Motor finance predictions: how did we get on?

After the Supreme Court hearing in April, we made 8 predictions about the judgment. How did we do?

Prediction 1: The Supreme Court will substantially overturn the Court of Appeal judgment - correct

The Court, as we predicted at our last webinar, approached its reasoning from first principles. The judgment substantially overturns the Court of Appeal decision and gives clarity to an area of the law with some previously difficult, and apparently conflicting authorities.

Prediction 2: The tort of bribery will, contrary to the appellants' argument, not be abolished - correct

This was described in the judgment as an “interesting, if bold, submission”. It always felt slightly tactical to us - designed to shift the debate in a favourable way to the lenders. Perhaps it worked?

Prediction 3: The Supreme Court will clarify, but not abolish,  the concept of the 'disinterested duty'. We predict a dissenting judgment on this key issue. -both!

If this was a pub quiz (perhaps not a very fun one…!) I’d be arguing for half marks on this.

The disinterested duty is clarified in so far as what is properly required is the existence of fiduciary duty of loyalty. Importantly, such a duty may arise where one person has performed a role in another decision making process by exercising judgement or discretion in relation to the affairs of that person (where the so called disinterested duty originates from in the case law). But whether it arises will depend on a number of factors, including whether the person agreed to act in the other’s interest to the exclusion of any interest of their own. (There also wasn’t a dissenting judgment - on this issue or at all - so the apparently different view of the judges that we picked up at the hearing were perhaps reconciled during the judgment writing process.)

Prediction 4: The Supreme Court will decide that the dealers in these cases did not generally owe fiduciary/disinterested duties to the claimants. Claimants would therefore need to show such duties arise on a case-by-case basis - correct

Common sense has prevailed with the judgment confirming what we all knew to the case: car dealers are acting in their own interests in selling a car and, as part of the same transaction, arranging finance. As the Court pithily put it: the finance was “simply a means whereby the dealer could make use of its knowledge and contacts in the car finance market to oil the wheels of what was for it essentially a sale transaction from start to finish”. 

Prediction 5: The remedies in the tort of bribery will be more closely aligned to equitable remedies, with claimants needing to establish loss (with a rebuttable presumption of loss equal to the amount of the commission) - incorrect

We found the appellants’ submission on this issue compelling - but the Supreme Court did not agree. The position therefore remains that there are different remedies between common law bribery and dishonest assistance. This includes, at common law, an irrebuttable presumption to recover the value of the bribe, without the need to establish loss.

Prediction 6: The Supreme Court will not find the lenders acted dishonestly - incorrect

Technically this is true - there was no such finding - but the Supreme Court did not find it necessary to rule on this issue as issues of adequacy of disclosure never arose given the conclusions about the need to establish a fiduciary duty and the lack of such a duty on the facts.

Prediction: 7 Irrespective of the outcome, the FCA will conclude that firms breached relevant regulatory rules. It will seek to implement a consumer wide redress scheme under s404 FSMA? 

We will find out on Monday if this one is right. I’m sticking by it…

Prediction: 8 Even if we are right that the appellants will win, secret commissions litigation and class and group action risk arising from it, is going nowhere?

Too early to call this one - but again I am sticking by it. For various reasons, there is every reason to suggest secret commission litigation and class and group action risk arising from it, is going nowhere.

Two quick points:

• As the recent Expert Tooling Court of Appeal judgment shows, secret commission litigation often arises in circumstances where it is not in issue that there is a fiduciary duty owed to the claimant. Like the energy broker group litigation, for different reasons, the group members in the leaseholders' group action will be arguing that the commission paid to the brokers and landlords by the insurers was paid in breach of fiduciary duty. So a lot of the Supreme Court's findings in motor finance do not obviously impact how those cases are put.
• Within motor finance, given the success of Mr Johnson's claim, there is every reason to suggest that there will be a pivot to unfair relationship claims, so mass litigation in motor finance arising out of undisclosed commissions are not likely to suddenly disappear after this judgment.