Hopcraft v Close Brothers Ltd
Car dealers arranging finance owed customers no fiduciary duties, but an undisclosed large commission made the credit relationship unfair.
Facts
Three consumers bought used cars on finance arranged by the car dealers, who acted as credit brokers and introduced them to lenders. The lenders paid the dealers commission, which the consumers either did not know about or did not fully understand. In the case of Mr Johnson, the commission was £1,650, about 55 per cent of the total cost of credit, and the dealer had a commercial tie with the lender, FirstRand, giving the lender a right of first refusal on its finance business. The dealer's documents said only that it may receive a commission and described its products as coming from a select panel of lenders. The Court of Appeal held that the dealers owed the consumers fiduciary or disinterested duties and that the lenders were liable for bribery and dishonest assistance.
Legal principle
The Supreme Court allowed the lenders' appeals on the fiduciary and bribery claims. The dealers did not owe the consumers fiduciary duties, because each party was pursuing its own commercial interests and an offer to find a suitable finance deal is not an undertaking to act altruistically in the consumer's interests. A fiduciary relationship is required for the tort of bribery, so those claims failed. However, in Mr Johnson's case the relationship between him and FirstRand was unfair under section 140A of the Consumer Credit Act 1974. The size of the commission, the failure to disclose it prominently, the undisclosed commercial tie and the misleading reference to a panel of lenders all made the relationship unfair, and the lender was ordered to repay the commission with interest. The decision shaped the regulator's approach to motor finance compensation.
Related cases on exclusion clauses and unfair terms
- Canada Steamship Lines Ltd v The King [1952] AC 192
- Chapelton v Barry Urban District Council [1940] 1 KB 532
- Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805
- Director General of Fair Trading v First National Bank plc [2001] UKHL 52, [2002] 1 AC 481
- George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803
- Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371
- Hollier v Rambler Motors (AMC) Ltd [1972] 2 QB 71
- Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433
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