Supreme Court rules on Motor Finance Case
The Supreme Court has ruled that finance lenders in the motor industry will not have to pay compensation to motorists over car finance loans.
Allegations of Undisclosed Commissions
The case involved three joined appeals by lenders relating to the payment of commission by lenders to car dealers in connection with the provision of finance for the hire purchase of cars. The commission in these cases was either not disclosed or partly disclosed to the hirer of the car. In each of the three cases the dealer profited from the sale of a car but also received commission from the lender. The customers claimed this commission payment was equivalent to ‘a bribe or to secret profits received by the dealers as fiduciaries.’
Supreme Court’s Key Findings
Judges Lord Reed, Lord Hodge, Lord Lloyd-Jones, Lord Briggs and Lord Hamblen concluded that customers’ claims in two of the appeals against the lenders in ‘equity and in tort cannot succeed.’ The court concluded that the dealers had no fiduciary obligation to the customer. The judgement stated: “Neither the parties themselves nor any onlooker could reasonably think that any participant was doing anything other than considering their own interests… At no point did the dealer give any kind of express undertaking or assurance to the customer that in finding a suitable credit deal it was putting aside its own commercial interest as seller.”
The justices did, however, allow the third appeal - Johnson v FirstRand Bank Limited, a claim under section 140 A of the CCC - as they ruled that there was an unfair relationship between one of the consumers and the lender on the particular facts of that case.
Who appeared?
Many Chambers’ ranked barristers and solicitors appeared in this case.
For the Appellant Close Brothers, barristers Laurence Rabinowitz KC, Andrew Scott KC, George Molyneaux, Niranjan Venkatesan KC and solicitors from Slaughter & May Gayathri Kamalanatha, Jonathan Clark, Ewan Brown, David Shone, Richard Smith appeared.
Appearing for FirstRand, also an appellant, were barristers Mark Howard KC, Matthew Hardwick KC, Simon Popplewell and Frederick Wilmot-Smith and solicitors Martin Ward and Chris Busby at Eversheds Sutherland.
For the respondents, Robert Weir KC, Jonathan Butters and Thomas Westwell were instructed.
For intervenors, The Financial Conduct Authority, Jemima Stratford KC, Aarushi Sahore, Jagoda Klimoqicz and Jaamae Hafeez Baig appeared, and for the National Franchised Dealers Association Limited were Jonathan Kirk KC, Richard Roberts, Jack Brady and Lee Finch.