Money to burn?

If you don’t want your precious profits to go up in smoke, you need an energy broker who finds the right deal for you – not for themselves. 

Mike Smyth of ORJ investigates mis-selling of energy deals

When you hire a broker to secure an energy deal that’s right for your business, you can then stop worrying about those bills and focus on running the business. Right?

Sadly, in too many instances, that’s not so. More and more cases are coming to light where energy brokers have fixed deals that only benefit themselves, rather than helping the poor customer who’s paying them.

It means that thousands of companies, small businesses, clubs and societies are being saddled with expensive energy bills. At the same time, their brokers are raking in massive profits for doing precious little – apart from lining their own pockets.

Two particular scams have caused severe damage to victims over recent years. In one scenario, the broker says a substantial government grant (around £30,000) will be paid following a switch to a new provider. This will allow the broker to take their fee, while still leaving a major bonus for the customer. A classic win/win! In reality, no such grant exists and the energy contracts entered into are often much more expensive than before.

Another familiar ruse involves duping clients to give their signature on letters of authority. These are then used to switch suppliers without informed consent – and at great cost to the customer.

Ofgem review

The mishandling and mis-selling of energy contracts has now reached such a level that the industry regulator – Ofgem – has produced a strategic review of the whole sector, in a bid to protect business owners and managers from bad practice. It believes the sector has become riddled by lack of transparency, leaving many locked into costly deals.

You might be sold the wrong energy deal because your broker has been incompetent, or because they are deliberately putting their interests before yours. Either way, if you lose out, you may be entitled to cancel the deal and even claim compensation.

So, let’s take a quick look at some of the legal principles here:

Firstly, there must be promises or assurances made to you, prior to switching energy suppliers, which have proved inaccurate, misleading or exaggerated.

Secondly, you must have acted on that advice received: you must be able to show that you entered into a contract because of the claims made.

Thirdly, you must have suffered loss as a result. Typically, this would be because your bills are higher than they should be.

Types of mis-selling

Mis-selling is a form of misrepresentation and can basically be divided into three categories:

Fraudulent misrepresentation occurs where a false statement has been made knowingly, or without belief in its truth. In other words, the broker acted dishonestly or recklessly.

Negligent misrepresentation is where a statement was made carelessly and breaches the duty of care owed by the broker.

Finally, innocent misrepresentation occurs where there was neither neglect nor fraud – but where you were misled anyway.

Your remedies

Depending on the type of misrepresentation involved and the damage caused as a result, you may be entitled to rescission or damages, or both.

‘Rescission’ simply means reversing the agreement: the parties are returned into the position they would have been, had the contract never been made.

With damages, the victim of the misrepresentation claims a sum of money equal to the financial loss suffered as a result.

If you are the victim of fraudulent or negligent misrepresentation, you can claim both rescission and damages. For innocent misrepresentation, the court has a discretion to award damages in lieu of rescission; but cannot award both.

Most energy brokers, of course, are honest practitioners, doing their best to secure the right deals for their customers. But, unfortunately, there is an unscrupulous minority who mislead and, frankly, rip-off those very businesses who turn to them for support.  It’s about time we fought back and made sure your hard-earned profits don’t go up in smoke this year.

Mike Smyth is a solicitor with ORJ Law. He specialises in litigation, construction and insolvency matters. To speak to Mike or one of his colleagues call ORJ on 01785 223440.