Buying a first car is a milestone most people don’t forget. Yet, when Mr Marcus Johnson bought his first car - a second-hand Suzuki Swift - from a Cardiff dealership in 2017, he could hardly have anticipated that the purchase would make him a respondent in a Supreme Court case, of importance to the UK retail financial services sector as a whole. 

In fact, that was exactly what happened. A series of decisions and appeals in the lower courts took the financing of his £6,500 Suzuki (along with the car finance of a few other respondents) to the Supreme Court. The judgment was handed down on Friday 1 August 2025.

From a broader retail sector perspective, the judgment means that financial services firms and their retail regulatory lawyers can continue to draft the product features, charges and remuneration (whether in motor finance, wealth, mortgages or insurance) based upon: (i) the Consumer Duty and other relevant FCA principles and rules; (ii) applicable statutory tests of fairness such as section 140A of the Consumer Credit Act (CCA) and the Consumer Rights Act 2015; and (iii) general common law constraints (e.g. the law of misrepresentation). There is no need to assess the commercial payments and wider arrangements applying the standards expected of a fiduciary.

Nevertheless, following the ruling in Johnson, all retail financial services firms should think carefully when bringing products and services to the market and consider whether it is tolerable for consumer to remain in ignorance of product features which might be viewed as relevant to their decision-making. 

Existence of a fiduciary duty and tort of bribery

The Supreme Court’s ruling is a c.100 page long, carefully reasoned analysis with no dissenting judgments. 

Mr Johnson’s first car purchase, the Court determined, was a three-cornered transaction in which each party was engaged in an arms-length arrangement in pursuit of their own interests. The Court accepted that there may be trust and confidence between the broker and the consumer, particularly where advice is given and received. However, that is not enough to give rise to a fiduciary duty, which is a duty of single minded and undivided loyalty. Liability for bribery, or payment of a secret commission, only arises where a fiduciary duty is established; the Court of Appeal’s reliance upon a lesser  “disinterested duty as the basis for primary liability for bribery was held to be wrong. The possibility of a claim by the consumer in equity for dishonest assistance of a breach of fiduciary duty and in the common law tort of bribery is therefore closed off. 

Ultimately, the Supreme Court has therefore accepted that recommending a car finance package is necessary to “oil the wheels” of the sale transaction, akin to a shop keeper proposing a product which is good for the job or a wine waiter recommending a wine which pairs well with the food the customer has selected. The needs and objectives of the customer may have to be assessed, but the recommendation is not in itself altruistic. The Court found that a fiduciary duty is not generated by vulnerability or consumer protection. 

The FCA has therefore taken the correct approach in its Handbook of Rules and Guidance not to equate advisory or discretionary client relationships, with a fiduciary relationship, which bears a higher standard.    

The Court addressed the questions before it from first principles in light of the commercial context, and the statutory and regulatory framework in which the relevant car finance transactions took place. The judgment warns against extracting dicta from caselaw and reading them in isolation and out of context. 

The test of fairness

Having determined that there was no fiduciary duty and no disinterested duty the Court proceeded to analyse whether Mr Johnson’s finance gave rise to an unfair relationship pursuant to section 140A of the CCA. On the one hand, this statutory test only applies in a consumer credit context and the Court expressly warns in its judgment against drawing comparisons with other financial services sectors, subject to a different factual matrix. For example, it notes that the circumstances of Plevin vs Paragon and other PPI cases were very different. Without car finance there could be no transaction at all for many of the thousands of consumers who have backlogged cases following the Supreme Court’s decision. In contrast, PPI insurance was not essential for the goods and services PPI consumers acquired, in Plevin.

On the other hand, the Court reminds us that the fairness test under section 140A CCA is an “in all the circumstances” test which lifts the bonnet of the car and has a proper look inside. It has the potential to examine each component part of the consumer credit relationship, those the consumer can see, and those he or she cannot. This includes aspects of the relationship and related agreements the consumer may not even care to consider when they buy, but might do so later in the relationship, especially when the novelty of a new car has worn off. 

The Supreme Court provides further guidance on how this assessment is to be done, listing the following, non-exhaustive, factors: (i) the proportionate size of the commission; (ii) the nature of the commission (e.g. discretionary or non-discretionary); (iii) the characteristics of the consumer; (iv) the extent and manner of the disclosure; and (iv) compliance with the regulatory rules. 

In Mr Johnson’s three cornered transaction, there were several things concealed from him. There were also considerations he ignored and/or did not have time to read or understand. Firstly, the product documentation boasted a panel of product providers but in practice, there was no form of meaningful panel because the broker was contractually tied to select just one lender. Secondly, the lender paid out a lavish commission, of which Mr Johnson was also oblivious. Thirdly, the commission structure had two elements. One element gave the broker the right to select the interest rate. Although Mr Johnson’s broker selected the lowest rate of interest at 8% (meaning no commission was payable under that element) the broker could have chosen a higher rate - up to 13%. Fourthly, these arrangements did not, in the round, comply with all of the relevant requirements under FCA rules. 

Read across to other sectors

Mr Johnson’s case may be particularly egregious and discretionary commission arrangements in the consumer credit market are now banned under FCA rules. However, car finance is not the only financial services sector with distribution arrangements which firms would not necessarily wish to advertise to their consumer clients. The consumer may pay a fee to the intermediary for the service, but there may also be a commission or other arrangement which benefits the intermediary, the quantum or nature of which is not flagged to the client using Lord Denning’s “big red hand” rule (Thornton vs Shoe Lane Parking Limited). 

Even where commission structures are prohibited, the client may make a single “client payment” which is divided up between a distributor and a provider using a formula which is not fully disclosed. The charges levied for a service may mean it is a better deal overall for a client with one set of circumstances than another with a different set of circumstances. Sometimes, the impression is given of a bigger panel than the one which exists in reality. Exclusivity provisions are often confidential and may alter the way in which the provider panel may operate in practice, even if those ties are subjugated to relevant FCA rules. Sometimes there may be no panel to speak of, at all.

Whether these arrangements create regulatory risks under relevant statutory tests of fairness, the Consumer Duty or other FCA rules will often be highly fact specific but the Johnson case serves as a reminder to look holistically at the relevant arrangements, and pay close attention to anything which might reasonably be expected to be objectionable to the consumer, at any stage. In the post-Consumer Duty landscape, this is particularly important. The risk of not doing so is that a new product or service proposition will be for the distributor and product provider, like the purchase of the first new car. It promises an exciting future, but in reality, without a proper inspection under the bonnet, a series of expensive faults may, in time be revealed.