Agency and Conduct of Business Rules: Lessons from the Motor Finance Saga in the UK

In this chapter (forthcoming in the EE Research Handbook on Consumer Protection in Financial Services Law and Regulation) we examine the evolving relationship between the common law of agency and conduct of business rules (CBR) within the UK financial services sector, focusing on the Supreme Court’s 2025 judgment in Hopcraft v Close Brothers Ltd, Johnson v FirstRand Bank Ltd and Wrench v FirstRand Bank Ltd. The decision, which concerned undisclosed commissions in motor-finance transactions, provides a pivotal clarification of how fiduciary obligations and regulatory conduct rules interact. It narrows the reach of fiduciary duties, aligns legal reasoning with prevailing market practice, and re-establishes the limits of judicial intervention in consumer finance.

The Spectrum of Financial Contracting

We frame our analysis through the ‘spectrum of financial contracting’, ranging from pure arm’s-length transactions to full fiduciary relationships. Our focus is on consumer transactions rather than those with professionals or market counterparties in the wholesale markets. We start from the observation that financial intermediation can occur with or without legal agency. Intermediaries—banks, brokers, or advisers—may perform advisory or transactional functions without necessarily assuming fiduciary status. The distinction between economic intermediation and legal agency is critical: while intermediaries generally transform cash into financial products (e.g. deposits, investment funds) an agent in law binds the principal in legal relations and owes strict duties of loyalty.

The modern regulatory landscape overlays this spectrum with quasi-fiduciary obligations under the Financial Services and Markets Act 2000 (FSMA) and related CBRs, including the FCA’s Principles for Businesses. The recently introduced consumer duty further strengthens these obligations by imposing outcome-focused responsibilities on firms, although it falls short of a full fiduciary standard. The challenge lies in reconciling ex-ante regulatory rules with ex-post common-law remedies and maintaining clarity over when fiduciary obligations arise.

Intermediation, Agency, and Fiduciary Duties

Under the common law, agency is a fiduciary relationship created when one party acts on behalf of another to affect legal relations with third parties. Core fiduciary principles include the ‘no conflict’ and ‘no profit’ rules: an agent must not allow personal interests to conflict with the principal’s nor profit from the position without informed consent. Breach triggers liability, regardless of loss, and may require the fiduciary to account for any undisclosed profit or commission.

However, not every intermediary is a fiduciary. Fiduciary duties depend on whether a person undertakes to act selflessly and with single-minded loyalty. In many financial settings—such as retail banking, credit broking, or investment distribution—relationships are contractual and commercial rather than fiduciary. The law in the UK increasingly permits parties to modify or limit fiduciary duties through contract, reflecting the realities of complex financial markets, albeit that option in constrained in dealing with consumers.

Hopcraft v Close Brothers Ltd: Re-drawing Fiduciary Boundaries

The Hopcraft litigation arose from claims by car buyers that dealers acting as credit brokers had earned secret commissions from lenders. The Court of Appeal had ruled that such brokers owed both fiduciary and ‘disinterested’ duties to customers, thereby exposing lenders to extensive liabilities. The Supreme Court, reversing that approach, held unanimously that the brokers did not owe fiduciary duties and that liability for bribery or secret commissions arises only when such a duty exists.

The Court emphasised that the transactions were arm’s length: dealers, lenders, and consumers each pursued their own commercial interests. Even if customers were vulnerable or less informed, that asymmetry alone did not create fiduciary obligations. Statements that a dealer would seek the ‘best’ finance package amounted only to contractual assurances, not an undertaking of altruistic loyalty. Thus, trust or dependency is a consequence—not the cause—of fiduciary duty. By rejecting the lower court’s broad view, the Supreme Court confirmed that fiduciary duties arise only where a partyundertakes to act selflessly, such as trustees, company directors, or genuine agents.

The Fate of the ‘Disinterested Duty’ and Secret Commissions

A central issue was the Court of Appeal’s notion of a ‘disinterested duty’—a supposed obligation to provide impartial advice even outside a fiduciary relationship. The Supreme Court rejected this as conceptually unsound: a contractual duty of impartiality is distinct from fiduciary loyalty and cannot ground liability for bribery. Only a fiduciary who receives an undisclosed commission commits the tort of bribery or breach of trust. Payments to non-fiduciaries, however questionable, do not give rise to proprietary remedies.

The Court reaffirmed that disclosure and informed consent remain the key safeguards. A fiduciary must make full disclosure of all material facts, but in purely commercial relationships, non-disclosure of commissions is permissible. Consequently, the claimants’ arguments under both equity and the tort of bribery failed.

Interaction Between Common Law and Regulatory Rules

We situate Hopcraft within the wider evolution of UK financial regulation. Earlier cases, such as Grant Estates Ltd v RBSand Green & Rowley v RBS, demonstrated judicial reluctance to merge regulatory conduct rules with common-law duties. In Grant Estates Ltd v RBS, Lord Hodge had treated the CBR regime under FSMA as a self-contained system, separate from tort or equity.

The Supreme Court in Hopcraft adopted a more integrated stance, recognising that courts should develop the common law coherently with the statutory framework. Regulatory provisions—such as CONC 4.5.3R, requiring disclosure of commissions that could affect impartiality—inform the context in which courts determine whether fiduciary or other duties arise. Yet, regulatory obligations differ materially from fiduciary ones: CONC’s disclosure obligations are qualified and limited, whereas fiduciary law demands fully informed consent.

This reasoning also interacts with the Consumer Credit Act 1974, particularly its concept of ‘unfairness’ in credit relationships. By allowing the FCA to intervene and by referencing its guidance, the Supreme Court signalled a dynamic interplay between law, equity, and regulation, where courts fill the residual gaps left by statutory schemes. The Financial Ombudsman Service and the FCA Principle of consumer duty may further bridge these domains, though neither provides the proprietary remedies available under equity.

Implications and Conclusions

The Hopcraft decision represents a turning point in the legal treatment of agency and conduct rules. It restores the arm’s-length model as the default framework for consumer finance and confines fiduciary duties to clearly selfless relationships. The Court’s reasoning reins in expansive interpretations that could have destabilised credit markets and affirms that bribery law applies only where fiduciary loyalty exists.

For regulators, the judgment confirms that CBRs and consumer duty perform a complementary function but do not supplant the common law. For courts, it establishes that equity’s intervention will now be guided by the surrounding regulatory environment. The result is a more coherent and pragmatic balance between market practice, consumer protection, and legal principle.

The full chapter can be accessed here.

Iain MacNeil is the Alexander Stone Chair of Commercial Law and Katarzyna Chałaczkiewicz-Ładna is a Senior Lecturer at the School of Law, University of Glasgow.