Troubled Sipp provider Berkeley Burke has been ordered to pay nearly £1m to people affected by high-risk unregulated investments made and accepted into the firm's sipp schemes.
A group of 176 investors brought a claim against Berkeley Burke after they suffered losses incurred from high-risk assets invested via Sipps.
The investors allege the pensions were sold through nine separate introducers, and were invested into single-asset high risk investments ranging from forestry in Australia, residential property in Arkansas and a holiday apartment in Grenada.
I cannot know, but if that is Berkeley Burke’s situation, it’s possible that the firm may slip into insolvency in light of the £1m costs order it now faces"
Berkeley Burke's defences failed to comply with a court order and confirmed that it would not take any further part in the litigation, resulting in it being struck out and the claimants being permitted to enter judgement.
Financial services barrister John Virgo represented the claimants throughout the proceedings and secured the court order, which has directed the Sipp provider to pay almost £1m as an interim payment on account of the claimants' costs, as well as the cost of the claimants' application.
Legal experts reportedly believe that the firm could go into insolvency following the court ruling.
Laura Robinson, senior associate at Clarke Willmott Solicitors, said: "I can only speculate, but an advised defendant in court proceedings will almost certainly have appreciated what the consequences would be for openly and deliberately dis-engaging in the litigation, including the severe financial consequences that would result.
"One possible explanation, where a defendant chooses this course of action, is that it simply cannot fund the proceedings any further. I cannot know, but if that is Berkeley Burke's situation, it's possible that the firm may slip into insolvency in light of the £1m costs order it now faces.
"Were that to happen, it seems likely that the industry would pick up the bill and hundreds of those who lost out will be once more restricted to the compensation available from the Financial Services Compensation Scheme."
Berkeley Burke was held accountable by the Financial Ombudsmen Service (FOS) for failing to act in accordance with the principles expected of them, including to conduct business with due diligence, paying due regard to the interests of its customers and treating them fairly.
The firm unsuccessfully challenged the lawfulness of the FOS's decision by judicial review, and whether it was entitled to make the decision, but not whether the FOS made the right decision.
The court agreed with the FOS, and Berkeley Burke has appealed, which is to be heard on 15 and 16 October 2019.
A spokesman for Berkeley Burke said: "We are considering our options whilst focusing on the hearing at the Court of Appeal for Berkeley Burke Sipp Administration Limited".