In late 2024, the UK motor vehicle finance industry was shaken by the decision of the English Court of Appeal in Johnson v FirstRand Bank Limited.1
The Court of Appeal held that car dealers were fiduciaries of their customers when the dealers obtained finance on behalf of those customers. As a result, lenders who had paid undisclosed commissions to the dealers were found liable for bribery and dishonest assistance.
The decision came as a surprise to the industry. If correct, it was estimated to cost lenders £44 billion.2 Tens of thousands of claims and potentially millions of customers were affected.3 Retrospective legislation was being considered by the UK Labour Government to avoid wider consequences for the industry.4
However, last week the UK Supreme Court reversed the Court of Appeal’s decision on the central issues.5
Background
The appeal concerned three claims which arose in similar circumstances:
- A customer agreed to purchase a car from a car dealer.
- The customer wanted to purchase the car on finance. The dealer obtained financial information from the customer and submitted it to lenders.
- The dealer then presented the customer with a finance offer. The offer was often accompanied by an express or implied statement that it was “competitive” or “suitable”.
- Once the finance offer was accepted, the lender paid the dealer a commission.
- In each case, the existence and amount of the commission was not disclosed to the customer.6 In some cases a contractual term said that a commission “may” be payable.
The English Court of Appeal held that when the dealer sourced finance for the customer, it acted on behalf of the customer. The customer reposed trust and confidence in the dealer to find an offer which was both competitive and suitable.7 Accordingly, the dealer owed fiduciary duties to the customer.
That finding led the Court to conclude that the commissions were received in breach of fiduciary duty. The lenders were liable for dishonest assistance and bribery, and were obliged to pay the amount of the commission to the customer.
The Court also held that, in one case, the hire purchase agreement was “unfair” under the Consumer Credit Act 1974, in part because of the undisclosed commission in question was found to be very high, as a proportion of the sum borrowed (£1,650.45 of a total loan of £6,399).
Supreme Court decision
In a 110-page judgment, the UK Supreme Court overturned the Court of Appeal’s findings on the equitable and common law claims but upheld the decision on the Consumer Credit Act.
Specifically:
- No fiduciary duty was owed.8 The dealer’s role in obtaining finance could not be isolated from its role as vendor. It was not enough that a recommendation was made or that the customer reposed trust and confidence in that recommendation: the same is true of a sommelier at a restaurant who recommends a particular wine.9 Similarly, it was not sufficient that the customer was vulnerable.10 Rather, the fiduciary needed to have assumed a duty of loyalty.11 Here, the dealers never undertook to put aside their own commercial interests.
- As a result, no liability could arise for dishonest assistance on the part of the lender.
- In relation to the bribery claims, the Court rejected a submission that the tort of bribery should be abolished.12 However, bribery required the person who received the commission to owe a fiduciary duty (overturning recent authority to the contrary).13 As no fiduciary duty existed here, no liability for bribery could arise.
- However, if the lenders had been liable for bribery, they would have been automatically required to pay the amount of the commission to the customers (unless they could show that the customer had given fully informed consent to the commission). The customer did not need to prove any loss. This was accepted to be a “strict approach”, justified by the need for “deterrence”.14
- However, the Court upheld the conclusion that the credit contract was unfair in one case because of the undisclosed commission. Not only was the undisclosed commission very high, the dealer had suggested that it had a panel of lenders to choose from, but in fact it had given the lender in question a right of first refusal.
Impact for New Zealand
The regulatory landscape and industry practices for motor vehicle finance in New Zealand are different to the United Kingdom. In particular, a dealer who makes a recommendation or gives an opinion about a consumer credit contract generally falls within the financial advice provider regime, subject to certain exclusions and exceptions, which requires the disclosure of the existence and amount of any commission.15
Nevertheless, the UK Supreme Court’s decision is likely to be influential in New Zealand.
First, the decision provides useful guidance on when a fiduciary duty will be recognised in a commercial context. Reposing trust and confidence is not enough, nor is the making of recommendations. What is needed is an assumption of a duty of loyalty.
Secondly, the tort of bribery is not particularly well known in New Zealand or established by New Zealand authorities.16 The UK Supreme Court’s confirmation that the tort exists, and has draconian remedies, may mean that New Zealand plaintiffs start to rely on it more frequently.
Third, the decision provides a useful reminder that lenders who pay commissions to intermediaries need to consider their position carefully. If the intermediary is a fiduciary of the customer, and it turns out that proper disclosure of the commission is not made (which the lender may not have visibility over), there may be an increased risk of claims against the lender.
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[1] Johnson v FirstRand Bank Limited [2024] EWCA Civ 1282.
[2] “Rachel Reeves considers overruling supreme court in £44bn car finance scandal” The Guardian (25 July 2025).
[3] Following the Court of Appeal judgment, the Financial Conduct Authority estimated that there could be over 470,000 motor finance complaints made by the end of January 2025: CP24/22, Annex 2 at [32].
[4] “Rachel Reeves considers overruling supreme court in £44bn car finance scandal” The Guardian (25 July 2025).
[5] Hopcraft v Close Brothers Limited [2025] UKSC 33.
[6] This was consistent with the dealer’s regulatory obligations, which only required the disclosure of the existence of commission in limited circumstances and only required disclosure of the amount at the request of the customer: Financial Conduct Authority, Consumer Credit Sourcebook, at 4.5.3R and 4.5.4R.
[7] At [90]-[107].
[8] At [267]-[290].
[9] At [97].
[10] At [274].
[11] At [83], [86],
[12] At [140].
[13] At [199].
[14] At [136], [233].
[15] Financial Markets Conduct Act 2013, s 431C(1); Financial Markets Conduct Regulations 2014, Sch 21A. In some cases, commissions may also be subject to restrictions on incentives paid by “financial institutions” (e.g. banks and insurers) under the conduct of financial institutions (COFI) regime.
[16] The leading New Zealand text currently states that there “may perhaps be a special tort of bribery”: Todd on Torts (9th ed, Thomson Reuters, 2023) at [14.1].
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
