Secret/undisclosed commissions...

[42man]

http://www.consumeractiongroup.co.uk/forum/mortgage-companies/151573-sub-prime-mortgages-loans.html#post2469994

[Sparkie1723]

Taken from Decembers Ruling by High Court ( Judge Waksman)

 

Secret Commissions

 

Ordinarily, the introducer or broker will be treated as an agent of the borrower. As such they owe a fiduciary duty to their client including the duty not to make a secret profit.

 

 

Provided that it is disclosed to the client, there is nothing wrong in principle in an intermediary charging a broker’s fee. However, the commission must be disclosed and a general statement that “a commission may be paid in certain circumstances” is not adequate.

 

 

The receipt of a secret commission by a broker is a species of fraud and is actionable both against the broker or introducer and the lender who paid the secret commission.

 

 

In the Court of Appeal case of Hurstanger v Wilson [2007] EWCA Civ 299, Lord Justice Tuckey commented as follows:

 

 

1. Obviously if there has been no disclosure the agent will have received a secret commission. This is a blatant breach of fiduciary duty but additionally the payment or receipt of a secret commission is considered to be a form of bribe and is treated in the authorities as a special category of fraud in which it is unnecessary to prove motive, inducement or loss up to the amount of the bribe. The principal has alternative remedies against both the briber and the agent for the money had and received where he can recover the amount of the bribe or for the damages for fraud where he can recover the amount of any actual loss sustained by entering into the transaction in respect of which the bribe was given (Mahesan v Malaya’s Housing Society [1979] AC 374, 383). Furthermore the transaction is voidable at the election of the principal who can rescind it . . . (Panama & South Pacific Telegraph Co v India Rubber, Gutta Percher and Telegraph Co [1875] 9 Ch App 515, 527, 532-3).”
   

Mr Mark White stated quite clearly and categorially under oath in my court case that Swift DO NOT pay commission as such. What can be more secret than that, when I can prove they do pay commission and BIG commission payments.

 

This means that anyone who's broker has gone bust can sue Swift direct

 

 

sparkie

[42man]

Excellent Sparkie...thank you for this, I hadn't read that (from Judge Waksman).....

[Sparkie1723]

Excellent Sparkie...thank you for this, I hadn't read that (from Judge Waksman).....

 

HI 42 man

 

I think quite a few did miss this ...it was in his ruling Carey v HSBC Bank.

 

sparkie

[mrsiphone]

Taken from Decembers Ruling by High Court ( Judge Waksman)

 

Secret Commissions

 

Ordinarily, the introducer or broker will be treated as an agent of the borrower. As such they owe a fiduciary duty to their client including the duty not to make a secret profit.

 

 

Provided that it is disclosed to the client, there is nothing wrong in principle in an intermediary charging a broker’s fee. However, the commission must be disclosed and a general statement that “a commission may be paid in certain circumstances” is not adequate.

 

 

The receipt of a secret commission by a broker is a species of fraud and is actionable both against the broker or introducer and the lender who paid the secret commission.

 

 

HI 42 man

 

I think quite a few did miss this ...it was in his ruling Carey v HSBC Bank.

 

sparkie

 

Afternoon sparkie I am helping a friend with a secret commission claim. I have read the carey case a couple of times now and couldn't find any reference to commission.

 

Can you help me out and point me in the direction of the above ?

 

Carey v HSBC Bank Plc [2009] EWHC 3417 (QB) (23 December 2009)

 

Very much appreciated,

Edited April 18, 2010 by mrsiphone

[mrsiphone]

Sorry Sparkie, it doesn't look like that is from that case

 

Angry Cat posted the same thing word for word a month before the Case was held

 

http://www.consumeractiongroup.co.uk/forum/show-post/post-2613411.html

[Killerschick]

Hi Mrs iphone,

If you Google the quote you will find it's just blurb from a claims company's website, Emmetts Solicitors aka www.financialmisselling.co.uk. They happen to mention Carey on their page about Consumer Credit Claims and this seems to be where some confusion has arisen.

The quote comes wholesale from their section about secret commissions:-

• If a “secret commission” has been paid by a lender to a broker, how will this affect any claim?
  

Ordinarily, the introducer or broker will be treated as an agent of the borrower. As such they owe a fiduciary duty to their client including the duty not to make a secret profit.

Provided that it is disclosed to the client, there is nothing wrong in principle in an intermediary charging a broker’s fee. However, the commission must be disclosed and a general statement that “a commission may be paid in certain circumstances” is not adequate.

The receipt of a secret commission by a broker is a species of fraud and is actionable both against the broker or introducer and the lender who paid the secret commission.

In the Court of Appeal case of Hurstanger v Wilson [2007] EWCA Civ 299, Lord Justice Tuckey commented as follows:

1. Obviously if there has been no disclosure the agent will have received a secret commission. This is a blatant breach of fiduciary duty but additionally the payment or receipt of a secret commission is considered to be a form of bribe and is treated in the authorities as a special category of fraud in which it is unnecessary to prove motive, inducement or loss up to the amount of the bribe. The principal has alternative remedies against both the briber and the agent for the money had and received where he can recover the amount of the bribe or for the damages for fraud where he can recover the amount of any actual loss sustained by entering into the transaction in respect of which the bribe was given (Mahesan v Malaya’s Housing Society [1979] AC 374, 383). Furthermore the transaction is voidable at the election of the principal who can rescind it . . . (Panama & South Pacific Telegraph Co v India Rubber, Gutta Percher and Telegraph Co [1875] 9 Ch App 515, 527, 532-3).”
   

Just to confirm none of this is referred to in Carey although the latter bit is taken from Hurstanger v Wilson. It's paragraph 39 of the full judgment which you can find here (among other places):-

http://www.creditlaw.co.uk/Cases/Full%20case%20-%20Wilson%20v%20Hurstanger%202007.doc

 

Hope this clarifies the position.

[sweetjane]

Swift advances wrote to us recently saying: "You will note that within section 6 (of the signed Additional Information, Authorities and Declarations Form) it clearly states: If your loan was introduced to Swift by a broker then it is likely Swift will pay the broker commission." The letter goes on "As you may be aware, recent case law has held that generic disclosure of this nature is sufficient to negate secrecy"

[Dougal16T]

Good evening,

 

I just suggest that you write back to Swift and quote the following case:

 

In the recent case of Nicholas G Jones v (1) Environcom Limited (2) Environcom England Limited and MS PLC t/a Miles Smith Insurance Brokers [2010] EWHC 759 (Comm) Mr Justice David Steel restated the broker's duty to inform its client of its disclosure obligations:

 

Broker's duty

David Steel J began his analysis by affirming (by reference to ICOB 4) the usual position that a broker has a duty to:

 

• advise their client of the duty to disclose all material circumstances (facts);
  
• explain the consequences of failing to do so;
  
• indicate the sort of matters which ought to be disclosed as being material or arguably material;
  
• take reasonable care to elicit matters which ought to be disclosed but which the client might not think it necessary to mention.
  

The Judge emphasised that if a new person became responsible for insurance matters in the client's organisation (as was the case at Environcom), the broker had a duty to ensure that the new person had the requisite understanding of the duty of disclosure.

The use of written advice

Miles Smith argued that it had fulfilled its duty by sending various documents to Environcom which explained its disclosure obligations. Miles Smith relied on several documents, including a letter dated November 2004 enclosing a “Summary of Insurance”, Miles Smith's revised terms of business dated January 2005, various invoices for premium and Proposal Forms. All of these documents contained some advice on the insured's disclosure obligations.

However, David Steel J concluded that none of these documents was sufficient to satisfy Miles Smith's duty to Environcom because they failed to adequately explain the obligation to disclose material facts, the nature of material facts, and the consequences of failing to disclose material facts, nor did they assist in determining at what stage disclosure was required.

The Judge emphasised that brokers could not rely on standard documents alone:

"I am not persuaded that it is sufficient simply to rely upon written standard form explanations and warnings annexed to proposals or policy documents…The broker must satisfy himself that the position is in fact understood by his client and this will usually require a specific oral or written exchange on the topic, both at the time of the original placement and at renewal (particularly if a new person has become that client's representative)."

In summary, David Steel J concluded that Miles Smith had failed to give adequate advice to Environcom on its disclosure obligations.

 

Now then whilst this relates to Insurance, in my view the same is true for all brokers - a generic letter regarding fees and commissions is NOT good enough - it must be specific and detail those amounts involved.

 

All comments thoughts etc welcomed....!

 

As always best wishes to all

 

Dougal

[frettful38]

Hi Dougal16T, although I agree with what you have written above my lender on the other hand have quite a different view about the disclosure of commissions. My solicitors wrote to my lender requesting information about the commission they paid to my broker [Ocean Finance]. I have the Underwriting Sheet which I believe came accidentally in my Data Request from Ocean. In the US it clearly states that Ocean Finance were paid a case commission fee by my Lender [blemain Finance Ltd].

 

When I questioned Blemain about this they referred me to Term 11 in my loans terms and conditions which reads :

 

"The Lender will usually pay the Broker a commission and this will will normally be calculated as a percentage of the loan amount"

 

My lender believes that this is enough information to have made me aware that they would pay my broker a commission. Here is the response from Blemain to my ex-solicitors about the commission.

 

http://i450.photobucket.com/albums/qq223/sophiak_bucket/barristers%20advice/downloads/blemainresponsetosolicitor.jpg

[42man]

It is still a 'secret' commission as it was undisclosed (i.e. you didn't know what the amount was)

[frettful38]

True 42man, but that still does not stop Blemain from covering their backs by referring me to Term 11 in my terms and conditions.

 

 

Well they didn't have to disclose the secret commission because I received the Underwriting Sheet that cam with my Data Request from them so ha bloody ha!

Edited May 26, 2010 by frettful38

[Dougal16T]

Good evening,

 

This is to Blemain:

 

In Wilson & Another v Hurstanger Ltd[2007] EWCA Civ 299 it was held that :The broker had not made a secret commission because the borrowers knew about the commission. But, in failing to disclose the amount, the broker had, nevertheless, acted in breach of his fiduciary duty because he had not obtained his clients' informed consent to the potential conflict of interest.

 

Significantly, the lender, (who in this case is Blemain) who had paid the commission knowing that the broker was acting as the agent of the borrowers, was found liable as an accessory to that breach. This meant that the borrowers were entitled to claim equitable compensation directly against Hurstanger.

 

 

I note that this is not the first occassion that Blemain have failed to act in accordance with the appropriate legislation, and I fully intend to take this matter as far as is neccessary in order to obtain compensation.

 

 

You have 14 days to comply with my request for details as to the actual amount of commissioin paid in my case.

 

 

Regards

 

I say that you must send this by first class recorded post - otherwise Blemain will not act and will claim ignorance.....

 

 

All the best to all

 

Dougal

Edited May 11, 2010 by Dougal16T
More emphasis needed......!!!

[frettful38]

Good evening,

 

This is to Blemain:

 

In Wilson & Another v Hurstanger Ltd[2007] EWCA Civ 299 it was held that :The broker had not made a secret commission because the borrowers knew about the commission. But, in failing to disclose the amount, the broker had, nevertheless, acted in breach of his fiduciary duty because he had not obtained his clients' informed consent to the potential conflict of interest.

 

Significantly, the lender, (who in this case is Blemain) who had paid the commission knowing that the broker was acting as the agent of the borrowers, was found liable as an accessory to that breach. This meant that the borrowers were entitled to claim equitable compensation directly against Hurstanger.

 

 

I note that this is not the first occassion that Blemain have failed to act in accordance with the appropriate legislation, and I fully intend to take this matter as far as is neccessary in order to obtain compensation.

 

 

You have 14 days to comply with my request for details as to the actual amount of commissioin paid in my case.

 

 

Regards

 

I say that you must send this by first class recorded post - otherwise Blemain will not act and will claim ignorance.....

 

 

All the best to all

 

Dougal

 

Thanks for that Dougal16T I will do what you have advised above along with much more. I don't know if you have read my thread that I have frettful-v-lender, there are many things that Blemain need to answer fro and the secret commission is only a drop in the ocean.

 

I am preparing a s140 against them and going to use the unfair relationship act. It will be long and difficult, nevertheless I am determined. I mean just look how far sparkie1723 has got with swift. We have to fight if we think we have been caused injustice. Only problem is that your average consumer don't know jack crap about the in's and out's of the law and finance industry, making it much harder and longer to get where we want.

 

Not only do we have to study the right act and apply the correct law to any breaches we have experienced, and on top of that you have these lenders and financial industries pulling every rabbit out of their hats to run us in to the ground. Fighting these companies is like pushing a car with the handbrake on

 

Thanks I will add what you have written to my long list of complaints against these warlocks.

 

Dougal16T, I don't know if you have seen this letter from Blemain which was sent to my solicitors who wrote to them requesting information about the secret commission. These solicitors are no longer acting for me. This response from Blemain is to the secret commission payment paid to my broker. My solicitor sent me this letter on the 26 April 10, even though he received Blemains response on 10 March 10.

 

Blemains response to my ex-solicitors regarding secret commission.

Edited May 26, 2010 by frettful38

[postggj]

fretfull

 

does a high court ruling get overturned by t & c

 

i think not

 

i shot godebt down in flames on that one

[frettful38]

thanks postggj, so you reckon Blemains response should not put me off writing to them? Blemain claim that we were not vulnerable and lacking in sophistication. Now that is another point that I should question them under the unfair relationship act s140. They would have to prove that we were not vulnerable and prove that we were sophisticated.

 

My OH for is not fluent in English as it is not his first language, and I on the other hand was being treated for depression and low mood.

[sweetjane]

Hi Dougal

Only just seen your post. Thanks and I'll adapt your letter for Swift although it was a final reply so I might just tack it on to my ongoing complaint. BW SJ

[frettful38]

If you take out a secured loan, unsecured loan or mortgage through a broker or agent then they have a duty under agency law to act in good faith among other things. This duty requires that they act in the best interests of the client at all times and do not allow their personal interests to conflict with the clients’ best interests.

 

Additionally, where a commission is paid to the broker by the lender, the broker should disclose this to the client. A broker is not entitled to profit from carrying out the instructions of its client unless all the relevant facts have been disclosed to the client and the broker has received the client's permission to do so. Depending upon the circumstances surrounding the commissions paid, it may be possible to bring a claim to recover the undisclosed commission.

 

If it is established that the commissions were secret and amount to a secret profit then, in certain situations, this can become considered a bribe if the money is paid to the broker or agent without the client’s knowledge. This is because the payment could influence the broker to act in a way which may not be in the best interests of the client which is not allowed and would give rise to a potential claim.

 

The same may apply to car loans. If the commission is undisclosed and is hidden in the amount of credit, the agreement may be rendered unenforceable as a result.

 

It is impossible to judge a case without having all the details available as each case is dealt with on its own merits.

 

The legal background to financial mis selling & unenforceable agreements ::

 

Financial Service Regulation

 

The Financial Services Authority governs and regulates providers of Payment Protection Insurance. This includes Loan companies and Insurance companies.

 

The FSA have over recent years carried out a campaign against PPI mis-selling and have publicly pledged to stamp it out !!

The Legal Background

 

Companies providing credit to the public in the form of secured and unsecured loans have to comply with the Consumer Credit Act 1974.

 

This act applies to all loans under the current limit of £25,000 until 2006 when the upper limit was removed.

 

(1) Section 60 (1) of the Consumer Credit Act 1974 empowers the secretary of state to make regulations as to the form and contents of documents embodying Regulation Agreements. A breach of the regulation can render the agreement invalid.

 

(2) Section 1 of schedule 6 of the Consumer Credit Act (Agreements) Regulations 1983 states that there must be an accurate statement of the amount of credit being provided in a fixed sum credit agreement. If there are any mistakes in this document for example an item of cost in obtaining the credit being included in the loan, the loan is irredeemably unenforceable.

 

Legal Precedents

 

- Dimond V Lovell (200) RTR 243

- Wilson V First County Trusts Ltd., (2001) QB07

- Wilson V First County Trust 2 (2001) ENCA CV633

 

(3) Paragraph 4 & 5 of the schedule 6 of the Consumer Credit Act states that a fixed sum credit agreement must correctly state the rate of any interest on the credit to be provided under the agreement and must also contain a term stating how the debtor is to discharge his obligations under the agreement to make the repayments. Details of the agreement should include

 

1. The amount of the repayment
   
2. The frequency and timing of the repayments
   
3. The dates of the repayments
   
4. The number of repayments
   

Any breach of the stipulation of the Act render the agreement irredeemably unenforceable.

 

(4) Schedule 7 of the Consumer Credit (Agreement) Regulations 1983 dictates the tolerance allowed in the disclosure of the APR.

 

The Law of Agency

 

1. The Law of Agency governs the relationship between agent and principal.
   
2. One important underlying principle of the Law of Agency is the fiduciary duty of the agent to the principal. The agent has an overriding obligation to act in his clients best interest at all times.
   

Legal Precedents

 

Bristol & West Building Society V Mathews (1998) CH1 Lord Justice Millett

 

3. The Broker as agent has a duty Not to make a secret profit. The agent is entitled to receive a fee as remuneration for his service or/and a commission which is the ordinary amount which agents are in the habit of charging. The implications of this is if there is no indication or reference to a payment of commission, there is a strong argument to support the contention that a secret commission has been paid.

 

Legal Precedents

 

Great Eastern Insurance Company V Cunliffe (1874) chApp525

 

4. The consequences of receiving/gifting secret commission are serious. "Section 1 of the Prevention of corruption Act 1906" deems it a criminal offence punishable by a fine and or a prison sentence.

 

5. The Civil Remedy in a case that can be proven is complex and not in any way shape or form an automatic right. The current spate of activity in the legal profession for alleged cases of PPI mis-selling will be based on the legal precedents in particular a recent case heard in the appeal court in spring last year.

 

Legal Precedents

 

Wilson & another V Hurstanger Ltd., (2007) EWCA CIR 299

In this recent case Lord Justice Tuckey deals extensively with issues of the secret commission. In this judgement of the 4th April 2007 the judge states;

 

"Certain things are clear - The defendants retained the broker to act as their agent for a substantial fee. The contract of Retainer contained the usual implied terms, but the relationship created was obviously a fiduciary one."

 

"As a fiduciary the agent was required to act loyally for the defendants and not put himself in a position where he had a conflict of interest"

 

"Whether there has been sufficient disclosure must depend on the facts of each individual case, given that the requirement is for the principles informed consent."

Edited May 13, 2010 by frettful38

[frettful38]

Although there have been precedent's set regarding the payment of secret commissions [Hurstanger & Wilson], but those were for loans under £25k therefore regulated.

 

Would the secret commission precedent also be applied for un-regulated loans also? I know that we can refer to these legal precedents but for people who have un-regulated loans, can they take advantage of these too?

 

Maybe someone can clarify please?

[Marky1701]

thanks postggj, so you reckon Blemains response should not put me off writing to them? Blemain claim that we were not vulnerable and lacking in sophistication. Now that is another point that I should question them under the unfair relationship act s140. They would have to prove that we were not vulnerable and prove that we were sophisticated.

 

My OH for is not fluent in English as it is not his first language, and I on the other hand was being treated for depression and low mood.

 

 

I have seen previous threads in a similar vein - I think the answer for anyone attending court/solicitors offices is to talk like Forrest Gump and start licking the windows.........

 

m

[frettful38]

I have seen previous threads in a similar vein - I think the answer for anyone attending court/solicitors offices is to talk like Forrest Gump and start licking the windows.........

 

m

 

If that helps win our cases then I for one will lick more than windows

[atom02]

The Legal Background

 

Companies providing credit to the public in the form of secured and unsecured loans have to comply with the Consumer Credit Act 1974.

 

This act applies to all loans under the current limit of £25,000 until 2006 when the upper limit was removed.

 

(1) Section 60 (1) of the Consumer Credit Act 1974 empowers the secretary of state to make regulations as to the form and contents of documents embodying Regulation Agreements. A breach of the regulation can render the agreement invalid.

 

(2) Section 1 of schedule 6 of the Consumer Credit Act (Agreements) Regulations 1983 states that there must be an accurate statement of the amount of credit being provided in a fixed sum credit agreement. If there are any mistakes in this document for example an item of cost in obtaining the credit being included in the loan, the loan is irredeemably unenforceable.

------------------------

 

I am still not clear on which agreements are regulated - please can someone clarify this for me?

 

Is a secured (2nd charge) loan taken out in sep 2007 a regulated agreement under cca1974?

 

i am sorry to ask if the answer should be apparent.

 

thanks, atom

[frettful38]

The Legal Background

 

Companies providing credit to the public in the form of secured and unsecured loans have to comply with the Consumer Credit Act 1974.

 

This act applies to all loans under the current limit of £25,000 until 2006 when the upper limit was removed.

 

(1) Section 60 (1) of the Consumer Credit Act 1974 empowers the secretary of state to make regulations as to the form and contents of documents embodying Regulation Agreements. A breach of the regulation can render the agreement invalid.

 

(2) Section 1 of schedule 6 of the Consumer Credit Act (Agreements) Regulations 1983 states that there must be an accurate statement of the amount of credit being provided in a fixed sum credit agreement. If there are any mistakes in this document for example an item of cost in obtaining the credit being included in the loan, the loan is irredeemably unenforceable.

------------------------

 

I am still not clear on which agreements are regulated - please can someone clarify this for me?

 

Is a secured (2nd charge) loan taken out in sep 2007 a regulated agreement under cca1974?

 

i am sorry to ask if the answer should be apparent.

 

thanks, atom

 

 

Depends on if the amount is £25k or over.

[atom02]

yes, it was for approx. £100k and now I apparently owe more than originally borrowed

[42man]

From what I understand it depends on each individual case with regard to recission of the contract however you would be at least entitled to the secret commission + interest from the date it was paid - Wilson v Hurstanger | OUT-LAW.COM by Pinsent Masons LLP