The recent Supreme Court judgment in Johnson v FirstRand Bank, Wrench v FirstRand Bank, and Hopcraft v Close Brothers has provided significant clarification on fiduciary duties, bribery, the tort of bribery, and consumer credit law. 

Claims Brought by the Claimants

These cases arose from allegations of undisclosed commissions paid by finance companies to car dealerships. The claimants alleged that the finance companies paid undisclosed commissions to car dealerships, which acted as intermediaries. 

The Claimants had each made allegations against the finance companies in relation to the tort of bribery (which they claimed entitled them to rescind their agreements and claim damages) and dishonest assistance in breach of fiduciary duty. 

The appeal in relation to Mr Johnson's claim included an allegation that the relationship was unfair within the meaning of s140 of the Consumer Credit Act 1974 (CCA). 

Key Findings of the Supreme Court

The Supreme Court addressed the key legal issues as follows:

• No Fiduciary Duty: The Court held that the car dealerships did not owe fiduciary duties to the claimants. It reasoned that fiduciary relationships arise in specific circumstances, such as where there is a relationship of trust and confidence, which was not established in these cases. The parties involved each pursue their own interests; dealers seek to sell cars, lenders seek to provide finance and customers seek affordability. 
• Bribery: The Court concluded that liability for the tort of bribery requires the recipient of the bribe to owe a fiduciary duty to the the customer. The dealerships did not owe a fiduciary duty and, as such, they could not be liable for a claims against them in equity or bribery.  
• Dishonest Assistance: The lack of a fiduciary duty also undermined the claims for dishonest assistance in relation to a breach of fiduciary duty.
• Consumer Credit: Mr Johnson's claim that the relationship was unfair was upheld by the Court. The Court emphasised though that each case must be assessed on its specific facts and it can depend on the size of the commission, consumer characteristics and the nature of any disclosure. 

What Happens Next?

The concern that the “floodgates” could be opened has been avoided as the Supreme Court's decision significantly narrows the potential for claims based on fiduciary duty and bribery due to undisclosed commissions. 

However, the door has been left open for claims (under the CCA) where there is clear evidence of improper conduct and unfairness. The judgment therefore highlights the importance of transparency in financial arrangements in a consumer credit context. That's not only in relation to motor vehicle finance claims but consumer finance more generally. 

The FCA has announced that it is considering creating a motor finance compensation scheme. A consultation in this regard is likely to be published by early October. 

Lenders should carefully review their commission arrangements, their documentation given to customers and what it says about commissions. Please let us know if any assistance is needed in that regard and our experts can help with that.