Farmer wins ‘secret commission’ claim against mortgage lender

A farmer has won her claim against a mortgage lender over commission paid to her broker without her knowledge.

The case involved Frances Elizabeth Wood and Commercial First Business Ltd (In Liquidation).

In 2007, Wood applied through a broker, UKMFS, for a mortgage from Commercial First Business to buy a farm.

She said she did not receive a copy of UKMFS’s terms, which stated that it received fees from lenders with whom it placed mortgages and that it would give the borrower advance notice of any such fees before the mortgage was completed. If the fee was more than £250, the exact amount would be specified.

UKMFS received commission of £57,092 from the lender.

Wood fell into arrears and a possession order was made in respect of the farm. She took legal action on 11 February 2013 on the basis that she had not known that UKMFS would be receiving payments from the lender in respect of the mortgage.

The High Court found in her favour.

It held that the standard terms sent out by UKMFS went further than simply raising the possibility that it might receive a commission from the lender – in which event it could not have been said that such payments were secret – but also contained an express promise that the borrower would be notified of the amount if more than £250.

Accordingly, there was an implied representation that if the borrower was not so notified, she was entitled to assume that the lender had not paid commission to UKMFS.

The fact that the lender might have held an honest belief that UKMFS had disclosed the commission payments to the borrower was irrelevant, since they had not been disclosed. It followed that the commissions were to be treated as secret.

Since the commission payments deprived Wood of the disinterested advice of UKMFS as her broker, the relationship between her and the lender was unfair.

Orders would be made for the recovery of the commission sums against the lender.

Please contact Janice Young if you would like advice about pursuing a case through court or any aspect of litigation.