Energy customers caught up in ‘scandal bigger than PPI’ suffer High Court blow

Hopes for hundreds of thousands of small businesses to reclaim hidden energy broker fees, amounting to potentially billions of pounds in refunds, have been dealt a blow in a High Court case.

Coventry-based manufacturing group Expert Tooling and Automation (ETA) took French power giant Engie to court to reclaim more than £130,000 in the broker fees it claimed had been hidden when agreeing its supply deals.

However, High Court Judge Andrew Saffman rejected the firm’s claim, ruling that the energy supplier cannot be held responsible for the deal agreed by an independent broker firm.

Judge Saffman’s ruling, seen by i, sates: “While I do not believe the defendant [Engie] covered itself in glory… there is no evidence of dishonesty and it cannot therefore be held to be an accessory.”

ETA used the services of energy broker firm Utilitywise (UW) to secure five contracts. The broker no longer trades after it fell into administration in February 2019.

The deals led to ETA paying up to 31% of their total energy bill in broker fees, but the ruling from the judge did not agree with the claimant that these deals were the responsibility of Engie.

In one of the five deals, agreed for a period of 5 years from 1 April 2016 to 31 March 2021, resulted in Utilitywise claiming more than £100,000 in commission, according to the court ruling.

ETA conceded that it was aware that Utilitywise would be paid a commission for brokering the contracts, while Engie agreed that the claimant was not told of the level of commission.

Judge Saffman added: “I have not heard any evidence that the commission paid to UW was an ‘exceptionally large sum’ or was anything other than the ‘customary rate of reward’ in the market.

“Indeed, such evidence as I did hear suggests the opposite.”

The judge also raised concerns over the time limitation of such energy broker claims stating that “this claim was brought on 31 March 2022, some 6 years and 7 weeks” after the first ETA contract was agreed.

The ruling could damage the chances of other companies seeking compensation.

Callum Thompson, whose Business Energy Claims (BEC) firm took on ETA as a client, has claimed that mis-sold energy contracts entered into by non-domestic energy users total around £2.25bn each year since 2000.

If every company hit by hidden broker fees made a successful claim, Mr Thompson believes the total paid out could dwarf the £38.4bn paid to PPI claimants since 2011.

Mr Thompson said of the latest ruling: “The impact of the decision is currently being considered by our solicitors”, claiming it did not mean an end to other claims.

“Energy commission claims of this type are very fact specific and so it would be wrong to suggest that the decision in any way represents an end to energy claims,” he said. “This decision is but one of a growing body of claims and court decisions.

“It is inevitable that in an area of such widespread consumer importance and given the most recent concerns recognised by Ofgem and now at Government level, the courts will need to give higher authoritative determination.”

However, a spokeswoman for Engie claimed the High Court ruling set a precedent, adding that it would appeal against a previous ruling.

“We welcome the recent High Court ruling, which is legally binding and sets a precedent for any similar cases, which we will defend,” the Engie spokeswoman said. “We were disappointed in the County Court judgment regarding ‘Queenie’s Slots’, which is not in accordance with other claims in this area and we will be looking to appeal.”

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In March, BEC won a brokers’ fees case in Leeds Crown Court on behalf of Queenie’s Casino Slots.

The business, based in County Durham, recouped £14,000 from Engie after a judge ruled an energy broker had hidden additional fees in the business’s bills.

Last week, the Government announced that almost every business in the UK will get free support to claim compensation for broker fees hidden in their energy bills.

Following stories in i highlighting the practice of energy broker fees being concealed within bills, the new scheme will allow businesses to claim up to £10,000 in compensation without having to go through the courts.

Business minister Amanda Solloway announced the move as part of Government and Ofgem changes to tackle “cowboy practices” such as hidden broker fees, inaccurate energy bills, and pressurising sales tactics for energy contracts.

Law firm Harcus Parker, which is bringing a group action against energy suppliers on behalf of hundreds of small businesses, told i that it is also “reviewing” the ETA case and its impact on its litigation.

Matthew Patching, partner at Harcus Parker, added: “We are aware of the recent High Court judgment in the Expert Tooling case. We are considering the content of the judgment and what impact it might have on the claims our clients are proposing to bring.

“The judgment appears to provide an interesting counterpoint to Ofgem’s welcome announcement last week that it plans to reinforce through regulation the requirement that energy suppliers disclose commissions paid to brokers to their customers.”

A spokesman from Energy UK, the industry’s trade association, said: “As the majority of non-domestic contracts are secured through brokers, the industry has long called for them to be regulated in the same way as the rest of the market.

“Energy UK and our supplier members have supported proposals resulting from Ofgem’s review of the non-domestic market, particularly around increasing the information, clarity and transparency of commissions. Ofgem having the legal powers to set out and enforce rules would increase regulatory oversight and establish higher standards for brokers so that business customers are properly protected.”

Energy regulator Ofgem and the Government declined to comment. ETA were contacted for comment.

How to claim compensation over energy broker fees

Last week, the Government and energy regulator Ofgem moved to end the practice of hiding broker fees.

The new scheme is set to be launched that could help businesses claim up to £10,000 in compensation without having to go through the courts. 

While micro-businesses – firms with less than 10 employees and sales under £1.8m – can already go to the Energy Ombudsman for help with energy contract disputes, the Government will extend access to companies with fewer than 50 employees. This means 99 per cent of all private businesses and charitable organisations will have access to the free resolutions service.

Due to the Government’s move not being retrospective legislation, losses small firms accrued will not be able to be considered by the ombudsman.

What to do if you still can’t benefit from the ombudsman scheme

So, what do you do if you have an historic claim as a small business or a claim of more than £10,000 as a micro business?

Before approaching a lawyer or energy claims firm, of which many can be found on the web, write to your business energy supplier to gather the information you need. 

Ask your supplier to provide detail of all the broker fees you have paid as part of your energy tariff since you agreed the deal. For example, if your company has been with the same supplier since 2000, then ask how much you have paid in broker fees since then. 

You should also ask your supplier what its profit has been during the course of your deal or deals with them. 

Finally, make clear to your energy supplier that you are prepared to take legal action should they refuse to refund your commission fees. 

If you cannot agree a settlement with your supplier, then consider adding your name to a group action by a legal firm. You could also, at this point, take your action to a business energy claims company. 

Also be aware that a claim is not guaranteed to be successful and may cost thousands in fees if you cannot agree a no-win-no-fee deal. 

What you will need to prove to a court

In order to convince a court or the ombudsman of your case you will be required to show all of the following: 

• fiduciary duties were owed by the broker/agent/introducer to the customer 
• the scope of those fiduciary duties 
• breach of those fiduciary duties by the broker/agent/introducer 
• the claimant did not give its informed consent to payment of commission 
• knowledge of that fiduciary relationship on the part of the supplier 
• an act on the part of the supplier which gives rise to a liability to the customer e.g. procuring the broker/agent/introducer’s breach of its fiduciary duties.  

If a claimant cannot establish any of these points any claim may be rejected by a court.

This article contains general information and should not be relied upon as specific advice.