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Hopcraft and another v Close Brothers Limited; Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance; Wrench v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance
Factual and Procedural Background
Three consumer actions were conjoined on appeal. Plaintiff 1, Plaintiff 2 and Plaintiff 3 each obtained used cars from four different motor dealers (Company C, Company D, Company E and Company F). Finance was provided by two lenders (Company A and Company B) under hire-purchase and, in one instance, a hybrid hire-purchase/personal–loan agreement. The dealers received commissions from the lenders that were wholly undisclosed or only partly disclosed to the customers.
At first instance the claims – alleging bribery, dishonest assistance, breach of fiduciary duty and, under the Consumer Credit Act 1974 (“CCA”), unfair relationships – met with mixed results. The Court of Appeal allowed each customer’s appeal, holding that the dealers owed fiduciary and “disinterested” duties, that commissions in three transactions were secret bribes, that the fourth commission was an unauthorised profit for which the lender was an accessory, and that Plaintiff 3’s agreement ought to be re-opened under section 140A CCA.
The lenders (now Appellants) appealed to the Supreme Court. The Financial Conduct Authority (“the Regulator”) and the National Franchised Dealers Association intervened.
Legal Issues Presented
- Whether, in typical three-cornered motor-finance transactions, a dealer owes the customer either (a) a fiduciary duty of undivided loyalty or (b) a lesser “disinterested” duty such that undisclosed commissions constitute bribes or unauthorised profits.
- Whether the common-law tort of bribery survives as a distinct cause of action and, if so, whether it is engaged where no fiduciary duty exists.
- What level of disclosure negates the “secrecy” element of a bribe.
- What remedies are available against a lender who pays a commission – proprietary/accounting, damages, restitution or rescission – and on what conceptual bases.
- Whether Plaintiff 3’s relationship with Company B was “unfair” within section 140A CCA having regard to (i) a 25% commission, (ii) a contractual tie requiring the dealer to place all business with Company B, and (iii) alleged regulatory breaches.
Arguments of the Parties
Appellants’ Arguments
- The dealer remained an arm’s-length seller throughout; implying a no-conflict duty would contradict commercial reality.
- No fiduciary duty therefore arose; at most the dealers provided ordinary brokerage services regulated by statute and the Regulator’s rule-book.
- The tort of bribery is obsolete; equitable and restitutionary principles plus statutory protections are sufficient.
- Even if bribery subsists, “secrecy” is negated where the customer is told a commission may be paid.
- In Plaintiff 3’s case, the commission and lender/dealer tie were adequately sign-posted; any non-reading of documents was the customer’s own choice.
Respondents’ Arguments
- By promising to source a suitable finance package, each dealer undertook a duty to act solely in the customer’s interest, importing fiduciary or at least disinterested obligations.
- Undisclosed or partially disclosed commissions breached those duties and amounted to bribes; liability attaches to both payer and recipient.
- The tort of bribery is well-established and essential for deterrence; disclosure must be full and informed, not merely indicative.
- Under section 140A CCA the very high commission and hidden tie rendered Plaintiff 3’s relationship with Company B unfair.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hurstanger Ltd v Wilson [2007] | Partial disclosure & bribery; fiduciary vs disinterested duty | Distinguished; Supreme Court rejected its “half-secrecy” approach |
| Wood v Commercial First Business Ltd [2022] | Recognition of a “disinterested” duty | Supreme Court declined to follow insofar as it detached bribery from fiduciary duty |
| FHR European Ventures v Cedar Capital [2014] | Bribes held on constructive trust | Confirmed proprietary consequence where fiduciary duty exists |
| Attorney-General for Hong Kong v Reid [1994] | Bribe as breach of no-conflict rule | Cited in support of fiduciary requirement |
| Keech v Sandford (1726) | No-profit/no-conflict rules | Re-affirmed as foundation of fiduciary law |
| Regal (Hastings) v Gulliver [1967] | Strict liability for fiduciary profits | Relied on in fiduciary analysis |
| Mahesan v Malaysia Co-op Housing Soc [1979] | Automatic recovery of bribe from payer | Followed; rule retained |
| Plevin v Paragon Finance [2014] | Unfair relationship under CCA – high undisclosed commission | Applied when assessing Plaintiff 3’s unfair-relationship claim |
| Smith v Royal Bank of Scotland [2023] | Approach to section 140A CCA | Guided final unfairness assessment |
| United Australia v Barclays Bank [1941] | Election between restitution and damages | Cited in remedies discussion |
Court's Reasoning and Analysis
1. Fiduciary question. The dealer remained a self-interested seller throughout each three-party negotiation. No express or implied undertaking of undivided loyalty was given; therefore no fiduciary or analogous duty arose. Dependence, vulnerability or generic trust do not themselves create fiduciary obligations.
2. Tort of bribery. An actionable bribe requires a breach of a fiduciary duty. The Court rejected the notion of a free-standing “disinterested duty” sufficient to ground the tort; Wood was not followed on this point. The tort itself was retained; a payer remains automatically liable to repay the amount of the bribe, but only where the recipient was a fiduciary.
3. Disclosure standard. To negate secrecy, full and informed disclosure is required, not merely stating that commission may be paid. Hurstanger’s “half-way house” between secrecy and informed consent was disapproved.
4. Application to Plaintiffs 1 & 2. Because the dealers owed no fiduciary duty, commissions could not constitute bribes or unauthorised profits; equitable and common-law claims failed.
5. Plaintiff 3 – CCA claim. Although bribery theories failed for the same reason, the Court assessed fairness under section 140A CCA afresh. Factors rendering the relationship unfair included: (a) a 25% commission (£1,650.95) undisclosed to the customer; (b) a contractual tie obliging the dealer to place all business with Company B; (c) misleading statements suggesting an impartial panel search; and (d) breaches of CONC 3.3, 3.7 and 4.5. Plaintiff 3’s failure to read documents weighed against him but was outweighed by the lender’s conduct.
6. Remedy for Plaintiff 3. Under section 140B the Court ordered Company B to repay the commission with commercial interest; rescission of the finance agreement was unnecessary.
Holding and Implications
Held: The appeals of Company A and Company B are ALLOWED save that Plaintiff 3 succeeds under section 140A CCA; he is awarded repayment of the commission plus interest.
Implications: (1) Liability for civil bribery in the UK persists but is confined to benefits paid to fiduciaries; mere brokerage does not trigger fiduciary duties in standard motor-finance arrangements. (2) Dealers and lenders must nonetheless ensure transparent, prominent disclosure of commissions to avoid CCA unfair-relationship findings. (3) The decision narrows exposure to historic bribery claims but leaves lenders vulnerable where large, undisclosed commissions coincide with misleading sales practices.
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