Supreme Court Clarifies Law on Commission Payments in Car Finance Cases: Hopcraft, Johnson and Wrench [2025] UKSC 33
August 6, 2025
Harriet Hartshorn and Georgia Cooper
Introduction
On 1 August 2025, the Supreme Court issued a unanimous decision in three linked motor finance appeals: Hopcraft v Close Brothers Limited; Johnson v FirstRand Bank Limited; and Wrench v FirstRand Bank Limited [2025] UKSC 33.
Unusually, and reflecting the significance of this decision, the judgment was handed down at 16:35 on a Friday afternoon, following a request from the Financial Conduct Authority (FCA) for the judgment to be made available outside market hours to allow time for it to be digested and to avoid market disorder.
Overview
The appeals centred motor finance arrangements whereby customers purchased vehicles with hire purchase finance arranged by the dealer. Upon a successful introduction, the lender would then pay the dealer a commission for the introduction.
The main issue before the Supreme Court was whether the continuing status of the dealer as the seller in a ‘dealer–lender–customer’ transaction is fatal to the recognition of a fiduciary duty owed by the dealer to the customer sufficient to found (i) a claim in dishonest assistance, or (ii) a lesser ‘disinterested’ duty to avoid being affected by personal interest, sufficient to found a claim in bribery.
Additionally, Mr Johnson maintained a claim that the payment of commission rendered his relationship with the lender unfair for the purpose of ss.140A-C of the Consumer Credit Act 1974.
The Court of Appeal’s decision
The Court of appeal found in favour of the Claimants, holding that motor dealers owed a fiduciary duty to their customers, and also undertook a duty to act in a disinterested manner sufficient to engage the tort of bribery.
The Court of Appeal held that in three of the transactions, the commission was wholly undisclosed and therefore amounted to a bribe. In the case of Mr Johnson, there was sufficient disclosure to prevent the commission being a bribe, but insufficient disclosure to avoid the payment being an unauthorised profit made in breach of the dealer’s fiduciary duty. The Court of Appeal also identified an unfair relationship sufficient for Mr Johnson’s hire purchase agreement to be re-opened under the CCA.
The Supreme Court’s Decision
In its much-anticipated ruling, the Supreme Court addressed three main legal issues:
1.Fiduciary Duties and Dishonest Assistance
The Court started from the definition of a fiduciary given by Millett LJ in Mothew: ‘A fiduciary is someone who has undertaken to act for on or behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principle is entitled to the single-minded loyalty of his fiduciary’ [89].
A fiduciary duty exists because the fiduciary has undertaken not to pursue his own interests [108]. Trust or customer vulnerability alone does not create such duties; these qualities are consequences, not causes, of fiduciary relationships [108]. The Court stressed that in ordinary commercial contexts, it is “normally inappropriate” to impose fiduciary obligations, as this would distort the parties’ bargain [110].
No such undertaking was present here. Dealers were always acting as sellers, motivated by their own commercial interests. They did not promise to prioritise customer’s interests or act as their legal agents. Instead, they simply introduced finance options as part of facilitating a sale [269-271].
The regulatory framework reinforces this conclusion. The FCA’s Consumer Credit Sourcebook (“CONC”) requires transparency but does not impose the strict “no conflict, no profit” duties of a fiduciary [265].
Without a fiduciary relationship, the claims for dishonest assistance – which depend on an underlying breach – also failed.
2. Bribery
The lenders argued that the tort of bribery had developed in error and should be abolished [139]. The Court rejected this invitation to overturn established law [140].
The Court rejected the Court of Appeal’s broader view that a mere duty to act in a disinterested manner was enough to ground a bribery claim. Instead, the Court confirmed that civil liability for bribery cannot arise unless the recipient of the relevant payment owed a fiduciary duty of loyalty [207], finding that the authorities provide no support for a contrary view [199].
The Court of Appeal’s finding that it was sufficient to exclude liability at common law that there be disclosure of the possibility that a commission might be paid, was held to be erroneous. Whether at common law or in equity, the law of bribery seeks to ensure than an agent acts free from any conflict of interest [225]. Nothing less than fully informed consent will do [226].
As the Court had determined that the dealers in the present case did not owe a fiduciary duty to their customers, the claims in bribery were bound to fail [339].
3. Unfair Relationships under the Consumer Credit Act
Turning to statutory consumer protections, the Court upheld one claimant, Johnson’s, argument that there had been an “unfair relationship” under section 140A of the Consumer Credit Act 1974. The ruling adopted key, although non-exhaustive, criteria put forward by the FCA for assessing unfairness, including [319]:
- The extent of which commission payments were disclosed to the consumer;
- The size of the commission; and
- The potential for those payments to influence the dealer’s advice or the financial product offered.
In Johnson, the Court gave particular consideration to the fact that the commission was around 55% of the total cost of credit (considered to be a ‘powerful indication’ of unfairness [327]) and that the lender had a preferential commercial arrangement with the dealer, contrary to the impression given to the consumer. It was noted that there was no disclosure of these key facts, breaching FCA disclosure rules ([329] and [335]).
The Court emphasised that while non-disclosure of commission alone does not automatically result in an unfair relationship, it is a significant factor in the overall analysis. The statutory test under s.140A was recognised as being broad and fact-sensitive, allowing courts to assess fairness holistically.
In this instance the lender was required to pay Mr Johnson the commission of £1,650.96 together with interest at an appropriate rate [338].
Conclusion
The decision significantly curtails the potential exposure of motor finance lenders to consumer claims, whilst leaving the door open to compensation claims arising under the CCA. Further, the Supreme Court has provided authoritative guidance on three complex areas of law: fiduciary duties in consumer finance, the legal boundaries of bribery, and the application of statutory protections in credit agreements.
The wider implications of this decision, and the FCA’s response to the same, will be considered by John Waiting and Harriet Hartshorn during a remote seminar which will be taking place at 16:30 on Wednesday 13 August 2025.
To book your place, please contact the Seminars Team at seminarbookings@exchangechambers.co.uk
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