By Esmaeil Momeni, litigation team lead solicitor, and Ovye Affi, a solicitor, at Manchester firm Consumer Rights Solicitors, which acts on two of the three motor finance cases going to the Supreme Court
Background: The Landmark Court of Appeal Motor Finance Decision
On 25 October 2024, the Court of Appeal delivered a landmark judgment in three conjoined motor finance undisclosed commission appeals:
- Johnson v FirstRand Bank Limited
- Wrench v FirstRand Bank Limited
- Mr and Ms Hopcraft v Close Brothers Limited [2024] EWCA Civ 1282
These cases concerned the payment of commission to car dealers acting as brokers, arranging finance for their customers.
The Claimants: Financially Unsophisticated Consumers
All three claimants were financially unsophisticated consumers with relatively low incomes. They engaged car dealers, acting as credit brokers, to arrange motor finance for the purchase of their vehicles.
The claimants argued that the motor finance car dealers, regulated by the Financial Conduct Authority (FCA), owed them a duty to provide impartial advice or recommendations and were acting as their agents in arranging the finance.
Court of Appeal Findings: Fiduciary Duty and Bribery
Following a three-day hearing, the Court of Appeal held that car dealers acting as credit brokers owed their customers a fiduciary duty, arising alongside their duty to provide disinterested advice.
Therefore, if commission payments were not disclosed or insufficiently disclosed, the payment constituted a bribe.
This ruling aligned with the binding authority of Wood v Commercial First Business Ltd [2021] EWCA Civ 471, where David Richard LJ clarified that the fiduciary relationship requires a duty of honesty and impartiality.
The Road to the Supreme Court
Lenders Seek Permission to Appeal
Aggrieved by the Court of Appeal’s decision, both lenders sought permission to appeal to the UK Supreme Court (UKSC). Permission was granted on 11 December 2024, with a three-day hearing scheduled from 1 April 2025.
Government Intervention: HM Treasury Steps In
On 21 January 2025, HM Treasury (HMT) applied for permission to intervene in the appeal under rule 26 of the UK Supreme Court Rules 2009.
The government intervention aims to shield the motor finance industry. However, this raises concerns that the Supreme Court may be asked to consider extrajudicial factors in its ruling.
Separation of Powers: Constitutional Context
Establishment of the UK Supreme Court
The UKSC was established in October 2009 under the Constitutional Reform Act 2005, replacing the judicial functions of the House of Lords.
Its role is to ensure the correct interpretation of the law and to enforce the legal limits on the powers of public institutions.
Objectives of the Constitutional Reform Act
The Act aimed to:
- End the practice of judges serving simultaneously as legislators.
- Separate the functions of the Lord Chancellor.
- Establish an independent Judicial Appointments Commission.
These reforms cemented the doctrine of the separation of powers in the UK democracy.
Separation of Powers Explained
The doctrine requires the three branches of government to operate independently:
- Legislative (Parliament)
- Executive (Government)
- Judiciary (Courts)
This ensures no single entity wields absolute power and maintains checks and balances.
Judicial Independence
Lord Neuberger of Abbotsbury in R (UNISON) v Lord Chancellor [2017] UKSC 51 highlighted that courts exist to enforce laws made by Parliament, and people must have unimpeded access to them.
John Locke’s Second Treatise of Government (1690) warned against combining legislative and executive powers, as it could lead to the abuse of power.
Debate: Is the Government’s Intervention Justified?
The Ethical Dilemma
While applying to intervene in a case is not inherently unconstitutional, the nature of HMT’s intervention raises concerns.
If the government pressures the Court to rule in a certain way due to economic concerns, it risks undermining judicial independence.
Lord Diplock in Attorney General v Times Newspapers Ltd [1974] AC 273 warned that once a dispute reaches court, no one should usurp its role to decide according to law.
The Broader Ramifications
The ethical question is whether the government should prioritise the financial stability of motor finance lenders over the rights of individual consumers.
This is particularly relevant given lenders’ failure for over 20 years to disclose commissions, despite the Court of Appeal judgment in Hurstanger Ltd v Wilson [2007] EWCA Civ 299.
Redistribution, Not Collapse
Requiring motor finance lenders to compensate customers would not lead to economic collapse but would redistribute wealth to individuals, potentially stimulating other sectors of the economy.
Supporting financial misconduct for the sake of economic stability undermines public trust and the integrity of the UK’s business and motor finance environment.
Conclusion
Despite the government’s controversial intervention, the public remains hopeful that the Supreme Court will uphold justice according to the law, not according to extrajudicial or political pressure.
As David Richards LJ stated in Wood:
“The law, reflecting the views of society, has for a very long time set its face against bribery as a corrosive practice, which undermines the country’s social, economic and commercial values and well-being.”
Related Legal Services from Consumer Rights Solicitors
Learn more about motor finance claims and how CRS can help protect your rights:
- Motor Finance Claims — Find out how undisclosed commission agreements could entitle you to compensation.
- Secret Commission Claims — Learn more about financial mis-selling and hidden broker fees.
- Wrongful Repossession Claims — Were your assets or vehicle repossessed unfairly? Take action.
- Mortgage Prisoner Claims — Get support if you’re stuck in an unaffordable mortgage with limited options.
- Previously Rejected PPI Claims — Revisit your PPI claim following new legal developments.
- Contact Us — Speak to our expert team for free initial advice on your case.
