Navigating Commission Disclosure: UK Supreme Court Limits Consumer Claims in Motor Finance Appeal

Each of the three appeals concerned individuals who had entered into motor finance agreements for second-hand vehicles, arranged by dealerships acting as credit brokers. In each case, the claimants were presented with one finance offer by the car dealerships, which they accepted. The lender in Mr. Johnson’s and Mr. Wrench’s cases was FirstRand Bank Ltd (t/a MotoNovo Finance), and in Ms. Hopcraft’s case, the lender was Close Brothers Limited. The central issues in all these cases were the commissions paid by the lenders to the brokers, and whether the failure to disclose the nature or amount of those commissions gave rise to legal consequences.

It is important to note that, at that time it was common for car dealers acting as brokers, to benefit from discretionary commission arrangements (DCAs), which incentivised them to increase the interest rate in return for higher commissions. This practice was subsequently banned by the FCA in January 2021.

Each claimant brought proceedings in the County Court against their respective lenders, alleging that the brokers had breached fiduciary and/ or so-called “disinterested” or “Wood/Novoship” duties, and that the inadequate disclosure of commission rendered the credit relationships unfair under section 140A CCA 1974 (s140A). The arguments drew on authorities such as Wood v Commercial First Business Ltd [2019] EWCA Civ 471 and Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908, which considered the duties of fiduciaries, as well as the (ostensibly discrete) duty to provide advice, information or recommendation on a disinterested, impartial basis (a “disinterested duty”).

In Mr. Johnson’s case specifically, the broker received a substantial discretionary commission that amounted to approximately 55% of the total interest paid by the consumer. The only reference to this arrangement was a general statement within the paperwork he received, that a commission “may be paid”. The disclosure did not provide any detail regarding the amount, nature, or structure of the commission.

The claimants argued that the lenders were liable in each of their cases, either because the brokers owed them fiduciary duties that had been breached, or because the failure to disclose the commissions resulted in an unfair relationship under s140A CCA 1974. The lenders contended that the dealers owed no duty of loyalty to the consumers sufficient to give rise to fiduciary obligations, as they were pursuing their own commercial interests in selling vehicles rather than acting solely in the consumers’ interests.

Mr. Wrench succeeded at first instance in the County Court, but lost on appeal, Mr. Johnson was successful at both levels, and Ms. Hopcraft’s claim was initially dismissed but later upheld by the Court of Appeal. In October 2024, the Court of Appeal allowed all three appeals in a joint decision, holding that brokers may owe fiduciary duties, or at least a duty to provide disinterested advice, where they hold a position of trust. This suggested that a failure to disclose commission payments could trigger equitable remedies, such as breach of trust or bribery. 

The Court of Appeal also held that the commission arrangements in the cases of Mr. Johnson and Ms. Hopcraft contributed to the unfair relationship between the consumer and the creditor. Given the wide-ranging implications of this decision for the financial services industry, and the risk of extensive historic liability, the Supreme Court granted permission to appeal. The FCA intervened to assist the Court, expressing concern over the Court of Appeal’s approach and emphasising the regulatory significance of the issues raised.

The Legal Test for Fiduciary duties

The UK Supreme Court delivered a detailed judgment, partially reversing and considerably narrowing the decision of the Court of Appeal. The Court clarified that such arrangements do not automatically impose fiduciary or “disinterested” duties, and that claims in equity or tort (including bribery) cannot succeed unless specific factual thresholds are met.

The Court held that the existence of fiduciary duties depends on an objective assessment of whether a party has consciously assumed responsibility to act loyally for another, exclusive of any self-interest. Mere receipt of commission does not generate such duties. The car dealers in these appeals operated as a “separate player in the negotiation from start to finish, free to pursue its own interests at arm’s length from the interests of the customer” ([280]). They were not considered to have assumed any undertaking of single-minded loyalty to the consumer, with the Court considering a more ‘common-sense’ approach at [277] that, “No reasonable onlooker would think that, by offering to find a suitable finance package to enable the customer to obtain the car, the dealer was thereby giving up, rather than continuing to pursue, its own commercial objective of securing a profitable sale of the car”.  

The Court confirmed in their judgment at [273] that “[…] dependency or vulnerability are not, […] indicia of a fiduciary relationship, in the absence of an undertaking of loyalty”. Therefore, the mere fact that the dealers were involved in some aspect of the decision making process of the consumer, did not give rise to a fiduciary relationship or an obligation upon them to act altruistically.

While recognising the common law tort of bribery as being established and distinct from equitable causes of action, the Court held that liability under that tort depends on the recipient being a fiduciary (at [73]). This meant the Court of Appeal was wrong to have held differently. As no fiduciary duty arose, the consumers could not succeed under the tort of bribery or in equity for dishonest assistance. It was also emphasised that accessory liability requires insufficient disclosure that fails to secure fully informed consent.

The Application of s140A CCA 1974

The Court treated s140A of the CCA 1974 as a distinct, fact-sensitive basis for redress. Lord Reed explained that unfairness can flow from numerous elements of the credit relationship, with the Court identifying in their judgment at [319], a non-exhaustive list of factors to consider, namely, “the size of the commission relative to the charge for credit; the nature of the commission (because, for example, a discretionary commission may create incentives to charge a higher interest rate); the characteristics of the consumer; the extent and manner of the disclosure (including by the broker insofar as section 56 is engaged); and compliance with the regulatory rules”. The Court highlighted that the absence or partial disclosure of a commission is relevant but not determinative of whether the relationship is fundamentally unfair.

Comparison with Plevin and the Outcome in Each Case

In applying these factors, the UK Supreme Court found that the relationship in Johnson was unfair. The commission was substantial, at approximately 55% of the total interest and nearly a quarter of the car’s purchase price, and the dealer had discretion in setting the rate. Disclosure in Johnson was vague and the commercial tie – wherein the lender had first refusal of customers who were referred to them, instead of there being a panel of multiple lenders - was concealed. In coming to this conclusion, the Court acknowledged the similarities raised on appeal by the Respondents, to the analogous case of Plevin v Paragon Personal Finance Ltd [2014] UKSC 61 (Plevin), noting that the size of the commission in Johnson equated to the position in Plevin, where the commission was 71.8% of the cost of the PPI policy premiums and the relationship therefore, found to be unfair. However, whilst the Court rejected this analogy, identifying that the two cases, “concerned different products on different markets” (at [326]), they maintained that the undisclosed commission being so high was a “powerful indication that the relationship […] was unfair”. As such, the Court ordered that Mr. Johnson should recover the full commission paid, with interest from the agreement date (29 July 2017), at an appropriate commercial rate.

By contrast, in Wrench, the commission was fixed, not discretionary, the documentation sufficiently referred to the existence of commission and the interest rate aligned with normal market offers. As a result, no unfair relationship or fiduciary duty was found. Similarly, in Hopcraft, although the commission was secret and discretionary, the Court concluded there was no evidence that the consumer had relied on the broker, nor that the rate was inappropriately inflated. Accordingly, the appeals in Wrench and Hopcraft were dismissed.

The UK Supreme Court decisively rejected the Court of Appeal’s broad proposition that the non-disclosure of commission automatically leads to a conclusion of fiduciary breach or unfairness. Instead, the Court held that each case must turn on a careful, contextual assessment, which is a “highly fact-sensitive exercise” (at [297]). Merely being unaware of commission is insufficient. To establish liability, there must be a potential combination of factors such as substantial commission, broker discretion, and weak or misleading disclosure, such that the factors undermined the fairness of the credit relationship.

In response to the judgment, the FCA published various statements between 1 and 3 August 2025. The regulator welcomed the clarity provided by the Court, noting that it was “[…] grateful to the Court for delivering the judgment after the market closed”, providing space for the regulator to form a response in the wake of such a decision. In addressing the need to consider a redress scheme, the FCA suggested that this could, if implemented, encompass agreements dating back as early as 2007. The FCA acknowledged the Court’s decision that unfairness can arise from undisclosed commissions in particular factual settings, whilst emphasising that legal findings of unfairness are not the only basis for regulatory intervention. A factor that will likely influence the scope of any redress scheme implemented.  

The FCA confirmed it is continuing to assess whether to implement a formal redress scheme under s404 of the Financial Services and Markets Act 2000. The regulator announced that it will launch a public consultation on the design of the redress scheme in October 2025, with consumer compensation payments expected to start in 2026, subject to consultation outcomes.

The proposed scheme may operate on an opt-out basis, automatically including eligible consumers. However, this is still to be determined. The FCA anticipates average redress figures to fall below £1,000 per consumer, though total industry exposure could range from £9 billion to £18 billion, depending on the scope of the scheme and consumer eligibility. Many lenders have begun setting aside provisions in anticipation of potential payouts, with uncertainties as to the levels of redress likely to be paid out and on what timescale the full weight of any such payments will hit.

In the meantime, the FCA has extended its pause on time for complaint responses and Financial Ombudsman Service decisions, and it continues to liaise with firms and consumer representatives to ensure that any redress mechanism is efficient, fair and transparent. The regulator in its responses, has reiterated its commitment to delivering outcomes that restore trust in the motor finance sector and protect consumers from undisclosed costs embedded in financial products, noting that it will be “[…] working intensively and engaging widely over the coming weeks on the detail of how a scheme could work”.

The UK Supreme Court’s decision in Johnson, Wrench and Hopcraft provides much-needed clarification on the legal framework governing commission payments in credit broking, specifically in the car finance sphere. By significantly narrowing the grounds on which fiduciary duties and common law remedies might be claimed, the Court has significantly limited the risk of the most widespread possible litigation against lenders. However, the Court has also reaffirmed the principle that certain commission arrangements, particularly those that are high, discretionary, and poorly disclosed or entirely undisclosed, can give rise to unfair relationships and may justify consumer redress.

Although the lenders in Wrench and Hopcraft avoided liability on the facts, the outcome in Johnson shows that the courts remain willing to intervene in cases of genuine unfairness. Moreover, the FCA’s pending decision on whether to launch a redress scheme and to what extent this scheme may stretch, means that firms may still face regulatory consequences even in the absence of legal liability. Moving forward, lenders must ensure that their remuneration structures are transparent, proportionate, and clearly disclosed. This is not only to comply with their legal obligations, but also to meet regulatory expectations on upholding standards of fairness and maintaining the wider public’s trust.

Karolina Szymanska, Pupil Barrister