A secret commission refers to an illicit payment made to an agent without the knowledge or consent of the customer or business they represent. This practice is typically considered unethical and often illegal, as it can undermine trust and distort decision-making processes. Secret commissions can occur in a variety of transactions, but most notably in payment protection insurance and mid-sold energy claims. Here are some key aspects of secret commissions:

1. Nature of the Payment: The payment is concealed from the customer, and the agent receives it for influencing a decision or favouring a particular outcome.
2. Breach of Duty: Agents have a duty to act in the best interests of their customers. Accepting secret commissions breaches this duty, as the agent’s loyalty may be compromised by their own financial gain.
3. Conflict of Interest: Secret commissions create a conflict of interest where the agent may prioritise their personal benefit over the customer’s best interests.
4. Legal Consequences: Many places consider secret commissions a form of corruption or bribery, subject to legal penalties such as fines, imprisonment, or both. Civil liabilities may also arise, including claims for damages for fraud or breach of fiduciary duty.

The ethical and legal standards regarding secret commissions aim to ensure transparency, fairness, and integrity in business and professional transactions.

Fully secret commission vs half-secret commission

A secret commission is a payment made to an agent by a third party without the knowledge of the consumer. This is a breach of fiduciary duty and can have serious legal consequences. 

Fully Secret Commission:

• The customer is completely unaware of the commission. 
• The agent receives a payment from a third party without disclosing it to the customer or getting their informed consent.
• This is considered the most serious form of secret commission and is often treated as a bribe. 
• Remedies available to the customer are typically more extensive, including rescission of the contract. 

Half Secret Commission:

• The consumer is aware that a commission is being paid to the agent but is unaware of the exact amount of the commission being added. 
• The agent discloses the existence of the commission but not the specific details. 
• While still a breach of fiduciary duty, it is generally considered less severe than a fully secret commission.
• Remedies available to the customer may be limited compared to a fully secret commission, and the court may exercise discretion in granting remedies like rescission. 

Secret commission in energy claims

In the context of energy claims, a secret commission typically refers to undisclosed payments made to brokers or agents involved in energy transactions or settlements. These payments are not disclosed to the customer and are intended to influence the broker’s actions or decisions.

In recent case law, Wood v Commercial First Business Ltd (2021), EWCA Civ 471 represents a landmark case on secret commissions. It clarified that a fiduciary relationship sometimes isn’t necessary to claim for a secret commission. The case involved a broker receiving a commission from a lender without disclosing it to the borrower. The court ruled that undisclosed commissions can be considered bribes, and borrowers can claim for their return and other damages, even without proving a fiduciary duty.

Context in Energy Claims:

• Energy Brokerage: Energy brokers or consultants might receive secret commissions from energy suppliers or service providers for directing clients to their services.

Nature of the Payment:

• These payments are concealed from the main parties involved in the transaction or claim. For example, an energy consultant might secretly receive a payment from a supplier for recommending their services to a client without the client’s knowledge.

Impact on Decision-Making:

• The broker’s recommendations or decisions might be biased due to the financial incentive, leading to potentially unfavourable terms or conditions for the consumer party.
• This can result in higher costs, lower quality services, or settlements that do not adequately compensate the customer.

Legal and Ethical Implications:

• Secret commissions are considered unethical and often illegal, as they violate the principle of transparency and the duty of the intermediary to act in the best interests of their customer.
• Legal consequences can include fines, imprisonment, and civil liabilities for breach of fiduciary duty or corruption.

Secret commissions in energy claims undermine the integrity of the transaction or process, leading to potential financial harm and loss of trust among the parties involved. If you wish to make a claim for the losses you have suffered as a result of secret commission, then please don’t hesitate to get in touch with us today.

Criteria for making a secret commission energy claim

The courts have established specific criteria that must be met to challenge the non-disclosure of commissions:

• Fiduciary Responsibility: Typically they must establish that a fiduciary relationship existed between the parties, where one party was expected to act in the best interests of the other.
• Disclosure Obligation: This duty includes the responsibility to disclose the commission amount and its calculation.
• Informed Consent: The customer must not have given their informed consent to the commission payment.

How can a solicitor help with a secret commission claim?

A solicitor can assist in making a claim regarding secret commissions in energy claims by providing expert legal advice, gathering evidence, and representing you throughout the legal process. They will investigate and compile evidence of the undisclosed payments, review contracts, and identify breaches of fiduciary duty.

The solicitor will file the necessary legal documents, ensuring compliance with procedural requirements. They will also negotiate with the opposing party for a settlement or represent you in court if needed, presenting a strong case to prove the existence and impact of the secret commission.

Why choose Expert Commercial Law?

At Expert Commercial Law, we have a panel of law firms who help both small and large business owners to pursue these types of claim if they have been mis-sold an energy contract with a secret commission. We understand that when an energy broker mis-sells a contract to your business it can have a significant impact. Contact us today for free of charge to find out if you could be eligible to make a claim.

We are not a firm of solicitors; however, we have a panel of commercial law solicitors who are authorised and regulated by the Solicitors Regulation Authority. If you contact us in relation to a commercial law case, we will pass your case onto a panel firm.

Our solicitors can also help with a number of other commercial claims, such as partnership disputes, breach of contract and CCJ removal.