Article By Harry Owen
Within the last week (01 April – 03 April 2025) the Supreme Court heard the three linked appeals of Johnson v FirstRand Bank (UKSC 2024/0158), Wrench v FirstRand Bank (UKSC 2024/0159) and Hopcraft & Anr v Close Brothers UKSC 2024/(0157).
Ultimately, the question being considered is what duty, if any, motor dealers owe to consumers when selling finance or whether finance was mis sold, and what compensation, if any, is due to the consumer.
The primary position advanced by Close Brothers and FirstRand Bank are, broadly, that the Motor Dealer is not a fiduciary, and in the alternative, if the Motor Dealer is a fiduciary, that consumers who complain should not be entitled automatically to a full refund of commissions paid.
Motor Dealer as a Fiduciary
The argument presented on behalf of consumers is that when it comes to selling finance, a Motor Dealer takes on a responsibility to act in a consumer’s best interest to the exclusion of all others, including their own.
The role of a fiduciary carries with it a duty either as a full fiduciary (i.e. to act solely in the best interests of the consumer) or alternatively, a lesser duty to provide customers with advice on finance on a disinterested basis. In either event, if acting as a fiduciary, and if a Motor Dealer is to receive commission from a finance company, the Motor Dealer must first obtain consent to do so from the consumer.
The primary basis for the appeal states that the Court of Appeal erred in finding that Motor Dealers owed a fiduciary duty to the consumer when selling finance.
Arguments in the Alternative
The alternate arguments put on behalf of Close Brothers and FirstRand Bank are applicable only if the Supreme Court places an enhanced duty on Motor Dealers.
The arguments forwarded create some tension between finance companies and Motor Dealers – potentially pushing the liability for any compensation away from lenders and toward the Motor Dealers.
Close Brothers and FirstRand Bank made further submissions in relation to secret commissions and, in particular, the case of Hurstanger Ltd v Wilson [2007] EWCA Civ 299. Close Brothers and FirstRand Bank proposed that different remedies should be considered in circumstances where a Motor Dealer disclosed the existence of commission, but not the amount.
This is important and likely to affect a great number of potential claims, as the majority of Motor Dealers relied upon standard paperwork which included disclosure of the potential existence of commission.
Submissions were made regarding the case of Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 and the concept of an unfair relationship under s140 of the Consumer Credit Act 1974. In Plevin it was found that a failure to disclose excessive commissions received in relation to Payment Protection Insurance payments, could result in an unfair relationship, entitling a consumer to compensation. Close Brothers and FirstRand Bank sought to distinguish the case of Plevin from the current case, on the basis that the nature of the commission was too dissimilar to provide a direct comparison.
The National Franchised Dealers Association
The Supreme Court also heard submissions from The National Franchised Dealers Association (NFDA), an intervenor in the case. The NFDA made submissions on behalf of Motor Dealers, setting out a background to the sales process, arranging of finance and the commercial realities of vehicle sales.
The NFDA focused on the Court of Appeal’s finding that the duties arising during vehicle sales were entirely separate from those arising when finance brokering, describing two distinct parts of the sale, with the Motor Dealer firstly dealing with the sale of the vehicle and then moving into an entirely separate role as a broker. The NFDA portrayed a more complicated and closely entwined process, where both the vehicle sale and the finance brokering take place simultaneously.
Submissions from both Close Brothers; FirstRand Bank and the NDA, averred that the Court of Appeal had gone too far in creating a fiduciary relationship between the Motor Dealer and the consumer that had never previously been present. This position was later echoed by the Financial Conduct Authority, during its submissions.
Johnson, Wrench and Hopcraft
Submissions on behalf of Johnson, Wrench and Hopcraft, took a differing approach, focusing to a much greater degree on the claim of bribery and the liability for and quantum of awards.
The focus on bribery was significant, perhaps because if it enables a claim to be made directly to the finance companies for cancellation of the contract and return of all monies and payment of the commission to the consumer. If found, this would greatly increase the potential quantum of claims made by consumers.
There were limited submissions by Johnson, Wrench and Hopcraft attempting to establish that there was a fiduciary relationship, or a duty to provide disinterested advice, suggesting that Motor Dealers have undertaken a classic finance broker role in assessing a consumer’s needs and recommending products that are appropriate.
This approach resulted in numerous judicial interventions, from seeking clarification as to the precise nature of the duty owed to how these circumstances could be distinguished from similar sales situations where a fiduciary relationship does not exist.
Representations were also made by Johnson, Wrench, and Hopcroft averring that an unfair relationship under s140A of the Consumer Credit Act 1977 was created in the circumstances of the three cases under review. Johnson, Wrench, and Hopcroft attempted to draw a direct analogy between Plevin and the current case as well as to define the calculation of the commission by reference to the cost of the finance and not the finance agreement as a whole.
FCA Submissions
The FCA made submissions as an intervener, straddling the positions forwarded by the parties. The FCA expressed support for the contention that Motor Dealers are not a fiduciary, but conversely supported the contention that Motor Traders have a duty to provide disinterested advice in order to protect consumers. The FCA averred that the application of a Plevin– like approach to the current facts was appropriate and suggested that the calculation of the commission as a percentage of the cost of finance and not the full cost of the loan was the most suitable approach.
The FCA provided expert guidance on the regulatory regime and their interpretation and expectations of a Motor Dealer’s role and the nature of the relationship between the dealer, the consumer, and the finance provider.
Conclusion
Much opinion has been published in recent days, speculating as to the potential judgment of the Supreme Court. For every opinion that confidently predicts a victory for Close Brothers and FirstRand Bank, you will find one confidently predicting a victory for Johnson, Wrench, and Hopcroft. Perhaps tellingly, for each of those opinions, you will find a dozen or more, non-committal suggestions that the case could be determined either way.
Perhaps an outright ‘victory’ for either party is unlikely, with the prospect of an intermediate position being established as the most likely outcome. At this stage, at least those interested can take comfort from the fact that the next step towards clarity is on the horizon. The Supreme Court has indicated that judgment could be handed down as soon as July 2025, with the FCA anticipating publishing guidelines around 6 weeks thereafter, as necessary.
Until then, the wait continues…
