Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd.
Summary of Legal Submissions Presented to the Supreme Court (April 1st to April 3rd 2025)
For the UK motor dealer, the three days of hearing boiled down to two questions:
What duty, if any, does the dealer have to the consumer when selling/arranging finance?
Whatever the duty, does the commission payment result in an unfair relationship for the purposes of Section 140A of the Consumer Credit Act 1974?
Legal Duty for the Motor Retailer
The Court considered two main issues in relation to whether a motor dealer has a duty to the consumer when selling and arranging finance; namely, whether there was a fiduciary relationship owed by the motor retailer to the consumer and, if so, whether there was any form of bribery (i.e. undisclosed commission).
Fiduciary Relationship
The concept of a fiduciary duty is that a party acts as a fiduciary if it takes on a responsibility for acting in another’s best interest to the exclusion of all other interests, including their own. A motor dealer has not traditionally been viewed as a fiduciary.
However, a number of cases argued in the Court of Appeal has extended the duties of finance brokers. First, in 2007, with the case of Hurstanger[1] and then, in 2021, with Wood[2]. The Court of appeal decision in Johnson[3] extended this to the motor industry in 2024.
In deciding whether this extension was correct, both parties sought to take the Court through a number of legal cases going as far back as the 1870s and as recent as March 2025 with the case of Rukhadze[4].
In summary, lawyers for the Claimants argued that the Court of Appeal in Johnson was right to extend the fiduciary relationship to the motor industry, and consequently to motor dealers.
Lawyers for the Banks, the NFDA and, to an extent, the FCA argued to the contrary that the Court of Appeal wrongly extended the fiduciary duty owed.
Bribery
Thus, the finding as to whether or not there is a fiduciary duty owed is important because if there is a fiduciary duty then it leaves motor dealers open to the accusation of bribery.
Where motor dealers have a fiduciary relationship with their customers when arranging finance, it follows that they have a duty of loyalty to the customer and must act in the customer’s best interests, even against their own interests.
The motor dealer is not allowed to make a profit or to enter into any contract that would be against the customer’s interest. Unless the customer provides their informed consent, any payments received by the motor dealer is a bribe. As a result, the customer is entitled, as of right, to rescind their contract and recover any payments made under the finance agreement, as well as to receive the commissions paid from either the motor dealer or the finance company who paid the commissions.
There was considerable legal argument from all parties about the nature and extent of the fiduciary duty and an analysis of the motor dealer’s relationship with the customer. The Court of Appeal had found that there was a distinct series of contracts taking place when a customer purchased a car and entered into a finance arrangement.
This has been challenged as an unfair representation of the reality of the motor dealer relationship. It was argued on behalf of the motor dealers that the sale of the vehicle and the arrangement for finance are inextricably linked, and therefore the idea of a single-minded loyalty required of a fiduciary is not a realistic reflection of the reality of a motor vehicle purchase.
On appeal, the finance company and the National Franchised Dealers Association (NFDA) maintained that they 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,” especially 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, especially 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.
NFDA Representations on Behalf of Motor Retailers
Lawyers acting for the National Franchised Dealers Association (NFDA) submitted that the Court of Appeal Judgment made an error in deriving a fiduciary duty from the nature of a credit broker’s basic tasks. It criticised the Court for effectively establishing a new category of fiduciary.
Further, it was submitted that the Court misunderstood the role of a motor dealer in broking finance. A dealer is not ordinarily responsible for negotiating with multiple lenders and certainly, because of the nature of the overall sales transaction, it is unrealistic to expect the dealer to act with undivided loyalty.
It was further emphasised that the remedies for bribery may lead to punitive awards and numerous windfall payments.
Unfair Relationship
The question was whether or not the nature and extent of the commissions was such that the failure to disclose the amount rendered the relationship between the creditor and debtor unfair under S140A Consumer Credit Act 1974. The Court was referred to the case of Plevin[5].
The case of Plevin concerned the sale of a PPI policy where over 70% of the price paid represented commission. In this case the Court concluded that a failure to disclose commission payments rendered the contract unfair as the average consumer would have questioned the benefit of such a policy.
Lawyers for the Claimants argued that as the commission in the case of Johnson was at least 50% of the cost (i.e. those costs over the amount borrowed), Plevin was directly applicable and would enable them to cancel the contract.
Lawyers for the Banks argued that Plevin did not apply, since PPI was an optional product secondary to the services being provided in the case, whereas the finance was central to the purchase. Furthermore, they argued that there was no evidence before the Court that removing commission paid to the dealer will reduce the price to the customer by the amount of the commission, not least because the actions undertaken by the motor dealer when arranging finance would likely still be completed by someone and the costs incurred somewhere. In any event, the commission was not excessive, particularly when compared to the amount borrowed.
Anyone wishing to view the case direct can do so at:
https://supremecourt.uk/cases/uksc-2024-0158
This article has been coauthored by Mr C Baylis (Barrister) and Mr P Carroll (Solicitor) instructed by MILS.
NB: Mr Christopher Baylis (Barrister) and Professor Henry Blair (Barrister) will shortly be releasing a legal analysis of the Court of Appeal decision and the Supreme Court submissions.
[1] Hurstanger Ltd v Wilson [2007] EWCA Civ 299.
[2] Wood v Commercial First Business Ltd [2021] EWCA Civ 471
[3] Johnson v FirstRand Bank Ltd (London Branch) (t/a MotoNovo Finance) [2024] EWCA Civ 1282.
[4] Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10
[5] Plevin v Paragon Personal Finance Limited [2017] UKSC 23
