Court of Appeal comments on the scope of broker commission disclosure duties in Expert Tooling and Automation Limited v Engie Power Limited

In March 2025, the Court of Appeal handed down its decision in Expert Tooling and Automation Limited v Engie Power Limited [2025] EWCA Civ 292 which considered the meaning of “informed consent” in the context of commissions received by agents and so is particularly interesting for any intermediaries, including insurance brokers, who receive commission from third parties when placing business with those third parties.

This article focuses on the potential impact on insurance brokers, and whether the comments of the Court of Appeal in this case arguably suggests brokers should be making more disclosures (even to so-called “sophisticated” clients) in order to meet the standard for informed consent. Brokers should take this opportunity to consider their standard disclosure wordings and/or Terms of Business in the context of the current litigation climate, to see whether these are sufficient.

Facts

The claim was brought by Expert Tooling Automation Limited (“Tooling”) a company which manufactures tools and related equipment and machinery, against Engie Power Limited (“Engie”), which supplies electricity. Tooling had engaged a broker, Utilitywise plc (“UW”), to procure electricity supply contracts on its behalf, which included arranging the contract which Tooling entered into with Engie in February 2016.  UW was dissolved in 2022 and so played no part of the proceedings.

Standard practice for brokers such as UW is to arrange and secure various electricity supply contracts for its clients (in this case, Tooling) and receive its commission from the energy supplier, e.g., Engie. In this case, the commission was calculated by reference to Tooling’s estimated energy consumption and a specified amount, equal to UW’s commission, was added to the unit rate of electricity supplied by Engie to Tooling. Engie paid 80% of the commission it expected UW to earn on placement of the contract, and undertook a reconciliation process at the end of the term to adjust the commission in light of Tooling’s actual consumption.

Tooling was aware that UW would be paid a commission by Engie for arranging the contract. The following disclosures were made by to Tooling in respect of the commission:

1. The fact that UW was going to be paid commission by Engie was communicated on a phone call between UW and Tooling;
2. UW’s terms and conditions included an oblique reference to commission, limiting its liability to the sum not exceeding “the aggregate commissions received by [UW] from a utility provider in connection with the Services provided to the Customer”
3. Engie’s contract with Tooling included a section stating that the prices quoted “may” include a commission due to a third party broker.

However, UW did not disclose the below facts:

1. the amount of commission it would earn;
2. that commission was calculated and added to the price of electricity paid by Tooling (as opposed to it being simply payable by Engie as an overhead);
3. that the amount of commission would entirely depend on the length of the contract Tooling entered into with Engie;
4. UW would receive a substantial upfront payment of 80% of the total commission; and
5. the amount of commission UW could earn depended on the length of the supply contract.

After discovering the above facts, Tooling issued its claim against Engie in April 2022 but not UW (by that time, UW was in administration and was dissolved shortly after) and alleged that Engie should be liable to account to Tooling for the commission paid to UW on the basis that Engie induced UW to breach its fiduciary and contractual duties to Tooling.

Decision of the High Court

It is well established that, where a fiduciary duty exists (such as in an agency relationship), the agent must not make a secret profit. Thus, if the client principal is unaware of the commission being received by the agent, there will have been a fully secret commission.  In this case, there was no dispute about the fact that the client (Tooling) was aware that a commission would be earned by UW, but not the full details. This is what the authorities have referred to as a “half-secret commission”. Where there is a half secret commission, the question is whether there has been informed consent by the principal. If there has been informed consent then the agent is entitled to the commission. This is a fact specific analysis in every case.

The High Court in the first instance held that UW’s fiduciary duty did not include an obligation to inform Tooling of the amount of commission and/or the method of calculation (i.e. that it was part of the price paid by Tooling); and in any case, Tooling gave informed consent as it clearly acknowledged that some commission would be paid to UW. The Judge was influenced by the fact that he considered Tooling to be a “sophisticated” customer, which was capable of understanding the commission arrangements.

Tooling appealed.

Decision of the Court of Appeal

The Court of Appeal disagreed with the High Court and found that:

1. Informed consent was not given in this case - Tooling was not fully informed of all material facts that would have affected its decision-making. The court emphasised that informed consent requires full disclosure of all material facts, and the fiduciary must provide this information proactively, not merely put the principal on inquiry. For example, the Court pointed to the upfront payment of 80% which provided an incentive for UW to procure that Tooling entered into a long-term contract irrespective of whether that was in Tooling’s best interests.
2. Crucially, informed consent is not impacted by the relative sophistication or vulnerability of the customer, in circumstances where it was not told of a number of material circumstances.  In other words, Tooling’s level of sophistication did not affect UW’s fiduciary duty to provide full details of the commission arrangements to enable it to make an informed decision about whether to consent to UW receiving the commission.
3. Engie did not provide any evidence that Tooling knew of a “market practice” as to the calculation of the commission. Therefore this was not a relevant consideration as to whether it gave informed consent.

Therefore, the Court of Appeal concluded that there was a breach of fiduciary duty by UW. However, Engie was not held liable to Tooling as the Court considered dishonesty was a necessary element for procuring or assisting in a breach of fiduciary duty and no dishonesty by Engie was alleged in the proceedings.

Discussion

We do not comment here on the findings in respect of the accessory liability of Engie, and we await the Judgment of the Supreme Court on similar issues in the case of Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Supreme Court Case ID UKSC/2024/0159).

However, this decision provides some important guidance in respect of disclosures of commission by brokers.  While arguably the decision does not change the current law on “half-secret commissions” (as this is always dependant on the facts) the Court of Appeal seems suggest that the following factors are no longer relevant  when considering whether informed consent has been obtained: 

1. How sophisticated the client is; and
2. Whether there is a market practice / custom and practice about the way commissions are charged, that the client is aware of.

These were considered relevant by the Courts in the previous decisions of Hurstanger Ltd v Wilson [2007] EWCA Civ 299 and Medsted Associates Ltd v Canaccord Genuity Wealth (International) Ltd [2019]EWCA Civ 83 and it is likely that many brokers relied on the findings in those cases to support their current ‘standard’ disclosures to clients in Terms of Business Agreements or engagement letters.

The decision signals the courts’ shift towards mandating more disclosure by brokers and a move away from factors that have so far been considered as potentially impacting the scope of fiduciary duty, such as the sophistication of the client or accepted market practice. However, the facts of each case and the actual knowledge of the principals remain central to the question of informed consent. This means it is difficult to adopt a ‘one-size-fits-all’ approach.

Overall, the Court of Appeal’s decision indicates that courts are more concerned with what the clients actually know. Ultimately, if a broker cannot be sure that their client knows about its payments from Insurers/third parties, it should disclose these as clearly as possible to avoid any criticism down the line.