Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd.
The first day of the Supreme Court hearing took place yesterday (1st April) in the case of Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd and Hopcraft v Close Brothers Ltd. [2024] UKSC 2024/0157; 2024/0158 and 2024/0159.
Whilst the next three days will not immediately provide a definitive answer to what duty, if any, motor dealers owe to consumers when selling finance or whether finance was mis sold, and if so, what compensation, if any is due, it is the final opportunity for both sides to put their arguments to the Court. The five Law Lords hearing the case are the highest Court in England and Wales, and will have the final say on the matter, using the submissions and information put before them as the basis for their decision.
MILS will be attending each day of the hearing in order to provide a daily summary of proceedings along with a detailed analysis on completion.
Hearing Schedule
Tuesday 01 April
10.30 – 13.00 Submissions by Close Brothers and FirstRand Bank
14.00 – 16.00 Submissions by Close Brothers and FirstRand Bank
Wednesday 02 April
10.30 – 11.15 Submissions by Close Brothers and FirstRand Bank
11.15 – 11.45 Submissions by NFDA
11.45 – 13.00 Submissions by Hopcroft, Wrench and Johnson
14.00 – 16.00 Submissions by Hopcroft, Wrench and Johnson
Thursday 03 April
10.30 – 13.00 Submissions by Hopcroft, Wrench and Johnson
14.00 – 14.45 Submissions by Hopcroft, Wrench and Johnson
14.45 – 15.15 Submissions by FCA
15.15 – 16.00 Submissions by Close Brothers and FirstRand Bank
Summary of Submissions 01 April
On the first day Close Brothers and FirstRand Bank concentrated on their main arguments, which can be divided into two main categories,
- That the Motor Dealer is not a fiduciary.
- In the alternative, if the Motor Dealer is a fiduciary, that appellants should not be entitled automatically to a full refund of commissions paid.
Motor Dealer as a Fiduciary
The concept of a fiduciary is that one party takes on a responsibility for acting in another’s best interest to the exclusion of all others, including their own. There are two different duties being considered here. Whether the motor dealer had a duty to be a full fiduciary, or a lesser duty to provide customers with advice on finance on a disinterested basis. This is significant as either of these duties would require the motor dealer to obtain consent from the customer before receiving commission from finance companies for the sale of finance.
The main line of the appeal is that the Court of appeal erred in finding that motor dealers owed a fiduciary duty to the customer when selling finance. The first hour of submissions from Close Brothers and FirstRand Bank centred on the historic interpretation of the relationship, including the assumption of an agency between the motor dealer and the finance company ever since the Hire Purchase Act 1964. This was expounded on through to the Consumer Credit Act 1974, and Counsel made compelling submissions concerning analogies between the motor industry and other sales industries. Finally, Counsel extended the Court of Appeal’s logic to other sales scenarios in order to highlight the ultimate effect of such a decision.
Whilst it is hard to draw conclusions so early in proceedings, these submissions were simple and effective and well received from the Law Lords present, so this was certainly a compelling start to the case.
Arguments in the Alternative
After an hour, Close Brothers and FirstRand Bank then moved on to their alternative arguments. These apply only if the Court places an enhanced duty on motor dealers.
The crux of these arguments concerned the nature of duties and remedies open to the claimants, and particularly how the law deals with different claims in Equity, Tort and Contract. Over the remaining three hours of submissions, Close Brothers and FirstRand Bank sought to reinterpret legal precedent from the 1870’s to present. A significant task. If successful, this would allow finance institutions to reduce the entitlement of compensation and ultimately to avoid direct liability. By its nature, this would increase the risk that motor dealers would become responsible for compensation.
Overall, the first day was a convincing success for Close Brothers and FirstRand Bank. Whilst it is concerning that over three quarters of the day’s arguments benefitted finance companies over motor dealers, it should be noted that these arguments were necessary and had to be made. The primary defence remains that the motor dealer is not a fiduciary to the customer, and so can accept commissions payments without breach. This is a much stronger argument that that being offered in the alternative, and much simpler to make. No criticism or concern should be implied for the time allotted to each argument, as those in the alternative are by their nature more complex and require greater exposition.
It should be noted that this advice is general in nature, and that any opinions are an initial view of an ongoing case. This is therefore provided as a general guide only.
Anyone wishing to follow the case direct can do so at:
https://supremecourt.uk/cases/uksc-2024-0158
