secret commission payment from lender

MA61

Hi all

Thought it better to join in this thread than start a new one. My parents have been contacted by another legal firm, regarding the same lender and same period, pretty much offering the same thing, including the 35% fee on a no win no fee basis.

I am wondering if I can fight this for them, and not have to be stung for the fee? I am going to do some research and post back here if and when i find out more.

A

dunstonh

am wondering if I can fight this for them

OK, what exactly are you going to fight it on?

MA61

dunstonh wrote: »

OK, what exactly are you going to fight it on?

Something along the lines of this:
In the case of Wilson v Hurstanger Ltd [2007] it was ruled that where there is a breach of fiduciary duty from a broker, the lender is an accessory to this breach and is therefore also liable to be the subject of any compensation claim arising out of voidable finance agreements such as this one.

dunstonh

MA61 wrote: »

Something along the lines of this:
In the case of Wilson v Hurstanger Ltd [2007] it was ruled that where there is a breach of fiduciary duty from a broker, the lender is an accessory to this breach and is therefore also liable to be the subject of any compensation claim arising out of voidable finance agreements such as this one.

That case was quite specific though. The borrower paid a fee in addition to the commission being paid and the commission amount was not disclosed. Most brokers do not charge a fee in addition to the commission. If there had been no fee charged, this case would have failed. So, was a fee charged in addition to commission? Was their borrowing taken out before or after commission disclosure was required? What type of loan is this? (mortgage, secured loan, unsecured loan)

MA61

dunstonh wrote: »

That case was quite specific though. The borrower paid a fee in addition to the commission being paid and the commission amount was not disclosed. Most brokers do not charge a fee in addition to the commission. If there had been no fee charged, this case would have failed. So, was a fee charged in addition to commission? Was their borrowing taken out before or after commission disclosure was required? What type of loan is this? (mortgage, secured loan, unsecured loan)

Secured loan I assume (I have found the paper work and it says legal charge). There were legal costs added on (presumably for securing the loan via the legal charge), but no fee.

The premise for pursuing this is that the solicitor who wrote to my parents say that they have obtained information from the lender that shows that they were one of the borrowers affected by the secret commission (how they obtained this info, I don't know). It may be a scam I guess, but a no win no fee solicitor - how would that work?

My claim would hinge on the secret commission paid by the lender to the broker, for promoting their product and causing a conflict of interest with respect to providing financial advice.

I refer you to paragraph 39 of the judgement:

Obviously if there has been no disclosure the agent will have received a secret commission. This is a blatant breach of his 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 money had and received where he can recover the amount of the bribe or for 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] AC374, 383). Furthermore the transaction is voidable at the election of the principal who can rescind it provided counter-restitution can be made. (Panama & South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Co. [1875] 9 Ch App 515, 527, 532-3).

Many thanks for your feedback so far.

Brokerwise

joe55 wrote: »

The company GE Money/Ocwen has agreeded to make an offer ClearLaw have said ,just dont know what it is, sometime in the next 7 10 days will get the letter of offer.
i have not paid ClearLaw any fee i expect they will take there cut from any winning


will keep you posted

I am amazed if this is the case. Ocwen purchased the business of City Mortgage Corporation and this would be early 1990's when income disclosure was not even on the radar. All second charge lenders paid volume overrides back then without exception

magpiecottage

joe55 wrote: »

The company GE Money/Ocwen has agreeded to make an offer ClearLaw have said ,just dont know what it is, sometime in the next 7 10 days will get the letter of offer.
i have not paid ClearLaw any fee i expect they will take there cut from any winning


will keep you posted

This was about 28 days ago.

joe55 wrote: »

clear law have indicated the claim in the region of £3000

All very quiet since the "7 10 days" expired.

dunstonh

Secured loan I assume (I have found the paper work and it says legal charge). There were legal costs added on (presumably for securing the loan via the legal charge), but no fee.

So, if there was no fee, what is it that you are trying to reclaim?

The premise for pursuing this is that the solicitor who wrote to my parents say that they have obtained information from the lender that shows that they were one of the borrowers affected by the secret commission (how they obtained this info, I don't know). It may be a scam I guess, but a no win no fee solicitor - how would that work?

Two models tend to exist on this front. One is like whiplash claims. It is cheaper for the firm to pay a few hundred pounds to get rid of the case than it is to employ solicitors to argue the case. The other is that the company will come back to you later saying there is a case but they need to charge you to take it to the litigation stage.

My claim would hinge on the secret commission paid by the lender to the broker, for promoting their product and causing a conflict of interest with respect to providing financial advice.

Brokers are not financial advisers. They are not employed or required to give financial advice and indeed, would not be authorised to give financial advice. So, your argument would be that they didnt do what they were not allowed to legally do in that respect. If no fee was paid then they were not employed by the borrower and no conflict existed.

I refer you to paragraph 39 of the judgement:

Obviously if there has been no disclosure the agent will have received a secret commission. This is a blatant breach of his 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 money had and received where he can recover the amount of the bribe or for 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] AC374, 383). Furthermore the transaction is voidable at the election of the principal who can rescind it provided counter-restitution can be made. (Panama & South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Co. [1875] 9 Ch App 515, 527, 532-3).

That is because the borrower in this case paid a fee and the commission was not disclosed which allowed it to be potentially viewed as a bribe. The fee meant the borrower was employing the client. In your case, you indicate that no fee was paid. So, how would the commission be a bribe?

MA61

dunstonh wrote: »

So, if there was no fee, what is it that you are trying to reclaim?

I must apologise - I have looked at the paperwork again and it is indeed a FEE that my parents paid to the broker. Sorry for wasting your time typing your response!

On this basis, then, I assume that case law is indeed pertinent!?

dunstonh

A fee and commission is allowed. However, the commission needs to be disclosed. If the amount of the commission is on any of the documents then its game over. If its not disclosed, then the case mirrors your scenario.