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Berkeley Burke decision challenge fails

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20/12/2018

Following the recent Berkeley Burke decision made by the High Courts, the Sipp provider’s attempt to challenge the decision has failed.

Berkeley Burke decision

Sipp providers are unlikely to welcome the recent Berkeley Burke decision made by High Court Judge, Judge Jacobs. He dismissed the company’s claim for a judicial review to challenge a decision made by the Financial Ombudsman Service (FOS).

The outcome of this case could have a huge impact on Sipp providers and regulators alike. It is likely to generate a steep rise in claims for mis-sold Sipps. It also serves to highlight the Court’s approach in dealing with Sipp providers that have failed to carry out a sufficient level of due diligence before allowing clients to make investments.

Sustainable Agro Energy

The complainant, Mr Wayne Charlton, was approached by a third party. He was then encouraged to invest £29,000 of his pension pot into Sustainable Agro energy (SA). The investment was a green oil scheme in Cambodia. He was told the land would be used to grow Jatropha trees for palm oil. The palm oil would then be turned into biofuel.

The scheme turned out to be a scam. More than 600 people had invested £12,250,000 in total into the scheme. Since the Serious Fraud Office (SFO) launched its investigation, three of Berkley Burke’s directors have been sent to prison.

The complaint

In 2012 Mr Charlton complained to FOS seeking the return of his money. The FOS upheld his claim and it was decided that Berkeley Burke should compensate the client as a result of its failure to carry out due diligence.

The Ombudsman concluded that Berkeley Burke should have been aware of the ongoing requirement on them to comply with the FCA’s Principles for Businesses. The FCA states that it is a requirement to undertake due diligence on investments before accepting them.

The FOS concluded that had such diligence been undertaken, Berkeley Burke would have identified that the investment was unsuitable. The Sipp provider disagreed with the Ombudsman’s decision, challenging it through this current claim.

Berkeley Burke argument

Berkeley Burke’s barrister argued that the Sipp provider had carried out adequate due diligence required at the time. They argued that FOS had retrospectively applied the tighter due diligence now in force due to a separate investment which was made in 2011.

Berkeley Burke also added that the FOS had erred in imposing new expansive duties on Sipp providers to investigate high-risk investments. They also stated the decision was inconsistent with previous decisions made by the Pensions Ombudsman.

However, Judge Jacobs agreed with the FOS and FCA and dismissed Berkeley Burke’s claim for judicial review. He held that the FOS was not obliged to follow the Pension Ombudsman’s previous decisions and that the FOS had applied existing FCA rules and principles correctly to the case at hand. He also said that the Ombudsman possessed a wide scope in making fair decisions based on the specific facts of each case.

Do you think that your Sipp provider didn’t carry out enough due diligence on your behalf? Get in touch to start your complaint today.