Selected cases

Court of Appeal of England and Wales · [2024] EWCA Civ 1282

Marcus Gervase Johnson v Firstrand Bank Limited (London Branch) t/a Motonovo Finance

This Court of Appeal decision is a leading authority on dealer-arranged motor finance and commission disclosure.

Court of Appeal of England and Wales25 Oct 2024

Plain-English explainers, not legal advice. Use the linked official source for section-level detail, and get advice for your situation.

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Quick read

  • If your business arranges consumer finance as part of a sale, do not assume the lender carries all the legal risk.
  • This Court of Appeal decision is a leading authority on dealer-arranged motor finance and commission disclosure.

Use this to check

  • In the court’s scenario, a motor dealer arranging finance was also acting as a credit broker for the customer, not just as seller.
  • A statement in standard terms that commission may be paid will not necessarily negate secrecy if it is buried in small print and not properly highlighted.
  • Hopcraft and Wrench were treated as secret commission cases, but Johnson had to be treated as a partial disclosure case because of the concession below.

Decision snapshot

  1. What happened

    • The Court of Appeal heard three linked appeals about used car purchases funded by consumer motor finance before January 2021.
    • In each case, the customer chose a car from a dealer and could not buy it outright, so the dealer offered to arrange finance.
    • The court described this as a common model.
    • The car price was agreed first.

  2. What the court had to decide

    • The Court of Appeal had to decide when commission paid by a lender to a motor dealer arranging consumer finance becomes legally actionable.
    • The main issues were whether the dealer was acting as a credit broker for the customer and therefore owed a disinterested duty and fiduciary duty, whether wording that commission may be paid was enough to negate secrecy, and what kind of lender liability followed in secret commission and partial disclosure cases.

  3. What the court decided

    • The Court of Appeal allowed all three appeals.
    • It held that the dealers were acting as credit brokers for the consumers and owed both a disinterested duty and a parallel fiduciary duty.
    • Hopcraft involved no disclosure, and Wrench involved insufficient disclosure to negate secrecy, so the lenders were liable as primary wrongdoers in secret commission cases.

Practical impact

Practical read

  • If your business arranges consumer finance as part of a sale, do not assume the lender carries all the legal risk.
  • In the court’s scenario, the dealer was a credit broker for the customer and owed duties that sat badly with undisclosed commission.
  • The practical lesson is narrow but important: if staff collect customer financial details, present finance as suitable or competitive, or imply they are searching a panel for the customer’s benefit, your documents and conduct...
  • Review introducer agreements, first-refusal terms, commission structures, suitability forms, scripts and complaint files together.

Useful next steps

  • In the court’s scenario, a motor dealer arranging finance was also acting as a credit broker for the customer, not just as seller.
  • A statement in standard terms that commission may be paid will not necessarily negate secrecy if it is buried in small print and not properly highlighted.
  • Hopcraft and Wrench were treated as secret commission cases, but Johnson had to be treated as a partial disclosure case because of the concession below.
  • Johnson’s unfair relationship finding under the Consumer Credit Act 1974 was fact-specific and turned on a combination of high commission, poor value and misleading material.
  • Businesses should review lender arrangements, suitability wording, staff scripts and disclosure practices together, because the court looked at the whole process rather than isolated documents.

The story

The case joined three appeals about dealer-arranged motor finance. Each customer wanted to buy a used car and needed finance. The dealer offered to arrange it, gathered information about the customer’s finances, and then presented a finance offer from a lender.

The court said this was a common retail model. The customer would know the car price, any deposit, the interest rate and the instalments. What the customer might not realise was that the dealer was doing two jobs at once. It was selling the car, but it was also acting as a credit broker.

That second role mattered because the dealer was being paid commission by the lender for introducing the finance business. The commission sat in a side arrangement between lender and dealer. The customer was not party to it. Even where documents mentioned commission, they might not say whether commission would in fact be paid, how much it would be, or how it was calculated.

The court focused on the conflict this created. If the dealer was presenting finance as suitable or competitive for the customer, but was also being paid by the lender, the dealer had an incentive that could pull against the customer’s interests.

Practical sense check

  • Customer chose a car and needed finance
  • Dealer collected financial details and arranged the finance approach
  • Dealer presented one finance offer to the customer
  • Lender paid commission to the dealer under a separate arrangement
  • The court had to decide what duties the dealer owed and when the lender became liable

What the court had to decide

The central issue was not simply whether commission existed. It was whether the dealer, in arranging the finance, was acting in a role that required it to put the customer’s interests first or at least act on a disinterested basis when presenting finance options.

The court also had to decide what level of disclosure was enough. A useful distinction ran through the appeals: secret commission, partial disclosure, and fully informed consent are not the same thing. That distinction affected the route to lender liability.

What the court focused on

  • Was the dealer acting only as seller, or also as credit broker for the customer?
  • Did that broking role create a disinterested duty and a fiduciary duty?
  • Did wording saying commission may be paid prevent the commission from being secret?
  • If disclosure was only partial, what did the lender need to know to be liable?
  • In Johnson, was the lender-customer relationship unfair under the Consumer Credit Act 1974?

The court framed one practical question very clearly. If a statement about commission sits in standard terms, but the borrower neither reads it nor is directed to it, has secrecy really been negated? The court’s answer was that this depends on the facts and on what was done to bring the point to the customer’s attention.

That is important for businesses because it shifts the focus away from whether the words existed somewhere in the paperwork and towards whether the disclosure was real in the customer’s hands.

What happened in each appeal

Hopcraft involved no disclosure of commission. The lender accepted that the commission had been kept secret. The Court of Appeal held that the lender was liable as a primary wrongdoer in a secret commission case.

Wrench was different in form but not in result. The customer had not been told that commission would be paid, although the lender’s standard terms referred to commission possibly being payable. The Court of Appeal held that this was still insufficient disclosure to negate secrecy. So Wrench was also treated as a secret commission case, and the lender was again liable as a primary wrongdoer.

Johnson was the most fact-heavy appeal. Mr Johnson had signed a Suitability Document saying the dealer may receive commission and suggesting the dealer would canvass a select panel of lenders and provide the product that best met his needs. But the court said the document was untruthful in important ways.

The court pointed to the dealer’s right-of-first-refusal arrangement with FirstRand, the absence of any real shopping around, and the size of the commission, which amounted to 25% of the total sum advanced. It also noted findings that Mr Johnson paid much more than the car was worth and did not read the documents.

Even so, Johnson had to be treated as a partial disclosure case because of the way it had been argued below. The Court of Appeal said it was bound to treat the case as similar to Hurstanger, where there was enough disclosure to negate secrecy but not enough to secure fully informed consent.

That point matters. The court did not simply relabel Johnson as a secret commission case. Instead, it held the lender liable as an accessory for procuring the broker’s breach of fiduciary duty by paying the commission in those circumstances.

What the court decided

The Court of Appeal allowed all three appeals. It held that the dealers were not just sellers of cars. In the finance part of the transaction, they were acting as credit brokers on behalf of the customers. Their task was to search for and offer a finance deal from their panel that was suitable for the customer’s needs and competitive. In some cases they undertook to find the best or most suitable deal.

Because of that role, the dealers owed the customers the disinterested duty described in Wood. The court also held that the relationship was fiduciary. In all three cases there was a conflict of interest and no informed consent by the consumer to the receipt of the commission.

The court then drew the legal line carefully. A lender is not automatically a primary wrongdoer just because the broker had a conflict and lacked informed consent. For primary liability, the commission must be secret. If there is partial disclosure that is enough to negate secrecy, the lender can instead be liable in equity as an accessory to the broker’s breach of fiduciary duty.

The court also said that, in a partial disclosure case, a fiduciary duty is required for accessory liability. In this type of case, that fiduciary duty arose in tandem with and because of the disinterested duty.

What the court focused on

  • Hopcraft - no disclosure, secret commission, lender primarily liable
  • Wrench - disclosure insufficient to negate secrecy, lender primarily liable
  • Johnson - treated as partial disclosure because of the concession below, lender liable as accessory
  • In all three cases the broker owed the relevant duties
  • The lenders were liable for repayment of the commission

The unfair relationship finding in Johnson

Johnson also raised a separate claim under sections 140A-C of the Consumer Credit Act 1974. The court stressed that non-disclosure or partial disclosure of commission does not automatically make a lender-customer relationship unfair. The court must look at all the facts and weigh their importance.

That is an important limit on the case. The unfair relationship finding was not framed as a universal rule that any undisclosed commission makes the relationship unfair.

On Johnson’s facts, however, the court found the relationship unfair. It treated several features as critical. The commission to the broker was 25% of the sum advanced. The amount borrowed and paid to the dealer was much more than the car was worth. The true relationship between lender and dealer was not disclosed by the lender and was actively concealed by the broker through misleading material.

The court was especially critical of the Suitability Document. It said a reasonable reader would think the dealer would canvass a select panel of lenders and advise on the result. In reality, that did not happen. The dealer was tied to FirstRand by a right-of-first-refusal arrangement and offered no real broking service beyond introducing Mr Johnson to that lender.

The Court of Appeal also decided the case should not be sent back to the County Court for more fact-finding on unfairness. It said there was only one possible finding on the evidence about disclosure, namely that the commission was not disclosed to Mr Johnson in any real sense. The court therefore decided the unfair relationship issue itself.

As a remedy, it directed that the commission be repaid to Mr Johnson, together with the interest he paid on it under the hire purchase and personal loan agreements, plus further interest from the agreement date.

How businesses should read it

This case is most useful for businesses that combine a product sale with consumer finance introductions. The court looked at substance, not labels. If your staff gather financial details, present finance as suitable or competitive, or imply they are selecting from a panel for the customer’s benefit, the law may treat your business as acting as a credit broker for the customer in that process.

That does not mean every introduction creates the same duties on the same facts. But it does mean businesses should test their real conduct against the customer-facing story they tell.

The biggest operational risk is mismatch. If your documents say you search a panel, act impartially, or provide the best option, but your lender agreement gives one lender first refusal or strongly steers business in one direction, the court may see that as a serious problem. Johnson is a strong example because the court found the suitability wording actively concealed the reality.

The second risk is over-reliance on standard terms. A line saying commission may be paid is not a safe harbour if it is buried in paperwork and not properly highlighted.

Practical sense check

  • Map the customer journey from product choice to finance signature
  • Identify every point where staff describe finance as suitable, competitive, best or impartial
  • Check whether panel descriptions match the real lender process
  • Review introducer terms for first-refusal, exclusivity or steering features
  • Review whether commission wording says may be paid when commission will in fact be paid
  • Make sure disclosures are brought to the customer’s attention in a meaningful way
  • Check that suitability or recommendation documents are factually accurate
  • Keep records showing what was given to the customer and what was explained

Documents and conduct to review

For many businesses, the practical response is not to add more legal wording. It is to align the whole process. The court looked at the sales conversation, the suitability material, the lender-dealer agreement and the customer documents together.

If one part of the process says the business is acting for the customer, while another part shows the business is tied to one lender and rewarded for steering business there, that inconsistency can become the centre of the dispute.

Key points

  • Suitability documents and recommendation forms
  • Pre-contract information and standard terms
  • Commission wording and any explanation of how the business is paid
  • Dealer or introducer agreements with lenders
  • Panel lender descriptions used in scripts or brochures
  • Complaint handling records and document retention practices
  • Training materials for sales staff
  • Any wording about searching the market or acting in the customer’s best interests

Historic files also matter. These claims often arise years after the sale. The court noted that the primary focus will often be on the documents and on what they reveal about the arrangements between lender and broker. If your business cannot reconstruct what happened, that creates its own difficulty when a complaint or claim arrives.

For lenders, this case also underlines the need to understand what dealer-facing materials say to customers. Liability risk does not sit only in the lender’s own standard terms.

Dates and status

The judgment was handed down by the Court of Appeal on 25 October 2024. It concerned motor finance transactions before the FCA’s January 2021 rule changes mentioned by the court.

The decision is a significant authority on dealer-arranged motor finance, commission disclosure and lender liability in the scenario described by the court. The Johnson unfair relationship ruling should still be read as fact-specific.

Common questions

Did the court say every dealer arranging finance owes the same duties?

The judgment is tied to the scenario the court described. That scenario involved a dealer collecting the customer’s financial information and presenting finance as suitable, competitive, or sometimes the best available from a panel. In that setting, the court held the dealer was also acting as a credit broker for the customer and owed a disinterested duty, with a parallel fiduciary duty. Businesses should avoid treating the case as a universal rule for every introduction.

Was a small-print statement that commission may be paid enough?

Not necessarily. The court said the question depends on the facts, including what steps were taken to bring the point to the customer’s attention. Burying a statement in small print that the lender knows the borrower is unlikely to read will not suffice.

What was the difference between Hopcraft, Wrench and Johnson?

In Hopcraft, there was no disclosure and the commission was accepted to have been secret. In Wrench, the Court of Appeal found the disclosure was insufficient to negate secrecy, so it was also treated as a secret commission case. In Johnson, because of a concession made below, the case had to be treated as one of partial disclosure rather than secrecy, even though the court was critical of what happened.

What did Johnson add beyond the commission issue?

Johnson also involved an unfair relationship claim under sections 140A-C of the Consumer Credit Act 1974. The court said non-disclosure or partial disclosure of commission does not automatically make a lender-customer relationship unfair. But on Johnson’s facts, including the very high commission, the poor value of the deal and the misleading suitability material, the relationship was unfair.

What should a business review after this case?

Review the whole finance journey, not just the lender agreement. Check staff scripts, suitability wording, panel descriptions, first-refusal or steering terms, commission wording, document order, and complaint records. Make sure the customer-facing story matches the real commercial arrangement.

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