Half-secret commissions and informed consent between brokers and customers

In the recent case of Expert Tooling and Automation Limited v Engie Power Limited [2025] EWCA Civ 292, the Court of Appeal overturned an earlier decision of the High Court regarding whether or not “informed consent” had been given by a customer who was charged a “half secret” commission by their energy broker that was instructed to negotiate (and sometimes execute) electricity and gas supply contracts on their behalf. 

Expert Tooling & Automation Limited (the Customer) instructed an energy broker — Utilitywise Plc (the Broker) — and signed a letter of authority incorporating the Broker’s standard terms of business into its contractual agreement. Under these terms, the Broker was to act in the Customer’s “best interests and save them money”. 

The High Court held that in these circumstances, the Broker was acting as the Customer’s agent and owed fiduciary duties to the Customer, including a duty not to allow its interests to conflict with those of the Customer. However, the Broker was already a party to a separate contract with Engie Power Limited (the Supplier) under which the Broker was entitled to charge a procurement commission in relation to the introduction of customers to the Supplier. 

Here, Carly Borne sets out the facts of the case and explains how half secret commission payments are treated by the courts.

Informed consent or breach of fiduciary duty?

The Broker had informed the Customer, as a matter of fact, that it would be paid commission by the Supplier verbally during a recorded telephone call, stating: “as I’m sure you’re aware as a consultancy, we do get paid a commission from the supplier as well”. The Supplier also informed the Customer (in the small print of its quotations) that its prices “may include commission due to any third-party broker”.

The Customer’s complaint was that it hadn’t appreciated (or been advised by either party) that it would fund the commission and that the commission would be added to the price of its contracts with the Supplier as an increased per kilowatt hour charge. The Customer had unfortunately (and wrongly) assumed that the Supplier would fund the commission. 

Five separate contracts were entered by the Customer — and on entering those contracts, substantial sums were to be paid to the Broker (an £89,000 upfront payment was made in respect of the first contract alone). The exact commission figure was calculated on the basis of the Customer’s estimated energy use over the life of the contracts and the Broker also had some say in the level of commission charged. The Supplier and Broker both agreed not to disclose the details of the commission to any third parties, unless required by law or by mutual consent.

The Court of Appeal was tasked with considering whether the extent of the information disclosed to the Customer regarding the commission was sufficient to obtain the Customer’s “informed consent” to what otherwise would have been a breach of the Broker’s fiduciary duty owed to the Customer. 

High Court and Court of Appeal decisions explained

Both the High Court and Court of Appeal cited the applicable test in Bowstead & Reynolds on Agency at 6-046 that agents may not enter transactions in which their personal interest may conflict with that of their principal "unless the principal, with full knowledge of all the material circumstances and of the nature and extent of the agent's interest, consents”. They also referred to an earlier case [Hurstanger] which proposes that “informed consent” requires that consent is given "with the full knowledge of all the material circumstances and of the nature and extent of the (agent's) [i.e. the Broker’s] interest."

The Judge at first instance considered that the act of adding commission to the unit cost of energy was a known industry practice (stated within a fact sheet produced by Ofgem) and that the Customer was neither vulnerable nor naïve, was referred to the terms and conditions of both the Broker and the Supplier, was told during telephone calls that commission was payable and could have asked for further details regarding the commission. The High Court held that in these circumstances that “informed consent” had been provided by the Customer.

However, the Court of Appeal disagreed with the lower court’s analysis and considered the meaning of “all the material circumstances” further. It referred to the court’s decision in FHR Ventures (affirmed in Firstrand, the further appeal of which is mentioned briefly below) that the test for deciding whether information was material was a low one that involved considering whether the information might (not would) have affected the customer’s decision.

The Court of Appeal Judge held that the Customer hadn’t been told about the following four factors, each of which may have affected its decision to contract with the Supplier:

1. The amount of the commission.
2. The fact that the commission would be calculated with reference to the length of the contract entered.
3. The fact that the Broker was entitled to indicate what commission it wished to add to the unit price, subject to the Supplier’s confirmation, in circumstances where the Supplier had little incentive to dispute the amount.
4. The fact that substantial commission was payable as an upfront payment to the Broker when each contract was entered into (£89,000 in respect of the first contract).

Furthermore, the Court of Appeal considered that giving only enough information to put the Customer on notice that commission was payable — meaning that it then needed to make further enquiries about the details of the commission — was insufficient to obtain “informed consent” between a principal (the Customer) and their agent (the Broker) because of the fiduciary duties owed to the Customer by the Broker. 

The Customer in this case was ultimately unsuccessful in its claim against the Supplier (at first instance and on Appeal for other reasons). A full copy of the Judgment can be found here. 

However, this is an evolving area of law. This month, an anticipated legal challenge to the Court of Appeal’s decision in Johnson v FirstRand Bank Limited [2024] EWCA Civ 1282 — and the extent to which Suppliers can be held liable for secret commissions (bribes) as well as half secret commissions — is due to be considered by the Supreme Court. 

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