Expert Tooling And Automation Ltd v Engie Power Ltd

Factual and Procedural Background

This case concerns the liability of a party who pays commission to the agent of a third party principal where the commission is only partially disclosed to the principal, commonly referred to as a "half-secret" commission case. The Plaintiff, Company A, is a manufacturer consuming significant energy, and the Defendant, Company B, supplies electricity. Company A employed a third party broker, Company C, to negotiate and sometimes execute electricity supply contracts with Company B. Company C received commission from Company B, included in the unit price paid by Company A, but Company A was only partially informed about the commission details.

Company C was dissolved during the proceedings and did not participate in the case. The claim form was issued by Company A alleging that Company C owed fiduciary duties breached by receipt of commission without informed consent, and that Company B procured this breach by paying the commission. The claim against Company B for procuring breach of contract was conceded and is not pursued on appeal.

The trial judge dismissed Company A's claim, and Company A appealed on seven grounds, later seeking to add an eighth ground related to alleged dishonesty by Company B. The appeal was expedited to precede a pending Supreme Court hearing on a related matter.

Legal Issues Presented

1. Whether the scope of the fiduciary duties owed by the broker to the principal includes a duty to disclose the amount and funding arrangements of commission received.
2. Whether the principal gave informed consent to the receipt of commission by the broker, negating any breach of fiduciary duty.
3. Whether the judge erred in considering the principal's sophistication and vulnerability in the context of informed consent and fiduciary duty.
4. Whether reliance on trade custom or usage was proper in assessing the scope of duty or informed consent.
5. Whether dishonesty is a necessary element for the supplier's liability in procuring the broker's breach of fiduciary duty.
6. The date on which the cause of action accrued for limitation purposes, particularly regarding the first contract.
7. Whether the limitation period was properly extended due to alleged deliberate concealment by the supplier.
8. Whether the supplier was dishonest in the sense required for accessory liability, as addressed in a related Court of Appeal decision.

Arguments of the Parties

Appellant's Arguments

• The judge erred in narrowing the scope of the broker's fiduciary duties, particularly denying a duty to disclose commission details.
• The judge wrongly concluded that Company A gave informed consent without full disclosure of material facts, including commission amount and funding.
• The judge improperly relied on Company A's sophistication and vulnerability to justify limited disclosure.
• Trade custom or usage should not have been relied upon to limit fiduciary duties or inform consent.
• Dishonesty should not be required for supplier liability for procuring breach of fiduciary duty; liability arises if the supplier knows the recipient is an agent and consent was not obtained.
• The cause of action accrued upon payment of commission, not contract formation, affecting limitation period.
• The supplier deliberately concealed material facts to prevent discovery of the claim.
• The supplier was dishonest under the standard in the related FirstRand case and should be held liable accordingly.

Respondent's Arguments

• The judge correctly defined the scope of fiduciary duties, which did not extend to disclosure of commission amount or funding details.
• The judge properly found that Company A gave informed consent based on disclosure and opportunity to inquire.
• Company A's sophistication and knowledge negated any claim of inadequate disclosure.
• Trade custom and industry practice supported the judge's conclusions on disclosure and consent.
• Dishonesty is an essential element of accessory liability for procuring breach of fiduciary duty, and no dishonesty was shown.
• The cause of action accrued at contract formation, making the claim time-barred for the first contract.
• No deliberate concealment by the supplier was proven to justify extension of limitation.
• The proposed new ground of dishonesty should not be allowed as it was not pleaded or raised at trial and would require new factual inquiry.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the nature and scope of the fiduciary duties owed by the broker to the principal, affirming the fundamental obligation of loyalty which prohibits conflicts of interest and unauthorized profits. It rejected the trial judge's conclusion that the scope of fiduciary duty was narrowed by the principal's knowledge or ability to inquire, holding instead that such factors pertain to whether informed consent was obtained, not to the definition of the duty itself.

The court emphasized that informed consent requires full disclosure of all material facts, including the amount and funding of commissions, and that it is insufficient for a fiduciary to provide partial information and rely on the principal to ask for more. The judge's reliance on the principal's sophistication and the opportunity to inquire was held to be an error of law.

Regarding the supplier's liability, the court analyzed the precedent in Hurstanger, concluding that liability for procuring breach of fiduciary duty is accessory liability requiring dishonesty. The court rejected the appellant's submission that the supplier's liability arises strictly from knowledge of agency and lack of informed consent, without dishonesty. It affirmed that dishonesty, in the sense of knowledge or deliberate blindness to the breach, is essential.

The court addressed the limitation issue, agreeing that the cause of action accrues upon payment of commission, not contract formation, but found that the claim was not time-barred given the facts.

Finally, the court refused permission to add a new ground of appeal alleging supplier dishonesty, noting that no such claim was pleaded or argued at trial, and that the facts necessary to determine dishonesty were not fully explored, thus raising issues of fact unsuitable for determination on appeal.

Holding and Implications

The court allowed the appeal on grounds concerning the scope of fiduciary duty and informed consent, concluding that the trial judge erred in finding no breach of fiduciary duty by the broker. However, it dismissed the appeal on grounds relating to supplier liability, limitation, and dishonesty, holding that:

• The claim against the supplier in money had and received is not supported in law.
• Accessory liability of the supplier for procuring breach of fiduciary duty requires proof of dishonesty.
• In the absence of any allegation or evidence of dishonesty, the claim against the supplier is properly dismissed.
• Permission to amend the grounds of appeal to include a dishonesty claim against the supplier is refused.

The direct effect is that the broker is found to have breached fiduciary duties, but the supplier is not liable without dishonesty. No new precedent was established beyond clarification of the application of existing principles, and the case highlights the need for full disclosure and informed consent in agency commission arrangements. The court noted the complexity of the area and the need for Supreme Court clarification.