Trafalgar Multi Asset Trading Company Ltd ((in Liquidation)) v James David Hadley
| Jurisdiction | England & Wales |
| Judge | Mr Nicholas Thompsell |
| Judgment Date | 19 May 2023 |
| Neutral Citation | [2023] EWHC 1184 (Ch) |
| Docket Number | Case No: BL-2020-000294 |
| Court | Chancery Division |
[2023] EWHC 1184 (Ch)
Mr Nicholas Thompsell
sitting as a Deputy Judge of the High Court
Case No: BL-2020-000294
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
Fetter Lane
London, EC4A 1NL
Mr Justin Higgo KC and Ms Belinda McRae (instructed by Kingsley Napley LLP) appeared for the Claimant
Mr Andrew Jones appeared in person and on behalf of Titan Capital Partners Ltd
Mr Mark Lorrell (instructed by Valemus Law) appeared for Mr Mark Lloyd
Mr James Hadley appeared in person
Mr William Wright appeared in person and on behalf of CGrowth Capital Bond Ltd
Mr Bentley Thwaite appeared in person and on behalf of Platinum Pyramid Ltd
Hearing dates: 28 February – 31 March 2023
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Contents
Heading
Commencing Paragraph
| 1. Introduction | 1 |
| 2. Parties and Persons Involved | 11 |
| 3. The Facts | 12 |
| 3.1 Background – Previous investment schemes including Capita Oak | 13 |
| 3.2 The Creation of the Fund and of Trafalgar | 19 |
| 3.3 Fundraising | 35 |
| 3.4 First investments | 37 |
| 3.5 The Quantum Investment | 39 |
| 3.6 The Titan Investment | 63 |
| 3.7 The Momentum Investment | 73 |
| 3.8 The Shawcross Investment | 83 |
| 3.9 The suspension of the Fund | 93 |
| 3.10 CGrowth Investment | 102 |
| 4. THe Case to Date | 128 |
| 4.1 Matters already settled | 128 |
| 4.2 Adjournment applications | 134 |
| 5. The Circumstances of the Trial | 144 |
| 5.1 Representation | 144 |
| 5.2 Applications and Orders | 146 |
| 5.3 Privilege against self-incrimination | 153 |
| 6. Evidence | 191 |
| 6.1 The Claimant's witnesses | 193 |
| 6.2 The Defendants' witnesses | 207 |
| 7. Mr Hadley and Mr Biggar's Want of Authority | 218 |
| 7.1 Actual authority | 218 |
| 7.2 Apparent authority | 247 |
| 8. Legal Principles | 251 |
| 8.1 Bases of Claims | 251 |
| 8.2 Unlawful Means Conspiracy | 253 |
| … 8.3 Breach of fiduciary duties | 262 |
| 8.4 Dishonest assistance | 265 |
| 8.5 Unconscionable receipt | 272 |
| 8.6 Bribery | 274 |
| 8.7 Vicarious liability for bribery | 282 |
| 8.8 Corrupt arrangements and rescission | 283 |
| 8.9 Breach of the restriction on financial promotion | 288 |
| 8.10 Breach of the general prohibition | 293 |
| 9. The Original Conspiracy | 298 |
| 9.1 The conspiracy claims | 298 |
| 9.2 The combination between Mr Hadley, Mr Talbot and Mr Chapman-Clark | 300 |
| 9.3 The intent to damage Trafalgar | 310 |
| 9.4 Unlawful means | 312 |
| 9.5 Conclusion in relation to the Original Conspiracy | 321 |
| 10. Mr Lloyd's Involvement | 325 |
| 10.1 How Mr Lloyd became involved | 325 |
| 10.2 Was Mr Lloyd a conspirator in the Original Conspiracy? | 332 |
| 10.3 Did Mr Lloyd breach the restriction on unapproved financial promotions? | 345 |
| 10.4 Did Mr Lloyd provide investment advice under article 53 RAO? | 352 |
| 10.5 Did Mr Lloyd undertake an activity specified under article 25 RAO? | 373 |
| 10.6 Were the activities excluded under article 33 RAO? | 382 |
| 10.7 Is there a defence under section 23(3) FSMA? | 386 |
| 10.8 Were the activities excluded as being not conducted in the UK? | 392 |
| 10.9 Were the activities excluded by article 72 RAO (overseas persons)? | 403 |
| 10.10 Conclusions in relation to Mr Lloyd's activities | 406 |
| 11. The Titan Transaction | 408 |
| 11.1 Claims relating to Titan | 408 |
| 11.2 The allegations of dishonesty against Mr Jones | 410 |
| 11.3 Breach of fiduciary duty by Mr Hadley | 426 |
| 11.4 Mr Hadley's actual and apparent authority | 439 |
| 11.5 Were Mr Jones and Titan part of the Original Conspiracy? | 448 |
| 11.6 Were Mr Jones and Titan part of another unlawful means conspiracy? | 452 |
| 11.7 Was there a conspiracy to hide Mr Hadley's share interest? | 478 |
| 11.8 Was there a conspiracy to bribe Mr Hadley? | 486 |
| 11.9 Dishonest assistance | 497 |
| 11.10 Unconscionable receipt | 508 |
| 12. The Cgrowth Transaction | 515 |
| 12.1 No legitimate commercial rationale for Trafalgar | 516 |
| 12.2 No legitimate commercial rationale for Trafalgar | 533 |
| 12.3 Claims relating to the CGrowth transaction: Bribery | 580 |
| 12.4 Claims relating to the CGrowth transaction: Breach of fiduciary duty | 585 |
| 12.5 Claims relating to the CGrowth transaction: Liability for bribes | 587 |
| 12.6 Claims relating to the CGrowth transaction: Unconscionable receipt | 590 |
| 12.7 Claims relating to the CGrowth transaction: Dishonest assistance | 592 |
| 12.8 Claims relating to the CGrowth transaction: Conspiracy | 594 |
| 13. Summary of the Claims Established by the Claimant | 614 |
| 13.1 Claims against Mr Hadley | 593 |
| 13.2 Claims against Mr Chapman-Clark | 619 |
| 13.3 Claims against Mr Lloyd and Pinnacle | 622 |
| 13.4 Claims against Mr Jones and Titan | 625 |
| 13.5 Claims against Mr Thwaite and PPL | 627 |
| 13.6 Claims against CGrowth | 630 |
| 13.7 Claims against Mr Wright | 633 |
| 13.8 Other remedies | 635 |
| 14. Conclusion | 636 |
INTRODUCTION
For most people brought up in the United Kingdom, the word “Trafalgar” denotes a triumph — our most famous naval victory. For the unlucky individuals (“ the pension investors”) who were persuaded to transfer their pension monies, often originally in very safe defined benefit schemes, for investment into an investment fund bearing that name, the word represents a disaster — the loss of much of these pension monies.
This case deals with the circumstances leading up to those losses, although the case is not brought by the pension investors themselves. It relates to an action brought by liquidators on behalf of Trafalgar Multi Asset Trading Company Limited (“ Trafalgar” or “ the Claimant”), the company that held the assets of the fund in which these pension monies were ultimately invested.
Trafalgar is a Cayman Islands subsidiary of Trafalgar Multi Asset Fund Segregated Portfolio (“ the Fund”). Trafalgar was established as the company through which the Fund made and held its investments.
The Fund, also a Cayman Islands entity, comprises a segregated portfolio of the Nascent Fund SPC (“ Nascent”), an open-ended exempted company registered as a segregated portfolio company pursuant to section 4(3) of the Cayman Islands Mutual Funds Law. As is noted on the front of the Offering Supplement produced in relation to the Fund, such registration does not involve any substantive supervision of the Fund by the Cayman Islands government or the Cayman Islands Monetary Authority and there is no compensation scheme imposed on or by the government of the Cayman Islands available to investors in the Fund.
The Fund and Trafalgar were established in late 2013. The First Defendant, James Hadley (“ Mr Hadley”), worked with Custom House to set up Trafalgar as an investment structure.
Mr Hadley, acting with others, arranged for the pension investors to transfer their pension monies into Qualifying Recognised Overseas Pension Schemes (“ QROPS”) and to instruct the pension trustees of those QROPS to invest the proceeds into the Fund.
The Claimant is pursuing various causes of action against a number of defendants relating to investments made by Trafalgar. The Claimant contends that there was an unlawful conspiracy and/or conspiracies to injure Trafalgar and that it has various causes of action in relation to these arrangements.
In brief, the Claimant's contention is that its Board was deceived into believing that Mr Hadley was an honest investment manager making genuine investments in Trafalgar's commercial interests whilst in reality, each of the major investments (or, on the Claimant's case, “purported investments”) made were unlawful, uncommercial transactions which no honest investment manager would ever have contemplated. They were either demonstrably fictitious, or the product of undisclosed self-dealing into newly-established companies either owned or controlled by Mr Hadley or his co-conspirators. It is Trafalgar's case that the relevant ‘investments’ were designed as the vehicle for extracting and misappropriating pension funds from the Fund for the unlawful benefit of the Defendants.
The relevant purported investments of which the Claimant complains comprise:
i) the transfer of a total of £9.5 million notionally to acquire unsecured loan notes issued by Quantum Global Capital Limited (“ Quantum”);
ii) the transfer of £1.5 million to acquire an unsecured bond issued by the Fifth Defendant, Titan Capital Partners Limited (“ Titan”);
iii) the transfer of £6 million to acquire unsecured bonds issued by Momentum Property Partners (1) Limited (“ Momentum”);
iv) the transfer of £1.3 million in December 2015 to acquire shares in a Gibraltarian company, Shawcross Holdings Limited (“ Shawcross”); and
v) finally, the transfer of £5.46 million and Trafalgar's remaining ‘assets’ in Quantum, Shawcross and Momentum between March and July 2016 to acquire bonds issued by CGrowth Capital Bond Limited, the Sixth Defendant (“ CGrowth”). It is the Claimant's case that this was done in an effort to conceal the four prior unlawful transactions from Trafalgar's Board, and to preserve control of the...
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Trafalgar Multi Asset Trading Company Ltd ((in Liquidation)) v James David Hadley
...this matter (the “ Liability Judgment”). The Liability Judgment is reported as Trafalgar Multi Asset Trading Co. Ltd v Hadley and ors [2023] EWHC 1184 (Ch) and was handed down on 19 May 2023. This came after a four-week trial dealing with the question of liability in this matter. Full deta......
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Trafalgar Multi Asset Trading Company Ltd ((in Liquidation)) v James David Hadley
...main judgment in this matter (the “ Liability Judgment”) which is reported as Trafalgar Multi Asset Trading Co. Ltd v Hadley and ors [2023] EWHC 1184 (Ch) and which I handed down on 19 May 2023. This came after a four-week trial dealing with the question of liability in this matter. Full d......