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

In consumer car-finance cases, a dealer who acts as a credit broker to source and select finance owes the consumer a disinterested duty and, ordinarily, an ad hoc fiduciary duty. A commission reference buried in standard terms may not prevent the payment being secret. If the commission is secret, the lender is a primary wrongdoer. If disclosure negates secrecy but does not secure fully informed consent, the lender’s liability is accessory and depends on the fiduciary duty. Fully informed consent requires disclosure of material facts, including the commission’s amount, calculation and relevant lender-dealer ties. Under the Consumer Credit Act 1974, unfairness is fact-sensitive. A very large undisclosed commission, inflated price and misleading brokerage arrangements may make the relationship unfair.

Three conjoined appeals concerned finance arranged by motor dealers for consumers buying second-hand cars. The dealers received commissions from the lenders, which were not fully disclosed.

• In Johnson, the County Court dismissed the common-law claim and remitted the statutory unfair-relationship claim for further findings.
• In Wrench, the first-instance decision for the consumer was overturned on appeal.
• In Hopcraft, the claim was dismissed, including the claim under the Consumer Credit Act 1974.

The appeals raised the duties owed by dealers acting as credit brokers, the distinction between secret and partially disclosed commissions, the requirements for accessory liability, and whether the lender-consumer relationship was unfair under sections 140A–140C.

All three appeals were allowed. The dealers acted both as sellers and as credit brokers. In their broking role they owed each consumer a disinterested duty to obtain suitable and competitive finance. In this context they also owed an ad hoc fiduciary duty of loyalty.

1. A dealer’s duties arose from the role undertaken and the consumer’s reliance on it. They were not defeated by the dealer’s separate role as seller, by the absence of a fee paid by the consumer, or by the dealer being the lender’s statutory agent for specified purposes under section 56 of the Consumer Credit Act 1974.
2. A general reference to possible commission in standard terms did not necessarily negate secrecy. The question was factual. A provision buried in small print, which the lender knew the consumer was unlikely to read, was insufficient in Wrench. Hopcraft and Wrench were therefore secret-commission cases, making the lenders primary wrongdoers.
3. Where disclosure was sufficient to negate secrecy but insufficient to secure fully informed consent, the rule in [2007] EWCA Civ 299 applied. A fiduciary duty was necessary to found accessory liability, although in this context it arose alongside the disinterested duty. Fully informed consent required disclosure of all material facts, including the amount and calculation of the commission and material ties between lender and dealer.
4. In Johnson, FirstRand knew of the fiduciary relationship and the commission payment. Its arrangements did not ensure full disclosure and indicated that the lender did not expect the dealer to disclose the amount or calculation of the commission. That amounted to knowledge, or deliberate blindness, of the essential facts constituting the breach. Equitable compensation was therefore payable in the amount of the commission, with interest. Rescission was refused because the vehicle had been sold and the agreement had long since been completed.
5. The statutory claim in Johnson also succeeded. Under the Consumer Credit Act 1974, the unfairness inquiry was broad and fact-sensitive. The 25 per cent commission, the amount paid above the vehicle’s retail value, the undisclosed first-refusal tie and the misleading suitability document together made the relationship unfair. The Court of Appeal had sufficient evidence to decide the issue and remedy without remission. FirstRand was ordered to repay the commission, the interest paid on it, and appropriate commercial interest.

1. Court of Appeal (Civil Division): the three appeals were heard together and all were allowed. The court held that the dealers owed disinterested and fiduciary duties, found secret commissions in Hopcraft and Wrench, found accessory liability in Johnson, and allowed Johnson’s statutory claim.
2. County Court at Cardiff: the deputy district judge dismissed Johnson’s claims. On first appeal, HH Judge Jarman KC treated the case as involving partial disclosure, rejected the common-law claim and remitted the statutory claim.
3. County Court at Birmingham: the deputy district judge found for Wrench, but HH Judge Worster allowed FirstRand’s appeal and rejected the common-law claim.
4. County Court at Hull: the deputy district judge dismissed Hopcraft’s claims, including the statutory claim.