The Berkeley Burke court case faces an uncertain future as its administrators assess whether the appeal will continue.
Berkeley Burke is currently fighting a decision from 2014, in which the Financial Ombudsman Service ruled the self-invested personal pension provider had to compensate a client after it failed to carry out adviser-style due diligence on his investment.
In October 2018 Berkeley Burke lost a High Court case meaning the ombudsman's ruling stood, but in February 2019 Lord Justice Hickinbottom of the Court of Appeal granted Berkeley Burke permission to appeal the ruling, claiming the decision was potentially one of "considerable and wider importance within the industry and for customers."
The two-day appeal hearing was scheduled to begin on October 15 but this has been thrown into doubt after Berkeley Burke’s Sipp business entered administration yesterday (September 18).
While the appointment of administrators does not stop Berkeley Burke from being able to continue with the appeal of the judicial review, there are concerns around how it will be funded.
Administrator RSM told FTAdviser: “The joint administrators are currently assessing whether the appeal will be continued.”
But mis-selling specialist law firm APJ Solicitors expects the appeal will not go ahead.
Glyn Taylor, a solicitor at APJ, said: “We believe the appeal won’t go ahead on 15 October.
“The recent developments will have a massive impact on this case and we are currently seeking expert opinion over what happens next with the judicial review.”
Berkeley Burke Sipp Administration Limited was put into administration because it was unable to cover the financial costs of defending claims made against it in respect of the firm's alleged due diligence failings when accepting high risk investments between 2010 and 2012.
Mr Taylor said that it did not come as a surprise that the Sipp provider entered administration before the Court of Appeal case as it was unlikely that the firm would be able to cover the court costs.
Last month (August 13), Berkeley Burke had its defence thrown out by the High Court in a multi-million pound claims case and was ordered to pay almost £1m in costs to claimants.
The group of 176 investors, led by solicitors Wixted and Co and Hugh James, brought a claim against Berkeley Burke after they suffered losses incurred from high-risk assets invested through Sipps.
Mr Taylor said: “We predicted Berkeley Burke would opt for insolvency ahead of the High Court appeal, which was scheduled for next month, as it was unable to pay the interim £1m to the group litigation claimants, and also relied on a form of crowdfunding to pay its legal costs.
“It was extremely likely that Berkeley Burke would have lost the appeal, as it would have had to prove that the ombudsman created a new duty of care, far beyond what was in place at the time.”
Last month, adviser trade body Libertatem revealed that it was seeking donations from advisers to help towards the cost of Berkeley Burke’s appeal case.
Garry Heath, director general at Libertatem, said it was in advisers’ best interests to put their support behind this case as if the Fos wins, the precedence set could be used against advisers in the future.
amy.austin@ft.com
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