New Model Adviser - For Professional Investors

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

What the Dickens? Another twist in Berkeley Burke v FOS saga

What the Dickens? Another twist in Berkeley Burke v FOS saga

‘Jarndyce and Jarndyce drones on. This scarecrow of a suit has, over the course of time, become so complicated, that no man alive knows what it means. The parties to it understand it least; but it has been observed that no two Chancery lawyers can talk about it for five minutes without coming to a total disagreement as to all the premises.’ - Bleak House.

Berkeley Burke’s appeal against the Financial Ombudsman Service (FOS) has not yet lasted as long as the famous case in Charles Dickens’ Bleak House, but the latest turn is at times as seemingly endless as that fictional legal battle.

A decision in July, which was published online at the start of October, and can be read in full further down this page, found in favour of the FOS and Wayne Charlton. Charlton is the client who first won a compensation claim against the Sipp provider in July 2014 over an investment in £23 million biofuel scheme Sustainable AgroEnergy he made through his Sipp.

(Some readers probably remember that some of the directors behind the company that ran Sustainable AgroEnergy were jailed in 2014 for committing fraud to investors.)

However, the victory has far from settled the case.

Since the original decision was made, Berkeley Burke has been attempting overturn the award, first by asking the FOS to review its findings and then through legal routes.

The FOS did agree to review its decision, with the client's consent, in 2014. The FOS issues a new provisional decision in 2015, but a final decision was not made until February this year. 

New Model Adviser® asked the FOS what the outcome of the decision was, but it declined to comment. Berkeley Burke also did not respond to our request for comment. 

In July justice Teare ruled that Berkeley Burke was not able to use section 69 of the Arbitration Act to appeal the award handed to Charlton. Teare ruled that as the initial award did not meet the requirements of an arbitration under the act, then he could not allow this case to continue.

So the FOS and Charlton won, end of story? Far from it.

As Teare noted in his decision, Berkeley Burke actually ‘would much prefer’ to appeal the decision through a judicial review. This hearing was in fact a move to ensure that when the case does come to a judicial review, it will not be thrown out on a technicality. This is the judicial review Berkeley Burke first considered three years ago. 

Here is the judge's ruling:

Why it matters

The client at the centre of the case lost as much as £29,000 by investing in Sustainable AgroEnergy. His retirement funds have obviously been depleted, and waiting for a final decision on compensation will not have helped.

It is also important for advisers and providers because currently there is uncertainty about who takes responsibility when a Sipp investment goes wrong. This matters because over the last couple of years a picture of a mini mis-selling crisis has emerged in connection to Sipp investments.

Figures released by the FOS have shown the number of complaints about Sipp investments are only going one way. In the year ending 31 March 2015 1,032 complaints were made in connection to Sipps and small self-administered schemes, the following year the FOS recorded 1,174 complaints and in the year ending 31 March 2017 this rose to 1,574 complaints. That’s a 50% increase over two years, and quarterly figures covering the three months between April and June this year suggest the number of complaints will rise further: the FOS recorded a 59% year on year increase in Sipp complaints to 678.

Meanwhile the Financial Services Compensation Scheme saw an even larger number  of complaints about Sipp investments in ‘risky assets’ over its latest financial year ending 31 March 2017. It received 3,565 complaints from consumers in connection to advice they received to transfer into Sipps, and paid out £105 million. Of course, advisers are currently footing this bill in the form of regulatory levies.  

As New Model Adviser® reported in August many of these claims came through unregulated introducer businesses. 

Bleak outlook? 

There is a final issue affecting almost everyone with an interest in the case. Those who have read Bleak House may recall that the Jarndyce vs Jarndyce case ultimately ends not because the judge reaches a decision, but because the money runs out.

While it is unlikely that this case will put anyone out of business, no one involved will be welcoming the delay in the decision. Hopefully there will be some progress before we get to this point. 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Comment & analysis

Asset managers: 'There is going to be a distribution revolution'

1 Comment Play Asset managers: 'There is going to be a distribution revolution'

In footage not used in our original CEO tapes videos, five CEOs discuss how distribution will change in the future. Will 'distribution' be revolutionised by technology the same way that Spotify changed music or the Kindle changed publishing?