NEWS: SUPREME COURT CRASHES CAR FINANCE CLAIMS, FTSE ROCKETS, SOLICITORS SWEAR VENGENCE, SRA FIRES WARNING SHOTS AND THE FCA REFLECTS

Gavin Renwick
Aug 5
17 min read

Updated: Aug 7

THE SUPREME COURT HAS OVERTURNED THE COURT OF APPEAL IN JOHNSON -v- FIRSTRAND BANK EFFECTIVELY CLOSING THE DOOR ON THE MASS MOTOR CLAIM COMMISSION SCANDAL.

This article conversely begins with the principles arising from the Supreme Court’s (SC) ruling in Johnson. A concise description of the background facts then leads to a report on the commercial impact of the litigation. Steakholder reactions follow together with a list of upcoming appeals. This set the framework for our customary definitive, decisive and direct commentary analysing the future course of the law.

As with all articles on this site; nothing constitutes legal advice and you are referred to out terms and conditions accordingly.

AS IT HAPPENED: -

04/08/25	@ 16:30:	FTSE 100 ended the session up 0.7% thanks to Lloyds, NatWest and Barclays Lloyds led the blue-chip benchmark climbing to its highest since 2015
04/08/25	@ 13:22:	Lloyds Shares Hit 10 Year High!
04/08/25	@ 08:45:	FTSE 100 Rallies thanks to gains in the UK Banks
04/08/25	@ 08:15:	Lloyds, Close Brother FTSE shares jump on judgement news.
04/08/25	@ 08:00:	UK FTSE Market Open
03/0825	@ 12:00:	FCA confirms it will begin consultations on a redress scheme so affected consumers need not use a law firm or a CMC. *(Always seek Legal Advice from a practicing solicitor).*
01/08/25		The SRA issues a real warning against all law firms over poor practices in motor finance commission claims. The legal industry begins a frantic review and risk assessment of associated cases. The FCA issues their own warning on LinkedIn saying they are coming after law firms. The solicitor profession notes the threat was made on a Friday evening after work.
01/08/25	@ 16:35:	The Supreme Court overturns the Court of Appeal (CoA) and slams the door shut on the car finance claims.
04/12/24		Lloyds Boss Warns Car Finance Saga is driving global investment out of UK Banks.
25/10/24		Shares in all Major UK banks but particularly Lloyds crash. South Africa based FirstRand Ltd plunge 3.2% as the Court of Appeal’s judgement reaches Johannesburg.
25/10/24		Shares in Close Brothers Group PLC crash (22.9% drop) and the group cease the writing of new UK motor Finance Business.
25/10/24		Court of Appeal finally decides *Johnson* and Wrench -v- FirstRand Bank, and Hopcroft -v- Close Brother.
23/10/24		Lloyds say UK Borrowers are Resilient as Profit Beats Estimates. Shares in UK banks that had been depressed rise.
01/04/24		The Court of Appeal begins hearing the conjoined Appeals on April Fools Day.

THE PRINCIPLES / THE LAW

The term ‘Lender’ is often used for the Defendants however, we use the synonymous and sligthly more derogative reference of ‘the Banks.’

THERE IS NO FIDUCIARY DUTY IN 'STANDARD TRANSACTIONS':

A ‘Fiduciary Duty’ is the term for ‘undivided loyalty’ both moral and legal. It is the duty owed by a trustee of an orphan’s estate to the child and it is the duty a solicitor owes to their client. Truthfully, it is one of absolute trust the breach of which merits unequivocal sanction.

In Johnson, the Supreme Court ruled that a car dealer, whom has been hired by the car’s owner to flog the car to absolutely anyone at the highest possible price, does not owe a Fiduciary Duty i.e. one of undivided loyalty to his potential customer/target. Instead, ‘the Dealer’, (as the name should suggest); is a mercenary pursuing his own interests in the negotiation and also that of his principal whom has hired him.

No definition of what a ‘standard’ or ‘non-standard’ transaction would be was provided. But it is worth noting that in Mr Johnson’s personal case; the commission was 25% of the car’s purchase price and he had agreed to pay 55% interest.

BRIBERY IS STILL A TORT I.E. IT IS A LEGAL WRONG

‘Tort’ is the legal term for ‘wrong.’ A tort/wrong may be both a civil breach or a criminal offence but more importantly it can be found in both statue i.e. Parliament made laws and ‘the Common Law’ i.e. Judge made laws.

The Tort of Bribery is concerned with payments made to agents without their principal’s knowledge or consent. As indicated, the Tort of Bribery is entirely judge made. That means it is a compilation of historical judgements made by wealthy individuals whom regularly instruct agents to act in their interests. The Senior Judiciaries’ collective feelings on the subject of their agents taking secret payment against their knowledge, is best surmised by ‘Lord Templeman:

“Bribery is an EVIL PRACRTICE that THREATENS THE FOUNDATIONS of ANY CIVILISED SOCIETY!” (A-6 for Hong Kong -v- Reid [1994] 1 AC 324).

It is in that context and before the most Senior Judges in the land; the Banks made the bold contention that the Tort of Bribery should be abolished.

For the avoidance of doubt, the Banks were not asking the SC to completely legalise bribery. Only that the scope of the allegation of bribery should be curtailed to the definition found in the Bribery Act 2010. This came into force 01/07/2011 and is a criminal offence i.e. much more difficult to prove:

The Tort of Bribery as briefly described by Briggs J:

“Bribery is committed where one person makes, or agrees to make, a payment to the agent of another person with whom he is dealing without the knowledge and consent of the agent’s principal.” (Ross River Ltd -v- Cambridge City FC [2008] 1 All ER 1004, Briggs J at para. 203).

An expanded description courtesy of David Steel J:

“For the purposes of the civil law ‘a bribe’ means the payment of a secret commission, which only means: (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that person is acting as the agent of the other person with whom his is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to the bother person’s agent (Petrotrade Inc -v- Smith [2000] 1 Lloyd’s Rep 486).

By contrast, the Bribery Act 2010 which deals with criminal liabilities and defines 'bribery' as follows:

Section 1: Offence of bribing another person

Under section 1 of the Bribery Act, a person (P) is guilty of an offence where they offer, promise or give a financial advantage to another person in two cases:

Case One: P intends the advantage to bring about an improper performance of a relevant function or activity by another person or to reward such improper performance (section 1(2)).

Case Two: P knows or believes that the acceptance of the advantage offered, promised or given, in itself constitutes the importer performance of a relevant function or activity (section 1(3)).

The motivation was obvious and crude. It is much more difficult to prove bribery ‘beyond reasonable doubt’ at the criminal standard than it is on the much more malleable civil tort standard.

The Supreme Court agreed to curtail the Tort of Bribery but not abolish it. Instead, the Tort of Bribery would only apply to where there was a genuine Fiduciary Duty. This would appear to have overturned the Court of Appeal in Wood v Commercial First Business Ltd that had previously held there was nothing more than ‘a duty to be impartial and to provide disinterested advice, information, or recommendation as was needed.’

RESCISSION IS A REMEDY FOR THE TORT OF BRIBERY

‘Recission’ occurs where there is a defect in a contract. Usually, one side will have made a misrepresentation to induce someone to enter into a contract. Consequently, the law shall ‘rescind’ the contract and the innocent party is put back into the position they would have been but for the contract or as close as possible.

Mr Johnson’s argument was essentially; but for the misrepresentation and other unfair practices alleged he would never have entered into the contract to purchase the car and so this money at least should be returned.

The Supreme Court reiterated the obvious principle i.e. that ‘Recission’ is a remedy to anybody who has been a victim of bribery. However, this is subject to the strict requirement that the rescinding party provide counter-restitution. What was not answered however, was how someone whom had enjoyed the benefit of a car for years, returns that benefit having used the car as though he had never had a car? Returning a used car now years old, is not the same as if the owner had never been without the car in the first place.

THERE IS NO ‘DISINTERESTED DUTY.’ DISCLOSURE MUST BE MADE.

Anyone whom has bought a computer since 1986 understands that terms and conditions delivered in bulk are often non-negotiable with hidden meanings/small print and are designed to protect the bigger party from consumer action.

The Supreme Court considered the documents that had been made available to Mr Johnson and apparently overturning the case of Hurstanger, ruled that they MUST INCLUDE ALL MATERIAL FACTS! Nebulous references to “commission may be paid” does not satisfy such a requirement and was unacceptable.

What amounts to ‘material facts’ will depend on the circumstances of each individual case.

THE REGULATORY CONTEXT

The Financial Conduct Authority (FCA) regulates the bank. Its previous incarnation was the Financial Services Authority (FSA) but the name was changed in 2013 after nearly every bank it had supervised in the UK required a state bailout.

That historical oversight aside and without any reference to the subsequent PPI scandal, the FCA in exercise of its remit publishes a handbook it expects the banks to follow. A dedicated section of the handbook is ‘the Consumer Credit Sourcebook’ (CONC).

The Supreme Court considered the commercial and regulatory backdrop particularly, the roles of the Financial Conduct Authority (FCA) and the Consumer Credit Sourcebook (CONC) [319]:

Section 56(2) Consumer Credit Act 1974: Defines ‘dealers’ as agents of the lender during negotiations. It should have been patently obvious that a car dealer does not have a Fiduciary Duty to the person he has been hired to flog a car to.

The FCA had already acted in 2021 to bad ‘Discretionary Commission’ models i.e. when the Commission was not a flat rate. This is important because a typical discretionary model would involve the dealer getting greater profit, the higher interest rate the car purchaser had agreed to. There was consequently; financial incentive on the dealer to hoodwink the customer into agreeing something that in ordinary terms would be considered unfair.

MR JOHNSON, ‘THE UNSOPHISTICATED MAN.’

Mr Johnson was a consumer whom had agreed to purchase a car on credit which amounted to 55% of the vehicle’s total value. The commission paid to the Dealer represented 25% of the loan.

We are pleased to report the Supreme Court did not hand a complete victory to the Banks and found that the relationship between Mr Johnson and the Lenders via the Dealer had been materially unfair [340] within the meaning of s.140A Consumer Credit Act 1974. Specifically, the following three facts:

The size of the commission (£1650.95) which represented 25% of the loan and 55% of the vehicle’s purchase price.
The misleading nature of the Suitability Document provided buy the dealer. This [dishonestly] suggested impartiality and access to a panel of lenders when in fact the dealer was contractually tied to FirstRand.
It was simply accepted by all, that Mr Johnson was an ‘unsophisticated man.’ That is not a legal term and is meant in the normal meaning.

Be that as it may, the Supreme Court awarded Mr Johnson the amount of commission plus interest. But it rejected the broader remedies such as rescission or damages beyond the repayment of the commission itself.

APPLICATION OF THE CASE OF PLEVIN AND THE PPI SCANDAL:

The now immemorial Mrs Plevin was deemed by the courts to be an ‘unsophisticated woman’ whom was mis-sold PPI by her bank. The bank clearly owed its customer especially one whom is unsophisticated, a fiduciary duty, disclosure of the PPI Commission had been inadequate and that relationship was deemed to be unfair.

There are obvious parallels between Johnson and Plevin. However; the Supreme Court correctly resisted the urge to apply Plevin principles to Johnson when the cases arose from entirely different facts [325]. Respectfully, there is an obvious difference between going to buy a car and opening a bank account.

THE CASE

Johnson and the 2 conjoined appeals of Hopcraft and Wrench arose from typical car-finance arrangements. The consumer attended a car garage with the intention of purchasing a car. They met a dealer who attempted to flog the car at the highest price. Once the consumer agreed to purchase the car they were offered a finance agreement from the bank/lender to do so.

The dealers contractual arrangements with the Banks allowed them a discretion to set the interest rates that the consumers would pay. However, in each case the dealer had taken a different approach to the disclosure of their commission. In Hopcraft, the dealer never mentioned it. In Wrench there were general references to commission scattered around the small print of terms and conditions but in Johnson, it was disclosed both in terms of the finance agreement and in ironically named “Suitability Document” supplied by the dealer.

Johnson, Hopcraft and Wrench brought their claims in the county courts where they collectively alleged:

The commission paid by the Bank to the Dealers were in fact bribes under tort.
The Banks were thus either directly liable under the tort of bribery or were accessories to a breach of a Fiduciary Duty by the Dealer whom was an agent of the Banks.
Each Claimant alleged that their credit agreements were unfair pursuant to s.140 CCA 1974.

The Court of Appeal started hearing the appeals on April Fools Day and found in favour of the Claimants:

Car Dealers did indeed owe a fiduciary duty to the poor sap they were attempting to flog a car to.
Car Dealers also owed a duty to provide “disinterest advice” i.e. “a disinterested duty” when discussing finance agreements.
The paying someone a commission to flog your car was indeed a bribe.
And in the case of Mr Johnsons whom for some reason had agreed to those terms, the relationship was unfair as he was clearly a very ‘unsophisticated man.’

It was of no surprise to absolutely anyone anywhere that an appeal to Supreme Court followed.

THE COMMERCIAL REALITY

You should have noted the chart courtesy of Bloomberg News that appeared at the beginning of this article. This provides a breakdown for what the Banks in the UK were setting aside to pay for these claims:

You can view Bloomberg’s analysis of the impact that the Court of Appeal’s Judgement BY clicking on the link above. But in succinct summary:

Financial Analysts estimated the Banks could be on the hook for anything between £10BN and £38BN.
This is approximately in line with the cost to the financial banking industry of the PPI scandal which the FCA put at £35.7BN although, competent bodies has since put estimates as high as £53BN.
Close Brothers Group PLC whom had dedicated 1/5 of their loan book to motor finance had reserved £165MIL.
Santander UK who have threatened to quit the UK market entirely, claimed to have set aside £295MIL to handle any fallout from the Court of Appeal Judgement.
But all of these reserves were a drop in the ocean compared to the £1.15BN Lloyds had set aside as the UK’s largest provider of motor finance underwriting.

CONSUMER & LEGAL INDUSTRY REACTIONS

We extend our thanks to Neil Rose of Legal Futures whose original article outlined most of the following:

Andrew Wingfield Partner of Proskauer (a USA law firm with a branch in London)

“The court made crystal clear: you can’t backdoor fiduciary duties in every customer transaction – commercial context matters. This judgement narrows the road for consumers bringing mass claims, but its not a get-out-of-jail card for poor disclosure … This judgement restores more traditional boundaries between commerce and conscience. Not every broker is a fiduciary and not every hidden payment is a bribe – but lenders still have to be transparent … it is a powerful judgement for those who believe in legal certainty. The court pulled equity back from the brink of overreach and reminded us that not every bad practice is unlawful.”

Susannah Marsh Partner of Moore Barlow:

“As the threat of billions in industry-wide payouts has been lifted, the financial services sector may breathe a sigh of relief, however this doesn’t put a pin in the issue entirely .. while the Supreme Court ruling may precent mass litigation, there may still be litigation to come. Ultimately, we’re not out of the woods yet … For Claims Management Companies, this ruling will force them to change their strategy. For example; if the prospect of success in case is lower because of this outcome, the business model is impacted.

Paul Hampson CEO of CEL Solicitors:

“The Judgement massively reduces the amount of potential claimants. Firms doing this type of work will have to do a proper job and find all the circumstances of a deal to work out if it was unfair … Firms that have been blanketly signing up anyone who bought a car on finance in mass numbers could be in trouble – particularly those with heft funding arrangements … A lot of firms have set up specifically to do this type of work have been banking on a windfall next year may find themselves in difficulty.

Robert Whitehead Chairman of Barings Law

“A major blow to Consumer Protection and a missed opportunity to address one of the financial sector’s most troubling practices … the rulings may slow things down, but it will not stop the movement towards greater transparency in the Car Finance Industry. People deserve to know the true cost of the financial products they’re sold and they deserve to be treated fairly."

Alex Neil, Co-founder of Consumer Voice

“This ruling doesn’t let lenders off the hook. Billions are still owed to consumers who were unfairly charged.”

FUTURE APPEALS/JUDGEMENTS & DEVELOPMENTS

UPCOMING APPEALS & DEVELOPMENTS

It is worth noting that there are further appeals pending or as Alex Neil essentially says above, this isn’t over:

Clydesdale -v- Financial Ombudsman Service: This test case is listed for September 2025 on the basis that there was inadequate disclosure of the commission; in breach of the FCA Commission Disclosure rules, the FCA’s Principles of Business and this amounted to an unfair relationship.

Angel -v- Black Horse: Listed for April 2026 about whether motor finance claims could be brough en masse on Omnibus Claim Forms.

Given the SC’s judgement in Johnson, the latter is not as relevant as it was before.

COMMENT

It was unbecoming of the Banks to seek to curtail the definition of ‘bribery’ in an age where society reels from wholly-banker-induced 2008 financial crash, the wholly-banker-caused PPI misselling scandal and the wholly investment-banker LIBOR rate setting scandal, among others.

The Courts Approach in cases of the Banks vs Everyone Else:

With respect to our Friends including the Learned ones; politics and the economy matter. Practitioners of law speculating on its future course would be well advised to start reading Bloomberg.

The Banks as holders of wealth enjoy a disproportionate influence on society. The courts by contrast are primarily concerned with the public good i.e. maintaining the administration of justice the absence of which leads to civil unrest. In every case where a few but very powerful players are in conflict with a mass of weaker parties the courts overriding objective of establishing ‘fairness’ takes on an even greater significance. What I am saying is that the greater the force a bigger party pushes against a weaker party; the stronger the judicial inclination to push back. It is instinctive to the human.

When considering the likely judgement of a Senior Court; it is the practice of this office to start by determining what would be the ideal outcome for the people deciding it? Judges in general have not gained their positions by way revolution since the 1600s. They almost always, favour maintaining the status quo or continuing whatever trend has momentum. There is rarely in law, a clear cut ‘right’ and ‘wrong’ answer to cases. Just a spectrum of reasonable outcomes i.e. what the public at large would tolerate.

Once potential judicial bias is established and risk assessed, we should assume that as the judges are human, then in considering the range of reasonable outcomes before them, their brains will naturally lead them down paths that will give them the most satisfaction/dopamine. That It is how the human brain is wired.

Was there Ever a Real Question of Fiduciary Duty here?

In 2024 when the CoA released their judgement, it appeared they had deliberately devised the worst possible judgement just so the Supreme Court understood from the resulting chaos, what the law most certainly should not be. That was economic and legal vandalism.

It was always an unworkable fiction to suggest that a car owner should hire a car dealer whom owed a duty of absolute undivided loyalty to the otherside! Why on Earth would anybody want to hire a car dealer who is acting for the otherside? To suggest this conflict is relieved by instructing the dealer to give disinterested advice is well again, why would anybody want to hire a disinterested car dealer to act for the otherside?

The Court of Appeal’s judgement was reported globally and made the UK a tragic international laughing stock. In our opinion, the Court was distracted ‘with fairness’. It saw only what was claimed to be unsophisticated people being blitzed by poorly drafted ‘War and Peace’ Terms and Conditions. Everybody understands these blocks of paper are entirely one-sided in favour of the Banks whom are already the more powerful party. The Court of Appeal attemepted to give ‘the masses’ redress while affording the banks some protection. But for reasons otherwise unexplained, experienced KCs were completely benighted as to the practical consequence of their judgement. One can only assume that the people whom decided this had never been to a car garage in their lives. The only alternative reading, is mischief.

In our opinion only, the SC has perhaps pushed back too hard against the concept of 'the Fiduciary Duty' but has mitigated this by enforcing the statutory principles of unfairness. We would say the correct interpretation of the law is as follows:

1. Is there a fiduciary duty between a customer and a car dealer? – No.

2. Is there a fiduciary duty between an unsophisticated customer and someone selling a finance plan? – Yes.

3. So does the car dealer owe a fiduciary duty to the customer? – This is ALWAYS fact specific:

Since the time of the horse and cart, the dealer and the customer have been competitors attempting to manoeuvre each other into a position that favours one over the other. That is commerce and long may it remain so as its natural and everybody understands it.

But, once the customer has agreed to purchase the car i.e. the dealer has made the sale AND they have both agreed a price, then we have an oral contract. The competition has ended and they are no longer sparing. The situation has changed.

Thereafter and factually, the customer then turns to the dealer asking for advice on a finance plan. He essentially offers to put himself in the dealer’s hands owing to his lack of sophistication in financial matters. In our opinion, it is the dealers response to this offer of trust that determines if a Fiduciary Duty is created? And it always fact specific e.g.

a. Should the dealer says he has a finance plan from e.g. BMW and that is the only one he can offer then obviously, no Fiduciary Duty is created. The dealer has acted with integrity and confirmed that he is an agent of his Principal. This is inline with the CONC.

b. However, if the dealer then goes onto say that he is neutral and can advise on financial matters then the dealer he has created a fiduciary relationship by accepting the responsibility. That it would be unwise to do so and bound to fail is the dealers fault.

In place of finding a Fiduciary Duty between Mr Johnson and a car dealer whom was pretending to be a neutral financial advisor; the SC instead found the relationship to be 'Unfair’. This is in our view, is sufficient to protect the public and it is well within the spectrum of reasonable judgements.

Solicitors should do a thorough fact check of their clients individual circumstances and in cases where apparent 'unsophisticated' individuals have been taken advantage of in commercial settings, bring the appropriate case on unfairness. It is not sufficient and never was to simply say ‘a man whom sold me a car got paid commission, can I have the money back and give the car back now I’ve had it for a few years.’ Give Over!

Conclusion

Finally, we recognise despite multiple re-drafts that there is a lingering tone to this article. It might suggest that while acting as a consultant for another law firm in 2024, we advised these claims were entirely manufactured “balderdash” by third party equity groups. They were nothing more than a sad attempt to keep the PPI/Plevin gravy train rolling as the claimants themselves were ignorant of the alleged wrong and were simply responding to [naff] adverts promising free money.

It was our private opinion that the ‘Law Lords’ performing either their function would inevitably slam the floodgates and then behind-the-scenes, direct regulators to go after the solicitors flooding the courts with them copy and pasted tat. For that reason; we are relieved to say we declined to have anything further to do with the cases.

P.S. Your Honours, please stop sitting on April Fools Day and graciously extend the courtesy to the rest of us.