Wood v Commercial First Business Ltd & Ors [2021] EWCA Civ 471 (31 March 2021)

Wood v Commercial First Business Ltd & Ors [2021] EWCA Civ 471 (31 March 2021)

A fiduciary relationship is not required for relief against the payer of a secret commission; it is sufficient that the payee owed a duty to provide impartial or disinterested advice. The payment of undisclosed commissions by the lender to the broker, without the borrower's informed consent, entitled the borrowers to rescission of the loan agreements and recovery of the commissions. The commissions in these cases were fully secret, not half-secret.

Citation
[2021] EWCA Civ 471
Parties
Claimant/respondent: Frances Elizabeth Wood; First Defendant: Commercial First Business Limited; Defendant/appellant: Business Mortgage Finance 5 PLC; Defendant/appellant: Business Mortgage Finance 7 PLC; Claimant/appellant: Business Mortgage Finance 4 PLC; Defendant/respondent: Richard Miles Pengelly
Jurisdiction
England and Wales
Judgment Date
31 March 2021
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court
Outcome
Appeals dismissed; borrowers entitled to rescission and recovery of secret commissions, subject to counter-restitution.
Legal Topics
Secret Commissions, Bribery, Fiduciary Duties, Agency, Rescission, Accessory Liability, Mortgage Mis Selling
Equity Contract Law Financial Services Law Secret Commissions Bribery Fiduciary Duties Agency Rescission +2 more

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Parties

Frances Elizabeth Wood

Claimant/respondent

Commercial First Business Limited

First Defendant

Business Mortgage Finance 5 PLC

Defendant/appellant

Business Mortgage Finance 7 PLC

Defendant/appellant

Business Mortgage Finance 4 PLC

Claimant/appellant

Richard Miles Pengelly

Defendant/respondent

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court

Legal Issues

  1. 1 Is a fiduciary relationship between client and broker a necessary pre-condition to relief against the payer of an undisclosed commission?
  2. 2 Did a fiduciary relationship exist between the client and the broker in these cases?
  3. 3 Are the commissions paid properly categorised as half-secret commissions?

Ratio Decidendi

A fiduciary relationship is not required for relief against the payer of a secret commission; it is sufficient that the payee owed a duty to provide impartial or disinterested advice. The payment of undisclosed commissions by the lender to the broker, without the borrower's informed consent, entitled the borrowers to rescission of the loan agreements and recovery of the commissions. The commissions in these cases were fully secret, not half-secret.

Court Disposition

Appeals dismissed; borrowers entitled to rescission and recovery of secret commissions, subject to counter-restitution.

Orders

  • Rescission of the relevant mortgage agreements and deeds granted to borrowers, subject to counter-restitution.
  • Borrowers entitled to recover the amount of undisclosed commissions from the lender or its assignees.