5th October 2023
“In Windermere Educational Trust v Northern Gas and Power & ENGIE, we successfully defended a customer’s pre-action disclosure application, which requested documents relating to its threatened energy commission claim. The judgment confirms that, in many cases, energy and finance firms should not accede to demands for pre-action disclosure when commission claims are intimated against them.“
Fuelled by a claims management company-driven consumer ‘claim culture’, energy suppliers and financial services firms are being hit with allegations that they’ve paid hidden or secret commissions to brokers/agents/introducers. In our recent briefing, Partner Nick McQueen highlighted some of the legal hurdles facing a would-be commission-claimant. He explained that it’s not as easy to succeed in these commission claims as some claims management firms are suggesting to energy and finance customers.
Consequently, claims management firms are increasingly pursuing inopportune, potentially vexatious and costly, court applications for pre-action disclosure  in commission cases. This is often done as a tactical attempt to extort a commercial pay-out from an energy or finance company wishing to dispense with a troublesome (albeit not necessarily a sound) legal claim.
Walker Morris has helped energy companies to resist pre-action disclosure demands made by claims management companies on behalf of would-be commission claimants. In this article, Nick (who successfully represented the energy suppliers in the recent pre-action disclosure application in Windermere Educational Trust Ltd v (1) Northern Gas and Power Limited, (2) ENGIE Power Ltd, (3) ENGIE Gas Ltd  – see below) offers practical advice for energy suppliers and financial services firms faced with demands for pre-action disclosure.
Would-be claimants (or, more commonly, their appointed claims management companies) are increasingly demanding pre-action disclosure – sometimes threatening, or even making, a court application to that effect.
Often, the demand will be very wide-ranging – effectively constituting a ‘fishing expedition’ for any possible information or documentation which could potentially help the would-be claimant to formulate or strengthen its intimated claim.
In some cases, the demand will be deliberately intended to put the potential defendant energy/finance company to such inconvenience, cost and public/reputational/commercial exposure that it becomes willing to pay to make the potential claim go away, even regardless of its merits.
Strict rules govern pre-action disclosure that can be sought via, and ordered by, the court (Civil Procedure Rule (CPR) 31.16 (3)). So, energy companies and financial services firms should ensure that staff are educated not to respond to – and certainly not to comply with – demands for commission claim pre-action disclosure without the business having first taken specialist legal advice.
There are several key points to note about pre-action disclosure demands generally:
Specifically in commission claims, there are a number of legal and practical reasons why pre-action disclosure can, and usually should, be resisted:
Windermere Educational Trust Limited (WET), the customer, operates a boarding school. Northern Gas and Power is an energy broker for utility services, whose role includes the comparing of gas and electricity prices. At all relevant times, ENGIE Power Limited and ENGIE Gas Limited (part of the same group of companies) supplied electricity and gas respectively to the customer.
Represented by Winn (a private equity-backed claims management company), the customer alleged in correspondence that when Northern Gas and Power negotiated and executed energy supply contracts for its premises, the broker received commission without its knowledge, which essentially amounted to bribery. Northern Gas and Power denied those allegations. It responded to the customer’s pre-action letter of claim setting out, amongst other things, that the customer knew it was being paid and there was, therefore, no secret commission and/or bribery.
In an attempt to obtain documents which may assist with its claim, the customer applied to the court for pre-action disclosure. Initially, the pre-action disclosure request was extremely wide-ranging, seeking some 10 different categories of documents. Almost immediately prior to the court’s hearing of the application, the request was narrowed to just one category: all commission statements and invoices detailing the calculation and payment of commission in relation to the energy contracts entered into between ENGIE and WET and brokered by Northern Gas and Power.
WET sought disclosure on the bases it was necessary and desirable for it to achieve its claim, and it would save costs. WET’s arguments related to quantification of the claim, informed consent to payment of commission, and it not being a ‘sophisticated’ customer for these purposes.
The broker and energy suppliers submitted that the requested pre-action disclosure would effectively pre-determine, without trial, a substantive issue in the claim – namely, whether Northern Gas and Power was under a duty to provide the particulars and amount of commission paid by ENGIE. They argued, for that reason in itself, the court should not order pre-action disclosure. Northern Gas and Power and ENGIE also submitted that the commission claim itself had no real prospect of success. They denied that the customer – a business, albeit a charity – was an unsophisticated, vulnerable person within the scope of secret commission claim authorities, and they stated that the customer was undoubtedly aware that ENGIE was paying commission to Northern Gas and Power. They argued that the various requirements for pre-action disclosure under CPR 31.16 (3) were not met. Finally, Northern Gas and Power and ENGIE referred to the fact that this was a commercial case, meaning that the court should require more convincing grounds before ordering pre-action disclosure, and they advanced the ‘bigger picture’ facts – that pre-action disclosure in this case could result in unfair exposure within other commission claims brought against the broker and/or energy suppliers and within the commercial commission market generally.
The judge explained that the courts are required to address pre-action disclosure application in two stages. Firstly, to determine whether the threshold requirements set out in CPR 31.16 (3) are made out, and secondly, and only then, to exercise its discretion considering whether pre-action disclosure is desirable, in the particular circumstances of the case, to dispose fairly of the anticipated proceedings, to assist resolution of the dispute without proceedings, or to save costs.
Adopting that approach, the judge decided:
The judgment in Windermere Educational Trust v Northern Gas and Power & ENGIE, including the costs order made against the customer/applicant, should be helpful for energy and finance firms faced with pre-action disclosure demands in other intimated commission claims.
Energy companies and financial services firms should take specialist legal advice immediately upon receipt of any demand for pre-action disclosure. Importantly, staff should be educated to recognise such a demand, and not to respond to it unless and until in receipt of legally-guided instructions to do so. Responding incorrectly, or disclosing items unnecessarily, could severely prejudice the business’ position in any subsequent litigation or settlement negotiations.
Walker Morris’ Commercial Dispute Resolution lawyers are experts in responding to pre-action disclosure demands, and in representing energy and finance businesses in all aspects of commission claim disputes.
As well as helping clients to handle and defend an increasing number of commission claims, we support businesses with health check reviews of existing contracts and relationships, including considering the extent to which commission has been disclosed, thereby helping to ‘future-proof’ against commission claims. We can also provide tailored training, to educate staff about commission claims, and about associated issues such as disclosure and legal professional privilege. Where necessary or advisable, we also help our clients to ensure regulatory compliance and to proactively change internal processes to minimise future risk.
Please contact Nick for further information or advice.
 Pre-action disclosure is the disclosing of documents relating to a potential or intimated court claim before court proceedings are commenced. A request for pre-action disclosure can be made (and responded to) privately and informally between the potential parties to an alleged claim, or it can be dealt with via an application to court.
 County Court, 8 February 2023.
 CPR 31.6
 Black v Sumitomo Corp (2001), Carillion Plc v KPMG LLP (2020), Assetco Plc v Grant Thornton UK LLP (2013), Rose v Lynx Express (2004), First Gulf Bank v Wachovia Bank (2005)
 See Walker Morris’ note on the law of privilege.