Court decides fiduciary duty can be owed even where no negligence

A Court has dismissed a claimant’s claim for damages for negligent financial advice but has upheld a claim for breach of fiduciary duty in respect of commission paid to the adviser. The Claimant, Mr McHale, has invested his pension savings via a SSAS in loan notes from the Dolphin Trust (subsequently known as the GPG), which entered into bankruptcy proceedings in 2020. Mr McHale had met with Mr Dunlop, who was an “introducer” of investors to the Dolphin Trust, and Mr Dunlop helped to set up the SSAS. When GPG went into bankruptcy, Mr McHale claimed for damages against Mr Dunlop and Chetwode Limited, a company operated by Mr Dunlop that was an IAR (but, as it transpired, not in relation to Dolphin Trust investments) and by the time of the hearing in liquidation, claiming the defendants had assumed the duties of reasonable care and skill and good fair to be expected of a financial adviser and that they acted in breach of that by putting their own interests above those of clients in recommending Dolphin Trust because of the high commission it paid. He also claimed for breach of fiduciary duty on Mr Dunlop’s part, saying he knew commission was payable, but not the amount of it, and that he had been offered a share of it.

Mr Dunlop said that at the time he met Mr McHale, after an introduction by a mutual acquaintance, he was not attending as an adviser and was not at the time authorised to give financial advice. Mr McHale received and read promotional documents, which included clear risk warnings, and a due diligence pack.

Considering the question of negligence, the defence alleged that the mutual acquaintance, Mr Lockington, had in fact been acting as financial adviser, and that he had sent a message encouraging and implicitly endorsing the Dolphin Trust investment. The court did not find evidence that Mr Dunlop had given advice, nor that he had claimed to be regulated when he was not. There had been no allegations against Mr Lockington.

Considering the question of fiduciary duty, there were some damaging messages, again initiated by Mr Lockington, relating and responding to Mr McHale’s request for clarification on the commission he would be paid. The court decided that even though Mr Dunlop did not act as financial adviser to Mr McHale, this did not mean he owed him no duties, and that he was subject to the fiduciary duty to account honestly for the commission promised to Mr McHale.