Introduction
On 1 August 2025, the UK Supreme Court delivered its judgment in Hopcraft and another v. Close Brothers Limited,[1] a case with far-reaching implications for retail financial services at large.
The central issue was whether undisclosed and/or partially disclosed commissions paid by finance lenders to motor dealers in car hire purchase transactions amounted to bribes or secret profits in breach of fiduciary duties, and further, whether such arrangements rendered the customer-lender relationship unfair under the Consumer Credit Act 1974 (CCA). The payment of such commissions is a commonplace commercial arrangement – certainly not exclusive to car dealerships – and any business engaging in such retail financial services should pay close attention to the lessons provided in this judgment.
Factual background
The appeals arose from three customers – Ms. Hopcraft, Mr. Wrench and Mr. Johnson – who each acquired used cars from different dealers under hire purchase agreements arranged by two lenders, Close Brothers and FirstRand Bank (trading as MotoNovo Finance). In each case, the dealer received a commission from the lender for introducing the customer, but the existence or amount of the commission was either not disclosed or only partially disclosed to the customer.
- Hopcraft purchased a secondhand Fiat 500, with finance arranged by Close Brothers. The dealer received a commission of £183.26 which was not disclosed to Hopcraft.
- Wrench acquired two cars from different dealers, both financed by FirstRand. In both instances, the documentation included a clause stating that a commission “may” be paid, but the amount was not disclosed.
- Johnson bought a Suzuki Swift with a combined hire purchase and personal loan package from FirstRand. The dealer received a commission of £1,650.95, but Johnson was not told of this, nor of the commercial tie between the dealer and lender.
All three customers brought claims alleging that the commissions were bribes or secret profits, and that their relationships with the lenders were unfair under the CCA.
High Court judgment
At first instance, the judges generally found in favour of the lenders. In Hopcraft’s case, the judge found that she had only been offered one finance package, with no advice or recommendation, and dismissed her claim. In Wrench’s case, the judge found that the dealers owed no fiduciary duty sufficient to engage the tort of bribery, and that the commission clauses were sufficient to negate secrecy. Johnson’s claim also was dismissed, with the judge finding no fiduciary duty and no unfairness under the CCA.
Court of Appeal judgment
The Court of Appeal reversed the High Court decision, holding that:
- The dealers, when acting as credit brokers, owed both a fiduciary duty and a “disinterested” duty to their customers.
- In the cases of Hopcraft and Wrench, there was insufficient disclosure of the commissions, rendering them secret, contrary to the “disinterested” duty on the dealers, and thus bribes at common law.
- In Johnson’s case, there was partial disclosure, so the commission was not a bribe, but it was still an unauthorised profit in breach of a fiduciary duty for which the lender was liable as a dishonest assistant.
- The relationship between Johnson and FirstRand was unfair under the CCA.
Supreme Court judgment
Undertook a comprehensive review of the law relating to fiduciary duties, the tort of bribery and the relevant regulatory context.
Fiduciary duties
The court reaffirmed that the test for fiduciary duties was an objective one, and that such a duty would arise only where a party has undertaken, expressly or impliedly, to act solely in the interests of another and to the exclusion of their own interests. It is not enough that the relationship is one where, generally, the parties have trust and confidence in each other or expect to be given advice.
This is a welcome conclusion for operators in retail financial services and reaffirms the common understanding that, particularly in commercial contexts, and especially where parties are dealing at arm’s length and pursuing their own commercial objectives, fiduciary duties are not to be lightly implied. Of course, each specific commercial context and the specific representations made throughout a relationship will need to be carefully assessed to consider if a fiduciary duty has arisen.
Applying this analysis to the matter before it, the court found that, in a typical car finance transaction, the dealer remains an arm’s length from the seller throughout, pursuing its own commercial interests. The provision of credit brokerage is ancillary to the sale and does not, without more, give rise to a fiduciary duty to the customer. The mere fact that a dealer intermediates between customer and lender, or that the customer may trust the dealer to find a suitable finance package, is not enough to create a fiduciary relationship.
Bribery
The Supreme Court overturned the Court of Appeal’s judgment that the tort of bribery could be engaged in circumstances where there was not a fiduciary duty but merely a duty to be “disinterested”. The court held that the tort of bribery was only engaged in circumstances where a fiduciary duty is established. Therefore, as a fiduciary duty was a precondition for civil liability in the tort of bribery to arise, it followed that the tortious claim failed. The court succinctly held, “the tort of bribery is not engaged by anything other than the receipt of a benefit by a person who is subject to a fiduciary duty to which the beneficiary of that duty has not given fully informed consent”.
This judgment underscored the well-known common law position whereby in order for a payment to be a bribe or secret commission, there must be a lack of fully informed consent by the principal (customer) to whom a fiduciary duty is owed. Partial disclosure to the principal is not enough; what is required is full disclosure of all material facts, though what is material will depend on the circumstances.
The Supreme Court concluded that, in the cases before it, the dealers did not owe fiduciary duties to the customers. The claims in equity and tort therefore failed, and the lenders’ appeals were allowed.
The CCA
In Johnson’s case, however, the Supreme Court found that the relationship between Johnson and FirstRand was unfair under section 140A of the CCA. The court assessed “all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor)”, and found that the relationship was statutorily unfair, primarily due to the size of the undisclosed commission, the failure to disclose it and the concealment of the commercial tie between the dealer and lender. The court ordered that the commission be paid to Johnson. This decision was highly fact-specific, and caution should be used in drawing too many direct parallels to other commercial contexts (not least as the CCA applies specifically to consumer credit arrangements). It is a cautionary tale, nonetheless, that these types of commission-based arrangements should be monitored and regularly revisited to ensure they do not fall afoul of any common law or statutory consumer protections.
Key takeaways
- A fiduciary duty is unlikely to arise in commercial relationships conducted at arm’s length unless there is a clear and unequivocal undertaking to act solely in the other’s interests.
- The tort of bribery is only engaged where the recipient of the payment owes a fiduciary duty of loyalty to the claimant.
- For a commission to be lawful, the principal must provide fully informed consent which will require full disclosure of all material facts to them. Partial or vague disclosure will not suffice to negate secrecy in the context of fiduciary duties.
- Dealers and lenders should ensure that customers are given clear, prominent information about commissions and any commercial ties, not only to comply with regulatory requirements but also to avoid findings of unfairness under the CCA.
[1] [2025] UKSC 33.
Contributors
Ben Sharrock-Mason