The Court of Appeal delivered its much-anticipated judgment in Expert Tooling and Automation Limited v Engie Power Limited [2025] EWCA Civ 292 last Friday (21 March 2025), marking a critical development in the law of fiduciary duty, informed consent, and accessory liability. The ruling provides valuable insight into how the court may approach similar issues in the upcoming Supreme Court appeal in Johnson v FirstRand Limited (“Johnson”) concerning undisclosed and partially disclosed commissions paid in relation to motor finance agreements (“PCP appeals”).
Key aspects of the Judgment
At the heart of the dispute was whether Engie, by paying commission to a third-party energy broker, Utilitywise Plc (“UW”), in circumstances where full details in relation to the commission was not disclosed to Expert Tooling (“Tooling”), could be held liable for procuring or assisting in UW’s breach of fiduciary duty.
The Court of Appeal reaffirmed that:
1. Fiduciary Duties and Informed Consent: UW, as an agent, owed fiduciary duties to Tooling, including a duty to avoid conflicts of interest. Tooling was aware that UW would receive commission from Engie, but it was not aware of the exact amount or nature of the arrangement. The Court stressed that informed consent requires full disclosure of all material aspects, not just an acknowledgment that commission is being paid.
2. Accessory Liability and Dishonesty Requirement: Engie’s liability as an accessory was a crucial issue. The court clarified that merely paying a partially disclosed commission is not sufficient to establish liability. Instead, there must be an element of dishonesty – i.e., Engie must have known or turned a blind eye to the fact that UW was breaching its fiduciary duty by failing to obtain Tooling’s informed consent.
3. Rejection of Automatic Liability in “Half-Secret” Commission Cases: The Court resisted arguments by Tooling seeking to expand third party liability that would impose strict obligations on payers of commissions in “partially disclosed” commission cases, which are distinguishable from outright bribery or payment of a “fully secret” commission, which is a form of primary wrongdoing.
Implications for PCP Appeals
This decision has possible implications for the pending Supreme Court case in Johnson, which concerns PCP arrangements in vehicle financing and the liability of finance companies for commissions paid to car dealers and brokers who arranged finance to facilitate vehicle purchases by consumers.
1. Judicial Consistency on Fiduciary Breaches and Informed Consent: The Court of Appeal’s approach to the requirement of fully informed consent suggests that the Defendant Appellants in Johnson may face significant hurdles in arguing that motor dealers and brokers were not fiduciaries, and that simply providing disclosure of the fact that commission may or would be paid was sufficient to allow the dealers and brokers to obtain a consumer’s informed consent.
2. Higher Threshold for Establishing Dishonesty: However, the ruling indicates that accessory liability in equity remains fault-based and hinges on dishonesty. The Supreme Court may be reluctant to relax this requirement in Johnson.
3. Clarification of Liability for Third-Party Payers: If the Supreme Court follows the Court of Appeal’s reasoning, lenders and brokers in the PCP appeals may find themselves in a stronger position, provided they can show that partial disclosure (even if incomplete) does not automatically translate into liability.
However, where the commission payment was based on a discretionary commission arrangement (“DCA”) entered into between the lender and motor dealer/broker, even providing partial disclosure and the Court of Appeal’s ruling in Expert Tooling on accessory liability may not be enough for lenders to escape liability in cases involving partially disclosed commissions due to the lack of disclosure concerning the nature of DCAs and the arguments concerning unfairness that such arrangements created, as a result.
Potential Liabilities Post-Ruling
For businesses engaged in commission-based arrangements, this judgment underscores the importance of ensuring that all commissions are transparently disclosed, with explicit informed consent to the payment of commission received. Third-party payers, such as lenders and service providers, should implement due diligence processes to document that those acting on behalf of consumers have properly disclosed the commissions received to those they act for.
Failure to do so may expose companies to liability, particularly if they are found to have actively encouraged only partial disclosure insufficient to obtain informed consent, or ignored red flags indicating a lack of informed consent was being obtained to such commission payments by those receiving them.
A Judicial signal to the Supreme Court?
The Court of Appeal’s ruling serves as a judicial signal that courts remain committed to maintaining a clear division between the law relating to bribery as a form of primary wrongdoing and secondary accessory liability requiring clear evidence of knowledge, or the turning a blind eye to, a breach of fiduciary duty by an agent.
While Johnson will ultimately determine the final approach, the Expert Tooling judgment suggests that the Supreme Court may adopt a similar stance, requiring factual findings of knowledge of breach of duty or, at the very least, of turning a blind eye to such breaches, rather than inferring liability from partial disclosure alone.
As the legal landscape around undisclosed commissions continues to evolve, businesses, financial institutions, and legal practitioners alike will be watching intently how the Supreme Court hearing in the PCP appeals unfolds when it commences on 1 April 2025.
A link to the judgment is here
