Expert Tooling v. Engie: Court of Appeal confirms that liability of payer of half-secret commission requires dishonesty

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Expert Tooling v. Engie: Court of Appeal confirms that liability of payer of half-secret commission requires dishonesty

Expert Tooling v. Engie: Court of Appeal confirms that liability of payer of half-secret commission requires dishonesty

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April 9, 2025

The legality of commission payments to third-party brokers which are not fully disclosed is an issue which has received increased attention in the English courts. Most recently, the Court of Appeal handed down judgment in Expert Tooling and Automation Ltd v. Engie Power Ltd,¹ a case involving partially disclosed commission paid to an energy broker. While ultimately dismissing the energy customer's claim against the energy supplier for the payment of commission, the decision helps to clarify the law governing so-called "half-secret commission" and confirms the importance of dishonesty as a prerequisite to a claim against the payer of commission.

The decision was handed down shortly before the appeal was heard in the Supreme Court in Johnson v. FirstRand Bank Ltd² concerning liability for secret and half-secret commission in motor finance, which is expected to produce one of the key judgments of 2025.

Background

The circumstances of the claim and a discussion of the decision of the lower court are set out in detail in our previous article, here.

Briefly, Utilitywise plc (UW), a third-party broker, procured contracts on behalf of Expert Tooling Ltd (Expert Tooling) for the supply of electricity by Engie Power Ltd (Engie). Expert Tooling knew that UW would be paid commission by Engie, but did not know the amount of that commission or the structure (in particular, that the amount of the commission would be added to the contract price paid by Expert Tooling). Following the winding-up of UW, Expert Tooling brought claims against Engie including for liability as an accessory to UW's breach of fiduciary duty.

High Court decision

The High Court dismissed the claim last year.

According to established law, UW would only incur liability in a case of partial disclosure of commission where it owed a fiduciary duty to Expert Tooling which was breached and there was insufficient disclosure of the commission arrangements to obtain Expert Tooling's informed consent.

While the court found that UW owed a fiduciary duty to Expert Tooling, it concluded that the fact that Expert Tooling and its employees were not vulnerable or financially unsophisticated, the receipt of commission by energy brokers in these circumstances was a common trade practice, and Expert Tooling could have discovered the amount and structure of the commission had it asked were factors which narrowed the scope of that duty, such that the failure to disclose the commission amount and its structure did not amount to a breach.

Even assuming this was incorrect, the judge found obiter that Expert Tooling had given its informed consent and that, in any event, there was no evidence of dishonesty which was required to hold Engie liable as an accessory to the breach of duty.

Court of Appeal decision

The Court of Appeal ultimately dismissed Expert Tooling's appeal, though it disagreed with the High Court's finding that there was no breach of fiduciary duty.

Breach of fiduciary duty

The Court found at the outset that the High Court judge was wrong to rely on factors such as the vulnerability or sophistication of Expert Tooling to determine the scope of the fiduciary duty owed by UW, noting that this approach was not supported by the authorities and had the effect of diluting the strict duty of loyalty owed to Expert Tooling.

Instead, these considerations were only relevant to the subsequent question of whether Expert Tooling had given informed consent to UW's breach of duty, which the court considered to be the "real battleground" between the parties. As to this, it was not in dispute that the correct test for informed consent required disclosure of all material matters and the nature and extent of the fiduciary's interest. The court noted that this was a low bar and that, in this case, the material facts clearly included the amount of the commission and the fact that it would be added to the price paid by Expert Tooling. It was not enough for UW to put Expert Tooling on notice by disclosing only some of the material facts and this was true regardless of the vulnerability or sophistication of Expert Tooling as principal.

Accessory liability

Given the finding that Expert Tooling had not given its informed consent to UW's breach of fiduciary duty, the question was whether Engie was liable for UW's breach. Here, the court rejected Expert Tooling's argument that an earlier Court of Appeal decision (Hurstanger)³ changed the law on accessory liability for a breach of fiduciary duty and imposed a new primary liability on the payer of partially disclosed commission which does not require dishonesty. The court confirmed that a payer of commission in a case of partial disclosure can only be liable as an accessory, of which dishonesty is a key component. Given Expert Tooling had not alleged dishonesty against Engie, it therefore could not be liable as an accessory.

The court also refused permission for Expert Tooling to add a further ground of appeal based on the submission that the Court of Appeal in FirstRand had effectively relaxed the dishonesty requirement by finding that it was sufficient to show that Engie paid the commission to UW in the knowledge that UW owed fiduciary duties to Expert Tooling (i.e. there was no need to prove Engie knew or turned a blind eye to the fact that there was no informed consent). While the court acknowledged that certain passages in the decision could be interpreted in this way when read in isolation, it ultimately took the view that FirstRand did not alter the existing approach to finding dishonesty.

Implications

The decision presents a challenge where informed consent needs to be shown to avoid primary or secondary liability for a breach of fiduciary duty. It therefore impacts those who have paid commission as well as those who have received commission payments. The challenge arises where there is doubt about whether the principal (the recipient of the supply, product or service) has been informed of all elements which might have affected their decision to enter into the contract on the terms they did and will turn on the evidence in each case. The decision will make it difficult to infer consent from the circumstances and reinforces that the bar to demonstrating informed consent is not easy to overcome.

However, when it comes to the question of imposing liability on a payer of a partially disclosed commission, the decision confirms the requirement to show dishonesty (in the sense of having a dishonest state of mind) and so that threshold remains a high one, and will be welcomed by suppliers and finance providers who might have paid commission to brokers in their business networks. That said, while the court sought to clarify the findings on dishonesty in FirstRand and that clarification is helpful, the decision highlights the remaining uncertainties in this area of law and this was indeed a key battleground before the Supreme Court in FirstRand last week.

It is telling that both the Court of Appeal in FirstRand and in this case cited a need for a comprehensive review of the legal principles governing non-disclosed and partially disclosed commission, and the question is whether the judgment from the Supreme Court in FirstRand which the Supreme Court indicated they hoped to hand down in July will provide much-needed clarity on what remains a very complex area of law.