Barry McWilliam v Norton Finance (UK) Ltd  EWCA Civ 186 (11 March 2015)
The Court of Appeal has held that a credit broker, Norton Finance, owed its consumer clients, Mr and Mrs McWilliam, a fiduciary duty such that it was liable to account to them for commissions received without their informed consent.
The McWilliams required a £25,500 loan to refinance existing debt and build a conservatory at their home. They approached Norton Finance, a credit broker who took their details and sent a pre-filled application form to the McWilliams. The declaration above the signatures acknowledged that Norton would receive commission from the lender and the McWilliams consented to this. It also stated that it was important for the McWilliams to read the accompanying borrower information guide which they did not do. Norton arranged the loan through Money Partners Ltd and the McWilliams instructed Norton to arrange PPI through Pinnacle at a cost of £3,745. The claimants agreed to pay Norton a £750 “broker fee” and a £500 “completion fee” bringing the total amount to £30,495.
The dispute centred on two commissions received by Norton. A payment of £2,675 (8.77% of the loan) paid by the lender, Money Partners, and a payment of £1,685.25 (45% of the premium) paid by the PPI provider, Pinnacle. The McWilliams were not informed of the additional commissions or the amounts involved. The McWilliams commenced proceedings in the County Court claiming that Norton had breached its fiduciary duty and should have accounted for the two additional commissions.
At first instance, the Recorder dismissed the claims on the basis it had been an information only sale, not an advised sale. Further, the additional commissions had in fact been paid to a different company, Fintel, which had used Norton as a trading name and so did not consider the issue of fiduciary duty.
The McWilliams were described by Tomlinson LJ as not being financial sophisticates. They were people of relatively modest means with credit history problems and did not meet the criteria for being ’non-status’ borrowers. It was found that they had relied on Norton to find suitable lenders to meet their needs. There had been a contract of agency and as such a fiduciary duty did exist. Norton should not have allowed its duty and its interests to conflict. It should not have acted for its own benefit without the McWilliams informed consent nor profited out of the trust reposed in it to procure the best possible deal. The scenario whereby the McWilliams had not required advice or recommendation beyond the availability of lenders and PPI providers was not relevant to the question of whether a fiduciary duty existed.
Tomlinson LJ found there had been a breach of fiduciary duty. The materials provided by Norton did not adequately alert the McWilliams to the additional commissions. The McWilliams had been unable to give their informed consent. They had been alerted to a commission based on a proportion of the PPI premium and agreed on that basis, but had not been told how much commission would be paid. Norton was ordered to account to the McWilliams for the additional commissions received to the value of £4,360 plus 5% interest since the date of completion of the loan.
Although the sums involved in this case are relatively modest and will no doubt trigger another wave of PPI based litigation, the issues it raises in relation to fiduciary duty and the extent to which informed consent are required could have far reaching consequences for agents and managers across a wide range of industries.
Andrew Wyllie, Paralegal, Michael Simkins LLP