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Helpful guidance from the High Court on Group Litigation Orders (“GLO”s) and transfer of proceedings to London

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management

16-02-2018

Mohammed Arif and Others v Berkeley Burke SIPP Administration Limited [2017] EWHC 3108 (Comm)

In this recent case, the court determined that:

  1. a GLO should be made in respect of a number of cases relating to the alleged mis-selling of self-investment pension plans ("SIPPs"); and
  2. the proceedings should not be transferred to London but should remain in Bristol.

The proceedings arose out of the alleged mis-selling of self-investment pension plans ("SIPPs") by Berkeley Burke and/or various introducers to existing pension holders who each transferred their existing plans into a SIPP having been introduced to Berkeley Burke by one of 9 introducers. In all there were 77 claimants, with more in the pipeline.

Whilst GLOs are relatively rare, financial institutions, including pension providers, are particularly at risk of GLOs where there are numerous mis-selling claims about a financial or pensions product. The judgment provides helpful guidance and insight on the circumstances in which GLOs may be made and critically, in this case, the judge did not expect Berkeley Burke to write to all of its customers inviting further claims. By refusing to transfer the proceedings to London, the judge also made clear that in the new age of Business and Property Courts ("BP&C") regional courts will be reluctant to transfer claims to London unless there is very good reason, on the basis that the regional courts are equally adept at dealing with such claims.

GLO application

What is a GLO?

A GLO is a procedural tool which allows the court to collectively manage a number of separate claims which give rise to common or related issues of fact or law (the "GLO Issues"). GLOs can be beneficial, particularly to claimants, for various reasons. One reason is that it enables a number of cases to be assembled which on their own may be relatively low in value, thereby obtaining collective strength, but spreading the costs risk across many cases.

Berkeley Burke objected to the making of the GLO as it considered that the proposed GLO Issues were too ambiguous and would not assist the litigation because the claimant-specific issues (i.e. liability and quantum) would still have to be proved in each case. Instead, it considered that the litigation would be better dealt with by way of lead claimants. Conversely, the claimants relied on Mann J’s decision in Tew & Tew and others v BOS (Shared Application Mortgages No.1) and others1 and argued that at the outset of GLO litigation, it is acceptable for the GLO Issues to be defined at a fairly high level because they can be refined as the litigation progresses.

What did the court decide and why?

The judge noted that:

  1. the provisions of the CPR allow the GLO issues to be varied as the litigation progresses (CPR 19.11(2)(b)); and
  2. there is a balancing exercise to be done - the greater the preponderance of common or related issues over claimant-specific ones, the greater the chance of a GLO being made; if only because it would likely lead to a significant saving of court time and costs if more decisions can be made at a group level, binding claimants across the board.

The judge was therefore minded to make a GLO for the following reasons which he considered were compatible with the Overriding Objective:

There was a significant number of present claimants with the potential to increase to around 200;

  • The determination of individual cases would be advanced by a determination of the common issues even if the individual issues would also have to be decided;
  • The GLO would have "real bite" because there was the potential for some of the GLO Issues to dispose of the claims without a further need for a trial of any claimant-specific issues or so many trials (or indeed lead trials);
  • The court could exercise its case management powers by directing that the trial of certain GLO Issues should take place before others. This could result in court time being considerably less than the six-week trial estimate;
  • In a case where the individual SIPP investments made by each claimant ranged from £6,000-£160,000 – there were obvious advantages in adopting a procedure which provides that Berkeley Burke’s disclosure on GLO Issues would be good for all parties, and which, presumptively at least provides that each group litigant is severally liable only for his share of the common costs; and
  • A GLO would ensure the obvious case management for future claims which could be grouped together in one court rather than scattered around. The managing court could also control other claims by means of a stay.

Other points to note

  • The claimants criticised Berkeley Burke’s failure to engage with the identification of potential GLO Issues. However, the Judge made clear that it is for the applicant to establish the case for a GLO with or without the support of other parties. Furthermore, if a party does not support a GLO (as in Berkeley Burke’s case), they cannot be criticised if they do not engage even if they accept that some common issues exist. This is asking too much and it is understandable that a party would be reluctant to positively engage as it may increase the judge’s appetite for making one.
  • The judge also considered the extent to which the GLO should be publicised (outside of the Law Society Gazette). It was accepted that it would be sensible to publish it on the claimants’ solicitors’ website but that Berkeley Burke should not be ordered to write to its own clients inviting claims. Such an act could have a damaging impact on its reputation and its business (and that of any other companies in its group) and would also fly in the face of limitation and a defendant’s right to "let sleeping dogs lie".
  • Additionally, the position could not be likened to the FCA’s power to require a firm suspected of mis-selling to engage in a customer contact exercise because: (i) the FCA will only publicise the fact of a pending investigation in exceptional circumstances (these proceedings were a long way from establishing liability on Berkeley Burke’s behalf); and (ii) requiring a firm to write to clients is identified as a potentially more effective way of remedying a contravention than an application by the FCA for injunctive relief under s.380 of FSMA 2000.

Application to transfer proceedings

Berkeley Burke had sought a transfer from the High Court in Bristol to the Royal Courts of Justice in London on the basis that the matter could be most fairly and expeditiously dealt with there (it being a nationwide claim). The claimants contested this request on the basis that no case should be too big to be resolved in the regions (as per the then Lord Justice Briggs’ Final Report (July 2016) on the "Civil Courts Structure Review").

The judge observed that much of the focus of the argument between the parties had been on whether London or Bristol was the more convenient venue for further hearings and trial and queried whether it was too early to make this decision – especially as it was not clear where all the claimants resided (including future claimants).

The judge also considered the Chancellor’s Advisory Note on the Business & Property Courts (October 2017) and the accompanying draft Practice Direction (now approved) which provided that in respect of transfers to or from a B&PCs District Registry, in addition to the criteria set out in CPR 30.3, regard should be had to other factors including:

  1. whether there are significant links between the claim and circuit in question;
  2. whether court resources, deployment constraints or fairness require the hearings be held in another court than the one in which it was issued;
  3. the wishes of the parties (which bear special weight but are not determinative); and
  4. the availability of a judge specialising in the type of claim in question to sit in the court to which the claim is being transferred.

In considering these factors, the judge noted that whilst there appeared to be no significant links between the claims and Bristol, the case had been managed in Bristol to date and Berkeley Burke had only applied for the transfer very recently. Furthermore, all the claimants supported the case remaining in Bristol.

Having given consideration to a letter from the FCA as an interested party in the proceedings, the judge dismissed the application. He considered that in order to be persuaded, alongside convenience and fairness, the complexity of the facts and legal issues and the public importance of the outcome ought to provide at least one fairly clear pointer away from Bristol – but in this case they did not: the claims were not overly complex.

He also highlighted that the ethos of the new B&PC structure is that the specialist civil jurisdictions will exist in the main regional centres and that if a court is going to transfer a case away it needs to be comfortable that it is not offending the new ethos by doing so. Whilst there will be cases where the value and/or procedural complexity will justify a transfer to London, there will equally be cases where a regional trial before a High Court judge will be appropriate.

Keeping a watchful eye

In addition to the helpful insight of the court above, the ultimate outcome of the GLO will also be of importance to SIPP providers because of the substantive legal questions to be determined which include:

  • Whether COBs rules apply: Berkeley Burke’s defence is that it did not mis-sell anything and that each SIPP was established by it on an execution only basis;
  • Whether the introducers carried out a regulated activity. Berkeley Burke contends that even if the introducers did arrange the investment or give advice on the merits of doing so, it was not advice in relation to the SIPP which the claimant says falls within articles 25 and 53 of the RAO as a "security". Instead the "real investment" was not the SIPP itself but the underlying investment vehicle or venture into which the SIPP funds were ploughed (in this case none were regulated investments); and
  • Whether the doctrine of ex turpi causa applies against some of the claimants – those who are suggested to have received monies or benefits out of or in connection with their SIPP investments which were not compatible with their fiscal statement as pension investments – which, where applicable and made good, ought to mean that they should be deprived of a result if it is just and equitable.

[1] [2010] EWHC 203 (Ch)

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