From: Matthew
Hoyle <MHoyle@oeclaw.co.uk>
Sent: Tuesday 5
August 2025 12:38
To: Lucas
Clover Alcolea; James Lee
Cc: obligations
Subject: RE: UK
Supreme Court on Fiduciaries (Again)
Thanks Lucas,
I think one aspect that as far as I can see
the court doesn't analyse fully is what is meant by 'arm's length' or 'acting
in their own commercial interests'. I think most people would accept there is a
difference between an agent on the one hand and e.g. a waiter or sales
assistant on the other. But saying that is in the modern world most fiduciaries
are professionals, who are only willing to act in that role because of their
own commercial interest.
As the SC notes, traditionally a trustee
could not be paid at all (and if they were, it was because of express
authorisation by the trust deed). Whether that is best understood as the
trustees duties being cut back ab initio, or an upfront informed consent to
departure from a duty is an interesting question which has not been adequately
considered. But, regardless, the default for company directors and commercial
agents is and always has been that they will be paid, and indeed that is for
the most part the only way they will be willing to act.
I therefore don't know whether using concepts
like 'acting in their own commercial interest' is helpful in this context. Many
professional fiduciaries are in truth only acting in their own interest in
order to generate fees, it just happens that that aligns with the interest of
the principal. The question is should they only be acting in the
interests of the principal. 'Arm's length' is similarly question begging - if
there is a fiduciary duty then it won't in fact be an arm's length
relationship. So what do you mean by 'arm's length'?
Overall, I think the result is right, but I
don't think the judgment is particularly helpful for those looking at marginal
cases. It is a five-judge panel and it doesn't purport to overrule older cases
on the subject so I suspect those will remain the relevant guide for
practitioners. I'm not sure this is helped by having a single judgment in this
case. Increasingly I think Lords Reid and Denning were right to deprecate
single judgments in Broome v Cassell and Paal Wilson & Co v
Blumenthal. A second concurring judgment in this case might well have
helped elucidate the principles better, and indeed might a dissent. Given the
public interest in this case and the result (which has proved controversial in
some quarters), I can see why the court may have wanted to present a united
front...
Matthew Hoyle
Barrister
One Essex Court
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From:
Lucas Clover Alcolea <lucas.cloveralcolea@monash.edu>
Sent: 05 August 2025 12:12
To: James Lee <james.lee@kcl.ac.uk>
Cc: obligations <obligations@uwo.ca>
Subject: Re: UK Supreme Court on Fiduciaries (Again)
Dear all,
Just to add
to the below, the judgment in Hopcraft v Close Brothers Limited
[2025] UKSC 33 is very detailed, long, and surprisingly, unanimous. There
was no Briggs/Burrows split, as there was in Rukhadze, Hotel Portfolio
II and Saudi National Bank, given that only Lord Briggs
(together with Lord Reed, Lord Hodge, Lord Lloyd Jones, and Lord Hamblen)
was on the panel. Leaving the facts as described by James below, and leaving to
one side the tort and consumer credit act aspects of the case (which run to
dozens of pages each! And about which I couldn't sensibly
comment), perhaps the most interesting part of the case is the Court s
discussion of what exactly a fiduciary is, and when someone is and is not one.
In doing that the Court appeared to retrench English law towards an analogical
and/or status based approach, as opposed to the characteristic or fact based
approaches as developed in Canada (for example in Frame v Smith), as
well as NZ (Chirnside v Fay; A, B and C v D and E Limited as Trustees
of the Z Trust).
I ve
highlighted the parts of the judgment that I found most interesting (I freely
admit I am viewing this through the lens of a book chapter I'm writing, so they
may not be the most interesting bits for everyone). Also, sorry, this is a
(very) long email because I ve extracted some of the most relevant parts of the
judgment (just re fiduciary duties, let alone the rest of it )
(To skip to
the ending, the UKSC rejected all the tort and breach of fiduciary duty claims,
but let one of the CCA claims pass go, in doing that it said some interesting
things, for example...)The Court noted that:
83. The law has not created a precise definition of when a person
undertakes, or is treated as having undertaken, fiduciary duties in relation to
another The categories of fiduciary relationships are not closed. This
should not surprise as fiduciary duties in English law are the creation of
equity and judges have developed the rules of equity over time: In re
Hallett s Estate (1880) 13 Ch D 696, 710 per Sir George Jessel MR. In a
commercial setting the task is to find in a particular context the boundary between
normal (self-interested) arm s length activity and the circumstances in
which equity recognises fiduciary duties of one of the commercial parties requiring
that party to put aside his or her own interests and act altruistically
in the interests of another.
84. The paradigm of a fiduciary is a trustee acting under an express
trust. In its simplest form an owner of property, A, empowers and directs
the trustee, B, to hold and administer property for the benefit of the
cestui que trust, or trust beneficiary, C, in accordance with the terms of the
trust which A sets out in the trust deed. B holds and administers
the property only for those purposes and for the benefit of C. B has no
beneficial interest in the trust property. The no conflict rule and the no
profit rule, which we have described, apply to regulate B s behaviour.
Thus, for example, it has long been established that a trustee is not entitled
to remuneration for his or her service without authorisation: Lewin on
Trusts, 20th ed (2020), para 20.001.
85. Judges have not developed an all-embracing conceptual basis for
the recognition of fiduciary duties. Instead, they have often identified the
incidence of fiduciary duties in the commercial sphere by drawing analogies
with the obligations of a trustee under an express trust. Thus, by analogy,
company directors have been treated as fiduciaries of their
company: Fraser v Whalley (1864) 2 Hem & M 10 (71 ER 361); Aberdeen Railway
Co v Blaikie Brothers (1854) 1 Macq 461; In re Lands Allotment Co [1894] 1 Ch 616.
Partners are treated as fiduciaries of their partners in relation to
partnership property: Aas v Benham [1891] 2 Ch 244 (see also the
Partnership Act 1890, section 20). The fiduciary duties arise out of roles
which a person undertakes in the office of director or as a partner in a
partnership. Similarly, a solicitor is the fiduciary of his or her client to
the extent of the solicitor s retainer and in relation to the client s
funds or property which the solicitor handles: Nocton v Lord Ashburton [1914]
AC 932, 956-957 per Viscount Haldane LC. The obligations attached to those
roles are well known, at least in general terms. Thus a person who voluntarily
assumes a well-known type of role which is generally assumed to be
fiduciary will have undertaken a fiduciary obligation.
86. The relationship between principal and agent is another well-known
example of a relationship which may give rise to fiduciary obligations where
the agent has undertaken to act on behalf of a principal in circumstances
which bring into being a relationship of trust and confidence: Mothew, p 18;
FHR, para 5. But, as explained in paras 101-104 below, the scope of any
fiduciary obligations will be ascertained by having regard to the nature of the
parties contract or the fiduciary s undertaking and the context of
the particular relationship of agency.
87. Fiduciary duties may also arise outside such established
relationships on an ad hoc basis where a person so acts as to bring himself or
herself under such obligations. In Soar v Ashwell [1893] 2 QB 390 the
Court of Appeal recognised that where a person takes on a role or exercises a
power which, if exercised by a trustee or agent, would carry with it fiduciary
obligations, the person s so acting causes him or her to undertake ad hoc
fiduciary duties
The most
important principle, according to the Court, in all these cases is that:
90...a fiduciary acts for and only for another. He owes a duty of
single-minded loyalty to his principal, meaning that he cannot
exercise any power in relation to matters covered by his fiduciary duty
so as to benefit himself. Accordingly, if a person is a fiduciary then he
must not put himself into a position where his interest and that of the
beneficiary might conflict (the no conflict rule), subject to the
principal s informed consent. In addition, or perhaps in consequence, he
must not receive a personal benefit from his fiduciary position (the no profit
rule), subject again to the principal s informed consent.
Of course, the Court accepts that a fiduciary
can have conflicting interests between their principals, 91... A familiar
example of such a situation is where the fiduciary is the trustee of a
discretionary trust, and has to decide which of the beneficiaries should
benefit from the trust fund. The trustee is undoubtedly a fiduciary,
notwithstanding that the beneficiaries have competing interests. He
fulfils his duty of loyalty to each of them if he exercises his powers with
complete impartiality as between them, and without any interest of his own.
105. Attempts have been made to argue that the existence of a
relationship, in which one party, A, is in a position of power over another, B,
and B is dependent on A, is sufficient to give rise to fiduciary obligations.
In Galambos v Perez [2009] 3 SCR 247, the Supreme Court of Canada
rejected the contention that such a power-dependency relationship was
sufficient on its own to do so. Cromwell J stated (para 75) that what is required
in all cases is an undertaking by the fiduciary, express or implied, to act in
accordance with the duty of loyalty reposed on him or her Such
an undertaking (to act only in the interests of the other) need not be express but
could be implied in the particular circumstances of the parties relationship
(paras 79 and 80). More recently the High Court of Australia in Naaman v
Jaken Properties Australia Pty Ltd [2025] HCA 1, in the judgment of
Gageler CJ and Gleeson, Jagot and Beech Jones JJ stated that vulnerability is
not the touchstone of a fiduciary relationship..
107. Dr Paul Finn and Professor Matthew Conaglen have suggested that
equity will recognise the existence of fiduciary obligations where it is
reasonable to expect that the person who is said to be a fiduciary will act in
the other s interest and to the exclusion of his or her own interest. See Dr
Finn in T G Youdan (ed) Equity, Fiduciaries and Trusts (Carswell, 1989),
Ch 1, p 54 and Professor Conaglen in Fiduciary Loyalty (Hart Publishing) 2010,
Ch 9. That may be so, but such an expectation arises because the putative
fiduciary has, or is treated as having, undertaken to act with the loyalty of
which Millett LJ spoke in Mothew. See Paul Finn in his capacity as Finn J in a
joint judgment with Stone and Perram JJ in Grimaldi v Chameleon Mining NL
(No 2) [2012] FCAFC 6; (2012) 200 FCR 296, para 177; and Children s Investment
Fund Foundation (UK) v Attorney General [2020] UKSC 33; [2022] AC 155,
paras 47 and 48 per Lady Arden.
108. As we have said, fiduciary obligations are the creation of equity.
That does not mean that the existence and scope of equitable obligations are
not influenced by the
common law: see paras 101-104 above. Nonetheless, equity rather than the
common law recognises the fiduciary duty. Equity analyses objectively the
relationship between the parties to ascertain whether it involves a
relationship of trust and confidence because a party has, or is treated as
having, undertaken to act with the loyalty of which Millett LJ spoke in Mothew.
The relationship of trust and confidence is the consequence, and not the
cause, of a fiduciary duty. The fiduciary duty exists because the fiduciary has
undertaken not to pursue his own interests. As Lord Woolf MR said in
Attorney General v Blake [1998] Ch 439, 454, the relationship of trust and
confidence arises whenever one party undertakes to act in the interests of
another or places himself in a position where he is obliged to act in the interests
of another . Similarly, the vulnerability which is the typical
characteristic of a person to whom a fiduciary duty is owed, is a consequence
and not a cause of a fiduciary relationship. It is because the fiduciary
has undertaken to act solely in the best interests of the principal, and
the latter trusts the fiduciary to do so, in a situation where it is
usually possible for the fiduciary to act in a self-interested way, that the
vulnerability typically arises.
109. As the courts have for good reasons eschewed any attempt to give a
precise definition of when a person is to be treated as having undertaken
fiduciary duties towards
another, there are no bright lines when addressing whether ad hoc
fiduciary duties arise.
But there are clear indicators. The courts have extended the application
of fiduciary duties by analogy with established fiduciary relationships. A fiduciary may expressly or impliedly
undertake to act solely in the interests of another, which is the norm that Cromwell
J wrote about in Galambos; or equity, in an objective assessment of the
parties arrangements or a party s unilateral acts (viz Soar v Ashwell and the
other cases in paras 87 and 88 above), may treat a party as if he or she had so
undertaken and for that reason recognise a fiduciary duty of loyalty and impose
the no profit and no conflict rules which protect it. In the latter case, there
must be circumstances in the relationship between the parties, and in
particular arising out of the conduct of the supposed fiduciary, which make it
appropriate for equity to treat the parties as if such an undertaking had been
given.
110. As a general rule, outside well-established fiduciary
relationships, such as company director, partner, or agent, in a commercial
context it is normally inappropriate to expect a commercial party to
subordinate its own interests to those of another commercial party :
Snell s Equity, 35th ed (2025), para 7-007. We are not concerned here with one
person s subjective trust and confidence in another in the other s performance
of a contractual obligation; one may trust a plumber to do a job properly
without the plumber becoming a fiduciary. The sales assistant in advising a
customer on the attractiveness of a garment, or the wine waiter in advising the
diner on the suitability of a wine with a meal, addresses the interests of the
customer or diner without taking on a duty to act exclusively in the other s
interests. He or she provides a commercial service in the interests of his or
her employer, who may thereby come under contractual obligations and may incur
vicarious liability for its employee s tortious acts. No obligation of loyalty,
of which Millett LJ spoke in Mothew, arises. Such a commercial transaction
or arrangement, in which one party has a personal financial interest, known or
apparent to the other party, in bringing the transaction into fruition, is not
one in which an undertaking of undivided loyalty and altruism can readily be
implied into a contract or such a duty recognised by equity. It is against
this background that we will assess the contention that the dealers owed
fiduciary duties to their customers.
So, what
did all this mean? Applied to the facts, the Court found the following:
270 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
271 there was no 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
274 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. There is typically a
large differential in their knowledge of the relevant part of the consumer finance
market. We say an element advisedly because, as is illustrated by the Johnson
transaction, there is nothing to stop customers arranging their own finance
packages if they wish to do so, or comparing the package offered by the
dealer with the best which they can find online, or by ringing around.
But dependency or vulnerability are not, as we have already explained, indicia
of a fiduciary relationship, in the absence of an undertaking of loyalty
277. The assumption by the dealer of the
position of intermediary or broker between the customer and the lender is, of
itself, neutral as to whether an obligation of undivided loyalty is being
undertaken by the dealer. The position of intermediary is not, nor is it
analogous with, that of a trustee, company director, partner or agent. But
the continuing status of the dealer as an arm s length party to a
commercial negotiation pursuing its own separate interests is anything
but neutral. It is irreconcilably hostile to the recognition of a fiduciary
obligation owed to another party in that negotiation. No reasonable
onlooker would think that, by offering to find a suitable finance package to
enable the customer to obtain the car, the dealer was thereby giving up, rather
than continuing to pursue, its own commercial objective of securing a
profitable sale of the car
281 In three of the transactions under review
there was, as already noted, a statement by the dealer to the customer that
it would seek the most suitable finance package for the customer s
requirements. This does not amount to an undertaking of fiduciary loyalty. An
offer to find the best deal is not the same as an offer to act altruistically.
If made as part of a contract it might give rise to contractual remedies
if not performed. If made with no honest intention to do so, it might
perhaps sound in misrepresentation. But it cannot be used as a way of inserting
a fiduciary obligation into an arm s length commercial relationship, any
more than in the case of the shop assistant or the wine waiter
282 Nor is the role of the dealer in selecting
and negotiating a suitable finance package for the customer one in relation to
which a fiduciary obligation of loyalty can be implied, with or without such a
statement of intent by the dealer. It is not to be implied by law, because
the role is not one which the law (or equity) treats as habitually or even
usually containing such an obligation (unlike the role of trustee,
company director, partner or agent), nor is it analogous with any of
those established relationships. It is not to be implied in fact because it
is incompatible with the arm s length position of the dealer from start to
finish of the negotiation of the transaction.
283. While we accept that a relationship of
trust and confidence is frequently a consequence of a fiduciary relationship,
it is not, for the reasons already given, an invariable pointer to a fiduciary
obligation, still less something which of itself gives rise to a fiduciary
duty. Relationships of trust and confidence arise in many circumstances
The particular kind of trust and confidence that may point towards a
fiduciary relationship is, as we have already explained, trust
and confidence that the alleged fiduciary will act with single-minded loyalty
towards the claimant, to the exclusion of his or her own interests. Trust
and confidence that the dealer on the other side of an arm s length
negotiation will secure the best available finance package for the
customer is not of that type.
284. Nor is the existence of an element of
dependency or vulnerability such a pointer, for the reasons explained
in the Galambos and Naaman cases.
285. So we conclude that, to the extent that
the Court of Appeal s judgment and the respondents case depends upon the
recognition of a fiduciary obligation of undivided loyalty on the part of the
dealer when selecting and negotiating a finance package for the customer,
they are wrong. In particular, the weight which the Court of Appeal placed
upon findings of subjective trust and confidence, and of
vulnerability, as indicative of a fiduciary relationship, at paras 90-91, 95,
100 and 103 of its judgment was wrong in law.
286. The outcome might be different in a case
where the very nature of the service undertaken can only sensibly be
provided by a person who puts their own personal interests aside. Then it
would satisfy the necessity test for implication. But it is in our
judgment inherent in the arm s length status of the dealer at all times
during the negotiation of the typical transaction that it retains its own
interest as seller, ie that it continues throughout to pursue its own
commercial interests, free of any undertaking, express or implied, to act
selflessly in the finding and negotiation of a finance package.
The only
short comments I ll make are that the Court seems to endorse a Birksian
approach to loyalty, specifically the third type of altruism or both positive
action in the interest of another and disinterestedness (I will admit that the
word positive doesn't appear, but I think it's a little hard to say that acting
in the interests of another doesn't involve positive action). The UKSC also
endorses the importance of a fiduciary undertaking, even if implied, as without
that one can t have fiduciary duties, no matter one s characteristics or the
facts of the case. Lastly, as I noted above, the Court also appears to be
taking a stand against what we could call fiduciary expansionism and
restating a more traditional analogical/status-based approach to fiduciary
relationships and duties.
All the
best,
Lucas
Lecturer
Faculty of Law, Monash University
15 Ancora Imparo Way, Clayton VIC 3168
Australia
E: lucas.cloveralcolea@monash.edu
W: https://research.monash.edu/en/persons/lucas-clover-alcolea
https://www.linkedin.com/in/lcloveralcolea/
On Sat, 2
Aug 2025 at 02:35, James Lee <james.lee@kcl.ac.uk> wrote:
Dear Colleagues,
The UK Supreme Court has just given judgment in the high-profile car finance decision of Hopcraft v Close Brothers/Wrench v FirstRand Bank/Johnson v FirstRand Bank [2025] UKSC 33 https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf. Judgment was given after 4:30 on a Friday afternoon because there was concern that the decision might have an effect on markets. The Court of Appeal had held that care dealers were liable to customers in respect of undisclosed commissions they would receive from lenders when the customer agreed to a product presented to them by the dealer. The Supreme Court allows the appeals and holds that the majority of the claims fail.
The judgment (interestingly attributed to all five Justices hearing the appeal) runs to 340 paragraphs, so I can only speak briefly to it but the Court reaffirms the existence of the tort of bribery (though holding that it can only be established, whether at common law or equity, in the context of a fiduciary relationship); it also holds that there was no fiduciary duty owed by the dealers because they were always acting, and understood to be acting, in their own commercial interest. On the claim under the Consumer Credit Act in respect of one claimant, Mr Johnson, the Court allows the appeal but then holds in his favour for different reasons and on different terms.
But there are range of issues considered and engaged (and some resolved in fairly short order); with disapproval of some longstanding authorities, some citation of ODG colleagues work, and all in all as broad a sweep of issues considered as I can recall in a UKSC private law judgment over the last few years.
This will, I suspect, be a controversial judgment, but fits the trend of UK Supreme Court recent jurisprudence on equity in supposedly proceeding from (contestable) first principles and reaching what is thought to be a commercially pragmatic result.
Best wishes,
James
-
James Lee
Professor of English Law
The Dickson Poon School of Law
Somerset House East Wing
King's College London
Strand
London WC2R 2LS
E-mail: james.lee@kcl.ac.uk
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