UK Supreme Court Rejects Rachel Reeves’ Motor Finance Intervention

The Supreme Court has rejected Chancellor Rachel Reeves’ bid for the treasury to intervene in a landmark case with ramifications for car dealers’ undisclosed commissions.

His Majesty’s Treasury (HMT) and the Financial Conduct Authority (FCA) sought permission to intervene in a legal dispute focusing on allegations of commissions being paid to salespeople without consumers’ knowledge.

The case in question is the appeals of the Johnson and Others v FirstRand Bank Limited and Others [2024] EWCA Civ 1282 Judgment (‘Johnson and Others’) at the Supreme Court scheduled for April this year.

This month, however, the court rejected Reeves’ application for an HMT intervention. The chancellor is believed to have been looking to avoid a potential £30 billion compensation bill (according to figures from ratings agency Moody’s) for lenders accused of secretly paying commission to car dealers.

The chancellor has expressed her concerns that the proposed redress figure could harm the motor finance industry, making it more challenging for consumers to access car finance. At the World Economic Forum annual meeting in Switzerland, she also revealed her concerns about the broader economic impact of the claims.

An HMT spokesperson said: “We respect the court’s decision not to grant our application to intervene in the Hopcraft case and will monitor it closely.”

Since the decision to refuse the HMT’s intervention was made public, the price of shares in both Lloyds Banking Group and Close Brothers Group has declined.

Along with the Treasury and the FCA, other associations and regulatory bodies that applied to intervene in the case were the Finance Leasing Association, National Franchise Dealers Association (NFDA) and Consumer Voice.

However, only the NFDA and the FCA were granted permission to do so.

At the time of their application, the FCA’s submission said: “Given (the FCA’s) statutory responsibilities with respect to consumers, firms (both motor dealer brokers and lenders) and the operation of the market more generally, as well as its ongoing work in this area, the FCA respectfully considers it vital for it to be able to participate in these proceedings.”

At Barings Law, we are representing thousands of clients who we believe have been affected by undisclosed commissions linked to their motor finance agreements.

Our Litigation Manager, Harry Grimshaw said: “On Monday 17 February, the Supreme Court confirmed the outcome of five applications to intervene in the appeals of the Johnson and Others v FirstRand Bank Limited and Others [2024] EWCA Civ 1282 Judgment (‘Johnson and Others’).

“Both the FCA and the NFDA have been granted permission to intervene, whilst the Finance Leasing Association, Consumer Voice and – most notably – His Majesty’s Treasury have each been refused permission to intervene.

“Having now been granted permission to intervene, it is understood that the FCA and NFDA will each have the opportunity to make 30 minutes of oral submissions at the Supreme Court hearing, along with submitting up to 20 pages of written submissions.

“In our recent post we looked at the grounds on which both the FCA and HMT made their applications and, whilst the Supreme Court have not published the reasons for their decisions, the grounds for intervention may explain why the FCA were successful and why HMT were unsuccessful.

“In an often-cited case authority on applications to intervene in appeal proceedings, Lord Hoffmann in Re E (a child) [2008] UKHL 66 adjudged at [3] that: ‘An intervention is however of no assistance if it merely repeats points… already made… It is not the role of an intervener to be an additional counsel for one of the parties. This is particularly important in the case of an oral intervention.’

“In their grounds the FCA appear to satisfy the above test; take this statement from the application for example: ‘(The FCA) respectfully submits that it will be able to provide the court with significant, independent and non-duplicative assistance in the resolution of these appeals.’

“Contrast the above presented by the FCA with the grounds said to have been presented by HMT, that their intervention is justified as the Supreme Court judgment ‘has the potential to… adversely impact the motor finance / car industry… limit how much lenders will lend… and put smaller lenders at risk of exiting the market’.”

The Supreme Court hearing is listed to start on April 1, and we will continue to monitor the situation closely and update our News and Insights page with any relevant updates.