Silvercloud Finance Solutions Ltd (t/a Broadscope Finance) v High Street Solicitors Ltd

A broker’s entitlement to transaction-based commission ordinarily depends on its services being the effective cause of the transaction, unless the contract clearly provides otherwise. That requirement may be implied to give the agreement business efficacy. A lending proposal may be an approach to a lender, directly or through an agent, for a loan of money. Presentation through an intermediary is sufficient, but the broker must still prove that its proposal caused the finance offer. An appointed representative under the Financial Services and Markets Act 2000 is not thereby an agent for general contractual purposes. Where the contract makes payment conditional on achieving the desired outcome, failure to establish effective causation also defeats a quantum meruit claim.

The claimant, a financial broker, claimed £100,000 under a written credit-broking agreement. The fee was 5% of any loan offered by a lender to whom the claimant presented a lending proposal. The defendant, a solicitors’ practice, obtained £2 million of lending through the ArchOver platform after earlier approaches by the claimant and a later approach through another broker.

The issues included whether the claimant contracted as principal, whether the contractual conditions for payment were satisfied, whether the claimant’s work was the effective cause of the lending, and whether a quantum meruit was available.

1. Claim dismissed. The claimant failed to prove that its work was the effective cause of the lending and therefore could not recover the contractual fee or a quantum meruit.
2. The claimant contracted as principal. The agreement identified the claimant as the broker. The fact that it was an appointed representative of AFS Compliance Ltd did not make it an agent for general contractual purposes. Sections 1 and 39 of the Financial Services and Markets Act 2000 created additional responsibility for the principal but did not alter ordinary contractual rights without clear words (paras [84]).
3. “Lending proposal” meant an approach to a lender, directly or through an agent, for a loan of money. ArchOver could act as the lenders’ agent, and a proposal presented through it could satisfy the contractual wording. The proposed finance did not need to be identical in terms or made within a specified period, because the effective-cause requirement supplied the necessary commercial limitation (paras [85]–[92]).
4. An effective-cause term was implied. The requirement was consistent with the established approach to commission agreements, prevented a broker from sending proposals indiscriminately and claiming payment whenever lending later occurred, and was necessary for business efficacy. The reasoning in Nahum v Royal Holloway and Bedford New College was distinguishable because it concerned a different market structure (paras [93]–[94]).
5. On the facts, the claimant’s earlier work did not cause the lending. The negotiations had stalled, the defendant was sceptical about lending secured on work in progress, and the later broker supplied additional input through a different relationship with ArchOver. The claimant therefore failed to discharge the burden of proof (paras [96]–[105]).
6. The quantum meruit claim also failed. The parties had contracted for payment only where the claimant brought about the desired outcome, and non-payment where it did not do so was not unjust (para [106]).