Self-invested personal pension (SIPP) provider Berkeley Burke is set to have to pay nearly £1m in compensation to claimants after it failed to comply with a court order.
After failing to comply with the 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 claimants are permitted to enter judgement.
As a group, claimants embarked on legal proceedings against Berkeley Burke when they lost money after investing in unregulated investments through its SIPPs.
Financial services barrister John Virgo represented the claimants throughout the proceedings and secured the court order, which has directed the SIPP provider to pay almost £1m as an interim payment on account of the claimants’ costs, as well as the cost of the claimants’ application.
According to court documents seen by RP’s sister publication Professional Adviser, Berkeley Burke must pay nearly £4,000 for the claimants’ costs associated with the court application in May, a further £10,000 for claimants’ costs associated with a July application and an interim payment of nearly £1m on account of the claimants’ costs for the legal proceedings.
On the SIPP provider’s failure to comply with the court order, Clarke Willmott senior associate Laura Robinson said: “An advised defendant in court proceedings will almost certainly have appreciated what the consequences would be for openly and deliberately disengaging in the litigation, including the severe financial consequences that would result.”
Addressing the possibility the firm risked falling into insolvency as a result of the costs it had been order to pay, Robinson said: “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 were Berkeley Burke’s situation, it’s possible that the firm may slip into insolvency in light of the £1m costs order it now faces.
“Were this to happen, it seems likely the industry would pick up the bill and hundreds of those who lost out would be restricted to the compensation available from the Financial Services Compensation Scheme.”
PA has contacted Berkeley Burke for comment.
Berkeley Burke v FOS
Earlier this year Berkeley Burke was granted permission to appeal the judgement delivered against it in October last year, which saw the High Court reject the SIPP provider’s claim against a Financial Ombudsman Service (FOS) decision.
In the original decision, the ombudsman ruled the SIPP administrator had to compensate a client after it failed to carry out appropriate due diligence on their investment.
Berkeley Burke, which facilitated the investment, argued it carried out the due diligence expected of it at the time, according to Conduct of Business Sourcebook (COBS) rules, and that the FOS subsequently placed undue responsibility by applying FCA Principles 2 and 6 in a way that created a new and unexpected duty of care on the part of SIPP operators.