UK Supreme Court narrows scope of improper commission claims in intermediary remittance cases, clarifying fiduciary duties across financial services
Summary
– The UK Supreme Court has limited the reach of insufficiently disclosed commission claims to narrowly defined fiduciary relationships.
– Full disclosure of all material facts to the principal is required to defeat claims of breach of fiduciary duty or civil bribery.
– Car dealers acting as lenders’ brokers were not fiduciaries; bribery claims tied to fiduciary duty, not mere impartial advice.
– A high-disclosure standard remains context-dependent; size, norms, and client sophistication shape what is “material.”
– The decision also touches on consumer credit fairness and signals continued regulatory interest, including a forthcoming FCA redress scheme for motor finance customers.
– Industry-wide implications point to stronger disclosure practices for brokers and intermediaries, including insurance brokers.
In-Depth overview
What the ruling changes
In the Hopcraft v Close Brothers Limited; Johnson v FirstRand Bank Limited; Wrench v FirstRand Bank Limited decision, the Supreme Court clarifies that the liability for undisclosed or insufficiently disclosed commissions hinges on fiduciary relationships. The Court narrows the scope of civil bribery to situations where the intermediary owes a fiduciary duty to the principal. Where no fiduciary relationship exists, bribery claims based on disclosing or omitting commissions are unlikely to succeed.
The core test: “single-minded loyalty”
A fiduciary relationship requires an express or implied assumption of responsibility to act exclusively for another in conducting that other’s affairs. Outside of classic categories (agent/principal, trustee/beneficiary, director/company), the Court stressed that it remains a high bar for a fiduciary duty to arise in commercial contexts—especially where parties are arm’s-length and pursue their own interests. On the facts, car dealers arranging financing for customers were not fiduciaries; the financing was an ancillary service to the vehicle sale, and dealers often operated as intermediaries between customers and lenders rather than as loyal representatives of the customer.
Bribery narrowed to fiduciaries
The Court overturned a broader BoP that had implied accountability for impartial but non-fiduciary intermediaries. Civil bribery will only be engaged where the intermediary owes a fiduciary duty to the principal. Where no fiduciary duty exists, the bribery claim fails, even if the intermediary’s conduct involves payments tied to a transaction.
Full disclosure as the defence
The Court held that full disclosure of all material facts to the principal is the proper defence to breach of fiduciary duty and to claims of civil bribery. There is no longer a general distinction between secret commissions and partially disclosed commissions. What counts as “material” depends on the principal’s sophistication and the payments’ size and nature. In practice, disclosure is not a one-size-fits-all matter—context matters, including whether the fee is reasonable within industry norms.
Implications for financial intermediaries, especially brokers
The decision has immediate relevance to intermediaries who receive payments from third parties, including insurance brokers who receive insurer payments. Although ICOBS provides guidance on disclosure, the Court’s reaffirmation of the need for “all material facts” means firms should be prepared to provide more than a generic reference to potential payments. In practice, disclosing the existence of a fee may be sufficient if the amount and calculation method are aligned with industry norms and the client’s sophistication; however, nonstandard or unusually large fees may require explicit disclosure of both amount and calculation method.
Consumer credit fairness: a notable example
In relation to a single unfair relationship claim under the Consumer Credit Act 1974, the Court found unfairness where the commission size (up to about 55% of total financing cost) and pre-transaction documentation concealed that a single lender controlled the panel, underrepresenting the customer’s awareness. The decision underscored that prominence and clarity in disclosing the existence and terms of commissions matter, and that failing to do so can breach consumer protection rules.
Regulatory response and a redress program
Following the ruling, the UK Financial Conduct Authority announced on August 3, 2025, a plan to launch a public consultation by early October 2025 on a redress scheme to compensate motor finance customers who were treated unfairly. The proposal targets commission arrangements (including discretionary commissions) that incentivized higher interest rates, with potential coverage extending to non-discretionary arrangements in light of the Court’s findings. The FCA estimates a potential scheme value of £9 billion to £18 billion, covering mis-sold loans dating back to 2007, with an anticipated operational date in 2026. A parliamentary committee has raised concerns about proportionality and the chilling effect on car finance, and participation in the redress scheme remains voluntary for customers who might pursue court claims instead.
Broader industry implications
Although the ruling centers on car finance, its logic is applicable across sectors that rely on intermediaries paid by third parties. The narrowed scope of civil bribery claims means that other alleged “secret” or undisclosed commissions in different markets may become harder to pursue unless a fiduciary duty can be established. Firms should assess their own disclosure practices for nonstandard fees and ensure documentation clearly identifies fee amounts or calculation methods, particularly where fees are not typical in the market.
Pending and watch-list developments
A notable case to watch is Expert Tooling and Automation Limited v Engie Power Limited, currently on appeal, which will consider the appropriate level of disclosure by an energy sector intermediary. Pending decisions may refine the balance between disclosure requirements and the integrity of commercial arrangements. In parallel, the broader regulatory agenda around premium finance and intermediary remuneration continues to unfold, reinforcing the need for clear, transparent, and well-documented fee structures.
Practical guidance for firms
– Review commission structures: Brokers and other fiduciaries should audit current arrangements to ensure full, clear disclosure of all material facts related to payments, including the existence, size, and calculation of fees.
– Itemize disclosures: For nonstandard fees or unusually large payments, itemize the amount or calculation method in client documentation or slips, rather than relying on general references.
– Assess materiality contextually: Consider the client’s sophistication and the payment’s size when determining what constitutes “material facts.”
– Align with ICOBS and consumer protection principles: Ensure that disclosures are consistent with existing rules and that any potential conflicts of interest are clearly disclosed.
– Prepare for redress considerations: Stay informed about regulatory schemes and potential redress processes that could affect past and present intermediary arrangements.
A balanced, hopeful note
The ruling provides clearer guardrails for intermediaries, promoting transparency and informed consent in financial transactions. For consumers, it reinforces the expectation that material conflicts of interest be disclosed in a timely and understandable way. For compliant firms, the decision incentivizes straightforward fee disclosures and governance that can reduce litigation risk while building trust with clients. The ongoing regulatory conversations, including the FCA’s redress scheme, indicate a trajectory toward greater accountability and, potentially, a more standardized approach to remuneration across financial services.
What this means for the industry
– Expect heightened emphasis on disclosure standards in contract terms and client communications.
– Brokers and insurers should prepare for potential regulatory redress programs, ensuring historical disclosures meet contemporary standards.
– Firms across sectors may reexamine whether their intermediate remuneration structures create fiduciary-like duties in particular circumstances.
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