A very old proverb states “the wheels of justice turn slowly, but grind exceedingly fine.” Anyone who has had extended dealings with the Court’s in this country would definitely agree that nothing happens in a hurry. SIPP provider Berkeley Burke faces a crucial Judicial Review at the end of the year concerning a Financial Ombudsman Service (FOS) judgment against them that has spent almost 4 years in the legal process, with a clear outcome still not being reached.
The original decision from the FOS in 2014 was a big shock to the industry as a whole. Before the scale of the current mis-selling scandal, became apparent, the FOS passed a verdict on a case that Berkeley Burke had a duty to their customer to undertake due-diligence on the investment, and should have been aware that the SIPP was potentially unsuitable for the customer. Previously, as they were not responsible for the advice, providers had no liability to the customer. However the FOS made reference to an earlier thematic review in 2012, where they highlighted that business must conduct their business with due care, skill, and diligence, and some firms were unable to demonstrate that they were unable to demonstrate they were conducting adequate due diligence on underlying investments, and were over relying on third parties to conduct due diligence on their behalf. By not showing adherence to this guidance, the FOS took the positon that Berkeley were liable for the losses suffered by the customer.
With a number of policies with investments such as those in this case (the investment was in biofuels) Berkeley Burke naturally didn’t take the decision lying down. They challenged the decision of the FOS, who reviewed their original decision. This new decision took an age to arrive, which proved hugely frustrating to many people, not least Berkeley Burke themselves, and most likely the customer as well, who suffered the loss of their investment in the first place. Again, the FOS found in favour of the customer.
Berkeley Burke, obviously desperate to overturn this decision, opted to take the legal route to appeal this decision. However, an appeal attempt was thrown out, with the Courts taking the stance that the FOS did not constitute arbitration, meaning their decisions were not binding on other parties, and the Courts, therefore, did not have the legal authority to view an appeal to the FOS verdict. This has left the only avenue open to Berkeley Burke as Judicial Review, with a date having recently been set for October this year.
The amount of time this case has been in motion, and the fact Berkeley Burke have felt Judicial Review an appropriate action, shows the importance they are placing on this case. Even if they get a decision in their favour, the costs they would have ranked up in this case will dwarf the initial pay out (the customer lost an investment of £29,000). If this decision stands, the knock on effect to other investments in Berkeley Bukes portfolio, not to mention other SIPP providers, will likely be significant.
An added complication is that Berkeley Burke are facing a huge group action lawsuit against them form SIPP investor, with 77 claimants in total, with more potentially to be added. This also focuses on failures in due diligences by the provider, and the use of unauthorised investors. The outcome of the Judicial Review at the end of the year will likely therefore be a key indicator on the direction that case will take
