Pengelly v Business Mortgage Finance 4 Plc

Pengelly v Business Mortgage Finance 4 Plc

The broker (UKMFS) owed fiduciary duties to Mr Pengelly, and the payment of commission by the lender (CFBL/Finance 4) to UKMFS without full disclosure or informed consent constituted a breach of fiduciary duty. The lender, knowing the facts constituting the fiduciary relationship and failing to ensure disclosure, was accessory to the breach. This was a case of a secret commission, not a half-secret commission, entitling Mr Pengelly to rescind the mortgage subject to counterrestitution.

Parties
Appellant/defendant: Richard Miles Pengelly; Respondent/claimant: Business Mortgage Finance 4 PLC
Jurisdiction
England and Wales
Judgment Date
28 July 2020
Procedural Posture
Civil Appeal / High Court Appeal From County Court Judgment
Outcome
Appeal allowed in part, dismissed in part
Legal Topics
Fiduciary Duties, Secret Commissions, Agency Law, Accessory Liability, Consumer Credit Act 1974, Rescission
Equity Contract Law Financial Services Fiduciary Duties Secret Commissions Agency Law Accessory Liability Consumer Credit Act 1974 +1 more

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Parties

Richard Miles Pengelly

Appellant/defendant

Business Mortgage Finance 4 PLC

Respondent/claimant

Procedural Posture

Civil Appeal / High Court Appeal From County Court Judgment

Legal Issues

  1. 1 Whether the mortgage broker (UKMFS) owed fiduciary duties to Mr Pengelly
  2. 2 Whether the payment of commission by the lender to the broker was a secret commission or bribe
  3. 3 Whether the lender (and its assignee) was accessory to a breach of fiduciary duty

Ratio Decidendi

The broker (UKMFS) owed fiduciary duties to Mr Pengelly, and the payment of commission by the lender (CFBL/Finance 4) to UKMFS without full disclosure or informed consent constituted a breach of fiduciary duty. The lender, knowing the facts constituting the fiduciary relationship and failing to ensure disclosure, was accessory to the breach. This was a case of a secret commission, not a half-secret commission, entitling Mr Pengelly to rescind the mortgage subject to counterrestitution.

Court Disposition

Appeal allowed in part, dismissed in part

Orders

  • Mortgage set aside subject to Mr Pengelly making satisfactory proposals for counterrestitution; if not agreed, matter to be restored for further hearing.
  • Appeal on section 140A of the Consumer Credit Act 1974 dismissed.