Supreme Court Judgment – Motor Finance

The Supreme Court’s decisive finding was that motor dealers do not owe customers a fiduciary duty in relation to their role as a credit broker arranging finance. In allowing the appeals and as there was no fiduciary duty arising, the Supreme Court concluded that the customers had no claim against the lenders in bribery or for breach of fiduciary duty. In the discrete appeal on Johnson, the Supreme Court upheld an unfair relationship under s140A of the Consumer Credit Act 1974 (“CCA”) on the facts of the case but substituted an alternative basis for the finding to the Court of Appeal (“CA”).

The Supreme Court’s decision and what it means

The Supreme Court considered three bases of claim: (1) Fiduciary Duties; (2) Tort of Bribery; and (3) Unfair Relationships.

Fiduciary Duties

The CA previously found that there was a fiduciary relationship between a dealer and customer: i.e. the dealer would act with single-minded loyalty towards the customer, to the exclusion of their own interests. The Supreme Court unanimously overruled the CA and held that car dealers do not owe customers a fiduciary duty.

There were several key factors leading to this decision:

1. Acting in their own interests - Each of the three parties to the negotiation engaged at arm’s length from the other parties “in the pursuit of a separate commercial objective of their own”. When pursuing each of their separate objectives, the Supreme Court stated that it was inevitable that each party could come into conflict with the commercial objective of the others. It was held that neither the parties nor any third party onlooker could reasonably think that each of the parties to the negotiation was acting in any way other than in their own interests.
2. Ancillary service - The Respondents argued that there were two distinct roles held by the motor dealer/broker and, when they became the broker, they should have acted in the customer’s best interests. The Supreme Court rejected this argument. They stated that the ‘credit brokerage service’ was not a distinct or separate service provided in its own right (in contrast to the services provided in Wood v Commercial First Business Ltd [2022] Ch 123 (“Wood”) and Hurstanger Ltd v Wilson [2007] 1 WLR 2351); it was a service ancillary to the sale of the vehicle.
3. Duty of loyalty – The Supreme Court found that at no point did the dealer expressly undertake or assure the customer that it would put aside its commercial interest for the customer, and a statement by a dealer to a customer that they would seek the most suitable finance package for the customer’s requirements does not amount to a statement that the dealer will put aside their own continuing commercial interests in the transaction. A duty of loyalty cannot be implied (in equity or law) in an arm’s length relationship between the dealer and the customer when the dealer is selecting and negotiating a suitable finance package.
4. Agency - The dealer did not act as an agent (under law) for the customer when arranging finance. The dealer did not have the authority of the customer to enter into legal relations with the lender and the customer entered into the agreement with the lender personally. This was despite the dealer obtaining confidential information about the customer’s financial position.
5. Vulnerability - The weight placed by the CA in its judgment on findings of subjective trust and confidence and vulnerability (as indicative of a fiduciary relationship) was wrong in law. Dependency on the dealer or the customer’s vulnerability are not indicative of a fiduciary relationship in the absence of an undertaking of loyalty.
6. Trust and confidence - The Supreme Court agreed with the CA that the way in which a dealer may provide the service and find a suitable finance package for the customer may result in an element of trust and confidence being reposed in the dealer by the customer. The customer may assume that the dealer will locate the most suitable finance package for them. The Supreme Court did not consider that this level of trust of confidence is beyond what would be expected and what frequently arises between commercial parties negotiating at arm’s length.

Tort of Bribery

One of the Appellants, Close Brothers, argued that the Supreme Court should abolish the common law tort of bribery, on the basis that the law had taken a wrong turn. Given that the claim also arose in equity, and the claim will also invariably apply to a payer of a bribe through a claim in dishonest assistance, a separate common law “bribery” claim was unnecessary and confusing.

The Supreme Court rejected this argument. They held that the common law liability for bribery was long-established. The Supreme Court would only depart from long-existing law if development of the law had been impeded or had led to unjust results. There was no suggestion that was the case here, and the reason for the strict approach set out in the tort of bribery remains relevant today.  The briber is a primary wrongdoer at common law which is an important difference to the position in equity.

The CA had recognised a lesser “disinterested” duty as set out by David Richards LJ in the case of Wood and stated that this lesser duty would be sufficient to give rise to liability in bribery if breached.  The Supreme Court overturned this finding stating that it was a “mistake to hold that a fiduciary relationship was unnecessary”; and a fiduciary relationship is an “essential requirement” for civil liability thereunder.  The Supreme Court having found (for the reasons set out above) that the dealers did not owe a fiduciary duty to their customers, no liability in bribery could therefore arise.

Unfair Relationship

In respect of the claim that there was an unfair relationship under s.140A/B of the CCA, the Supreme Court confirmed that the application of the unfair relationship test in any particular case “…will, inevitably, be a highly fact-sensitive exercise”.

The Supreme Court accepted that the CA had made errors in its decision which meant that it needed to be re-considered. The CA was factually wrong to consider that the commission caused the cash price of Mr Johnson’s vehicle to be increased. The CA was also wrong to consider that the fact the price was above the Glass Guide valuation was a cause of unfairness in circumstances where there was no evidence of the reason for that discrepancy.

Nevertheless, the Supreme Court concluded that, on the specific facts of Mr Johnson’s case, the relationship was unfair. The Supreme Court considered the following:

1. The size of the commission – the Supreme Court referred to the decision in Plevin (where a commission of 71% in the context of a PPI policy was found to be unfair) but considered that Plevin could not simply be read-across to motor finance. It was “…not possible simply to apply the reasoning of the Supreme Court in Plevin to the present case. The two cases are concerned with different products on different markets.” Finance was not optional for Mr Johnson if he wished to purchase the car. He was provided with information in respect of the price of the car and the cost of finance and was in a position to compare the price of other options. However, the Supreme Court considered that the fact the commission in Mr Johnson’s case was “so high” (55% of the total charge for credit) was a “powerful indication” of unfairness.
   
   However, we note the FCA has subsequently acknowledged in its call with market analysts^[3] that the measure of commission compared to the total charge for credit as an indicator of unfairness is not straightforward, because interest rates could be low, making the commission appear relatively high, yet the customer had a good deal on the finance.  Equally, such a comparator will inevitably impact lower value transactions where the total charge for credit is lower, but the dealer will still incur costs in introducing that deal;

2. Non-disclosure of commission – the Supreme Court concluded that the existence of commission was not disclosed to Mr Johnson and that the dealer was therefore in breach of CONC 4.5.3R. The basis of this finding is not entirely clear (on the basis that the Supreme Court acknowledged that Mr Johnson had been provided with a document by the dealer that did refer to the possibility of commission), but appears to be fact specific on the grounds that Mr Johnson was not told about the commission orally, Mr Johnson did not read the documents provided to him, his evidence was that he was rushed and did not feel that he had time to read the paperwork, he was unsophisticated, and his attention was not expressly drawn to the contractual clauses that referenced the possibility of commission;
3. The existence of a commercial tie between FR and the dealer – the trading terms between FR and the dealer required the dealer to first give FR the option to provide finance, before any other finance provider. However, the suitability document provided by the dealer to Mr Johnson indicated that the dealer could offer finance from a panel of 22 lenders and that the dealer would select the product that best met his requirements. The Supreme Court considered that the suitability document provided by the dealer gave a false impression given the existence of the tie, which was not otherwise disclosed; and
4. Mr Johnson’s failure to read the documents – Mr Johnson’s wilful failure to read the documents was an important factor to take into account in considering fairness. Had he read the suitability document or the standard terms and conditions, he would have been informed of the possibility of commission and, had he pursued the point further, could have discovered the amount. However, that had to be balanced against the fact he was commercially unsophisticated and it was questionable to what extent a lender could reasonably expect a customer to read/understand the detail of those documents. A customer would not expect a commission of such size to be payable and greater prominence should have been given to the clause providing disclosure and the customer’s attention specifically drawn to it. Further, even had Mr Johnson read the documents provided to him, it would not have revealed the existence of the commercial tie. 

Balancing the above four factors, and having concluded that it was appropriate for them to decide the question of fairness (rather than remit it to a District Judge), the Supreme Court concluded that the relationship was unfair “by reason in particular of the size of the commission, the failure to disclose the commission, and the concealment of the commercial tie between the dealer and [FR]”. The Supreme Court recognised that the court had wide discretionary powers in determining remedy. In Mr Johnson's specific case, they considered that the appropriate remedy was for the return of the commission to be paid to Mr Johnson with interest at an appropriate commercial rate from 29 July 2017 (the date of the agreement).

Summary

In summary, the Supreme Court has provided clear guidance on ability of customers to bring claims for bribery and breach of fiduciary duty in the motor finance context.  The fact that dealers have their own commercial interests in the sale of the vehicle means that they are highly unlikely to owe a fiduciary duty and claims for bribery and breach of fiduciary duty/dishonest assistance will fail at that first hurdle.

The position in respect of unfair relationship claims is less straightforward. Whilst the Supreme Court found that there was unfairness in the specific combination of circumstances of Mr Johnson’s case, they acknowledged that consideration of fairness in any individual case requires a fact-specific determination. They agreed with the CA that “the mere fact that there has been no disclosure of the commission, or only partial disclosure, will not necessarily suffice of itself to make the relationship between lender and customer unfair for the purposes of the CCA. It is a factor to be taken into account in the overall balancing exercise required under section 140A”. Whilst the undisclosed commission in Mr Johnson’s case was so high as to be a powerful indication of unfairness, it was not determinative and a consideration of all relevant facts in the case will still be necessary. There will be many different factual scenarios which will likely lead to different outcomes.

What happens next?

The FCA made an announcement ^[4] on 3 August 2025 regarding their decision to consult on an industry-wide redress scheme. Their announcement confirmed that there would be a consultation period for a redress scheme relating to discretionary commission arrangements (“DCAs”) and, possibly, non-DCAs covering agreements dating back to 2007. The FCA is aiming to publish the consultation by early October 2025 and it will likely be open for 6 weeks. Any final scheme will likely launch in 2026 with consumers starting to receive compensation later that year.

The FCA is intending to consult on the following:

1. How a range of factors must be assessed together when deciding on whether the relationship between the lender and consumer was unfair
2. Whether non-DCA arrangements will fall within the scope of the scheme
3. Redress calculation –(1) whether a de minimis threshold is appropriate; (2) what redress should be awarded. A payment in the amount of the commission (as was awarded in Johnson) will be considered as an approach alongside alternative approaches which may lead to lower redress payments; (3) what should be the applicable rate of interest. The FCA intends to propose an interest rate equal to an annual average base rate plus 1%.
   
   The FCA has estimated that most eligible individuals will receive less than £950 in compensation per agreement.
4. Whether an opt-in or opt-out scheme would be appropriate – in either case, the FCA anticipates requiring firms to make customers aware that they may be eligible.
5. ‘High’ commission – what rate of commission would be considered high enough to be a ‘powerful indication’ of an unfair relationship.
6. Complaints deadline – currently, firms do not need to respond to relevant motor finance complaints before 4 December 2025. The FCA will consult on extending this deadline further to align with the redress scheme.

Some form of redress scheme based on DCAs appears almost inevitable.  What is unclear is the extent to which the FCA will deal with non DCAs as part of any redress. The FCA has agreed that the assessment of unfairness is complicated and needs to be considered in the round. In a call with market analysts^[5], the FCA confirmed that the Supreme Court’s decision does not fully determine the range of factors which might need to be taken into account, acknowledging that a simple approach based on Plevin was confirmed by the Supreme Court as “not right”, with factors such as discounts on vehicles and lack of sophistication of customers being “part of a complex factual matrix” that will need to be considered.

Given this complex factual matrix, it is difficult to envisage how the FCA could seek to put in place an ‘unfairness’ based scheme which could be universally applied based on the type of factors identified by the FCA as being relevant to the question of fairness.  This being the case, it will be interesting to understand how the FCA will seek to meet its simplicity and cost effectiveness principle of delivering any redress scheme.^[6] 

Johnson is, in our view, an unusual case, with the dealer in that case having provided misleading documentation – and is likely not the most suitable vehicle for wide application.  If the FCA does put in place any scheme to seek to cover such cases, it may be that it will need to focus on arrangements where there were similar unusual factors as were present in Mr Johnson’s case.

The Court of Appeal hearing in R (Clydesdale Financial Services Ltd) v Financial Ombudsman Service Ltd [2024] EWHC 3237 (Admin) is to be heard from 16-18 September 2025. This case concerns a challenge to one of the FOS’s decisions on DCAs. This decision will likely inform the FCA’s final remediation plans.

The prospects of multi-claimant group litigation in this area will also be influenced by the outcome of the separate appeal hearing in Angel and others v Black Horse and others, which is to be heard in the Court of Appeal in April 2026.

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^{[1] The following appeals, respectively: (1) Amy Louise Hopcraft and Carl Hopcraft v Close Brothers Limited (“Hopcraft”); (2) Marcus Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (“Johnson”); and (3) Andrew Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance (“FR”, “Wrench”) - UKSC 2024/0157, UKSC 2024/0158 and UKSC 2024/0159.} 

^{[2] Judgment [2025] UKSC 33}

^{[3] https://www.fca.org.uk/publication/transcripts/motor-finance-market-analyst-briefing-august-2025.pdf}

^{[4] FCA to consult on a compensation scheme for motor finance customers | FCA}

^{[5] Transcript of a conference call led by Nikhil Rathi between the FCA and market analysts on motor finance, 5pm 3 August 2025}

^{[6] Principles of a motor finance consumer redress scheme}