Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd. – The Supreme Court Decides

The wait is over—the Supreme Court announced its historic decision in the motor finance commission cases. No matter how you slice it or dice it, the decision amounts to a clear win for the industry.

The Status Quo

For years, the motor finance industry operated on a widespread model where lenders paid commissions to dealers for arranging customer finance. This was the everyday architecture of the market. That was until around 2019, when the Financial Conduct Authority (FCA) turned its attention to the situation and undertook a consultation CP19/28; Motor finance discretionary commission models and consumer credit commission disclosure. The result was a ban on discretionary commissions from January 2021. While this significant change aimed at concerns going forward, it had the consequence of implying wrong doing in the past, which only served to increase the tempo of legal disputes.

The drama escalated in October 2024 when the Court of Appeal delivered a bombshell ruling, applying principles from Wood v Commercial First Business Ltd [2021] ¹ to find that where a commission was paid secretly, it constituted a bribe in civil law.

In what was a significant turn of events, the Court also ruled that when arranging finance, motor dealers were not merely arm’s-length sellers but were acting as agents on behalf of the consumers and therefore owed a fiduciary duty to act in the Customers – interest rather than their own. This resulted in any payments from the finance company being deemed a bribe unless it was fully disclosed to the consumer during the sale. The ruling sent shockwaves through the industry, as it had enormous financial implications for both lenders and dealers alike.

The Supreme Court’s Final Word

The Supreme Court has now delivered the denouement, systematically dismantling the Court of Appeal’s reasoning and resolving the central conflict in the industry’s favour, while leaving a critical sub-plot for future attention.

Is The Motor Dealer A Fiduciary When Arranging Finance?

No. The judgment explicitly rejects the two-stage analysis advanced by consumers, which sought to separate the car sale from the finance arrangement, viewing it as “commercially and legally unrealistic” because the dealer’s interest persists until completion.

The Court’s decision is based on the recognition that a dealer remains an arm’s length party throughout the entire transaction, pursuing its own commercial objective of securing a profitable sale. This continuing self-interest is, in the Court’s own words, “irreconcilably hostile to the recognition of a fiduciary obligation owed to another party in that negotiation”. Crucially, the Court determined that an offer by a dealer to find the “best” or “most suitable” deal does not amount to an undertaking of selfless, fiduciary loyalty, noting such statements are characteristic of many arm’s length commercial negotiations.

Accordingly, the Court of Appeals view that partial disclosures create liability for dealers and, by extension, lenders has been excised from the law.

Is Commission A Bribe?

In perhaps the most surprising move of the decision, the Court held that civil liability for bribery cannot arise unless the recipient of the benefit owed a fiduciary duty of loyalty to the claimant. It methodically traced the tort’s equitable origins, concluding that the mischief it targets is the corruption of a pre-existing duty of loyalty. This finding directly overturns the principle from Wood v Commercial First Business Ltd [2021] ², which had proposed a lesser, free-standing “disinterested duty” as a sufficient basis for a bribery claim. This single finding collapses the primary basis of the claims that posed the greatest systemic risk.

It might be easy to miss the impact of this ruling on a cursory read. Because dealers are not fiduciaries, the necessary precondition for the tort of bribery is not met. Therefore, even a completely secret commission paid to a dealer in this context cannot legally be a bribe. The Court explicitly stated that as a result of this reasoning, “the customers’ claims against the lenders in equity and in bribery cannot succeed”.

Does Commission Lead To An Unfair Relationship under S140A of the CCA

While this is the one success in the case for the Appellants—as the court found that Mr Johnsons relationship with First Rand was unfair under s140A of the CCA—this should in fact be seen as a win for the Motor industry as well.

The Court has taken this opportunity to provide binding guidance on the lower courts (and the FCA) as to the factors to consider when assessing a commercial relationship under s140A. The judgment identifies two decisive factors:

• The Size of the Commission: The commission paid to the dealer was £1,650.95, amounting to an eye-popping 55% of the total charge for credit. The Court endorsed the reasoning in Plevin v Paragon Personal Finance Ltd, stating that “at some point commissions may become so large that the relationship cannot be regarded as fair if the customer is kept in ignorance”. The failure to disclose a commission of this magnitude was deemed a “powerful indication” of unfairness.

• The Undisclosed Commercial: Tie: The dealer had a contractual arrangement giving the lender a right of first refusal on any finance business, a fact that was not disclosed. Instead, a “Suitability Document” created the “false impression” that the dealer was selecting the best product from a panel of 22 lenders. The Court described this as a “suppression of the truth” and “active concealment of the reality,” which was attributable to the lender under the CCA.

It is likely that these considerations will form the basis of any FCA redress scheme, should such a scheme survive this judgement.

Notably, however, in its analysis under the CCA, the Supreme Court affirmed that the mere fact that a commission was not disclosed, or only partially disclosed, is not in itself sufficient to make a relationship unfair. Instead, the Court clarified that non-disclosure is a single factor—albeit an important one—to be weighed in the overall balancing exercise when determining unfairness on the specific facts of a case.

Conclusion: A New Rulebook

Of course, first impressions need to be taken with a grain of salt, and this is our first impression of what is a complex and detailed judgement. Over the next week we will be producing further advice and guidance bringing out aspects of the judgment in detail as appropriate.

Still, our first impressions are that this is a very positive outcome for the motor trade. The Supreme Court’s decision brings the curtain down on perhaps the industry’s biggest legal drama ever. The existential threat posed by bribery and fiduciary duty claims has been neutralised. The legal framework has been reset, shifting the entire focus away from common law principles and onto the statutory regime of the Consumer Credit Act. While the ‘unfair relationship’ provisions will remain a battleground for cases with egregious facts, the Court has provided a new, and far more favourable, rulebook for the industry.
Don’t forget, as a MILS member you have access to the MILS Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.

1 Wood v Commercial First Business Ltd [2021] EWCA Civ 471
2 Wood v Commercial First Business Ltd [2021] EWCA Civ 471