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From April 1-3 2025, the Supreme Court heard the conjoined appeals on the cases of Hopcraft and another (Respondents) v Close Brothers Limited (Appellant) (UKSC/2024/0157); Johnson (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant) (UKSC/2024/0158); Wrench (Respondent) v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (Appellant) (UKSC/2024/0159). These cases were in relation to car finance commission payments and the issues that were being disputed involved the common law tort of bribery, fiduciary duties, secrecy and disclosure, informed consent, dishonesty and accessory liability, as well as the law on unfair relationship and rescission.
In each of these cases, the Respondents entered into hire-purchase agreements to buy their cars, but were unaware/did not know that the dealer was paid some money (i.e. a commission) by the Appellants in order to finalise/secure a car finance deal for the Respondents with the Appellants.
Appeals Background
In the Hopcraft case, the commission was kept secret from the Respondents. At first instance, the Respondents case was that the dealer owed a duty to provide information, advice or recommendation on a “disinterested” basis, however the Respondents were unsuccessful and later appealed the decision to a circuit judge, who then transferred the case to the Court of Appeal.
In the Wrench case, the Respondent did not know and was not told that a commission was paid, even though the Appellant’s standard T&Cs referred to a possibility of commission being paid. The Respondent’s primary case was that the commission was secret, and the alternative case was that, even if it was not secret, the dealer never obtained the Respondent’s fully informed consent to receive the payment. The Respondent was successful at first instance, however a circuit judge allowed the Appellant’s appeal, to which the Respondent then appealed the matter to the Court of Appeal.
In the Johnson case, the Respondent also did not know and was not told that a commission was paid, even though the Appellant’s standard T&Cs made reference to a possibility of commission being paid; however, additionally, the dealer also supplied the Respondent with a “suitability document”, which the Respondent signed, indicating that the dealer “may” receive a commission payment from the Appellant. The Respondent’s case was that even if the commission was not secret, the dealer never obtained the Respondent’s fully informed consent to receive the payment. The Respondent was unsuccessful at first instance and on appeal and thus, appealed the matter further to the Court of Appeal.
The Court of Appeal heard all three cases between 2-4 July 2024 and handed down its judgment on 25 October 2024. The Court of Appeal allowed all three appeals in favour of the Respondents and held that dealers owed both a “disinterested” duty as well as a fiduciary duty to the Respondents. The Court of Appeal also held that the commissions were secret and that disclosure had to be sufficient to negate secrecy, such that any reference to commission must be drawn to the attention of the Respondents and not simply buried within the Appellants’ standard T&Cs or buried within numerous documents put forth onto the Respondents to which the Appellants did not reasonably expect the Respondents to read. The Court of Appeal also held that to negate secrecy the Respondents had to be made aware of all material facts that would allow them to make a fully informed decision whether or not to enter into the car finance agreement. This would ensure that the Respondents’ fully informed consent was obtained for the payment of commission.
The Appellants sought permission to appeal the Court of Appeal’s decision, however the Court of Appeal refused permission. The Appellants then sought permission to appeal from the Supreme Court, which was allowed, and the final appeal was listed for 1-3 April 2025.
In the lead up to the appeals, the NFDA and the FCA were granted permission to make submissions as intervenors at the Supreme Court hearing. HM Treasury also tried to seek permission to intervene, however the Supreme Court rejected their application. The Supreme Court also decided upon a case that dealt with fiduciary duties and the ‘no profit’ rule (Rukhadze and others v Recovery Partners GB Ltd and another [2025] UKSC 10) in the lead up to the appeals. This case would later be relied upon by the Appellants’ counsels in the appeals on 1-3 April 2025.
The Appeals
On 1 April 2025, the appeals in relation to car finance commission claims began. The Appellants’ focus on day one of the appeal was:
The Appellants’ argument for ground 1 was that the disinterested duty was analogous to the fiduciary duty. But a fiduciary duty cannot exist where there is no objective undertaking to act as an agent, so the court must try to find an ad hoc fiduciary duty for the dealer. The Appellants argued that where a statement in a document discloses that a dealer may receive commission, then the dealer cannot be a fiduciary of the customer as it is not exercising its power for the customer and the dealer has its own interest in the transaction.
The Appellants’ argument for ground 2 was that the 100+ years of common law bribery was wrong as it appeared to not deal with issues such as loss and causation but still provided remedies akin to those found under equity. This was their primary argument. Their alternative argument was that if common law bribery should remain as it is, then there should be no automatic entitlement to a money judgment.
The Appellants’ argument for ground 5 was that the right to rescission is founded upon the procurement of breach of the no profit rule (as in the Rukhadze case) and this only applied to fiduciaries. They also argued that remedies for bribes should be exclusively equitable for the argument raised for ground 2.
The Appellants’ argument for ground 3 was that the Appellants did not have knowledge (nor did the FCA nor the dealer itself have knowledge) that the dealer acting as a broker would make the Appellants a dishonest assister to the dealer’s breach of duty to the customer. They argued that it would need to be shown that the Appellants had knowledge that the dealer was the broker and was not entitled to receive commission without disclosure to and consent from the customer.
On 2 April 2025, the appeal continued into the second day. The Appellants’ counsels continued with their remaining submissions and their focus was:
The Appellants’ argument for ground 4 was that the payer of the commission should only be liable if they are a dishonest accessory and that disclosure that commission “may” be paid was sufficient, in accordance with the Hurstanger case.
The Appellants’ argument for ground 6 was to distinguish the Plevin case from the current appeal case and to argue that breach of a fiduciary duty did not make the relationship between the parties unfair.
The NFDA, allowed to make submissions as intervenor, made their arguments and tried to provide a more holistic picture of the role of the dealer when introducing finance rather than make arguments on the merits of the appeal. They submitted that the credit brokering done by the dealer was very similar to other retail products “brokered” daily on the high street; and that for over 100 years it has been well known that commission was a normal part of hire purchasing.
The Respondents’ counsel then made his submissions on the development of the tort of bribery and the current state of that law being correct. He also submitted that the right of rescission being a remedy was for the purpose of acting as a deterrent for the bribe and that it did not matter whether it emanated from equity. Counsel also submitted that the common law of bribery developed because it was concerned with meeting the pernicious practices of bribes. He also made submissions specifically in relation to the dealers’ role in credit brokering car finance and how a fiduciary duty was readily apparent on the facts, as the Court of Appeal found it to be. Counsel also submitted that an ad hoc fiduciary duty is found in these cases because there was no objective undertaking from the dealer, so the focus was on the role of the dealer when arranging the finance and that role was of a credit broker.
On 3 April, the appeal continued into the third and final day. The Respondents’ counsel continued with his submissions and focused attention on the three cases that were being appealed, and he drew attention to the facts and evidence of each case, and the language used in the evidence that indicated secrecy and fiduciary duties.
The Respondent’s counsel also made submissions on unfair relationships pursuant to s.140A CCA 1974 and that this legislation was enacted for the benefit of the consumers and that there was nothing in s.140A suggesting that the tort of bribery or the law on fiduciary duty has been excluded by Parliament. Counsel also submitted there is a prima facie case of unfair relationship, then s.140B(9) puts the burden of proof on the creditor to prove that the relationship was fair.
The Respondent’s counsel also made submissions on accessory liability stating that an Appellants’ knowledge that the dealer was acting as a credit broker for the customer was enough and that paying the dealer a sum of money to incline the dealer to select that Appellants for the customer was dishonest.
The Respondents’ counsel also made submissions on the issue of knowledge and consent. He submitted that it was not enough that customers were put on enquiry, but that there had to be disclosure of all material facts. The burden rests on the paying party to prove that the payment was not secret as the payer bears the risk of the bribe. Counsel submitted that customers are not expected to have read a clause simply because it is a term of a contract. The commission clauses were hidden in plain sight. Buried in the small print and that this was deliberate.
The FCA, allowed to make submissions as intervenor, argued that the law on fiduciary duty was too wide. They agreed to retain the common law on bribery, but believed it was subsumed by the law on fiduciary duty. It also stated that the Court of Appeals findings made it difficult to draw lines between car dealers and other credit intermediaries. It also stated that it would consult on a potential redress scheme 6 weeks from the outcome of this Supreme Court appeal.
Thereafter, the Appellants’ counsels provided their replies to the Respondents’ submissions and reinstated their previous submission from the previous days, before the appeals were finally concluded.
When Is The Judgment Expected?
The Supreme Court have stated that they would take time to consider all submissions made by all parties and that they would not rush their judgment. They indicated that a judgment could be handed down around July 2025. And so, we now await the judgment accordingly.
What Could Happen
If judgment is in the Respondents’ favour, then the plethora of cases that have been stayed pending the outcome of the appeals could settle and any cases that would otherwise have litigated could also settle, which means that there could be less strain on the county courts. However, settlement will all depend on the respective parties’ appetite for the same or for further litigation. Also, the FCA said that it would consult on a potential redress scheme within 6 weeks of the decision from the Supreme Court, so lenders may wait until this scheme is rolled out before committing to settling cases that have not yet been litigated. This all remains to be seen. For the motor finance industry, there will need to be further rules and regulation on commission disclosure and dealerships will need to take further care and precautions before brokering car finance.
If judgment is in the Appellants’ favour, then this may signal the end of car finance commission litigation completely. You would expect to see cases that have been stayed being either discontinued or applied for strike out and no doubt the lenders’ solicitors will try to seek costs whenever and wherever they can. Also, the FCA may not need to consult on a redress scheme either and the finance providers and dealerships may continue business as usual.
Which way will the Supreme Court swing? Only time will tell.
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