Johnson v FirstRand Unpacked

What did the Supreme Court Decide in a Nutshell?

Motor dealers do not owe fiduciary duties to customers, nor do they accept bribes when being paid commission by a lender. It is possible for a CCA ‘unfair relationship’ to arise if certain factors are present.

At a high level, the Judgment determined that:

1. Motor dealers do not owe fiduciary duties to customers
2. Where there is no fiduciary duty, there can be no bribe, and
3. An unfair relationship under section 140A of the Consumer Credit Act 1974 (the CCA) can arise if certain factors are present. This was the case for Mr Johnson.

What did the Supreme Court say about Fiduciary Duties?

Motor dealers do not owe fiduciary duties when acting as a broker.

The Judgment explains that a 'fiduciary duty' is a duty to act with “single-minded loyalty” in the interests of the person to whom the duty is owed (often referred to as the 'principal'). A fiduciary must act in good faith, must not make a profit out of acting, must not place himself in a position where his duty and his interest may conflict and may not act for his own benefit without the informed consent of his principal. Fiduciary relationships typically arise between a solicitor and client, a director and a company or a trustee and a beneficiary, although it is possible for ad hoc obligations to arise outside of these established categories. In any case, there must be an assumption of responsibility by the fiduciary to act exclusively on behalf of its principal and to set its own interests aside.

In a motor finance context, the Supreme Court was clear that dealers pursue their own commercial interests throughout the transaction – both when negotiating the price (or other features) of the vehicle, and when arranging the finance. This is incompatible with the existence of a fiduciary duty.

The Supreme Court acknowledged that there are some types of intermediary which could give rise to a relationship of trust and confidence – for example, a wine waiter recommending the best wine, a shop assistant advising on the most suitable clothing, or a search engine which influences users' decisions by the order in which it displays search results for products or services. The fact that the diner, or shopper, or internet user has trust and confidence does not mean that a fiduciary duty arises. In all of these cases, the intermediary continues to act in their own commercial interests, and this is understood by all parties. Similarly, whilst a customer might trust a dealer’s recommendations about a finance product, that does not mean the dealer acts as fiduciary.

What did the Supreme Court say about the law of Bribery?

The law of bribery is only engaged where there is a fiduciary duty.

The lenders argued that the tort of bribery should be abolished. The Supreme Court didn’t go that far and ruled that a ‘civil wrong’ of bribery does exist (whether referred to as a ‘tort’ or otherwise).

However, the Supreme Court held that the case of Wood was incorrect in suggesting that the tort of bribery could be engaged where an agent owed a lesser ‘disinterested duty’ rather than a fiduciary duty. Instead, the Supreme Court decided that there has to be a fiduciary duty before a payment can amount to a bribe.

Since the Court decided that the motor dealers did not owe a fiduciary duty to their customers, the claims in bribery failed. The Court went on, though, to clarify that where a payment is made by a third party to a fiduciary, disclosure must be sufficient to obtain the principal's fully informed consent. So previous cases were wrong to suggest a lesser standard of 'half-secret' or 'partially-disclosed' commissions in bribery claims: that is no longer good law.

Essentially, the duty required for a common law claim in bribery and an equitable claim in dishonest assistance is the same. The differences lie in whether the lender is liable as a primary wrongdoer (bribery) or an accessory (dishonest assistance), and in the remedies available (although the Court did not go on to consider those in detail, and did not consider what would amount to 'dishonesty' on the part of a lender for a claim in dishonest assistance).

What did the Supreme Court say about how to avoid breaching fiduciary duty?

Only fully informed consent will do.

Although the Supreme Court found that motor dealers do not owe a fiduciary duty, it still set out what would be required for compliance with such an obligation. The Judgment effectively swept away the notions of 'half-secret' or 'partially-disclosed' commission which were introduced by the Hurstanger case. Where there is a fiduciary duty, disclosure of any commission must be sufficient to obtain the principal's fully informed consent.

The Court emphasised that what is needed is disclosure of the ‘key material facts’. What the 'key material facts' are in any particular case will depend on the circumstances and it does not necessarily mean every fact. It’s possible, for example, that where the principal understood that a reasonable commission would be paid and that was the case, that could amount to fully informed consent even if the amount was not disclosed.

What did the Supreme Court say about unfair relationships?

Unfair relationships are highly fact sensitive. But an unfair relationship can arise in motor finance commission cases if certain factors are present. This was the case for Mr Johnson.

Under ss. 140A-C CCA, where the relationship between a debtor and a creditor is unfair because of the terms of the agreement or of a related agreement, or because of something done or not done by or on behalf of the creditor (whether before or after the making of the credit agreement), the Court can make various orders to remedy that unfairness. It is for the creditor to show that the relationship is fair. It is well established – and recognised again in this case – that a s. 140A assessment depends on all the circumstances of a particular case, and is highly fact-sensitive.

The Court identified the following 'factors' as a (non-exhaustive) list of what will normally be relevant in a motor finance context:

1. The size of the commission, relative to the cost of credit.
2. The nature of the commission, and the Court observed that a discretionary commission may create incentives to charge a higher interest rate.
3. The characteristics of the consumer.
4. The extent and manner of the disclosure.
5. Compliance with the regulatory rules.

Importantly, the Court was clear that the mere fact that there has been no disclosure (or only partial disclosure) of any commission will not necessarily make the relationship unfair. It is just one factor to be taken into account.

Ms Hopcraft and Mr Wrench did not pursue unfair relationship claims in the Supreme Court, but Mr Johnson did. Mr Johnson’s case had a number of distinguishing factors. He was given a ‘Suitability Document’ from the dealer which stated the dealer worked with a panel of 22 lenders. Those lenders were listed, with FirstRand Bank appearing 11th on the list. The Suitability Document also said that the dealer would “provide an illustration of the product that best meets your individual requirements based on the answers you provide.” In reality though, FirstRand had a right of first refusal and the dealer was required to submit all applications to them initially.

The Court found that the Court of Appeal was mistaken in thinking that Mr Johnson had needed to borrow more money in order to pay the commission, and was wrong to rely on a discrepancy between the price paid for the car and an industry guide price, when that had not been pleaded or addressed at trial. So the Supreme Court put those considerations to one side.

The Court then applied the above factors to the facts of Mr Johnson’s case:

1. The size of the commission was high. It amounted to 26% of the loan amount and 55% of the total cost of credit (i.e. the interest payable by Mr Johnson over the term of the credit agreement). The Court considered that, had Mr Johnson been aware of the high commission amount, he could well have made a different transactional decision (and so the failure to disclose the existence of the commission to Mr Johnson was itself a breach of CONC 4.5.3R). Such a high undisclosed commission was a “powerful indicator” that the relationship between Mr Johnson and the lender was unfair.
2. There was a commercial tie between the dealer and FirstRand which was not disclosed. If anything, Mr Johnson was actively misled – including by the Suitability Document – into thinking that the dealer would find the best deal for him, rather than sending his application straight to FirstRand Bank. Honest and accurate disclosure was required to allow the customer to make an informed decision. The failure to disclose the commercial tie was a clear breach of various CONC provisions, including those requiring brokers to disclose financial arrangements with lenders which could impact their impartiality (CONC 3.7.4G).
3. Weighing against the customer, the Court acknowledged that Mr Johnson had not read his finance documentation. Had he done so, it would have been clear that commission would have been paid by whichever lender to the dealer. However, the Court also acknowledged that Mr Johnson was commercially unsophisticated and queried how much the lender could expect him to read and understand all documents. This was particularly the case because there was no attempt at prominence: the fact that the commission amount and commercial tie were unusual features of the transaction meant that the lender should have tried even harder to ensure the relevant information was prominent. In any case, even if Mr Johnson had read everything, nothing would have alerted him to the existence of the commercial tie.

Taking all of the factors into account, the Court held that an unfair relationship had arisen in Mr Johnson’s case. It ordered the lender to pay to Mr Johnson an amount equivalent to the commission paid to the dealer, plus interest at an “appropriate commercial rate” calculated from the date of the agreement.

What has the FCA said?

There will be a consultation on an industry-wide redress scheme, though TBC whether non-discretionary commission arrangements will be in-scope.

The FCA announced on 3 August 2025 that it intends to consult on an industry-wide redress scheme in relation to motor finance commissions. It has said that the consultation will be launched in early October 2025 and will run for six weeks, with a view to the scheme coming into effect and payments being made to customers from 2026. Key points are:

• Scope: Discretionary Commission Arrangements (DCAs) will be in scope. The FCA will consult on whether non-DCA arrangements will be included, given that the Judgment makes clear that non-disclosure of facts relating to a non-DCA arrangement can still result in unfairness.
• Time period: The FCA will propose that the scheme looks back to 2007, aligning with the period for which the Financial Ombudsman Service (FOS) can consider motor finance complaints.
• Assessing fairness: The FCA considers that there are various factors that could point to unfairness, and redress would depend on the non-disclosure of those factors and the interaction between them. This will depend on the facts of each case. The factors could include the following (which are broadly those identified by the Supreme Court): 
  • the size of the commission relative to the charge for credit;
  • the nature of the commission (for example, whether it is discretionary);
  • the characteristics of the consumer;
  • compliance with regulatory rules;
  • the extent and manner of disclosure.
• Redress: The FCA notes the Supreme Court's approach to quantum, which involved ordering payment to the customer of an amount equivalent to the commission, plus interest at a commercial rate. The FCA has indicated that it will consider this approach alongside alternatives, although it notes that any alternative is unlikely to result in higher redress overall than full repayment of the commission. The FCA also intends to consider interest on redress calculated on a simple (rather than compound) basis, at a margin of 1% over the average base rate in each year. It estimates that most customers will probably receive less than £950 per agreement.
• Opt in/opt out: The FCA has expressed no view on this yet. Both options are currently open.
• Complaints handling pause: The current pause on deadlines for lenders to respond is in place until 4 December 2025. The FCA will consult on extending this so that it aligns with the timetable for payments under the scheme.

It therefore seems almost certain that there will be a redress scheme of some sort. The rules of that scheme will need to set out the basis upon which firms are to identify customer harm and calculate redress. The FCA's proposals on that are expected to be published in October.

Are there pockets of Residual Risk?

Yes – but these will be very limited when it comes to a bribery or dishonest assistance claim, due to the need for a fiduciary relationship. Risk does, however, continue to exist in relation to credit agreements under s. 140A.

As explained, the Court made very clear that a fiduciary relationship does not exist in a typical motor dealer/broker scenario. It is therefore hard to see how such a relationship could exist in any other standard broker scenario where it is clear that the broker is acting in their own commercial interests. There will be certain scenarios where, even on the Court's analysis in this case, a fiduciary duty could exist (for example, possibly in certain Independent Financial Adviser arrangements). However, in those cases it is likely that the parties will already have been aware that the fiduciary acts only on behalf of the customer and in accordance with the customer’s best interests. On the Supreme Court's analysis, scenarios in which a fiduciary relationship could arise inadvertently in a commercial context are likely to be rare.

The key residual risk is in relation to unfair relationships under s. 140A CCA. These provisions bite on ‘credit agreements’ between a lender and a borrower who is an individual, a small partnership or an unincorporated association. Importantly, the scope is not limited to regulated credit agreements and applies to exempt credit agreements, such as those relying on the CCA business purpose exemption or high-net-worth exemption (though whether or not the lender/borrower relationship is unfair is such cases will depend on all the circumstances, and the relevant factors may well be applied differently). In any event, the unfair relationship test is highly fact-specific and will ultimately depend on the relevant factors present in each case.

For more information, please view the below recording of the Motor Finance Commission Judgment Webinar that was delivered by Jonathan Chertkow, Hannah Piper, Tom Devine and Elizabeth Greaves on the morning of 4 August 2025.

If you have any questions or wish to discuss the judgment please don’t hesitate to get in touch with a member of the team.

Authored by Jonathan Chertkow, Hannah Piper, Tom Devine, and Elizabeth Greaves.