On 1 August 2025, the Supreme Court handed down its highly anticipated judgment in three conjoined motor finance appeals concerning undisclosed commission payments: Hopcraft v Close Brothers Limited, Johnson v FirstRand Bank Limited and Wrench v FirstRand Bank Limited [2025] UKSC 33.
The primary issue was whether car dealers assumed a fiduciary duty to customers by arranging finance packages for their vehicle purchases, in which case an undisclosed or partially disclosed commission would constitute a bribe or secret profit.
Background
Hopcraft, Johnson and Wrench each bought cars using hire purchase agreements. In each transaction, the lender paid a commission to the car dealer. These commissions were either undisclosed or partially disclosed by stating that a commission of an unspecified amount might be payable.
Each customer complained that they had not been properly informed of the commission payments made to the dealers. The claims were advanced on three grounds: First, that the lenders had bribed the dealers by paying them a commission; second, that the dealers owed the customers a fiduciary duty; and third – in Johnson’s case – that his relationship with the lender was unfair. The claimants were unsuccessful with these claims at the County Court, prompting a conjoined appeal.
In October 2024, the Court of Appeal found in favour of the claimants, holding that the car dealers owed fiduciary duties to their customers by acting as credit brokers in obtaining offers of hire purchase finance from various lenders. This was a significant and unexpected judgment, which imposed duties on dealers far beyond what was presumed under existing FCA rules.
The lenders appealed to the Supreme Court.
Fiduciary Duties in Commercial Dealings
On appeal, the Supreme Court overturned the Court of Appeal’s judgment, ruling that dealers did not owe any fiduciary duty towards their customers.
In a typical fiduciary relationship, the decision-maker sets aside their own interests to act solely in the interests of the principal.
The Supreme Court ruled that by arranging finance packages for their customers, the dealers were merely pursuing their own commercial objective of securing profitable car sales.
Drawing an analogy with a wine waiter, the Supreme Court reasoned that a car dealer may play a role in the customer’s decision-making process by making recommendations, without undertaking a duty of single-minded loyalty to the customer.
It was held that, without an established fiduciary relationship, the customers’ claims against the lenders in equity and bribery could not succeed.
Guidance on Unfair Relationships
Contrary to each claimant’s failure to establish a fiduciary relationship, Johnson’s claim under section 140A of the Consumer Credit Act 1974 (CCA) was upheld. The Supreme Court found that the terms of his hire purchase agreement gave rise to an unfair relationship.
The decisive factors were (i) the substantial commission (26% of the credit advanced and 55% of the total charge for credit) (ii) non-disclosure of this commission and (iii) the concealment of the commercial link between the dealer and lender.
The lender was ordered to pay the commission to Johnson, in addition to interest accruing at a commercial rate from the date of the agreement.
Conclusion
Overall, the Supreme Court’s decision reshapes the legal landscape for car finance, confirming that commercial arrangements between dealers and lenders do not automatically give rise to equitable obligations.
Key takeaways:
- No Fiduciary Duty: The Supreme Court confirmed that, in typical arm’s length commercial transactions, car dealers who assist with arranging finance do not owe fiduciary duties to their customers.
- Commission Disclosure: In isolation, the existence of undisclosed or partially disclosed commission payments cannot justify an equitable claim for secret profits or bribery.
- Unfair Relationships:Johnson’s successful section 140A claim illustrates how excessive commission payments, lack of transparency and dealers steering customers towards particular lenders can contribute to a finding of unfairness. The Supreme Court’s broad approach highlights the need for lenders to remain vigilant in consumer credit arrangements.
For further guidance on how this ruling may impact your business or lending practices, please contact a member of our specialist Banking team.
