Recap on the background:
The three linked appeals related to claims brought by customers who purchased a vehicle from a dealership on finance. They could not afford the vehicle purchases outright and required funding from lenders to complete the transaction. The dealer arranged the finance and received a commission from the lenders for the introduction. This tripartite transaction was key to the Supreme Court’s findings, with it being found that each party to the transaction was acting in their own interests. The disclosure of the existence of the commission was different in each case, in Johnson it was disclosed in the Finance Agreement and in the Suitability Document, in Wrench it was referred to in the lender’s T&Cs, whereas in Hopcraft the commission was not mentioned at all.
The Court of Appeal’s judgment surprisingly found that:
- the dealers owed a fiduciary duty to their customers and breached this duty when accepting a finance commission.
- the lenders were an accessory to the breach by paying the commission to the dealers, without obtaining the customer’s fully informed consent.
- the dealers owed a duty to provide disinterested advice and information in relation to the finance.
- the payment of the commission constituted a bribe.
- in the case of Johnson, the Court of Appeal deemed that the relationship between the lender and the customer was unfair under s.140A of the CCA. Johnson was the only case where the question of unfairness was an issue before the Court.
The Court of Appeal’s decision caused concern within both the motor industry and the wider finance industry as it had implications for all intermediated business. It also cut across a long line of eminent precedent. The very notion that a seller of goods could be a fiduciary of the buyer was nonsensical. It could not be reasonable to suggest that a motor dealer owed a duty of "single-minded loyalty" to a retail customer. "A fiduciary acts for and only for another". A car dealer pursues their own commercial interests in selling cars. There could be no starker contrast.
The lenders appealed the decision to the Supreme Court.
Key findings in the Supreme Court’s judgment
1. Fiduciary Duty
The Supreme Court found that the dealers were not fiduciaries of customers in motor finance transactions. The dealers, customers and lenders acted at arm’s length, pursuing their own commercial interests. The Supreme Court found that the Court of Appeal placed too much weight upon findings of trust, confidence and vulnerability, when in fact, a fiduciary duty was not dependent on such matters, but rather on an undertaking being given by the fiduciary to act entirely in another person’s interest. In the cases in hand that undertaking was just not present.
2. Bribery
The Supreme Court held that the existence of a fiduciary duty is necessary for the tort of bribery to be engaged. The Supreme Court disagreed with the reasoning in Hurstanger that the “real evil” of bribery is secrecy, instead the “real evil” is a breach of the fiduciary’s no conflict rule, which can only be negated by full disclosure of the facts. However, where there is no fiduciary duty on the part of the dealer, there was no conflict of interest and the suggestion that the commission payment was a bride was misconceived.
3. Unfair Relationships
The Supreme Court ruled that there was an unfair relationship between Mr Johnson and FirstRand due to the specific facts of the case. It was held that the assessment of unfairness depends on the particular facts of a case and the courts have to take into account a broad range of factors (the so called "waterbed") that go into making up a motor finance transaction – for example the deposit, APR, price, part exchange allowance, manufacturer contribution, optional extras etc), all are relevant.
Just because there had been no disclosure or only partial disclosure of the commission, this did not automatically make a relationship unfair. You have to look at all the facts of the particular case.
Mr Johnson’s Claim under s.140A CCA was the only successful claim of the 3, on the basis that:
- the significant size of the commission was paid to the dealer (being 55% of the charge for credit) and not disclosed;
- the dealer had a contractual tie with FirstRand and that tie wasn’t disclosed in the documents. The documents gave the false impression that there was a panel of lenders and suggested impartiality.
The future
The decision constitutes a serious set back to the CMC industry and hopefully marks the beginning of the end of this wave. What remains of motor finance commission claims, is potential section 140 allegations of "unfair relationship" – to which a consumer was always entitled to raise. However, such claims require consideration of the waterbed of factors and are highly fact sensitive. Almost by definition, they are not suitable for omnibus claims such as the one issued by Barings in Angel (note Angel is subject to an appeal in Spring 2026).
When determining s.140A claims, the SC has given some useful hints in relation to the factors to be given weight:
- amount of commission –v- charge for credit (probably in excess of 50%) – and those claims will be in the minority;
- the nature of commission (e.g. was it DCA);
- extent and manner of disclosure, and
- compliance with the regulatory rules.
However, usefully of note is that the mere fact there is no disclosure of the commission, or only partial disclosure, will not of itself make the relationship unfair. It is just one factor.
The Supreme Court’s judgment has narrowed the issues down and has provided lenders with clarity, dismissing the suggestion that a dealer owes a fiduciary duty to a customer. The decision has likely caused the CMCs to reconsider their strategy. The assessment of whether a finance agreement is unfair depends on individual circumstances, and the courts retain discretion to consider a range of factors when carrying out the assessment.
As a result, it will be much harder for the CMCs to prosecute these claims successfully and en masse. Of note was that prior to the C of A decision, the FS industry was winning more of these claims than it was losing. FOS take note.
FCA redress scheme
The FCA confirmed its intention to consult on an industry-wide redress scheme by early October 2025, with consumers expecting to receive compensation by next year. The FCA has commented that the “fairness assessment” will depend on the following:
- the size of the commission relative to the charge for credit;
- the nature of the commission i.e. whether it was discretionary;
- the characteristics of the consumer;
- compliance with regulatory rules; and
- the extent and manner of disclosure.
The FCA should give (at least some) consideration to the fact that there is no evidence to suggest that in the vast majority of motor finance transactions the customer "got a bad deal". That should be the starting point. In the vast majority of cases, the customer got the car they wanted on terms affordable to them.
The FCA have indicated that any redress should cover agreements dating back to 2007, but that doesn't appear sensible, not least because many claims are already statute barred and the FCA only started regulating in 2014.
Slightly worrying was that the SC decided that the appropriate remedy in the Johnson case was the repayment of the commission. It is not clear why that determination was made. Whilst the FCA have accepted that it is unlikely that any alternative calculation would lead to higher compensation, absent evidence of any "customer harm", redress should be very carefully assessed.
If you wish to discuss any points mentioned in this article, please contact one our experts.
