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Smalls businesses around the UK could be in line for payouts totalling billions of pounds from energy firms after a landmark court ruling, i has revealed.
It comes after Queenie’s Casino Slots, a firm based in County Durham, recouped £14,000 from French power giant Engie in a court case at Leeds County Court over broker fees.
The claim centred on hidden broker fees in energy deals for micro businesses, those with a turnover of less than £1.8m.
Now both legal and energy experts say this could “open the floodgates” for many similar compensation claims and dwarf the scandal of mis-selling PPI (payment protection insurance) from 1990 to 2010.
What is the issue?
Queenie’s Casino Slots won back £14,000 after a judge ruled an energy broker hid additional fees in the firm’s bills.
The case focused on an energy deal agreed with brokers, who also received a commission from the energy company, without the knowledge of the client.
This commission is added to a business’s energy bill, often hidden in the customer’s tariff, and can account for up to 50 per cent of the total costs, according to research from industry regulator Ofgem.
In October 2022, Ofgem started to close this loophole making it a requirement for brokers to declare their commissions to clients in micro-businesses.
However, Business Energy Claims (BEC) which brought the case on behalf of Queenie’s Casino Slots, said any subsequent claims from businesses could stretch back to the year 2000.
Andrew Smith, owner of Queenie’s Casino Slots, told i: “ 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 thousands of pounds 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.”
What was the court ruling?
In the Queenie’s Casino Slots ruling, it emerged energy firm Engie had not been transparent during the process and the judge highlighted “deliberate concealment” on its part.
“Relevant information was … kept secret … and that concealment was, in my judgment, deliberate on Engie’s part,” Recorder Geoffrey Pritchard ruled.
It was revealed during the case that Queenie’s Casino Slots knew the broker would be paid in some form but not the amount nor that it would be included in the firm’s 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.
Who could be affected by this?
The court ruling could mean hundred of thousands of similar businesses who entered into these energy deals could now seek compensation over hidden broker fees in their bills.
Victoria Myers, a lawyer at Energy Solicitors, said: “This has the potential to be the next PPI scandal with thousands of innocent business owners being misled and mis-sold contracts.
“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.”
While Callum Thompson, the managing director at BEC, said the case has “the real potential to open the floodgates to other businesses and organisations, large and small, which may have been misled and as a result mis-sold energy contracts.
“What we are looking at is a multi-billion-pound issue on a similar scale to the PPI scandal which could affect hundreds of thousands of businesses and other organisations who may or may not realise they could have a claim.”
Ofgem has found that between two and three million businesses (67 per cent) use a broker to help choose their tariff.
BEC said it had already settled “dozens of claims” relating to broker fees, as energy suppliers seek to avoid court.
But this could be the tip of the iceberg as it had a number of forthcoming court cases which, if successful, would result in millions being paid back to their clients by a range of energy providers.
Mr Thompson said mis-sold energy contracts entered into by non-domestic energy users had come to around £2.25bn each year since 2000 and if every company affected by hidden broker fees made a successful claim, then BEC believed the total paid out could dwarf the £38.4bn paid to PPI claimants since 2011.
How to make a claim against your business energy provider
Before approaching a lawyer or energy claims firm, of which many can be found on the web, write to your business energy supplier to gather the information you need.
Ask your supplier to provide detail of all the broker fees you have paid as part of your energy tariff since you agreed the deal. For example, if your company has been with the same supplier since 2000, then ask how much you have paid in broker fees since then.
You should also ask your supplier what its profit has been during the course of your deal or deals with them.
Finally, make clear to your energy supplier that you are prepared to take legal action should they refuse to refund your commission fees.
If you cannot agree a settlement with your supplier, then consider adding your name to a group action by a legal firm. You could also, at this point, also take your action to a business energy claims company.
Also be aware that a claim is not guaranteed to be successful and may cost thousands in fees if you cannot agree a no-win-no-fee deal.
In order to convince a court of your case you will be required to show all the following:
- fiduciary duties were owed by the broker/agent/introducer to the customer
- the scope of those fiduciary duties
- breach of those fiduciary duties by the broker/agent/introducer
- the claimant did not give its informed consent to payment of commission
- knowledge of that fiduciary relationship on the part of the supplier
- an act on the part of the supplier which gives rise to a liability to the customer e.g. procuring the broker/agent/introducer’s breach of its fiduciary duties
If a claimant cannot establish any of these points any claim may be rejected by a court.
