Rukhadze and Others – What It Means for Commission Claims

On 19 March 2025 the Supreme Court handed down judgment in Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10 (‘Rukhadze and Others’) representing a judgment that will be understood as largely claimant friendly, albeit with a caveat.

The Supreme Court in Rukhadze and Others reaffirmed the equitable maxim that agents are not permitted to make unauthorised profits from transactions entered into on behalf of their principals, to whom they owe fiduciary duties. That said, lawyers and consumers alike must be mindful of the reference to the existing equitable discretion to allow an agent to retain some of its unauthorised profits on account of their work and skill in their role.

Starting first with the positives, there are clear parallels in the applicable law referred to in this judgment compared to what will be heard and argued upon in the Johnson and Others motor finance commissions appeals. In Johnson and Others, to be heard by from 1 April 2025, the Supreme Court will consider appeals from motor finance lenders arguing that credit brokers do not owe fiduciary duties to motor finance consumers with the lenders neither procuring such breaches of fiduciary duty nor being accessories to the breaches.

Should it be established that a fiduciary duty exists, the next question will be whether credit brokers can nevertheless retain some or all of their commissions. If they can, then the motor finance lenders, may not be liable. Applying Rukhadze and Others, the answer to that question appears at first to be no. Lord Briggs, giving the leading judgment, adjudged that fiduciaries continue to have a duty, in equity, to not profit from the role as agent of their principal. Where agents do make unauthorised profits, they belong to the principals. Citing Lord Briggs at [75]:

“…The rigour of the profit rule … continues to underpin adherence by fiduciaries to their undertaking of single-minded loyalty to their principals”.

And at [22]:

“The duty arises at the moment when the profit is received and, in terms of timing, marches hand in hand with the constructive trust which obliges the fiduciary to treat the profit as belonging to his principal”.

Encouragingly, Lord Briggs, Lord Reed and Lord Hodge, which each reaffirmed the extent of agents’ obligations in Rukhadze and Others will all hear the Johnson and Others appeals as part of a five-judge panel.

Moving now to the caveat, throughout Rukhadze and Others there is reference to an equitable allowance for agents to retain some of their unauthorised profit where skill and effort has been expended in the performance of their role. Lord Briggs describes this allowance at [55] as “a discretionary way of alleviating the potential injustice of transferring to a beneficiary the whole of the fruit of a fiduciary’s hard work and skill”.

It is certainly rare for the equitable allowance to apply, something which Lord Burrows recognises at [295]: “there should normally be no equitable allowance for a deliberate or cynical breach of fiduciary duty”.

It is understood generally that where agents are afforded an allowance to retain some profits arising from their breach of fiduciary duty this typically means they retain a portion of any agent fee paid to them by their principal. However, in a motor finance context the credit broker is not paid any agent fee and so if the equitable allowance were to apply it could mean that the broker retains some of their commission and the consumer, as Claimant, would not receive the entire commission payment as relief or damages.

It remains to be seen what impact, the Rukhadze and Others judgment will have on the Johnson and Others Supreme Court appeal and on motor finance commission claims as a whole. Indeed, the same Judges sitting in Rukhadze and Others may well again find that the equitable allowance to retain unauthorised profits does not apply.

This all or nothing application would appear to be the most appropriate and as adjudged by Lord Burrows at [299]: “the stringent application of the account of profits remedy for breach of fiduciary duty is more appropriate today than it ever was”.

We will continue to discuss developments in motor finance claims and relevant cases concerning fiduciary duties and the roles of agents and intermediaries.

Access the full judgment here.