"It's possible that the firm may slip into insolvency in light of the £1 million costs order it now faces."
SIPP provider Berkeley Burke has been ordered to pay almost £1m in costs to investors whose money was invested in high-risk unregulated investments.
As a group, hundreds of claimants embarked on court proceedings to recover their losses.
Now, after failing to comply with a Court Order and confirming that it would not take any further part in the litigation, Berkeley Burke will have to pay almost £1 million as an interim payment on account of the claimants’ costs as well as the costs of the claimants’ application.
However it is expected that the total financial settlement will amount to several million pounds.
Legal experts believe that there is a possibility that Berkeley Burke SIPP Administration, incorporated on 25 April 2008, might now slip into insolvency.
Laura Robinson, senior associate at Clarke Willmott Solicitors, commented: “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 £1 million 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.”
A spokesperson 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.”