Rob Weir KC, Jonathan Butters and Tom Westwell in Supreme Court motor finance decision
The Supreme Court has handed down judgment in Hopcraft v Close Brothers Limited [2025] UKSC 33, on appeal from the decision of the Court of Appeal in October 2024 that found lenders liable for undisclosed commissions paid to car dealers arranging finance for the consumers.
Robert Weir KC, Jonathan Butters, and Thomas Westwell appeared for the claimant consumers, as they did before the Court of Appeal.
The decision represents a partial but significant win for consumers. In a unanimous judgment, Lord Reed, Lord Hodge, Lord Lloyd-Jones, Lord Briggs and Lord Hamblen found the lender liable under ss.140A-C of the Consumer Credit Act 1974 (“CCA”) in the case of Johnson v FirstRand, the only one of the three conjoined appeals in which statutory consumer protection law was in issue.
There was an unfair relationship between Mr Johnson and FirstRand as a result of multiple failings by FirstRand and the dealer (for whose conduct FirstRand was deemed responsible). These included the high commission, the non-disclosure of the commission, and the contractual tie between FirstRand and the dealer which was concealed from Mr Johnson. These matters also gave rise to various breaches of the Consumer Credit Sourcebook (“CONC”) sections of the Financial Conduct Authority (“FCA”) rules.
The fact Mr Johnson did not read documentation provided to him referring to the possibility of commission being paid did not affect the unfairness. The commission had not been disclosed to him, which also placed the dealer in breach of CONC 4.5.3R, because the clauses were not given prominence and the extent to which a customer could reasonably be expected to read and understand the detail of such documents was questionable.
The decision ensures many car finance customers will be able to obtain redress under ss.140A-C CCA and/or under s.138D(2) Financial Services and Markets Act 2000 on an action for damages for breach of CONC.
The FCA has subsequently announced that it will consult on a redress scheme to compensate motor finance customers who were treated unfairly, based on the factors identified by the Supreme Court. As a result of the decision in Johnson, the FCA will consult on whether the scheme should extend to include non-discretionary commission arrangements, as well as the discretionary arrangements to which its original investigations had been limited.
The Supreme Court allowed the lenders’ appeal against the Court of Appeal’s decision that the car dealers owed a fiduciary duty to customers when arranging finance. The dealers did not give an undertaking of single-minded loyalty to the customers. The dealers had their own commercial interest in the finance transaction and their roles in selling the cars and arranging finance could not be separated from one another.
In determining the appeals in relation to the common law/equitable claims, the Court clarified a number of important points in relation to the civil law of bribery: (1) there is an independent tort of bribery under which the briber is primarily liable; (2) the tort is committed only where a bribe is paid to a person that owes a fiduciary duty, and a lesser “disinterested duty” will not suffice, contrary to the Court of Appeal’s decision in Wood v Commercial First Ltd [2022] Ch 123; (3) a commission paid to a fiduciary will be “secret”, and treated in law as a bribe, where it is paid without the principal’s informed consent, and the Court of Appeal in Hurstanger Ltd v Wilson [2007] 1 WLR 2351 was wrong to hold that there could be a “halfway house” or “half-secret” commission; and (4) there is an automatic right to recover the bribe from the briber, as well as a right to rescission at common law and a concurrent right to rescission in equity.
The appeals have been extensively covered in the press, see here (BBC).
The judgment is available here.
The Devereux team are instructed by Kavon Hussain of Consumer Rights Solicitors and Kevin Durkin of HD Law.
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