In one of the most eagerly anticipated judgments of this year, the Supreme Court today handed down its decision in the lead motor finance cases - Johnson, Wrench and Hopcraft1.
We have previously written about these cases here and here.
These cases were notable because the Court of Appeal's judgment had opened the door for consumers to bring claims against lenders due to insufficient disclosure of any type of commission arrangement – rather than just discretionary commission arrangements ("DCAs"), which were banned by the FCA in 2021 (and which were the original focus of the FCA's investigations into commission in motor finance arrangements).
In finding that the car dealers owed a fiduciary duty to their customers, the Court of Appeal had also raised the possibility of a flood of similar claims in analogous transactions involving intermediaries such as mortgages and insurance.
In a landmark decision which overturns significant findings of the Court of Appeal, the Supreme Court held that:
- In each case, the dealers did not owe fiduciary duties to the
customers.
- The lenders could therefore not be held liable as accessories
for breach of fiduciary duty; no such duty existed.
- Further, a claim in bribery depends upon the recipient of that
bribe owing a fiduciary duty (and not some form of lower
duty).
- It follows that the lenders could not be held liable in the
tort of bribery.
- However, in Johnson, the claimant succeeded in their
claim under section 140A of the Consumer Credit Act 1974 (the
"CCA"). The Court found that the
relationship between lender and consumer was indeed
"unfair" for the purposes of ss.140A-B of the CCA. This
was, in particular, because of the size of the commission; the
failure to disclose the commission; and the concealment of the
commercial tie between the lender and dealer (the lender having a
right of first refusal over the dealer's business).
- The Court also provided some clarity on some of the more arcane points of law which arose in the appeal, including whether the tort of bribery ought to be abolished (the Court said no), and whether it was correct that remedies for the tort of bribery included an irrebuttable presumption that the bribe increased the price of the relevant product (the Court said that there is).
Market participants will no doubt be hoping that this judgment provides a measure of certainty around the motor finance claims more generally.
And in their finding that the car dealers are not fiduciaries (with the liabilities for dealers and lenders which potentially follow), the Supreme Court have at least restored a measure of common sense to the position. There also appears to be no need for a (highly unusual) legislative intervention, as was reported last week.
However, Mr Johnson's successful claim under the CCA raises the possibility of similar such claims involving commission arrangements which were not DCAs.
The facts in Johnson were quite unusual; the size of the commission (being 55% of the total charge for credit) in particular points towards an imbalance between lender and customer. But where to draw the line? And if, as the Court suggests, the lack of disclosure is a further factor in the balancing act under section 140A, how much weight should that be given? Lenders (and customers) will need to assess whether their own arrangements were sufficiently comparable to Johnson for any claim to be successful. That may not be a straightforward calculation.
This is in many ways just the end of the beginning when it comes to motor finance claims.
There are two cases scheduled to be heard by the Court of Appeal which will provide some further guidance as to how the bulk of motor finance claims might be dealt with, in particular those claims involving DCAs:
- the appeal in Clydesdale v FOS2 is listed
for September 2025. This concerns the judicial review of a decision
by the Financial Ombudsman Service (the
"FOS") against Clydesdale (trading as
Barclays Partner Finance), which had found that inadequate
disclosure of a DCA was in breach of: the FCA's commission
disclosure rules; the FCA Principles for Business; and amounted to
an unfair relationship under the Consumer Credit Act 1974. The FOS
had chosen the case as a "lead" complaint, ahead of
similar such complaints; and
- the appeal in Angel v Black Horse3 is listed to be heard in April 2026, on matters of procedure. That case concerns some 5,800 claimants who have brought claims against lenders in relation to DCAs under the Consumer Credit Act. The High Court held that those claims can be brought together under omnibus claim forms.
The FCA have suggested that they will confirm before markets open on Monday whether they will propose a redress scheme.
Of course, the functioning of the scheme will bring with it a host of new issues for the FCA (and market participants) to consider. The FCA have provided some guidance on some of those issues, including whether the scheme would be opt-in or opt-out, the calculation of redress, and the relevant timeframes.
If the FCA do press ahead with a redress scheme, the next stage will be a consultation; the FCA have indicated this may be shorter than usual (for example, 6 weeks).
We are continuing to review the judgment and its implications.
Footnotes
1. [2025] UKSC 33
2. R (Clydesdale Financial Services Ltd t/a Barclays Partner Finance) v Financial Ombudsman Service (CA-2025-000102)
3. Angel And Others v Black Horse Limited (CA-2025-001011).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
