Nicholas Paul Shane McHale v Andrew John Dunlop & Anor

An introducer may assume a tortious duty to provide information and perform services with reasonable care, but that does not automatically make the introducer an independent financial adviser. The existence and scope of any duty depend objectively on the parties’ dealings and the responsibility undertaken. Information and advice fall on a spectrum, and the court should identify the purpose and true scope of the assumed responsibility.

An introducer who offers an investment enhanced by a promise to share commission may assume fiduciary duties concerning that commission. Where the investor knows that commission is payable but is deliberately misled about its amount, fully informed consent is absent. The appropriate remedy may be an account of the commission received.

The claimant invested pension savings through an SSAS in Dolphin Trust loan notes between 2016 and 2018. He claimed damages from the first defendant, an introducer, alleging that the defendant had assumed the duties of an independent financial adviser and negligently recommended the investments.

He also claimed an account of commission received by the defendant. The claimant knew that commission was payable and had been promised a share, but alleged that the amount and basis of the commission were misrepresented.

The court determined whether the defendant owed the pleaded duties of care, whether he owed fiduciary duties concerning the commission, and what remedy followed.

1. Negligence claim dismissed. The defendant did not assume responsibility to advise the claimant, as an independent financial adviser, on the merits or suitability of investing in Dolphin Trust. Objectively, the claimant had already decided in principle to invest after discussions with another person whom he trusted as a former adviser. He knew that the defendant was an introducer receiving commission and was not seeking impartial advice on competing investments.
2. An introducer who conducts face-to-face meetings may assume duties of care. Here the defendant assumed duties to provide information consistently with the Dolphin Trust brochure, to advise on the logistics of transferring pension funds to an SSAS, and to take steps needed to facilitate the purchase of loan notes. Those duties did not extend to advising on suitability or whether the claimant should invest.
3. The distinction between information and advice is a spectrum rather than a rigid binary classification. The court must identify objectively the purpose and scope of the responsibility assumed. The claim failed because the pleaded independent-adviser duty was not established; it was therefore unnecessary to decide breach, reliance, causation or contributory negligence.
4. Fiduciary claim succeeded. By promising the claimant one third of the commission, the defendant presented an enhanced investment opportunity and undertook responsibility to provide an honest account of the commission payable. That undertaking created fiduciary duties concerning the commission. The defendant breached them by deliberately misleading the claimant about the total commission and failing properly to account.
5. The claimant was not required to prove vulnerability or lack of sophistication. He had repeatedly asked about the commission and had been promised a share of the total commission. He therefore required truthful disclosure sufficient to permit informed consent. The appropriate remedy was an account of the total commission paid to the defendant, with payment of the amount found due and interest.