Trafalgar Multi Asset Trading Company v James David Hadley & Anor.

The Court found that a pervasive scheme to channel pension monies into risky and self‑dealing investments for the benefit of introducers and associated parties had been implemented. Key legal principles applied included unlawful‑means conspiracy, breach of fiduciary duty, dishonest assistance, unconscionable/ knowing receipt, bribery principles and the regulatory prohibition on unapproved financial promotion and on carrying on regulated activities without authorisation under the Financial Services and Markets Act 2000 (FSMA). The judge held that the First Defendant (Mr Hadley) participated in an "Original Conspiracy" with others (including Mr Talbot and Mr Chapman‑Clark) which caused loss to Trafalgar by diverting assets into Quantum, Dolphin Capital, Momentum and Shawcross and then into CGrowth; that Mr Lloyd and Pinnacle participated in the fundraising scheme and breached the financial‑promotion restriction and undertook regulated arranging activity; and that PPL/Mr Thwaite and CGrowth were vicariously and directly liable for bribery arranged in relation to the CGrowth bond transactions. The judge also analysed agency, actual and apparent authority and concluded that, while some dealings could be binding absent wrongdoing, the relevant authority was vitiated by undisclosed conflicts, bribery and other unlawful conduct so as to permit rescission and restitution remedies in specified respects.

This is a first‑instance judgment by Deputy Judge Nicholas Thompsell in proceedings brought by the liquidators of Trafalgar Multi Asset Trading Company Ltd (in liquidation) against multiple defendants concerning fundraising, investments and subsequent losses arising from the Trafalgar Multi Asset Fund (a segregated portfolio of Nascent Fund SPC).

Background and parties:

• Trafalgar was the operating company for the Fund; VAM (Victory Asset Management) was the intended investment manager; Mr Hadley and Mr Biggar performed the practical investment management functions though no formal delegation to them was properly documented.
• Introducers (notably Mr Lloyd / Pinnacle) used online marketing to recruit pension investors, who transferred funds into QROPS which then invested in the Fund via Trafalgar.
• Major challenged transactions were investments/subscriptions in Quantum (loan notes), Dolphin Capital, Titan (loan notes), Momentum (loan notes), Shawcross (shares) and transfers into CGrowth bonds.

Nature of the claim / relief sought: Liquidators sought to recover losses and obtain remedies including restitution, equitable compensation, damages and proprietary relief, advancing causes of action including unlawful‑means conspiracy, breach of fiduciary duty, dishonest assistance, unconscionable/knowing receipt, bribery, and claims based on breaches of FSMA (financial promotion and the general prohibition).

Issues framed:

• Whether there was an overarching unlawful‑means conspiracy (the "Original Conspiracy") involving Mr Hadley, Mr Talbot, Mr Chapman‑Clark and others to channel and extract investor funds;
• whether Mr Lloyd/Pinnacle knowingly participated and whether their activities fell within FSMA/RAO regulated activities or breaches of the financial‑promotion rules;
• whether Mr Hadley and others breached fiduciary duties, and whether third parties (Titan, CGrowth, PPL, Mr Jones, Mr Wright, etc.) were liable for dishonest assistance, unconscionable receipt or vicarious liability for bribery;
• whether various transactions were voidable for lack of authority, apparent authority or because they were procured by bribery or unlawful means;
• the effect of privilege against self‑incrimination and the scope of section 13 Fraud Act 2006 in civil proceedings.

Court's reasoning and findings (concise):

• The judge accepted that an "Original Conspiracy" existed: the fund‑raising and investment pattern (including Quantum, Dolphin Capital, Momentum and Shawcross) was orchestrated to generate large commissions and to benefit the conspirators, causing Trafalgar loss. Unlawful means included misleading/unapproved financial promotions, undisclosed conflicts of interest, regulatory breaches and contractual and fiduciary breaches.
• Mr Lloyd and Pinnacle were found to have participated in the scheme: the marketing and introducer conduct breached the restriction on financial promotion (section 21 FSMA) and amounted on the evidence to arranging activity under article 25 RAO (principally article 25(2)); article 33 RAO and the "overseas person" exclusions were not available; the section 23(3) FSMA defence (all reasonable precautions) failed.
• Mr Hadley breached fiduciary duties by self‑dealing (Momentum, Titan) and by accepting/arranging payments linked to the CGrowth transactions; the Court of Appeal had earlier upheld bribery findings as to payments connected with the sale of VAM and the judge found additional bribery/unlawful payments in relation to the Proactive/PPL introducer arrangements. These bribery findings vitiated authority and supported equitable remedies.
• CGrowth and PPL (and Mr Thwaite) were held responsible for bribery undertaken by PPL and for consequential restitution/damages and were subject to claims in dishonest assistance and unconscionable receipt; Titan and Mr Jones were largely exculpated from conspiracy/dishonest assistance liability on the evidence, although Trafalgar could not recover against Titan where Titan had relied on apparent authority and a later ratification.
• The judge examined evidence and legal tests (conspiracy, dishonesty, blind‑eye knowledge, fiduciary duties, bribery, vicarious liability, and financial services perimeter issues) and applied authorities (including Adams, Avacade, Kuwait Oil Tanker, Hely‑Hutchinson, Royal Brunei, Akindele and others) to reach his conclusions.

Practical consequence: The Court concluded that multiple claims succeed in respect of various defendants and transactions; remedies (restitution, equitable compensation and damages) were available and a further consequentials hearing on remedies and quantification was directed.

This first‑instance claim largely succeeded. The Court held that an unlawful‑means conspiracy (the "Original Conspiracy") and multiple breaches of fiduciary duty, bribery and related wrongful acts were established against key defendants, including Mr Hadley, Mr Chapman‑Clark, Mr Talbot and Mr Lloyd/Pinnacle. PPL and Mr Thwaite (and vicariously CGrowth) were held liable for bribery and related equitable claims. Titan and Mr Jones were treated differently: Titan’s subscription/repayment position was affected by authority and ratification findings so Trafalgar could not unwind all Titan dealings, and Mr Wright was not held liable on the principal conspiracy and dishonest‑assistance allegations. The judge explained his reasoning with reference to authority on conspiracy, fiduciary duties, dishonest assistance, unconscionable receipt, bribery and FSMA perimeter rules and directed a consequential hearing to determine remedies and quantum.

The judgment records prior interlocutory and appellate steps. Deputy Judge Karat (sitting in the High Court) heard a summary judgment / strike‑out application on the bribery claim and gave judgments dated 22 March 2022 ([2022] EWHC 641 (Ch)) and a supplementary decision ([2022] EWHC 919 (Ch)). The Court of Appeal allowed the Claimant's appeal on the bribery point: Trafalgar Multi Asset Trading Co. Ltd v Hadley and ors [2022] EWCA Civ 1639 (summary at [3]-[11] in this judgment). Applications for leave to appeal to the Supreme Court were refused (permission to appeal to Supreme Court refused by order dated 5 January 2023 and an application for leave refused by the Supreme Court on 18 April 2023). The trial judge also dealt with interlocutory adjournment applications and related decisions including Trafalgar Multi Asset Trading Company Limited v Hadley and others [2023] EWHC 651 (Ch).