A pension provider had no legal responsibility to investigate investments after a client was cheated out of his savings, the High Court was told today (10 October).
Berkeley Burke hit the headlines earlier this year when they were accused of 'mis-selling' self-invested personal pensions (Sipps).
The company is now fighting a decision made in 2014 by the Financial Ombudsman Service ordering the company to repay Wayne Charlton after he lost part of his pension to a fraudulent company, Sustainable AgroEnergy.
Berkeley Burke insists the ombudsman made the order erroneously and Jonathan Kirk QC, representing the company, told a judicial review at the High Court: "The reason we say the ombudsman got it wrong is that he used the principle secondary legislation to find that there was a duty of enquiry or investigation.
"What we say about the error of law generally is that if there was to be such a duty of enquiry, that was outside what was expected of the sector at that time.
"To use the principle in order to generate such a specific, new and unexpected duty was wrong.
"The notion that any Sipp administrator at that time was making such enquires into the vast array of investments that could be placed in a Sipp wrapper was not played out."
Mr Charlton brought a complaint to the ombudsman in 2011 after losing part of his pension with Sustainable AgroEnergy, which promised returns of between 8 and 9 per cent.
The company purported to provide agricultural land leases in Cambodia, where they would grow jatropha trees for biofuel.
But in 2012 the company was investigated by the Serious Fraud Office and went into administration.
"Three directors were sentenced to periods of imprisonment after SFO investigations," Mr Kirk said.
The ombudsman said Berkeley Burke had a duty to carry out advisor-style due diligence on his investments.
Mr Kirk argued the company clearly stated it was not their responsibility to investigate investments before clients opened an account with them and that the law, at that point, did not require them to do so.
"The view they took was that was not their responsibility - they set out clearly that they are not going to be responsible. That is the battle ground."
Mr Kirk said the reason this case raises such important points of principle, is that it if successful, it would force administrators to take "steps to ensure that the investment was genuine and not a scam, which requires considering generally whether the type of investment is a good one - that creates a wholly different level of responsibility for a Sipp administrator.
"I think the point has been made, I am not seeking to suggest that a Sipp administrator has no responsibility but that the responsibility of a Sipp administrator has to be proportionate to what they are doing.
"It cannot be said that somebody administering a pension has the same duty as those who are dealing shares.
"They say from the outset, 'we are not going to investigate,' that they will not undertake such an investment enquiry.'
The QC read from documents provided by Berkeley Burke before potential customers decide to use their Sipp wrapper.
The document stated: "Berkeley Burke are not authorized to provide financial advice. We strongly advise that you receive financial advice before investment."
Mr Kirk said company was required to and did ensure that the investments within their Sipp wrappers were compliant with HM Revenue & Customs.
"It also accepts that it had a duty to consider whether the product in question was Sipp-able, is the ugly word that has been used.
"What they do not accept is that it was procedure at the time for a Sipp administrator to verify whether the land had actually been purchased in Cambodia by Sustainable AgroEnergy.
"It would obviously require some kind of investigation into the Cambodian land registry," Mr Kirk said.
The company would also have to check whether the investment vehicle was viable or whether, 'overall, it was likely to generate a return.'
The hearing is expected to last three days.
