Supreme Court: Order made
Consumers claims law firms will be sizing up the business energy claims market after the Supreme Court allowed a key appeal on undisclosed commissions by consent.
The parties to Expert Tooling and Automation Ltd v Engie Power Ltd agreed the claimant’s appeal should be allowed in light of last year’s Supreme Court ruling on motor finance commissions, and the court made an order accordingly.
Claimant and defendant lawyers are already at odds over the extent to which the decision opens up a new seam of work.
Expert Tooling used a third-party broker, Utilitywise (UW) to negotiate and, in some cases, execute on its behalf electricity supply contracts with Engie. UW was paid nothing by Tooling, but received a commission from Engie, the amount of which was added to the unit price Tooling paid for electricity.
The company was aware that UW would receive commission by Engie but not how much, and claimed that was entitled to recover the commissions it had paid. The High Court dismissed the claim, which the Court of Appeal upheld despite allowing Expert Tooling’s appeal in part.
The Court of Appeal granted Tooling permission to appeal on two points, although only the first was needed in light of Hopcraft.
This was whether the court wrong to distinguish between a ‘half secret’ and ‘fully secret’ commission for the purpose of determining whether the commission should be treated as a bribe that attracted restitutionary liability for the amount of the bribe. In Hopcraft, the Supreme Court ruled there should be no difference.
Rodney Gardner, the solicitor who won the Plevin case on undisclosed commissions in PPI, wrote on LinkedIn that the Supreme Court had given a green light to claims.
“Litigation [may be] needed in pursuing individualised cases, as in Plevin, where lenders still fought every claim, via the courts. However, it is worth sending in a complaint/letter of claim, to see whether firms pay up voluntarily as the defendants are utility providers/brokers, and not lenders, and may cooperate.
“You will still need to make out all the relevant facts and circumstances as well as applying the law cogently.”
Hugh James partner Neil Stockdale said that, with the distinction between full and half secret commissions no longer at issue, “key considerations now include whether the broker was operating in a position of trust, how commission was presented during the sales process, and whether the information provided was sufficient to enable a business to make an informed decision on cost exposure”.
In a briefing [1] written with solicitor Sophie-May Lewis, Mr Stockdale explained that the outcome of the case “reinforces the relevance of fiduciary duties in broker-led energy procurement and the role of supplier knowledge”.
They went on: “Where brokers presented themselves as advisers acting in the business’s best interests, the law will now closely examine whether the duties of loyalty and transparency arose, and whether the supplier knew, or ought to have known, that commission was being generated through those relationships.”
But a briefing [2] from Leeds firm Walker Morris, which acted for Engie, argued that claimants would still face “significant hurdles” in proving their cases.
This was because, in “the vast majority” of claims, where the customer was not paying the broker and there was no express agreement for the broker to put aside its own commercial interests in favour of the customer’s, they would not be a fiduciary (as per Hopcraft). As a result, there would be no claim, either in equity or civil bribery.
“Even in the unlikely scenario in which customers are able to prove [the intermediaries] owed fiduciary duties, they will face further hurdles in order to bring a successful claim. For example, customers should need to also prove that energy suppliers had knowledge of the purported fiduciary relationship…
“In the post‑Hopcraft landscape, the viability of business energy commission claims will turn less on commission disclosure in the abstract and more on whether claimants can establish the existence – and supplier knowledge – of a true fiduciary undertaking.”
Mr Stockdale said a number of suppliers and brokers had suggested that most cases would still fail because broker relationships were “purely commercial” or because businesses ought to have understood how commission arrangements worked.
“Claimants should treat those misguided assertions with caution. The Supreme Court has shifted the focus away from technical labels and standard terms, and back to the reality of the sales process. While each case will turn on its own merits, the decision does not introduce new barriers for claimants or undermine the viability of properly evidenced claims.”
Paul Kerfoot, a barrister at Trinity Chambers who spoke about business energy claims at last year’s Claims Futures conference, wrote in his briefing [3] that changes to disclosure practices meant older cases were likely to be the ones with better prospects of success and that there was a good argument to postpone limitation.