Paul Bugden, Bugden + Co., London
Ref: Hopcraft v Close Brothers Ltd; Johnson v FirstRand Bank Ltd and Wrench v FirstRand Bank Ltd [2025] UKSC 33
The outcome of this recent Supreme Court decision turned on the question whether the law recognised a duty owed by a motor trade dealer to his customer to avoid a conflict between his interests and those of his customer in relation to the dealer’s role in the negotiation of a finance package for his customer, such as would make the receipt of a commission from the lender (otherwise than with the customer’s fully informed consent) a bribe at common law or a breach of fiduciary duty giving rise to equitable remedies. On examination of the typical features of the transactions under review the court held that on the facts the typical features of the transactions were incompatible with the recognition of any such obligations at common law or in equity for a variety of reasons.
Now the case might appear at first sight to be of little relevance to the transport lawyer. The facts certainly do not attract interest of themselves to such a lawyer but the perceptive and insightful discussion in the case of the legal issues surrounding the identification of the role of party in a transaction as a principal, intermediary, agent or fiduciary, as the case may be, are instructive in throwing some fresh light on these issues which after all are such a common aspect of transport law; the paradigm example in carriage law perhaps being whether a contractor contracts with his customer to carry or rather to arrange the carriage as his agent or perhaps just as a broker of sorts to identify a suitable carrier.
Of course, the contractor can assume the role of both principal and agent to the same party (or indeed some other party to the same contract) in one and the same contract as in contracts of carriage with agency on-carriage clauses or Himalaya clauses. Likewise, not all agents have fiduciary duties and not all fiduciaries are agents and not all intermediaries are agents.
Where there is an agency the real difficulty lies often in identifying; a) the principal or principals for whom the agency is simultaneously or consecutively exercised, b) the precise mandate conferred by such party or parties on the agent and indeed also whether the agent is a sole agent, or rather, say, a co-agent or sub-agent, c) whether the agency role also embraces equitable fiduciary obligations and, d) perhaps other discrete obligations to be undertaken as a principal or bare intermediary. None of these roles are necessarily exclusive to the performance by the contractor of any one obligation assumed by his contract let alone of course to the position where he assumes a multiplicity of different obligations thereby and simply because someone is somebody’s agent for one purpose does not mean that they are an agent for all purposes.
The court observed that in the case before it the continuing status of the dealer as an arm’s length party to a commercial negotiation pursuing its own separate interests was considered to be irreconcilably hostile to the recognition of a fiduciary obligation owed to another party in that negotiation. Each of the three participants in the negotiation of the transaction was separately engaged at arm’s length from the other participants in the pursuit of a separate commercial objective of their own. Neither the parties themselves nor any onlooker could reasonably think that each of the participants to such a negotiation was doing anything other than considering their own interests.
Although, viewed separately, the activity of the dealer as an intermediary between customer and lender in seeking a suitable finance package for the customer from among its panel of lenders might be regarded as a form of credit brokerage, this service was not being provided by the dealer as a distinct and separate service in its own right but 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. It was not a service provided to the customer under any contract or even for a separate reward and at no time in the negotiation of any of these transactions did the dealer give any kind of express undertaking or assurance to the customer that in finding a suitable credit deal for the customer it was putting aside its own commercial interest in the transaction as seller of the vehicle.
Nor was any agency undertaken by the dealer for the customer in the negotiation of the finance package with the lender, in the sense in which agency is a term used in the law (rather than just a loose label where someone agrees to do something for someone else). The dealer did not have the authority of the customer to enter into legal relations with the lender. Those legal relations were entered into by the customer personally signing the hire purchase or other finance agreement. The dealer did obtain confidential information about the customer’s financial position to enable the lender to appraise the credit risk of lending to the customer. But this intermediary activity did not require or even point to the dealer assuming the mantle of agent for the customer. It is equally consistent with the dealer being an agent for the lender, or just a pure intermediary with no relationship of agency with either.
On the other hand, there were in fact important respects in which the dealer was involved in the transaction as the agent of the lender in relation to the finance package as where he had the authority of the lender to choose the interest rate which was to be chargeable under the hire purchase agreement the dealer had no authority to bind the customer to legal relations with the lender in relation to the finance package.
Finally, the court observed that there may typically be at least an element of dependency upon or vulnerability to the dealer affecting the customer in relation to the finance package. But dependency or vulnerability are not indicia of a fiduciary relationship, in the absence of an undertaking of loyalty. That the way in which a dealer may proffer the service of finding a suitable finance package for the customer may engender an element of trust and confidence reposed by the customer in the dealer, in the sense that the customer may assume that the dealer will locate the most suitable finance package for the customer’s particular needs was not doubted but the court considered that the evidence did not show that this went beyond that which may frequently arise between commercial parties negotiating at arm’s length, such as that which the customer might repose in advice received from a shop assistant or wine waiter, or in the advice which the dealer might give as to the best roof rack to source from the market and add to the car.