Car customers claimed undisclosed commissions paid by finance lenders to motor dealers constituted bribes or breaches of fiduciary duty. The Supreme Court held dealers owed no fiduciary duty to customers when arranging finance, as they remained arm’s length sellers throughout. Bribery and equity claims failed, but one customer’s unfair relationship claim under the Consumer Credit Act 1974 succeeded.
Background
These three conjoined appeals concerned undisclosed or partially disclosed commissions paid by motor finance lenders to car dealers in connection with hire purchase agreements for used cars. Three customers—Ms Hopcraft, Mr Wrench and Mr Johnson—each obtained cars from different dealers, with finance arranged through the dealers from lenders Close Brothers Ltd and FirstRand Bank Ltd. In each transaction, the lender paid the dealer a commission for introducing the hire purchase business. The commissions were either not disclosed at all or only partially disclosed through standard contractual clauses stating that commission “may” be payable. The customers brought claims alleging the commissions constituted bribes under the tort of bribery, that the dealers had breached fiduciary duties by receiving secret profits (with the lenders liable as dishonest assistants), and that the relationships were unfair under section 140A of the Consumer Credit Act 1974 (“CCA”). Only Mr Johnson’s CCA claim survived for determination before the Supreme Court.
In a typical transaction, the customer selected a car at a dealer’s premises, the dealer sourced finance from its panel of lenders, the customer signed a hire purchase agreement with the lender, and the lender paid the dealer a commission. The customer had no direct dealings with the lender. These transactions are extremely common in the motor trade and have operated in broadly this fashion for at least 75 years.
The Issue(s)
The central question was whether motor dealers, when acting as credit brokers to arrange finance for customers from their panel of lenders, owed their customers either: (1) a fiduciary duty of single-minded loyalty sufficient to ground a claim in dishonest assistance against the lender in equity; or (2) a lesser “disinterested” duty sufficient to engage the tort of bribery—such that undisclosed commission payments were actionable. The Court also considered whether the tort of bribery should be abolished, what duty relationship engages the tort, the disclosure necessary to negate secrecy, and whether the relationship between Mr Johnson and FirstRand was unfair under section 140A of the CCA.
The Parties’ Key Arguments
The Lenders (Appellants)
The lenders submitted that the dealer never ceased to be a seller acting at arm’s length, pursuing its own commercial interests throughout the transaction. A fiduciary duty of undivided loyalty was incompatible with this continuing arm’s length relationship. Close Brothers further argued that the tort of bribery should be abolished as unprincipled and that equitable remedies sufficed. Both lenders contended that nothing less than a full fiduciary duty could engage either the tort of bribery or equitable claims, and that partial disclosure of commission was sufficient to negate secrecy.
The Customers (Respondents)
The customers argued that dealers undertook fiduciary duties when selecting finance packages, as they exercised judgment and discretion over the customer’s financial affairs, creating trust and confidence. They submitted that a lesser “disinterested” duty was sufficient to engage the tort of bribery, following the Court of Appeal’s decision in Wood v Commercial First Business Ltd. They contended that nothing short of fully informed consent could negate liability, and that Hurstanger Ltd v Wilson was wrongly decided insofar as it allowed partial disclosure to defeat a bribery claim.
The Court’s Reasoning
The Tort of Bribery: Should It Be Abolished?
The Supreme Court unanimously rejected Close Brothers’ submission that the tort of bribery should be abolished. The Court emphasised that common law liability for bribery was established by a trilogy of late 19th century cases and confirmed in Mahesan v Malaysia Government Officers’ Co-operative Housing Society Ltd [1979] AC 374. Lord Diplock had said by 1956 the law was “too well established … to be questioned”. The Court noted the numerous subsequent cases recognising the tort and its recent affirmation by the Supreme Court in Republic of Mozambique v Privinvest Shipbuilding SAL (Holding) [2023] UKSC 32. The Court stated at paragraph 145:
the reasons for the law’s strict approach to bribery are as relevant today as they were at the end of the 19th century, if not more so
The Duty Relationship Required for Bribery
The Court held, departing from the approach in Wood v Commercial First Business Ltd [2022] Ch 123, that the tort of bribery requires the recipient of the payment to owe a fiduciary duty of loyalty to the claimant. A lesser “disinterested” duty is insufficient. At paragraph 207:
Civil liability for bribery cannot arise unless such a duty was owed. Such a duty may arise in circumstances where one person has performed a role in another person’s decision-making process by exercising judgement or discretion in relation to the interests and affairs of that other person. However, whether it does so will depend on a number of factors, including whether the person undertook or agreed to act in that person’s interests to the exclusion of any interest of their own.
The Court traced the equitable origins of the tort of bribery and demonstrated that every case in which a bribery claim had been upheld involved a recipient who owed a fiduciary obligation. The mischief addressed by the tort is the breach of the no conflict rule incumbent upon a fiduciary, not merely the failure to give disinterested advice.
Disclosure and the Negation of Secrecy
The Court overruled Hurstanger Ltd v Wilson [2007] 1 WLR 2351 insofar as it held that partial disclosure (that commission “may” be payable) was sufficient to negate secrecy for common law purposes while insufficient for equity. The Court held that the same standard of disclosure applies at common law and in equity: fully informed consent to all material facts is required. At paragraph 225:
The common law action for bribery has equitable origins, and derives from the right to rescission in equity… Since the need for disclosure arises for a common reason, it is incoherent for it to be governed by diverging rules.
What Constitutes a Fiduciary Duty
Drawing on Bristol and West Building Society v Mothew [1998] Ch 1, Hospital Products Ltd v United States Surgical Corpn (1984) 156 CLR 41, and Galambos v Perez [2009] 3 SCR 247, the Court confirmed that a fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter, in circumstances giving rise to a relationship of trust and confidence founded on an obligation of loyalty. The Court emphasised at paragraph 96:
fiduciary duties arise where a person consciously assumes (or undertakes) responsibility in relation to the management of the property or affairs of another, in circumstances where he or she knows or ought to appreciate that this carries with it the expectation that he or she will act with loyalty to that other in that regard.
Crucially, trust and confidence of the kind pointing towards a fiduciary relationship is trust that the alleged fiduciary will act with single-minded loyalty to the exclusion of his own interests. Dependency or vulnerability alone are insufficient. The Court stated at paragraph 110:
outside well-established fiduciary relationships, such as company director, partner, or agent, in a commercial context “it is normally inappropriate to expect a commercial party to subordinate its own interests to those of another commercial party”
Application to the Facts: No Fiduciary Duty
The Court held that the typical features of the tripartite car finance transaction were incompatible with a fiduciary obligation. Each participant was engaged at arm’s length pursuing separate commercial objectives. The dealer’s credit brokerage was ancillary to the sale, not a distinct service. There was no express undertaking to exclude the dealer’s own interests. The dealer had no agency authority to bind the customer. While there might be an element of trust and dependency, this did not go beyond what commonly arises in arm’s length commercial relationships. At paragraph 277:
The assumption by the dealer of the position of intermediary or broker between the customer and the lender is, of itself, neutral as to whether an obligation of undivided loyalty is being undertaken by the dealer… But the continuing status of the dealer as an arm’s length party to a commercial negotiation pursuing its own separate interests is anything but neutral. It is irreconcilably hostile to the recognition of a fiduciary obligation owed to another party in that negotiation.
The Court rejected the respondents’ “two-stage” analysis which sought to separate the sale negotiation from the finance sourcing, holding that the dealer remained a separate player pursuing its own interests from start to finish.
The Statutory and Regulatory Context
The Court noted that the FCA’s regulatory regime under CONC did not treat dealers as fiduciaries and required disclosure of commission only in limited circumstances—where it could affect the broker’s impartiality or have a material impact on the customer’s transactional decision. This regulatory framework was part of the objective context militating against recognition of fiduciary duties.
Remedies for Bribery
Although the bribery claims failed on the facts, the Court confirmed important principles on remedies. It upheld the established right of a principal to recover the amount of a bribe from the briber without proof of loss, based on restitution for wrongs. At paragraph 233:
There is a clear deterrent effect if any would-be briber knows that he or she is to be automatically liable for the amount of any bribe paid. Conversely, if liability depends on identifying and proving precisely how the bribe has been factored into the briber’s gain, the difficulty and expense of establishing this would seriously undermine such deterrence.
Mr Johnson’s CCA Claim
The Court found Mr Johnson’s relationship with FirstRand was unfair under section 140A of the CCA, though it corrected errors made by the Court of Appeal (which had wrongly linked the coincidental similarity between the commission amount and the personal loan, and taken account of an unpleaded allegation about the car being overpriced). The unfairness was established on two principal grounds. First, the undisclosed commission of £1,650.95 was very large relative to the credit—amounting to 26% of the advance and 55% of the total charge for credit. Applying Plevin v Paragon Personal Finance Ltd [2014] UKSC 61, the Court held that at some point commissions become so large that the relationship cannot be regarded as fair if the customer is kept in ignorance. Second, the undisclosed commercial tie between The Trade Centre Wales and FirstRand, under which the dealer was contractually required to offer all business to FirstRand first, was actively concealed by a Suitability Document that falsely represented the dealer was selecting from a panel of 22 lenders. The Court agreed with the Court of Appeal that this was a suppression of the truth. At paragraph 334:
In fact, the reality was that the Trade Centre Wales made no attempt to be impartial between different lenders in the interests of the consumer. All the business was offered to FirstRand. The dealer gave the customer the Suitability Document which actively concealed the reality.
While Mr Johnson’s failure to read the documents was taken into account, the Court noted he was commercially unsophisticated, the relevant clause was buried among many other terms without prominence, and nothing could have alerted him to the commercial tie.
Practical Significance
This judgment is of major importance for the motor finance industry and consumer credit law more broadly. It establishes that motor dealers acting as credit brokers in typical tripartite hire purchase transactions do not owe fiduciary duties to their customers and therefore cannot be liable for bribery or breach of fiduciary duty in respect of undisclosed commissions. This significantly limits the exposure of lenders to claims of dishonest assistance or bribery in relation to the payment of commission to dealers. The Court confirmed that the tort of bribery requires a fiduciary duty of loyalty, overruling or disapproving aspects of Wood and Hurstanger. It also established that the same standard of disclosure (fully informed consent) applies at common law and in equity, removing the intermediate category of partially disclosed commissions recognised in Hurstanger.
However, the decision also demonstrates that the unfair relationships jurisdiction under section 140A of the CCA remains a potent tool for consumers. Where commissions are disproportionately large and undisclosed, and where the true relationship between dealer and lender is concealed—particularly where commercial ties exist—the statutory test of unfairness may well be met. The decision provides authoritative guidance on the application of section 140A in the motor finance context, which will be relevant to the many thousands of pending complaints and claims in this sector.
Verdict: The Supreme Court allowed the lenders’ appeals on all bribery and equitable claims, holding that the motor dealers owed no fiduciary duty to the customers and therefore the customers’ claims in bribery and dishonest assistance failed. However, Mr Johnson’s claim under section 140A of the Consumer Credit Act 1974 succeeded: the Court found the relationship between Mr Johnson and FirstRand was unfair, principally by reason of the size of the undisclosed commission and the concealment of the commercial tie between the dealer and the lender. The Court of Appeal’s order in Mr Johnson’s favour was set aside and replaced with an order requiring FirstRand to pay Mr Johnson the commission of £1,650.95, plus interest at an appropriate commercial rate from 29 July 2017.
