Another Judicial Review Of The Financial Ombudsman: More Verification Of Their Stance

Berkeley Burke SIPP Administration Limited v Financial Ombudsman Service Limited (2018) EWHC 2878 (Admin)

We reported recently on the Tenet and Sense cases which considered financial networks' liability for dishonest IFAs.

In another judicial review towards the end of last year, again related to fraudulent financial adviser activity, the court has considered the liability of pension administrators.

Background

Berkeley Burke (BB) is a Self-Invested Personal Pension (SIPP), provider and administrator. One of their clients complained about their work when carrying out his wish to invest in what turned out to be a scam.

The basic concept of a SIPP is that an individual can choose the investments which form the assets in his or her pension. There are certain assets, such as listed shares in quoted companies, which can be put into a SIPP and which benefit from the tax advantages which apply to SIPPs, and are therefore "SIPPable". Other assets, such as residential property, do not qualify for those advantages, and there is, therefore, no benefit to holding such assets in a SIPP.

Mr Charlton was a gardener. In 2011, he was introduced to Berkeley Burke by a third party and wanted to make an investment in a "green oil" scheme in Cambodia. He wanted to hold that investment in a SIPP. The investment was offered by Sustainable AgroEnergy plc ("SA"). Mr Charlton applied to transfer his existing £24,000 personal pension to Berkeley Burke and to use the money for investment in Sustainable AgroEnergy's scheme. A large number of other individuals invested in the scheme: some 616 investors invested around £12,250,000 in SIPPs operated by Berkeley Burke.

However, the scheme was fraudulent. Sustainable AgroEnergy did not own the land in Cambodia where the jatropha trees that formed the basis for the investment supposedly grew.

Sustainable AgroEnergy was subsequently placed into receivership following a Serious Fraud Office investigation, and three of its directors were sent to prison for fraud.

The Financial Ombudsman

Following his complaint to Berkeley Burke, Mr Charlton escalated his complaint to the Financial Ombudsman. They were asked to determine the complaint, by reference to what was, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case. The Ombudsman required Berkeley Burke to pay compensation but Berkeley Burke challenged the lawfulness of the decision.

The Financial Conduct Authority Principles relied on by the...