Nicholas Paul Shane McHale v Andrew John Dunlop & Anor
| Judge | GERAINT WEBB KC |
| Neutral Citation | [2024] EWHC 1174 (KB) |
| Year | 2024 |
| Court | King's Bench Division |
| Counsel | Zachary Bredemear,Stephanie Wookey |
| Date | 17 May 2024 |
Neutral Citation Number: [2024] EWHC 1174 (KB)
Case No: KB-2022-000075
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 17 May 2024
Before:
GERAINT WEBB KC
(sitting as a Deputy High Court Judge)
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Between:
NICHOLAS PAUL SHANE MCHALE
Claimant
- and –
(1) ANDREW JOHN DUNLOP
(2) CHETWODE LIMITED
(IN LIQUIDATION)Defendants
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Zachary Bredemear(instructed by ebl miller rosenfalck) for the Claimant
Stephanie Wookey(instructed by Macintyre Law) for the First Defendant
Hearing dates: 19 – 22 March 2024
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Approved Judgment
This judgment was handed down remotely at 10:30am on 17 May 2024 by circulation to the
parties or their representatives by e-mail and by release to the National Archives.
Judgment Approved by the court for handing down
(subject to editorial corrections)
McHale v Dunlop
Table of contents:
SectionHeadingParagraphs
AIntroduction 1
BThe pleadings and the procedural history8
C Issues13
DPrivilege against self-incrimination15
EThe factual evidence19
FRelevant law concerning the claims in negligence92
GRelevant law concerning the fiduciary claims118
HAnalysis of the claims in negligence134
IAnalysis of the fiduciary claims189
JConclusion 219
A.Introduction
1.The Claimant, Mr Nicholas McHale, claims damages from the First Defendant, Mr
Andrew Dunlop, in respect of losses arising from investing his pension savings, via a
small self-administered scheme (‘SSAS’), in two year and five year loan notes in an
overseas investment scheme known as the Dolphin Trust between 2016 and 2018. The
Dolphin Trust subsequently became known as the German Property Group (‘GPG’),
2.In October 2020 the Financial Conduct Authority (‘FCA’), the Financial Services
Compensation Scheme (‘FSCS’) and the Financial Ombudsman service published a
joint statement to explain that companies in the GPG had entered preliminary
bankruptcyproceedingsinGermanyandtoadvise on the procedure for making
complaints to the Ombudsman and/or claims to the FSCS.
3.Mr Andrew Lockington, a friend of Mr McHale, arranged for him to meet with Mr
Dunlop, an ‘introducer’ of investors to the Dolphin Trust, in January 2016. A series
of meetings and communications took place between Mr McHale, Mr Dunlop and Mr
Lockington in 2016 and thereafter. With the assistance of Mr Dunlop, an SSAS was
set up in respect of Mr McHale’s pension funds and the vast majority of his pensions
savings were transferred to this SSAS. In total Mr McHale invested £320,000 in
Dolphin Trust loan notes with either a 2-year or 5-year term via the SSAS. Those
investments were in three separate tranches: (a) in August 2016 a sum of £150,000
was invested (£75,000 in 2-year loan notes and a further £75,000 in five year loan
notes); (b) in March 2018 £50,000 was invested in 5-year loan notes; and November
2018 £120,000 was invested, again in 5-year loan notes.
4.There are two limbs to Mr McHale’s pleaded case. The first limb is a professional
negligence claim for damages which is put on the basis that the Defendants “assumed
theduties of reasonable care and skill, good faith to be expected ofafinancial
adviser” acting within “the CodeofConduct” under the Financial Servicesand
Markets Act 2000 (‘FSMA’) and that they acted in breach of duty by “putting their
own interests above those of their client by recommending [Dolphin Trust] because of
the high commission it paid…”.
Judgment Approved by the court for handing down
(subject to editorial corrections)
McHale v Dunlop
5.The second limb is a claim for an account of the alleged undisclosed commission
received by Mr Dunlop in respect of the relevant investments into the Dolphin Trust.
The Claimant’s skeleton clarified that the claim was for breach of fiduciary duty in
respect of “half-secret” commissions, it being accepted that Mr McHale knew that
commission was payable, but not the amount of the commission and, further, that Mr
McHale had been offered a share of the commission.
6.The Second Defendant, Chetwode Limited (‘Chetwode’), was a company operated by
Mr Dunlop. Chetwode was listed with the FCA as an Introducer Appointed
Representative for a company called Openwork Limited which was originally named
on the Claim Form as a Third Defendant. That claim was discontinued following
service of Openwork Limited’s Defence and it was not contended at trial that
Openwork Limited had any involvement in matters concerning Dolphin Trust.
Chetwode went into voluntary liquidation in 2022 and was not represented at the trial.
Mr Bredemear, counsel for the Claimant, confirmed that no relief is sought from
Chetwode.
7.By their Defence the Defendants deny that Mr Dunlop was a financial adviser, as
opposed to an introducer to the Dolphin Trust. The existence of the alleged duty of
care, breach, reliance and causation are denied. The claim for undisclosed commission
is denied and it is averred that Mr Dunlop agreed to share his commission equally
with Mr Lockington and that Mr Lockington then entered into a separate agreement to
share the commission with Mr McHale.
B.The pleadings and the procedural history
8.The Claim Form was issued in January 2022. The brief details of claim endorsed on
the Claim Form identify claims for breach of statutory duty under the FSMA, breach
ofcontract,negligenceand negligent misstatement and alleged that Mr Dunlop
“carried out regulated activities including giving investment advice to the Claimant,
communicating collective investment schemes and recommending and arranging for
Pension Funds to be transferred to a Small Self-Administered Pension Scheme and to
be thereafter invested by way of loan notes issued by Dolphin Trust”. The Claim
Form was amended in April 2022 to add the claim for undisclosed commission.
9.I am informed that a case management conference listed for February2023, was
vacated by agreement to enable the Claimant to amend its case following service of
the Defence. Subsequently, the Claimant served a draft Reply on 28 February 2023,
some 7 months after service of the Defence. An application was made on 4 April 2023
to amend the Particulars of Claim and to serve a Reply out of time. That application
was dismissed at a hearing before Deputy Master Toogood KC on 12 December 2023;
I am informed that the reasons given included that the proposed amendments
introduced a new case and, further, were too compressed and inadequately pleaded.
10.Mr Bredemear, who appeared for the Claimant at the trial, was not responsible for the
Particulars of Claim or thedraft Reply. Prior to thetrial he confirmed to the
Defendants that the claims for breach of statutory duty, breach of contract and
negligent misstatement were not being pursued. At the start of the trial I directed that
an Amended Particulars of Claim should be produced so that there was no doubt as to
which parts of the Particulars of Claim were abandoned; the draft amended pleading,
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