Hopcraft v Close Brothers and the Remedy Riddle

Legal Analysis of the Parties’ Legal Submissions to the Supreme Court. On 1st to the 3rd of April 2025, the Supreme Court heard submissions in Hopcraft and another (Respondents) v Close Brothers Limited (Appellant), the landmark case dealing with undisclosed car finance commissions. At the close of the process, the Court indicated that a decision will be announced at the earliest opportunity, and no earlier than July this year.

The stakes are massive: The Court of Appeal previously found that undisclosed—or barely disclosed—commissions may breach common law fiduciary or disinterested duties or contravene the unfair-relationship provisions in the Consumer Credit Act 1974 (CCA). In fact, so far—both at the Court of Appeal and the Supreme Court—the issue of liability has dominated the discussion. Important though liability obviously is, a significant sub-plot has received far less attention: How should Courts or regulators actually remedy such an unfair relationship or breach of duty when it arises?

This “remedies riddle” is more than a footnote. Although the Court of Appeal deemed the arrangements problematic in Hopcraft, it heard no real submissions on what specific remedy to impose and made only a cursory foray into the CCA’s menu of options. The same gap loomed over proceedings at the Supreme Court: Counsel devoted much time to whether or not car dealerships really owe fiduciary duties—after all, they’re retailers, not pure financial advisers—and just how “secret” a commission must be to trigger the dreaded “bribery” label. Yet neither side spent much time exploring the actual consequences of a finding of breach of a disinterested or fiduciary duty, or unfairness under the CCA.
With the Supreme Court now poised to issue judgment, this very practical question remains unclear: If finance companies and dealers lose, what happens next?

The Road to the Supreme Court

A great deal has already been written about the Court of Appeal decision, so what follows is a brief summary. The lower Court found that, in arranging finance, motor dealers can owe legal duties that prohibit undisclosed commissions.

Fiduciary or “disinterested” duties may arise for dealerships if they undertake to provide impartial help with obtaining finance. The Court reasoned that a broker’s role in procuring a suitable loan for the customer can, in certain factual circumstances, imply an “ad hoc” duty of loyalty, bringing with it strong restrictions on undisclosed gain. If a commission remained wholly or effectively hidden from the customer, the law treats it as akin to a “secret commission” or “bribe.”

In Hopcraft, the commission was fully undisclosed and thus a bribe. In Wrench, the mere mention in boilerplate that “a commission may be payable” was deemed too vague to meaningfully alert the customer, so commission remained practically undisclosed and thus a bribe. In Johnson, by contrast, the dealership provided some disclosure, albeit limited. The Court of Appeal decided that this was a partial disclosure case and then concluded that the disclosure was insufficient to convey the amount of the commission, its nature, or the extent of the dealer’s interest in setting the interest rate.

Key Arguments Before the Supreme Court

On appeal, the finance company and the National Franchised Dealers Association (NFDA) maintained that dealers are retailers acting in their own commercial interest, not advisers with single-minded loyalty. They attacked the Court of Appeal’s conclusion that a dealership’s credit-brokering tasks necessarily create fiduciary obligations. In any event, they argued, failing to reveal a commission does not automatically brand the payment a “bribe,” particularly if there was at least some mention of a commission in the deal paperwork. At best, they argued, it might be an unfair practice under the CCA—leading to potential relief—but not the draconian remedies that often come with “secret commissions.”

In response, the consumers’ legal teams highlighted the real risk of exploitative finance deals. Those risks are exacerbated, of course, when dealers can manipulate interest rates to boost their commissions. They pointed out that the Court of Appeal’s framework aligns with the Supreme Court’s earlier condemnation of hidden commissions in cases such as Plevin (where the Supreme Court ruled that a lender’s failure to disclose a substantial commission on a Payment Protection Insurance (PPI) policy to a borrower created an unfair relationship under the Consumer Credit Act 1974). In essence, they say the Court of Appeal was right on the law: A lender paying an undisclosed or half-disclosed commission puts the borrower at a stark disadvantage and, if that arrangement was never flagged, the common law or the statutory scheme should afford potent redress.

Mind the Gap—Limited Discussion of Remedies

Despite all the high-powered lawyering, however, detailed arguments on how to remedy legal violations were conspicuously thin at both the Court of Appeal and at the Supreme Court. Counsel poured energy into arguing who ought to prevail and under what legal theory—fiduciary obligation, “disinterested” duty, or “unfair relationship”—yet dedicated comparatively little time to an equally crucial question: What relief should follow if the consumer wins? Full rescission? A simple refund? A partial rewrite?

The gap matters. The Financial Conduct Authority (FCA) has publicly stated that, if the Supreme Court confirms a breach of duty or finds systematic unfairness in motor finance, it may institute a broad-based redress scheme akin to the PPI redress model. Yet creating such a scheme without judicial guidance on which remedies are legally justified would risk being arbitrary or unprincipled. For instance, awarding full rescission on every claim would yield windfall gains for consumers in a great many cases and generate untold chaos in underwriting. On the other hand, a uniform “commission refund” might be under-inclusive if some borrowers have overpaid interest for years.

A Tale of Two Theories: Common Law and the CCA

Most of the confusion about remedies arises because there are two separate routes to liability—common law and the CCA—and each can produce different outcomes:
Common Law Bribery / Fiduciary Duty. If a dealership is held to a fiduciary standard, a “secret commission” can be classed as a bribe. The result? Courts generally have an “all-or-nothing” approach: full rescission (if feasible) plus the return of the bribe, or at least a requirement that the bribe be disgorged. Judges do have equitable discretion, but the case law on bribery/secret commissions is famously rigid, especially in cases of total nondisclosure.

Meanwhile, the remedy for partial disclosures under a disinterested duty remains unclear, in part because the entire notion of that duty is still novel. Complicating matters further is the fact that out of the three consolidated cases before the Court of Appeal, only one—Johnson—involved partial disclosure. In that case, the Court also found breach of the CCA. The judges suggested that the remedy awarded—refund of the commission—was rooted in Section 140B of the CCA, leaving open the question of what remedy might flow, purely at common law, if a “disinterested duty” was breached absent a statutory claim.

Unfair Relationship Under Section 140A–C CCA. Separately (or in parallel), a consumer can show the credit arrangement is “unfair.” If the Court agrees, section 140B arms the judge with broad, discretionary powers to fix the unfairness. In theory, a judge can reduce remaining loan payments, write off interest, or even set aside the entire agreement—or simply order the lender to refund the undisclosed commission.
This second statutory route is typically more flexible than the common law route, but that also means that the remedy is fact specific. It depends on the seriousness of the wrongdoing and the practicalities of unwinding the contract. While this approach is arguably fairer to both sides, given its particularised evaluation, it does not lend itself well to a redress scheme.

The Court of Appeal Did Not Hear Any Submissions on Remedy

Because the Court of Appeal barely engaged with Counsel on remedies, it effectively took the simplest route without elaboration in that it refunded the commission with interest.
The Court of Appeal’s approach was neither legally developed nor well-calibrated to the specific details of the situation.

If a commission arrangement amounts to a “bribe,” then existing common law suggests that the proper remedy should be recission of the entire agreement, not merely disgorgement of the commission. In Hopcraft, the Court considered this but rejected it because too much time had passed since the vehicle had been sold. That may have been sensible in the narrow case before the Court, but what if the consumer is still paying off the loan or the deal is more recent? Does recission remain the default?

On the other hand, if a commission arrangement is “unfair” under the CCA, then a Court has access to a broad suite of remedies that hinge on a careful evaluation of the unique facts and surrounding circumstances. But what facts and circumstances, in this context, matter most? For instance, should any remedy reflect how material the payment of commission was to the customer’s decision? Delineation of the relevant factors matters, especially if Court process is going to be replaced with a streamlined FCA redress scheme.

Conclusion

Everyone expects that the Supreme Court will provide a clear statement on whether car dealerships truly stand in a fiduciary capacity—and if so, how hidden commissions become “bribes” in the eyes of the law. But from a practical standpoint, the bigger story may be about remedies. The Court of Appeal left a glaring gap, awarding a straightforward refund of the undisclosed commission without explaining why the rest of section 140B’s powers did not come into play. The Supreme Court hearing also failed to engage squarely with those options.

Will the Supreme Court cement a relatively rigid approach, tying all undisclosed commissions—or even just “secret commissions”—rescission? That seems unlikely, as it would lead to chaos. Will the Court emphasise the CCA’s flexible arsenal, granting lower Courts wide freedom to shape proportionate redress in each scenario? This seems more likely, but if it fails to provide clear guidelines for exercising remedial discretion in this context, we cannot see how an FCA redress scheme could coherently function. Will the Court just adopt the same pragmatic but unprincipled approach of the Court of Appeal and award disgorgement of undisclosed commissions? Perhaps, but that would leave the law in this area underdeveloped and risk future disputes when claimants inevitably try to extend the logic of Hopcraft to other scenarios.

The importance of grappling with the remedy riddle—and bridging the gap between centuries-old common law bribery rules and the more modern, flexible CCA regime—cannot be overstated. The practical future of the UK’s motor finance marketplace may hinge on that balance of deterrence and fairness, clarity and nuance.

In summary, there is in part good news for motor retailers in that for the reasons set out above, we doubt that the Supreme Court will rule definitively on perhaps the most important issue, namely remedy. If we are right, then motor retailers will be able to defend any litigation whether brought by the consumer or the finance companies on a fact specific basis.

This article has been co-authored by Mr C Baylis (Barrister) and Professor Henry Blair (Senior Counsel) instructed by MILS.