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FSCS appeals landmark High Court advice ruling

Royal Court of Justice High Court 480

The Financial Services Compensation Scheme has lodged an appeal against a landmark High Court ruling relating to how the scheme assesses compensation claims for poor advice.

The original case was brought by Charmaine Emptage, who was advised by Berkeley Independent Advisers mortgage broker Peter Sharratt to exchange a £40,000 repayment mortgage for an interest-only mortgage of more than £111,000. She was also advised to invest over £70,000 in Spanish property.

She took her claim to the FSCS after Berkeley went bust and the Spanish property bubble burst in 2009.

After initially rejecting Emptage’s complaint, the FSCS awarded Emptage £11,522.98 in December 2010, saying it would only award compensation in respect of the mortgage advice and not on losses associated with the Spanish property purchase as this was an unregulated transaction.

But last month High Court judge Mr Justice Haddon-Cave ruled the FSCS “failed to view Sharratt’s negligent advice as an indivisible ‘package’”. He said Emptage should be put back in the financial position she was in prior to the unsuitable advice and ordered the FSCS to pay her legal costs of £150,000.

The judge noted the case may have implications for other similar cases.

The FSCS lodged an appeal yesterday.

A spokesman for the FSCS says: “The FSCS has decided to appeal against the decision in the case of Ms Emptage following a careful review of the judgment and in the light of legal advice.

“We believe we acted properly and according to our rules. We cannot comment further at this stage.”

Financial Escape director Phil Castle says: “I cannot see how the judge came to the conclusion he did, and there has got to be an element of caveat emptor here. The FSCS is doing the right thing by appealing.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. You see FSCS, this is what happens when you steer the truth, you end up in a world of do-do’s.

    The FSCS has obviously been eager (as always) to pay the customers original claim. To do so they have agreed that the adviser actually recommended the client to borrow money in order to buy a property in Spain. Seems unlikely doesn’t it? Its more likely that he simply facilitated her objective. He is a mortgage adviser, not an investment adviser.

    Once you decide he was effectively advising her to invest, you end up opening the door to compensation for the investment advice as well. If mortgage advisers take resposibility for the use of money then the sky will fall in….again. Clients must sometimes take responsibility for their own stupidity and FSCS needs to consider the consequences of their eagerness to pay spurious claims that start small, then escalate..

  2. RegulatorSaurusRex 1st November 2012 at 1:33 pm

    How do you force someone to buy Spanish property?

    The woman was greedy, the FSCS shouldn’t hand over the money and expect honest advisers to pay for the acts or omissions of the stupid and gormless element.

    The FSCS is a dinosaur, it is extinct but nobody has the courage to tell it and move on.

    FSCSaurusRex is the jailer and you are the prisoners.

  3. Scott,

    Whilst it may seem unlikely, as you put it, I’m afraid that’s what happened. See the judgment at, which is well worth a quick read. Though I feel that the FSCS has a case too.

  4. The compensation culture in this country is getting out of hand and the last thing we need is for prople to be dipping in to the FSCS if they think they have a chance of redress, gain, or even just being put back to where they were before they made their decision or took action.

    I cannot understand that the FSCS would have to pay out for a loss arising from an unregulated activity given that it is funded by fees arising from regulated activities.

    This could open up the way for all sorts of claims as it is likely that anyone who has purchased a property in Spain over the last 5 years is now holding an asset at a far lower value and the funding of that purchase may well have been by way of a regulated financial product, be it a mortgage, pension crystalisation, investment encashment etc.

    The way the FSCS,PII, and FSA fees are going I am wondering if it is possible to put a disclosure on our terms of business such that our adviser charge/fees are based upon our current costs but if those costs increase as a result of actions not taken by us and totally beyond our control we may (will) have to make a retrospective charge of an unknown amount in future?

    Im not sure the FSA would like that under TFC!

    Alternatively I am considering taking advice as to how i break down my charges to clients and then add a charge only relevant to regulatory costs!

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