The Court of Appeal has another go at addressing half-secret commissions, but will the Supreme Court agree?

Expert Tooling and Automation Ltd v Engie Power Ltd [21.03.25]

The Court of Appeal’s decision in Expert Tooling and Automation Limited v Engie Power Limited relates to “half secret” commissions in the context of the brokering of energy supplies and the issue of whether the energy supplier should be found liable as an accessory to the broker’s breach of fiduciary duty notwithstanding that it had not been dishonest.

The decision followed hot on the heels of the Court of Appeal’s decision in Johnson v FirstRand Bank Limited [2024], which concerned commissions received by motor car dealers acting as brokers of financing. That decision has of course garnered considerable attention from the media, business and the FCA, due to the potential fall-out. The appeal is being heard in the Supreme Court on an expedited basis at the time of writing.

In Expert Tooling, the Court of Appeal sought to explain and clarify its decisions in FirstRand and Hurstanger v Wilson [2007], and makes for important reading ahead of the Supreme Court’s decision in FirstRand.

The facts

Expert Tooling and Automation Limited (Expert Tooling) entered into a contract for energy brokering services with Utilitywise Plc (UW). UW entered a separate brokerage agreement with Engie Power Limited (Engie).

As brokered by UW, Expert Tooling contracted with Engie for the supply of electricity for a period of 60 months starting on 1 April 2016. The parties then entered into four additional forward contracts in the course of 2016 and 2017.

Engie paid UW a substantial up-front commission, calculated as 80% of the commission UW would be entitled to, based on estimated consumption over the life of the contract. For the first contract, this resulted in an up-front payment of £89,000. The commission was effectively paid by Expert Tooling, by way of increased pence per kilowatt pricing.

UW disclosed to Expert Tooling that it would be paid commission but no other details, such as the amount, the upfront payment or that the commission would be added to the unit price.

UW entered into administration in 2019 and was dissolved in May 2022, so Expert Tooling brought a claim against Engie, on the basis that Engie was liable as an accessory to UW’s breach of fiduciary duty in failing to disclose full details of the commission it was due to receive in brokering the electricity supply contracts.

First instance decision

The court found that UW was acting for Expert Tooling as agent and therefore owed it fiduciaries duties, including the duty not to allow its interests to conflict with those of Expert Tooling. However, the court found that, after analysing the characteristics of Expert Tooling, the fiduciary duty did not extend to informing Expert Tooling of the amount of the commission or that it was added to the electricity unit price.

Obiter, the court found that (a) UW had obtained informed consent for the commission, and (b) dishonesty was an essential ingredient of accessory liability.  It was not argued, and there was no evidence to suggest, that Engie had been dishonest. 

Expert Tooling appealed on a number of grounds.

Court of Appeal decision

The Court of Appeal found that the judge at first instance had wrongly evaluated the scope of fiduciary duty, by not focusing on the contract terms and instead, conflating the issues of scope of duty and informed consent. The “no conflict” duty owed by UW had not been varied by the contract expressly or impliedly by trade usage/custom.

The Court of Appeal also agreed with Expert Tooling that it had not given its informed consent. In failing to disclose the amount, upfront commission and the way the commission was paid, Expert Tooling had not been properly informed of all material matters as to how UW was in a conflict of interest, so it could not have given its informed consent to UW acting in those circumstances. The judge at first instance had been wrong to take into account what was essentially constructive knowledge and to rely on the fact that, as a sophisticated party, Expert Tooling could have asked for more information.

So far so good for Expert Tooling. However, the Court of Appeal then agreed with the judge that Engie was not liable as an accessory. The Court of Appeal did not agree with Expert Tooling that the decision in Hurstanger recognised a new species of primary liability in equity - where a payer of a half-secret commission would be liable for procuring the broker’s breach of fiduciary duty if it was aware of the agency and the principal had not given informed consent. The court sought to clarify that Hurstanger was based on established principles applying to commissions and accessory liability, such that dishonesty was required to establish liability on the part of Engie.

Expert Tooling had not argued at first instance that Engie had been dishonest, but had sought to argue on appeal that Engie had been dishonest in the sense adopted by the Court of Appeal in FirstRand. Expert Tooling argued that the Court of Appeal had found FirstRand dishonest merely because it had known that the broker owed fiduciary duties as agent to the borrower.  This was contrary to established principle that dishonesty required the accessory to be actually aware of, or turn a blind eye to, the facts which gave rise to the breach of fiduciary duty.

In reviewing its decision in FirstRand, the Court of Appeal noted that it had first analysed whether FirstRand had been dishonest. It had found that the contractual terms agreed between FirstRand and the broker were such that FirstRand was “actively encouraging the broker not to make full disclosure” and was preventing the broker from giving independent advice as to the most suitable product. FirstRand had turned a blind eye to the car dealer painting itself as an ordinary, independent credit broker when it knew that was not the case - and that was dishonest.  Later aspects of the judgment in FirstRand, which suggested that all that was required was proof the lender/payer of commission knew of the fiduciary duty and had failed to satisfy itself that the borrower had given informed consent, had to be read in the context of this earlier finding of dishonesty.

The Court of Appeal went on to find that in the case of Expert Tooling, it was not possible to find dishonesty without evidence of Engie’s state of mind, for a number of reasons, including that the contract terms between UW and Engie were quite different to that applied in FirstRand. It was not possible to safely infer that Engie was complicit in or had turned a blind eye to UW’s breach of fiduciary duty.

Comment

The decision in Hurstanger has led to a conceptual difficulty in cases of accessory liability for breach of fiduciary duty concerning half-secret commissions: how is the established requirement for dishonesty in accessory liability factored into the analysis alongside the broker/agent/dealer’s requirement to obtain informed consent? 

In Expert Tooling, the Court of Appeal sought to clarify that Hurstanger was not authority for the existence of a new species of accessory liability which did not require dishonesty on the part of the payer of commission.  It also sought to clarify its decision in FirstRand which seemed to suggest that it was only necessary to establish that the payer of commission knew of the fiduciary relationship and had failed to satisfy itself that the borrower had given informed consent.

The decision leaves the issues greatly unresolved, but this is perhaps unsurprising given that the Supreme Court was due to hear the First Rand appeal within a few days of the Expert Tooling decision being handed down. It will be fascinating to see how the Supreme Court analyses these issues and how it comments upon the decisions discussed above.

There is no doubt that the Supreme Court’s decision in FirstRand will have substantial ramifications for brokers and payers of commission. Insurers of brokers and those providing brokering services alongside other services, such as car dealers, will be carefully considering policy terms, including dishonesty exclusions, and the possibility of subrogated claims against the commission payer. Depending on the Supreme Court’s decision, insurers will therefore be looking to carefully examine the terms of the contract between the broker and commission payer.