UK Supreme Court Clarifies Consumer Rights in Motor Finance Agreements

The UK Supreme Court recently overturned a decision of the Court of Appeal of England and Wales in the cases of Johnson v FirstRand Bank Ltd, Wrench v FirstRand Bank Ltd, and Hopcraft v Close Brothers Ltd. This judgment is welcome relief for UK motor lenders and car dealers. The UK Supreme Court held that car dealers do not owe a fiduciary duty of loyalty to their customers when providing a credit brokering service for car finance. Our Dispute Resolution and Financial Regulation teams examine the implications for stakeholders.

What you need to know

• The UK Supreme Court recently handed down judgment[1] on the three joined appeals of Hopcraft v Close Brothers Limited, Johnson v FirstRand Bank Limited, and Wrench v FirstRand Bank Limited.
• The Court held that the provision of credit broker services by motor dealers to its customers did not give rise to a fiduciary relationship.
• The decision confirmed that fiduciary duties will only arise where:
  1. They fall into or are comparable with the well-established categories of fiduciary relationships, or
  2. Where a person undertakes to act exclusively in the interests of another
• In the absence of a fiduciary relationship between the motor dealers and the customers, the claims against the lenders in both tort and equity failed.

In our previous article, we discussed a judgment of the Court of Appeal of England and Wales. This judgment held that motor dealers undertook both a fiduciary duty and a duty to act in a disinterested manner when providing credit broker services to their customers.

By way of reminder, in each of the appeal cases, the car dealer was paid a commission by the lender. The customers were either not told about this at all or were only told that a commission might be paid, without any details about the amount.

Much press commentary has focused on the operation of so-called discretionary commission arrangements, or “DCAs”, in the UK car finance market. DCAs were commission arrangements under which the motor dealer had the right to determine the applicable lending rate and therefore the amount of its own commission. These arrangements were banned in 2021 by the UK Financial Conduct Authority. However, the cases before the Court of Appeal involved multiple claims by borrowers for repayment of undisclosed or partially disclosed commissions, without specific reference to whether these were DCAs or not.

The customers argued that undisclosed or partially disclosed commissions were essentially bribes, or secret profits the dealers received while acting in a position of trust, where the motor dealers were supposed to put the customer’s interests ahead of their own.

The Court of Appeal held that the lenders who paid commission to the dealers in connection with the finance packages provided to the customers were liable to repay those amounts to them either:

1. At common law for bribery, where the commission was not disclosed, or
2. In equity as accessories to the breach of a fiduciary duty, where there had been a partial disclosure of the payment

The UK Supreme Court overturned this decision, holding that no fiduciary relationship exists between a motor dealer and its customers. The Court held that the existence of a fiduciary relationship is a precondition for liability under the tort of bribery. The Court clarified the distinguishing features of fiduciary duty and the circumstances in which a fiduciary relationship will arise.

Fiduciary duty - “A duty of single-minded loyalty”

The UK Supreme Court explained that a key requirement of a fiduciary relationship is that;

“a fiduciary acts for and only for another… [owing] a duty of single-minded loyalty to his principal, meaning that he cannot exercise any power in relation to matters covered by his fiduciary duty so as to benefit himself.”[2]

This single-minded loyalty arises where the fiduciary agrees to act in the interests of another to the exclusion of its own interests. Fiduciaries cannot therefore make a profit from their position or place themselves in a position where their personal interest may conflict with their duty to their principal, unless the fiduciary obtains the fully informed consent of their principal.

The Court noted that there is no precise definition of when a person undertakes or is treated as having undertaken a fiduciary duty and the categories of fiduciary relationships are not closed. However, in general, the courts will recognise a fiduciary duty in two instances:

1. Where the relationship falls into or is comparable with one of the well-established categories of fiduciary relationships, such as that of trustee/beneficiary or company/director.
2. Where a party expressly undertakes an obligation to act exclusively on behalf of another in the conduct of that person’s affairs.

Fiduciary duties in a commercial context

The UK Supreme Court noted that, as a general rule, outside the well-established fiduciary relationships, such as one between a director and a company, it is normally inappropriate to expect a commercial party to subordinate its interest to those of another commercial party. It went on to reason that a commercial transaction in which a person has a personal financial interest that is known or apparent to the other party, is not one in which a fiduciary duty of loyalty can be readily implied.

Motor dealers as fiduciaries?

On that basis, the UK Supreme Court held that the role of the motor dealer in negotiating a suitable finance package for the customer is not one into which a fiduciary duty of loyalty can be implied for two reasons. First, it is not an arrangement which falls into the well-established categories of fiduciary relationships, nor is it comparable to these relationships. Second, the motor dealer could not have been said to have undertaken a fiduciary duty of loyalty to the customer. The intermediary services provided by the dealer were not distinct from the motor sale services provided. Therefore, the dealer was simply acting in its own interests as an arm’s length seller at each stage of the transaction. Additionally, the dealer did not give an express undertaking to the customer that it would put aside its commercial interests as a seller in finding a suitable finance package.

The Court confirmed that while there may be an element of trust and confidence between the dealer and customer and an element of dependency upon or vulnerability to the dealer, these aspects are not themselves indicative that a fiduciary relationship exists. Given this conclusion, the customers’ claims against the lenders in bribery failed. It went on to affirm that nothing short of a fiduciary relationship would suffice to bring a claim in tort for bribery. As something of a consolation to the customers, it upheld one customer’s claim on narrow grounds under the UK’s Consumer Credit Act 1974.

Conclusion

The regulatory position in Ireland regarding car finance arrangements is very different to the UK. Also, the decisions of the UK courts are not formally binding on the Irish courts. As it relates to the law of fiduciary duties the decision is nevertheless constructive. It provides clarity on the circumstances that give rise to these duties under English and Welsh law. If regarded as persuasive by the Irish courts, it means that Irish intermediaries and their principals are unlikely to be faced with successful claims for repayment of undisclosed or partially disclosed commissions based on alleged breaches of fiduciary duty.

For more information and expert advice, please get in touch with a member of our Dispute Resolution or Financial Regulation teams.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] [2025] UKSC 33.

[2] Hopcraft v Close Brothers Limited, Johnson v FirstRand Bank Limited, Wrench v FirstRand Bank Limited [2025] UKSC 33 [90].