One of the few impacts of the Supreme Court case of Hopcraft, Johnson and Wrench -v- Close Brothers and FirstRand Bank (‘Johnson & Ors’)
[Please see our Article on this judgment by clicking here]
In December 2024, Clydesdale Financial Services Limited (‘Clydesdale’), trading as Barclays Partner Finance applied for judicial review of a decision of the Financial Ombudsman Services’ (Mr Jesdhen Narayanan was the ombudsman in question). The ombudsman had decided in favour of the consumer(Ms Lewis) with regards to a motor finance agreement she had entered into with Clydesdale which had a Discretionary Commission Arrangement structure that ultimately impacted the interest rate the consumer was paying monthly.
The agreement had been made through the dealership, Arnold Clark, which ultimately introduced her to Clydesdale as the finance provider. The ombudsman had upheld Ms Lewis’ complaint in 2024and made a compensation award. The points in question were the commission structure as well as what should have been disclosed to her at the time of the agreement. Clydesdale had not sought recoupment of the compensation against Ms Lewis but challenged whether the complaint should have been upheld and whether monetary compensation was rightly ordered.
Clydesdale had made three main grounds for appeal including arguments such as to whether (i) FOS had erred in law by deciding that the commission arrangement should have been disclosed by the broker to Ms Lewis under FCA rules at the time, (in particular rule CONC4.5.3R) by Arnold Clark, (ii) the FOS reached an irrational decision on quantum/ compensation (iii) if an error in law had been made by establishing that the broker was caught under the Consumer Credit Act as they acted as an agent for the bank and in doing so the ombudsman had made an error in law by holding the bank responsible directly.
At the High Court, Mr Justice Kerr, dismissed each of these grounds however allowed an appeal to be made on all grounds regardless. The decision was therefore in favour of the ombudsman’s findings.
Interestingly, when discussing the extent of disclosure required about the commissions required by the lender under the CONC 4.5.3R the judge stated the following.
“…using the word “existence” simpliciter, the wording of the rule was then already wide enough to require, in some cases, disclosure of more than the bare fact that commission, a fee or other remuneration would be, or could be, payable. It was open to the Ombudsman, in my judgment, to decide that this was a case in which the disclosures made fell short of what CONC 4.5.3R then required…”
This meant that the ombudsman had been right to conclude that disclosure of the nature of the commission was required by the lender as well.
This High Court judgment was passed in December of 2024, and Clydesdale had proceeded with the appeal having successfully secured the permission to appeal to the Court of Appeal. However, this appeal was withdrawn within a month of the Supreme Court judgment of Johnson& Ors. It can be implied that the High Court and Supreme Court decisions go hand in hand and allow for the same principles in terms of unfairness in favour of the consumer. The bank itself in recognition of the Supreme Court decision saw that the questions it sought to appeal were answered within the same judgment and chose to withdraw.
The Supreme Court decision removed (or at least substantially weakened) some of the key legal arguments Clydesdale had been pursuing, while confirming that statutory (CCA) routes could still produce liability in limited circumstances. Faced with that clarified legal position plus an imminent FCA-led redress scheme, Clydesdale chose to withdraw the appeal and deal with the regulator’s scheme rather than continue the Court of Appeal fight.
It can reasonably be concluded therefore that the higher courts carry a more sympathetic and sound approach towards consumers, acts to protect them against unfair relationships. In doing so, they bind the lower courts to do the same.
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