McWilliam & Anor v Norton Finance (UK) Ltd (t/a Norton Finance)

A consumer credit broker may owe fiduciary duties where it undertakes to find the most advantageous available loan and the borrowers repose trust and confidence in it. The absence of financial advice or a recommendation does not preclude that relationship.

A broker receiving commission from the lender or associated insurer must obtain the borrowers’ informed consent. For vulnerable and financially unsophisticated consumers, merely disclosing that commission may be paid is insufficient. Disclosure of its amount is necessary to expose the potential conflict of interest.

An admission made in pleadings or correspondence cannot be withdrawn without the court’s permission. Permission must be assessed fairly, with particular attention to reliance, prejudice, timing and the merits of the affected claim.

The claimants retained the respondent credit broker to arrange a refinancing loan and payment protection insurance. They agreed to stated fees, but the broker also received commissions from the lender and insurer. The claimants sought an account of those commissions for breach of fiduciary duty.

The Middlesbrough County Court dismissed the claim. The recorder accepted evidence that another company had received the commissions, notwithstanding the respondent’s earlier written and pleaded admissions. She also indicated that the broker owed no fiduciary duty because the transaction was an information-only sale.

The claimants appealed. The issues were whether the respondent could withdraw its admission without permission, whether it owed a fiduciary duty, and whether the disclosures obtained informed consent to the additional commissions.

1. The appeal was allowed unanimously. Norton was bound by its admission that it had received the additional commissions. Under rule 14.1 of the Civil Procedure Rules 1998, an admission made in writing or in a statement of case could be amended or withdrawn only with the court’s permission. The re-amended defence did not itself withdraw the admission because the permission to amend extended only to amendments consequential upon the amended particulars of claim.

2. The recorder had effectively permitted withdrawal on her own initiative without giving the claimants an opportunity to address that question. That produced manifest unfairness. The admission had led the claimants not to pursue disclosure or investigate the relationship between Norton and Fintel. They consequently lacked the documents required to test the evidence given at trial. Relevant considerations included prejudice, the late stage of the proceedings and the prospects of the claim if withdrawal were permitted.

3. There was a contract of agency. Norton was paid by the claimants to identify the willing lender offering the most advantageous available terms, arrange the loan and identify available payment protection insurance. An agency relationship did not automatically establish fiduciary duties, but such duties arose where the undertaking involved the repose of trust and confidence.

4. The relationship was fiduciary. The claimants were reasonably competent but financially unsophisticated and vulnerable because of their substantial indebtedness. They relied upon Norton to obtain the best available deal and were exposed to its disloyalty. Norton therefore had to avoid conflicts, could not profit from the trust placed in it and could not act for its own benefit without informed consent. The fact that Norton provided information rather than advice did not alter that conclusion. The court was bound by Hurstanger Ltd v Wilson [2007] 1 WLR 2351.

5. The claimants had not given informed consent. General disclosure that commission could be received did not adequately disclose the additional loan commission. Although the possibility of insurance commission was disclosed, its amount was not. Disclosure of the amount was necessary to expose the conflict to vulnerable and unsophisticated borrowers. Customs developed in traditional insurance markets did not govern the specialised consumer payment protection insurance market.

6. Norton was ordered to account for commissions totalling £4,360.25, with interest at 5% from completion of the loan.

1. Court of Appeal (Civil Division): By [2015] EWCA Civ 186, unanimously allowed the appeal, held Norton to its admission, found a fiduciary relationship and ordered an account of £4,360.25 with interest.

2. Court of Appeal (procedural stages): The appeal was initially dismissed by consent on 12 April 2012 after Norton entered administration. On 16 May 2014 the court reinstated the appellants’ notice and set aside the dismissal order.

3. Middlesbrough County Court: Mrs Recorder McMullen dismissed the claims. She found that Fintel Ltd had received the commissions and indicated that Norton would not, in any event, have owed a fiduciary duty.