claimants in deceit and in negligence succeed against all three Defendants, limited in the case of Mr Miltiadous and Mr Brougham to liabilities arising in the period during which they were partners of Mr Christou, as discussed above. Following circulation of this judgment in draft, on 9 March 2010 the precise form of the Order to be made in consequence of this judgment was determined by agreement between the parties and by rulings by me.