Expert Tooling and Automation Ltd v Engie Power Ltd

Hearing dates: 29 and 30 January 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 21 March 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This case concerns the liability of someone who pays commission to the agent of a third party principal, where the circumstances of the commission are only partially disclosed to the principal (sometimes referred to as a “half-secret” commission case).

The claimant, Expert Tooling and Automation Limited (“Tooling”) is a company carrying on business as a manufacturer of tools and related equipment and machinery. It consumes significant amounts of energy. The defendant, Engie Power Limited (“Engie”), supplies electricity. Tooling used the services of a third party broker, Utilitywise Plc (“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 under its contracts with Engie. Tooling was aware that UW Would be paid commission by Engie, but did not know other material matters, including how much.

The authorities concerning secret commissions (or bribes) and partially disclosed commissions were recently reviewed by this court, in Johnson v FirstRand Bank Limited [2024] EWCA Civ 1282 (“ FirstRand”). That case concerned commissions which motor car dealers received from finance companies where, the purchaser having requested financing, the motor dealer also acted as broker between the purchaser and the finance company. An appeal against that decision is due to be heard by the Supreme Court at the beginning of April 2025. The hearing of the present appeal was expedited to be heard – and if possible for judgment to be given – before the Supreme Court hearing in FirstRand.

UW has played no part in these proceedings. It was dissolved on 19 May 2022, having gone into administration on 13 February 2019.

The claim form was issued on 1 April 2022. Tooling claimed, in essence, that: (1) UW owed it contractual and fiduciary duties, in particular a duty not to allow its interests to conflict with those of Tooling; (2) the receipt of commission from Engie without having obtained Tooling's informed consent constituted a breach of those duties; (3) Engie, by paying the commissions, had procured UW's breaches of contractual and/or fiduciary duty; and (4) Tooling was entitled to recover the amount of the commissions paid by Engie as money had and received, alternatively as equitable compensation for inducing UW to breach its duties. The claim for procuring breach of contract was dealt with only briefly at trial, it being conceded that it stood or fell with the equitable claim. It is not pursued on appeal.

The claim against Engie was principally based on the decision of this court in Hurstanger v Wilson [2007] EWCA Civ 299; [2007] 1 WLR 2351 (“ Hurstanger”). The principle said to be derived from that case is that the payer of a half-secret commission, who is aware that the recipient of the commission is the agent for the claimant, is liable to pay equitable compensation for having procured a breach of fiduciary duty by the agent, unless it (the payer) can establish that the commission was paid in circumstances where the claimant had given their informed consent to the payment.

The judge dismissed Tooling's claim, for reasons I explain in more detail below. Tooling appeals on seven grounds, with the permission of Snowden LJ granted on 7 August 2024. The decision of this court in FirstRand was handed down on 25 October 2024. Tooling then applied to add an eighth ground of appeal, described below at [41]. On 14 January 2025, Lewison LJ adjourned Tooling's application to the hearing of the appeal, but gave permission to the parties to file supplemental skeleton arguments addressing the point.

The facts

Much of the factual background is common ground, or is the subject of findings by the judge against which no appeal has been brought. The following are the essential matters relevant to the points raised by this appeal.

The contract between Tooling and UW

Under a letter of authority from Tooling dated 1 November 2015, UW was engaged “to act as a service provider to [Tooling] in all matters pertinent to our Gas and Electricity supplies and service.” Later letters of authority were provided by Tooling to UW in similar terms. In various emails from UW to Tooling, it was stated that “if you have returned a signed LOA, you acknowledge and accept that you have read the Utilitywise standard terms and conditions, and your instructions will be deemed agreement by you to be bound by Utilitywise standard terms and conditions.” There followed a link to the terms and conditions on UW's website.

Those terms and conditions obliged UW to provide “the Services” to Tooling. These were defined as the services set out in the schedule of services provided to the customer. In fact, no schedule of services was provided. It was the evidence of Mr Craig Forster, an employee of Tooling who dealt with UW, that UW told him that as experts in the energy market, they would act on Tooling's behalf and in their best interests and save them money. This echoes what appears on UW's website, where the following appeared:

“With hundreds of different tariffs on offer from dozens of suppliers, having a trusted advisor on your side to reduce uncertainty and help pick the right contract terms for your business will give you real peace of mind and save you time, money and hassle.

At Utilitywise we pride ourselves on taking the hassle out of business energy procurement. We'll negotiate with your energy supplier on your behalf and help you secure a fixed price energy contract that can you give you budget certainty and help your financial planning.”

In light of these facts, the judge found that UW was Tooling's agent, that this was a case of paradigm agency and, as such, UW owed fiduciary duties to Tooling including the duty not to allow its interests to conflict with those of Tooling. There is no appeal from those findings.

The contract between UW and Engie

There was a separate legal relationship between UW and Engie. At the time of the entry into the first contract between Engie and Tooling, this was contained in a detailed brokerage agreement dated 25 June 2015. The recitals included that UW wished to charge a procurement commission in relation to the introduction of customers to Engie, and that the provisions of the agreement were intended to ensure that UW “will act in a fair, honest, transparent, appropriate and professional manner when dealing with Potential Customers”. By clause 4.1.1 UW warranted and undertook that:

“it has the authority to act on the Potential Customer's behalf; (1) in relation to the procuring and providing to [Engie] of information relating to its Electricity and/or Gas consumption and supply; (2) for the purposes of obtaining quotations and contracts to supply; and (3) In providing all further information and data that may be required by [Engie] on an on-going basis.”

By clauses 4.1.8 to 4.1.10, UW undertook to act in various ways which amounted to acting fairly and transparently with potential customers. By clause 4.1.11 it undertook that:

“It will, at all times whether prior to or providing any product or service or during the provision of the same, be transparent with the Potential Customer in relation to all charges and commissions…”

The payment of commission was addressed in clause 5. Clause 5.1 provided that Engie would pay a commission in respect of each supply contract Engie entered into with a potential customer, where requested by UW. The rate of commission was, by clause 5.2, to be notified by UW to Engie during the preparation of the quotation by Engie, and “shall be subject to agreement between the Parties.” By clause 5.6 it was agreed that the commission to be paid to UW would be based on the potential customer's estimated energy consumption, subject to a reconciliation process at the end of each supply contract.

In fact, upon entry into each contract, UW was paid a substantial sum up-front, calculated as 80% of the commission UW would ultimately be entitled to, based on Tooling's expected consumption over the life of the contract. In the case of the first contract, the price charged to Tooling was 17.82p per kWh (day rate) and 15.598p per kWh (night rate) over the five-year term. 5.6p per kWh of these prices represented the amount of UW's commission. The estimated consumption over the life of the contract was over 2 million kWh, producing an estimated commission of just over £112,000. UW received an up-front payment from Engie of £89,000.

By clause 8.4, both parties agreed not to disclose the details of the agreement or any information disclosed under it to any third party, “other than to fulfil their obligations under this Agreement or if required by law or an appropriate regulatory authority, without the written consent of the other Party.”

Later brokerage agreements between UW and Engie were in materially similar terms.

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