Berkeley Burke struck out and faces £1m+ Costs Order

Recovering losses from unregulated investments

Hundreds of claimants found themselves out of pocket after making high risk unregulated investments which were accepted by Berkeley Burke into their SIPPs. As a group, those claimants embarked on court proceedings to recover their losses.

After failing to comply with a Court Order and confirming that it would not take any further part in the litigation, Berkeley Burke’s defences in the Group proceedings have been struck out and the claimants are permitted to enter judgement. John Virgo, a leading financial services barrister at Guildhall Chambers in Bristol, represented the claimants throughout the proceedings and secured the Order, resulting in Berkeley Burke having to pay almost £1 million as an interim payment on account of the claimants’ costs as well as the costs of the claimants’ application.

Why has this happened?

I can only speculate, but an advised defendant in court proceedings will almost certainly have appreciated what the consequences would be for openly and deliberately dis-engaging in the litigation, including the severe financial consequences that would result. One possible explanation, where a defendant chooses this course of action, is that it simply cannot fund the proceedings any further. I cannot know, but if that is Berkeley Burke’s situation, it’s possible that the firm may slip into insolvency in light of the £1 million costs order it now faces. Were that to happen, it seems likely that the industry would pick up the bill and hundreds of those who lost out will be restricted to the compensation available from the Financial Services Compensation Scheme (again).

How does this affect Berkeley Burke’s separate appeal against the Financial Ombudsman Service (‘FOS’) decision in favour of Mr Charlton?

By way of background, Berkeley Burke was held accountable by the FOS for failing to act in accordance with the high-level principles. Specifically, the FOS made its decision on the basis that it was fair and reasonable to expect authorised entities, like Berkeley Burke to:

1. conduct business with due skill, care and diligence;
2. pay due regard to the interests of its customers; and
3. treat them fairly (even in execution-only cases).

The FOS argued that, in any event, the test of what was fair and reasonable went beyond the rules and guidance produced by the FCA.

By Judicial Review, Berkeley Burke challenged the lawfulness of the FOS’s decision, questioning whether the FOS was entitled to make the decision on the basis that it did. It is important to note that the challenge was not whether the FOS made the right decision. The court agreed with the FOS, and Berkeley Burke appealed.

The SIPP industry has been eagerly awaiting the outcome of Berkeley Burke’s appeal following the initial unsuccessful Judicial Review, which is due to be heard on 15 and 16 October 2019.

Will it go ahead?

If Berkeley Burke does slip into insolvency, almost certainly not. Of course, if the appeal falls away, the court’s decision at first instance will stand unless or until there is any superior authority.

For more information, please contact Laura Robinson.