Summary of the Judgment:
This landmark decision concerns secret commissions paid by motor finance lenders to car dealers and the resulting legal duties owed to consumers.
The cases were conjoined due to overlapping facts and legal issues.
Key Points:
1. Nature of the Dispute
- Customers entered hire purchase agreements to finance cars.
- Lenders paid commissions to dealers for brokering the finance.
- These commissions were undisclosed or only partly disclosed to customers.
Customers claimed:
- The commissions were bribes
- Dealers were fiduciaries and earned unauthorised secret profits
- Lenders dishonestly assisted in this breach
- The deals created unfair relationships under the Consumer Credit Act 1974 (CCA)
2. Core Legal Issue
Whether dealers, when arranging finance, owed fiduciary duties or at least a “disinterested” duty to customers – such that undisclosed commissions were legally actionable.
- No fiduciary or disinterested duty arises just because the dealer arranged finance.
- Dealers acted as independent sellers, not as agents or advisers.
- The three-cornered structure (dealer-lender-customer) doesn’t support an implied duty of loyalty.
This overruled the Court of Appeal, which had found dealers owed both fiduciary and disinterested duties.
3. Bribery and Fiduciary Duty Claims Rejected
- The tort of bribery remains part of English law.
- But it applies only if there’s a duty to act disinterestedly or loyally – not present here.
- The equitable claims for dishonest assistance and unauthorised profit failed for the same reason.
4. Only One Claim Succeeds
- Mr Johnson’s unfair relationship claim under section 140A CCA was upheld:
- The large undisclosed commission, a commercial tie between dealer and lender, and regulatory breaches led the Court to find the finance deal unfair.
- Remedy to be determined under section 140B.
Legal Impact
This decision:
- Shields lenders from widespread bribery or fiduciary-based claims over non-disclosed commissions.
- Confirms that standard dealer-lender-customer finance arrangements do not create fiduciary relationships.
- Limits liability to statutory remedies under the CCA, particularly section 140A (unfair relationships).
- Reinforces the importance of full, clear disclosure for lenders/brokers under FCA regulation.
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