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FSCS loses appeal over landmark High Court advice ruling


The Financial Services Compensation Scheme has lost a High Court appeal in a landmark case which could radically change the way it assesses compensation claims for poor advice.

The 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.

When Berkeley went bust and the Spanish property bubble burst in 2009, Emptage made a claim with the FSCS. It initially rejected Emptage’s complaint, then awarded her £11,522.98 in December 2010, saying it would only award compensation in respect of the mortgage advice and not on losses related to the unregulated Spanish property purchase.

High Court judge Mr Justice Haddon-Cave ruled in October that Sharratt’s negligent advice was an “indivisible package” and that Emptage should be put back in the financial position she was in prior to the unsuitable advice. The FSCS appealed in November.

In his judgment on the appeal, published this week, Lord Justice Moore-Bick said it is difficult to see how the FSCS judged a fair level of compensation given the original unsuitable recommendation.

Evolve Financial Planning director Jason Witcombe says: “Although there is no doubt some investors need to be fully compensated for poor advice, it will be dangerous if people start getting compensated for all their losses regardless of the merits of the case.”

FSCS chief executive Mark Neale says: “We have a duty to consider all claims objectively according to our rules. We believed we acted properly in deciding the claim by Ms Emptage and that we were unable to compensate for the full loss because we do not protect investments in property.

“However, the Court has found in the claimant’s favour and FSCS accepts the decision. We will consider the implications of the judgment for our handling of similar claims.”


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