Claims against energy brokers are continuing to grow and legal firms are beginning to see more claims from businesses who are seeking compensation against their broker.
Darren Morgan, partner in the Commercial Dispute Resolution team at Blacks Solicitors, shares his advice on what energy brokers and businesses need to know about claims and when they might be justified.
A rise in claims
It’s estimated that there are around 3,000 energy broker firms in the UK, and over two million businesses may be able to claim compensation. An increase in marketing by “ambulance chasing” law firms has led to a significant growth in the volume of claims being run against brokers.
It is too early to say whether there will be a rise in claims linked to the current energy crisis or market volatility. For example, the invasion of Ukraine was only six months ago and if there is any fallout from that with clients it is likely to still be at the complaint stage with brokers and so it may take more time for us to see an increase in claims that are directly related to it.
What energy brokers need to be aware of
In the event of a claim, a broker should seek legal advice, preserve and review their paperwork and identify what information has been passed to the client. This information will include the market review that led to the recommendation, for example was it a whole of market review or something more limited. Brokers will also need to ensure an explanation was given as to how they have earned their fee. If this was by commission, has a figure or method of calculation been given?
As a consequence of the type of legal relationship that exists between brokers and their clients, unless the broker has been transparent and fully explained exactly how it will be paid and, if paid commission by the supplier how that commission will be calculated, then the broker will be vulnerable to a claim for compensation.
It’s important for brokers to remember that even if they have signed up to a Code of Conduct and followed that Code, this is unlikely to be a defence to a claim if there hasn’t been sufficient transparency regarding fees.
What businesses need to be aware of
It’s advisable to invite several brokers to provide a report to compare and contrast the best deals that are available before making a decision.
When it comes to claims arising as a result of market volatility, businesses will often argue that they should have been put on a fixed tariff rather than a variable rate. For this type of claim to have any credibility there needs to be evidence that fixed deals and/or lower fixed deals were available from suppliers. Fixed tariff offerings have been in limited supply and the deals on offer are changing rapidly which can make it harder for a customer to secure evidence of the best deals that are available.
If a claim is based on an allegation of bad advice, a business will need to seek the view of an independent expert to support the claim and identify what better deal was available and why.
For more information, please visit: www.lawblacks.com/business/commercial-dispute-resolution