This article has been co-authored by Mr C Baylis (Barrister) and Professor Henry Blair (Senior Counsel) instructed by MILS
The Road to the Supreme Court
A great deal has already been written about the Court of Appeal decision, so what follows is a brief summary. The lower Court found that, in arranging finance, motor dealers can owe legal duties that prohibit undisclosed commissions.
Fiduciary or “disinterested” duties may arise for dealerships if they undertake to provide impartial help with obtaining finance. The Court reasoned that a broker’s role in procuring a suitable loan for the customer can, in certain factual circumstances, imply an “ad hoc” duty of loyalty, bringing with it strong restrictions on undisclosed gain. If a commission remained wholly or effectively hidden from the customer, the law treats it as akin to a “secret commission” or “bribe.”
In Hopcraft, the commission was fully undisclosed and thus a bribe. In Wrench, the mere mention in boilerplate that “a commission may be payable” was deemed too vague to meaningfully alert the customer, so commission remained practically undisclosed and thus a bribe. In Johnson, by contrast, the dealership provided some disclosure, albeit limited.
The Court of Appeal decided that this was a partial disclosure case and then concluded that the disclosure was insufficient to convey the amount of the commission, its nature, or the extent of the dealer’s interest in setting the interest rate.
Key Arguments Before the Supreme Court
On appeal, the finance company and the National Franchised Dealers Association (NFDA) maintained that dealers are retailers acting in their own commercial interest, not advisers with single-minded loyalty. They attacked the Court of Appeal’s conclusion that a dealership’s credit-brokering tasks necessarily create fiduciary obligations. In any event, they argued, failing to reveal a commission does not automatically brand the payment a “bribe,” particularly if there was at least some mention of a commission in the deal paperwork.
At best, they argued, it might be an unfair practice under the CCA— leading to potential relief—but not the draconian remedies that often come with “secret commissions.”
In response, the consumers’ legal teams highlighted the real risk of exploitative finance deals. Those risks are exacerbated, of course, when dealers can manipulate interest rates to boost their commissions.
They pointed out that the Court of Appeal’s framework aligns with the Supreme Court’s earlier condemnation of hidden commissions in cases such as Plevin (where the Supreme Court ruled that a lender’s failure to disclose a substantial commission on a Payment Protection Insurance (PPI) policy to a borrower created an unfair relationship under the Consumer Credit Act 1974). In essence, they say the Court of Appeal was right on the law: A lender paying an undisclosed or half-disclosed commission puts the borrower at a stark disadvantage and, if that arrangement was never flagged, the common law or the statutory scheme should afford potent redress.
Mind the Gap—Limited Discussion of Remedies
Despite all the high-powered lawyering, however, detailed arguments on how to remedy legal violations were conspicuously thin at both the Court of Appeal and at the Supreme Court. Counsel poured energy into arguing who ought to prevail and under what legal theory—fiduciary obligation, “disinterested” duty, or “unfair relationship”—yet dedicated comparatively little time to an equally crucial question: What relief should follow if the consumer wins? Full rescission? A simple refund? A partial rewrite?
The gap matters. The Financial Conduct Authority (FCA) has publicly stated that, if the Supreme Court confirms a breach of duty or finds systematic unfairness in motor finance, it may institute a broad[1]based redress scheme akin to the PPI redress model. Yet creating such a scheme without judicial guidance on which remedies are legally justified would risk being arbitrary or unprincipled.
For instance, awarding full rescission on every claim would yield windfall gains for consumers in a great many cases and generate untold chaos in underwriting. On the other hand, a uniform “commission refund” might be under-inclusive if some borrowers have overpaid interest for years.
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