22/05/2023

Judgment against fraudsters in multi-million-pound pension Ponzi scheme

Belinda McRae acted for the successful claimant, Trafalgar, in both the High Court and the Court of Appeal. She was led by Justin Higgo KC at Serle Court, and instructed by Sue Thackeray, Mary Young, Kate Salter, Abigail Hall and Chantelle Tang at Kingsley Napley.

In Trafalgar Multi Asset Trading Company Ltd v Hadley & Ors [2023] EWHC 1184 (Ch), the claimant, Trafalgar Multi Asset Trading Company (“Trafalgar”), has obtained judgment against multiple defendants party to a conspiracy to deprive pension investors of their hard-earned funds.

Trafalgar was a Cayman segregated portfolio under the Nascent umbrella platform, which was a cost-effective structure for start-up fund managers launched by Maltese fund administrator Custom House.

The first defendant, James Hadley, along with the third defendant Stuart Chapman-Clark (alias Stuart Grehan) and Stephen Michael (Mike) Talbot, devised a scheme to persuade individuals to transfer their pension funds into Trafalgar. The ninth defendant, Mr Lloyd, identified possible clients and arranged for them to receive ‘independent’ financial advice on the pension transfer from Mr Hadley, an unregulated and unqualified individual intending to act as Trafalgar’s investment manager. Once transferred, the pension funds were invested in newly established companies either owned or controlled by Mr Hadley or his co-conspirators, and then extracted for their benefit.

Trafalgar brought claims against Mr Hadley for breach of fiduciary duty and conspiracy to injure by unlawful means, which were upheld in a 126-page judgment after a five-week trial in the Chancery Division before Deputy High Court Judge Nicholas Thompsell. The judge described the above arrangements as “so rife with illegality and other types of unlawfulness that one hardly knows where to begin” (312).

The judge also upheld Trafalgar’s claims against several other defendants (Mr Chapman-Clark, Mark Lloyd, Pinnacle Brokers Limited, CGrowth Capital Bond Limited, Platinum Pyramid Limited (PPL) and Bentley Jarrard Thwaite) in unlawful means conspiracy, dishonest assistance, knowing receipt and/or bribery.

In reaching his conclusions, the judge expressed his sympathy to the pension investors who were persuaded to invest in Trafalgar and lost millions of pounds. He observed that “this suffering was brought about by the cupidity of various individuals who contrived schemes that would provide them with considerable rewards at the expense of Trafalgar and therefore, ultimately, the pension investors” (637).

The judge’s findings were made against the background of the judgment of the Court of Appeal on 16 December 2022. Trafalgar had applied for summary judgment of its bribery claims against Mr Hadley, PPL and Mr Thwaite and/or to strike out PPL/Mr Thwaite’s pleaded defences to bribery claims. The Court of Appeal upheld Trafalgar’s appeal of the first instance judgment, having accepted that the defendants had failed to plead the facts necessary to make out a defence of informed consent. This is an unusual example of a successful summary judgment application in the fraud context  (see [2022] EWCA Civ 1639).