What risks remain for those who pay commission following the Supreme Court’s motor finance decision?

The hotly anticipated Supreme Court decision in Hopcraft & Another v Close Brothers Limited [2025] UKSC was handed down on 1 August 2025, largely overturning the decision of the Court of Appeal in favour of the lenders. 

While the decision was closely followed for the potentially colossal impact it could have on a number of UK lenders providing motor finance, the decision marks a significant clarification to the law on the potential liabilities that can arise where payments are made by third parties to entities who act as the fiduciary to another. As such, the decision is of potential significance to a wide range of industries where wholesalers distribute their products and services through commercial agents, brokers and advisers on the promise of commission payments.

In this article we will consider:

(i) where the law on bribery and fiduciary duty stands following the Hopcraft decision and lenders liability for unfairness under s.140A of the CCA; and

(ii) the broader implications of this decision going forwards, including those commercial relations between lenders and third parties that could still be caught under the tort of bribery.

1. The supreme court’s decision

1.1 In Hopcraft, the borrowers contended that the motor dealers from whom they purchased motor vehicles under personal finance agreements, owed them a fiduciary duty of undivided loyalty.  As a consequence, it was contended that the payment of commission to the motor dealers by the lenders constituted either: (i) a bribe (where the payment was not disclosed); or (ii) a breach of the motor dealers’ fiduciary duty, which the lender had dishonestly assisted. 

1.2 Following detailed analysis of the law on bribery and those circumstances that create a fiduciary relationship, the Supreme Court determined that:

(a) Civil liability for the tort of bribery only applied where secret payments were made to a fiduciary.  A payment made to an agent who owed a ‘disinterested’ or other lesser duty was not sufficient.

(b) A fiduciary duty is ‘a duty of single-minded or undivided loyalty’¹, and that ‘no reasonable onlooker’² could conclude that such a duty existed.  The motor dealers were one corner of a triangular relationship with the borrower and the lender, where the dealer was at all times pursuing their own commercial objectives.

1.3 The result of these two findings was that the lenders could not be liable on either basis contended for by the borrowers.  The absence of a fiduciary duty was fatal to both claims.  

1.4 The lenders were prevented from unanimous victory by the Supreme Court’s decision that they can be liable under the Consumer Credit Act 1974 (“CCA”) for an ‘unfair relationship’ in circumstances involving undisclosed commissions. The Supreme Court re-emphasised the established position that determining liability under the CCA is ‘a highly fact-sensitive exercise’³, but decided that Mr Johnson’s claim justified compensation under the CCA.  It is noteworthy that the Supreme Court went to some length to spell out that the specific facts of Mr Johnson’s claim were particularly egregious. This could be seen as a steer by the Supreme Court that they consider it unlikely that many of the thousands of claims that have been drummed up by CMCs and law firms will meet the necessary threshold. 

2. Where does the law stand now?

2.1 The tort of bribery exists at common law, but a fiduciary duty is required

(a) The Court found that the tort of bribery does exist at common law, despite a submission to the contrary from the lenders.  However, it agreed with the lenders that a fiduciary duty of loyalty is a necessary pre-requisite of the tort of bribery and the ‘disinterested duty’ relied upon by the Court of Appeal was insufficient. 

(b) As such, the court confirmed that the tort of bribery is only engaged by the receipt of a benefit by a person who is subject to a fiduciary duty to which the beneficiary of that duty has not given fully informed consent – this creates a conflict between “the recipient’s personal interests and his fiduciary duty of loyalty”⁴.

(c) Importantly, simply being an agent or owing common law duties will not be sufficient.  There will need to be a clear case that the agent in questions duties are such that they elevate to the status of a fiduciary, which will only be the case in specific circumstances.

2.2 The concept of Half-secret commissions no longer exists

(a) The Supreme Court’s decision overturned the concept of half-secret commissions established in Hurstanger Ltd v Wilson [2007] 1WLR 2351. In Hurstanger the broker had disclosed the fact of the commission to the consumer, but not the amount and in doing so was found to have breached his fiduciary duty.  The lender’s liability in these circumstances depended on establishing its dishonest assistance in the fiduciary’s breach.

(b) However, the Supreme Court’s decision is clear that where an agent receives commission and a fiduciary duty is established, the only way for both the payor and recipient of the commission to avoid liability for bribery is through fully informed consent.

2.1 Car dealers do not owe a fiduciary duty to their customers

(a) The Court decided that the “three-cornered transaction between dealer, lender and customer is fatal to the recognition of any fiduciary duty owed by dealer to customer”.⁵  This is because the fiduciary relationship would require the car dealer to act in the customer’s interests to the exclusion of their own, which the court considered to be an entirely unconvincing proposition. The car dealer’s role was not solely to assist the borrowers in procuring finance.  Rather, the dealers were, first and foremost, attempting to sell a car to the customer in a transaction where the dealer’s interests were inherently opposed to those of the customer.  The dealer clearly used its lender contacts to “oil the wheels of what was for it essentially a sale transaction from start to finish”.⁶ 

(b) The practical consequence of this finding is that fiduciary obligations are unlikely to arise where a party is attempting to sell their own product or services and, in parallel, offer to introduce the customer to providers of complimentary services.  This is likely to be the same for a wide range of point of sale arrangements (e.g. for insurance and credit).

2.4 Lenders can be liable for unfairness under s.140A of the CCA, but this is highly fact specific

(a) The only decision to go against the lenders was the Court’s decision that a lender can, in these circumstances, be found to be liable for an unfair relationship under s.140A of the CCA.  However, determining unfairness under the CCA is highly fact specific, requiring each case to be considered on its own merits.

(b) Of the three cases before it, only Mr Johnson’s case was held to require compensation under the CCA.  In that case the commission size (55% of the cost of credit), the non-disclosure of the commercial tie between the dealer and lender (regarding which the documentation provided to the consumer was misleading); and the unsophisticated nature of the consumer all contributed to the Supreme Court’s findings of unfairness. Accordingly, the Court required payment by the lender of the commission sum plus interest to the consumer.

(c) However, it is noteworthy that the Supreme Court considered these factors to be particularly egregious.  This suggests that (in the Supreme Court’s view) the threshold for CCA liability may be relatively high.

3. What are the broader implications of the Supreme Court’s decision

What is required to be a fiduciary?

The Supreme Court’s decision, whilst narrowing the circumstances in which the tort of bribery can arise, does not rule out liability for the party paying commission where a fiduciary duty is owed by the party receiving commission (i.e. the broker/agent).  So it is critical that those industries where wholesalers distribute their products and services through commercial agents, brokers and advisers on the promise of commission can identify when a fiduciary duty arises. 

3.1 The key indicator of a fiduciary relationship is an express or implied undertaking to act solely in the interests of another, i.e. a relationship of “single-minded or undivided loyalty”, where one party subordinates their own interest to another. In the Supreme Court case the car dealers were found to, first and foremost, be attempting to sell a car to the customer, i.e. they were not solely acting to assist the borrowers in procuring finance.

3.1 A fiduciary duty typically falls within an established relationship (e.g., trustee-beneficiary, solicitor-client) or where there is an express undertaking to act solely for another.

3.3 Accordingly, in situations where commission is paid to a third party on the promise that they will distribute products and services onwards, the question of loyalty and separate commercial interests needs to be carefully considered. Where this distinction is less clear cut, it will be important to consider the underlying documentation, specifically:

(i) Is there any suggestion of undivided loyalty to the consumer in the retainer, is there assurance that the party will be acting solely in their interests?; and

(ii) Is the commercial relationship between the parties accurately described?

If you do owe a fiduciary duty, how do you avoid liability for bribery?

3.4 If the party paying the commission considers there to be a risk of a fiduciary duty being made out in their commercial arrangements, they need to ensure that the consumer provides their fully informed consent to any commission paid to the broker.

3.5 In practice, this will mean:

(a) clearly spelling out the commission arrangements to the consumer, including the amount; and

(b) asking the consumer to consent to the commission arrangements.

3.6 Evidencing the consumer’s fully informed consent will be best achieved by setting out the arrangements clearly in writing and then asking the consumer to sign their consent to them.  This document will need to be brought to the consumer’s attention, i.e. the disclosure of the commission arrangements should not be hidden in the documentation and the consumer should be given the opportunity to ask questions about it. 

What does the decision mean for findings of unfairness under the CCA?

3.7 In its decision, the Supreme Court referred to the ‘helpful’ factors identified in the non-exhaustive list by the FCA that could point towards unfairness, namely:

(i) the size of the commission relative to the charge for credit
(ii) the nature of the commission, for example, whether it is discretionary
(iii) the characteristics of the consumer
(iv) compliance with regulatory rules
(v) the extent and manner of disclosure  

3.8 The FCA has subsequently repeated these factors in its announcement about the redress scheme to compensate motor finance customers who were treated unfairly.  Accordingly, these are all factors that lenders ought to be considering when analysing their own potential liability under s.140A of the CCA both in the context of motor finance and more broadly, with regard to their other credit broker relationships.

3.9 The Supreme Court’s decision, whilst acknowledging that each case will need to be determined on its own merits, is likely to be indicative of the types of relationship that will be found to be unfair under the CCA.  For example, the court’s finding that an undisclosed commission of 55% of the cost of credit was a ‘powerful indication’ of unfairness is likely to be influential.  Notably, however, this was not the only factor before the Court that led to a finding of unfairness.  The Supreme Court has arguably sought to set the bar reasonably high, outlining the multiple egregious factors that led to a determination of unfairness in this particular case.

3.10 The FCA has today announced that it will issue a statement to the market and publish its consultation on a proposed motor finance redress scheme, along with supporting evidence and analysis, shortly after markets close on Tuesday 7 October 2025.    

Burges Salmon offers extensive financial services industry insight, helping our clients to navigate the complexities, and capitalise on the opportunities, of the financial services landscape.

Click here to subscribe to our financial services newsletter.