Home Business News Landmark case for energy opens floodgates for small businesses who were mis-led and mis-sold

Landmark case for energy opens floodgates for small businesses who were mis-led and mis-sold

by LLB staff reporter
22nd Mar 24 9:22 am

A leading energy litigation firm is urging UK business owners to check their energy contracts amid fears they could be owed tens of thousands of pounds following a landmark court case for energy mis-selling.

Earlier this month, a court handed small entertainments business “Queenies Casino Slots”, in County Durham, a payout of around £14,000 from global energy provider Engie, after they were held liable for failing to disclose the commission an energy broker was making from the contract.

The case could pave the way for hundreds of thousands of other claims amid a growing scandal involving rogue brokers and complicit energy suppliers, according to energy litigation experts, Energy Solicitors Ltd (ESL).

Experts at ESL believe the energy market is fragmented and due to a lack of regulation over many years, many businesses have fallen victim to mis-selling and incurring substantial losses.

The legal experts are working with thousands of businesses in a bid to recover these losses, which according to industry figures are in the region of £2.25bn each year and affect approximately 2.2million businesses in the UK.

ESL’s Director and Senior Partner, Victoria Myers said: “If you’ve used an energy broker, they may have added hidden commission into your energy contracts without clearly explaining it.

“Energy brokers legally have to disclose any commissions earned, but over the years many have made misleading statements or concealed their financial incentives.”

ESL has found that despite their legal obligations, major business energy suppliers would secure high-cost deals with brokers, who in turn would receive commission at the customer’s expense, without a proper and clear explanation.

In the recent ruling, it emerged that Engie had not been transparent during the process, as the Recorder highlighted ‘deliberate concealment’ on its part: “Relevant information was … kept secret … and that concealment was, in my judgment, deliberate on Engie’s part.”

In what is known as a ‘half secret case’, the client knew the broker would be paid in some form, but did not know the extent, the amount or that they themselves would foot the bill.

The court found a conflict of interest between the broker and client, and that the broker had determined the size of the commission which ultimately went against the client’s best interests, while also determining the length of contract.

Pointing out that the client could not have discovered the commission amount, the Judge said the brokerage agreement meant both Engie and the broker would deliberately conceal commission.

The ruling highlighted that “it was in Engie’s interest to keep the brokers happy and to … attract them to do business with Engie as opposed to another electricity supplier.”

The judgment added: “if the customers did enter electricity supply contracts with Engie, then the brokers would obtain a payment (by way of a commission paid on a fixed figure per kWh) from Engie. It was Engie’s policy to not reveal the size or nature of this commission.”

A French multinational company, Engie has been active in the UK energy market for more than 20 years. An employer of some 100,000 staff across the globe and with 24 million customers, the firm generated almost 83 million euros in recent reports.

In 2018, an Ofgem survey found 67 per cent of small and micro business customers used a broker to help choose their tariff, with fixed rates for up to five years with no cooling-off period, meaning companies are legally locked in and highlighting the true scale of the scandal.

The owner of Queenie’s, welcomed the ruling. He said: “We are pleased to have won damages against the supplier.

It may not seem like a huge amount but for a small business like ours it makes a big difference.

“Like many others, we are trying to operate in challenging economic circumstances. Energy bills are big enough as it is without having to fork out more.

“Many other businesses may have fallen foul to this type of practice costing them £1000s in the process… money they can’t afford.

“No business wants to be ripped off. Check your energy bill or get support – it’s important to make sure you are not overpaying through hidden fees.”

Victoria Myers and her team of legal experts at ESL are now urging businesses who may have mis-sold energy to check their contracts.

She said: “This has the potential to be the next PPI scandal with thousands of innocent business owners being mis-led and mis-sold contracts – we believe many still may not know they have been targeted and it’s a frustrating situation for everyone affected.

“The recent court ruling, while not a huge sum of money, means a lot to a small entertainment firm and has much wider implications for energy litigation. A major energy supplier ‘deliberately concealed’ costs from a small business, and that is huge.

“This is a multi-billion-pound issue and at a time when businesses struggle with growing costs across the board, it is important for them to look at their contracts and ensure they aren’t missing out on what is rightfully theirs.”

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