Johnson v FirstRand: The Supreme Court Ruling That Changed Everything
In January 2025, the UK Supreme Court handed down a judgment that fundamentally altered the legal landscape for millions of car finance customers. The case — reported as [2025] UKSC 33 — confirmed that car dealers who secretly earned commission from lenders had breached their legal duties, and that customers were entitled to full disgorgement of those commissions. MotorRedress (www.motorredress.co.uk) explains the background, the ruling, and what it means for your claim.
The Cases That Reached the Supreme Court
The Supreme Court ruling consolidated several linked cases that had been working their way through the civil courts since 2021. The lead cases were:
- Johnson v FirstRand Bank Limited (London Branch) — Marcus Johnson financed a BMW through a dealership using a FirstRand-backed product. FirstRand operates in the UK through its Aldermore and MotoNovo Finance brands.
- Hopcraft v Close Brothers Limited — Mr Hopcraft financed a Volkswagen through a dealership using Close Brothers Motor Finance.
- Wrench v FirstRand Bank Limited — a second FirstRand case involving a Toyota agreement.
All three cases concerned discretionary commission arrangements under which the dealer received a higher commission for setting a higher interest rate, without disclosing this arrangement to the customer.
The Court of Appeal Ruling: October 2024
Before reaching the Supreme Court, the cases were decided by the Court of Appeal in October 2024. The three-judge Court of Appeal (Briggs, Popplewell, and Snowden LJJ) held unanimously that:
A car dealer acting as a credit broker owes the customer a fiduciary duty in relation to the credit-broking activity. This is a higher-level duty than the merely contractual or tortious duty that had previously been assumed.
A fiduciary cannot receive a commission from a third party (the lender) that creates a conflict of interest without obtaining the principal's (the customer's) fully informed consent.
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Standard commission disclosure clauses — of the type used by all major motor finance lenders — did not constitute fully informed consent because they did not disclose:
- The specific amount of the commission
- That the commission varied with the interest rate set
- That this created a direct conflict of interest
Where a fiduciary duty is breached by receipt of an undisclosed commission, the customer is entitled to rescission of the agreement or disgorgement of the full commission plus compensation for excess interest.
The ruling was immediately hailed as a landmark. Lenders' share prices fell sharply. The FCA announced that it was pausing complaint handling to assess the implications.
The Supreme Court Appeal
The lenders appealed to the Supreme Court, arguing primarily that:
- A credit broker does not owe a fiduciary duty — the relationship is more analogous to a commercial intermediary than a fiduciary.
- Even if a fiduciary duty existed, it should be a "half-secret" commission case (disclosure of commission existence without specifics), which attracts a less severe remedy than a "fully secret" commission.
- The appropriate remedy should be equitable compensation (actual financial loss) rather than disgorgement (full return of the commission).
The Supreme Court's Answer
In [2025] UKSC 33, the Supreme Court (five-judge panel) upheld the Court of Appeal's findings on the core points:
On fiduciary duty: The Supreme Court confirmed that while not all credit brokers automatically owe fiduciary duties, in the factual context of motor finance DCAs — where the dealer had discretionary control over the interest rate and stood to benefit financially from exercising that discretion — the dealer was in a position of conflict that required disclosure and consent. Whether characterised strictly as a "fiduciary duty" or as a species of bribery/secret commission at common law, the substantive outcome was the same: the dealer could not receive the commission without the customer's fully informed consent.
On the disclosure standard: The Supreme Court endorsed a high disclosure standard. For consent to be "fully informed", the customer would need to know the commission amount (or its basis), the conflict it created, and that they were consenting to proceed despite that conflict. Standard motor finance documentation did not meet this standard.
On the remedy: The Supreme Court confirmed that disgorgement (full return of the commission) is the appropriate starting remedy, not merely compensation for financial loss. However, the Court acknowledged that in some circumstances, a court might adjust the remedy in equity if full disgorgement would be disproportionate — for example, where the customer suffered minimal actual loss. In practice, the FCA's proposed redress scheme will apply a standardised formula that incorporates both disgorgement and excess interest elements.
Why This Ruling Is So Significant
Prior to [2025] UKSC 33, the FOS had been assessing motor finance commission complaints on a "loss-based" approach: how much extra interest did the customer actually pay because of the DCA? This produced relatively modest awards in many cases, and lenders had been able to argue that if the rate charged was "commercially reasonable", the customer suffered no measurable loss.
The Supreme Court's ruling demolished this approach in two ways:
It is not necessary to show that the rate was unreasonable to establish the claim. The breach of duty occurs at the point the dealer receives the commission without consent — regardless of what rate was charged.
Disgorgement does not require proof of loss. The customer is entitled to the return of the commission because it was received in breach of duty, not because the customer can prove a specific financial loss equal to the commission amount.
This is conceptually important: it means that even a customer who was charged a competitive interest rate (but where the dealer still received a DCA commission) may have a valid claim for disgorgement of that commission.
What the Ruling Does Not Cover
The Supreme Court's ruling is not unlimited. It does not:
- Cover agreements entered into after 27 January 2021 (when DCAs were banned)
- Automatically cover fixed commission arrangements (where the commission did not vary with the rate)
- Apply to non-consumer agreements (business finance)
- Create liability for lenders where the dealer's conduct was fully disclosed and consented to
Implications for the FCA's Redress Scheme
Following [2025] UKSC 33, the FCA published consultation paper CP25/27, which uses the Supreme Court's framework to design a mass-redress scheme. The scheme:
- Adopts the disgorgement remedy as the basis for commission redress
- Adds excess interest compensation calculated on the interest rate differential
- Applies 8% simple restitutionary interest from payment dates
- Covers both PCP and HP agreements
- Will be administered directly by lenders, with FOS as the backstop for disputed cases
The combination of these elements means that the FCA scheme should deliver materially more to consumers than the pre-October 2024 FOS approach. Industry analysts estimate that the total cost to lenders under the new framework could reach £15–25 billion when restitutionary interest is fully accounted for — well above the FCA's initial £8.2 billion estimate.
Lenders' Financial Provisioning
In response to the combined Court of Appeal and Supreme Court rulings, major lenders have set aside substantial provisions:
| Lender | Reported Provision (by Q1 2026) |
|---|---|
| Lloyds Banking Group (Black Horse) | £4.5 billion |
| Close Brothers | £400 million |
| Santander UK | Undisclosed (material) |
| FirstRand (MotoNovo/Aldermore) | £100–200 million (estimated) |
These provisions confirm that the lenders regard the liability as real and substantial. The scale of provisioning also validates the £8.2 billion FCA estimate, with the possibility of exceeding it once restitutionary interest accrues through the payment process.
What This Means for You
If you financed a car through a dealership between April 2007 and January 2021, the Supreme Court ruling has directly strengthened your claim. You no longer need to prove that the rate you were charged was "unfair" in an absolute sense. You need only show that:
- A DCA was in place between your lender and your dealer
- The dealer received a commission under that arrangement
- You were not given fully informed consent disclosures meeting the standard set by [2025] UKSC 33
In the vast majority of agreements from this period, all three elements are present.
To begin your claim, visit MotorRedress.
This article is for educational purposes only. Compensation amounts vary. Eligibility criteria apply.
Originally published on MotorRedress
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