Court rules on secret commission in finance agreement

Introduction

The County Court at Southampton delivered a judgment concerning a dispute over a hire purchase agreement between Jakub Kasperczak and FirstRand Bank Limited, trading as Motornovo Finance. The case revolved around the payment of a commission to a dealer, which the appellant alleged constituted a secret commission, thereby rendering the agreement unfair under the Consumer Credit Act 1974.

Background

Jakub Kasperczak entered into a hire purchase agreement with FirstRand Bank Limited for a second-hand Audi A6 in January 2017. The arrangement involved a payment of £19,400 over 60 months at an APR of 16.4%. The dealer, Imperial Cars of Swanwick Ltd., received a commission of £3,433.80 from the bank, which was disclosed in the agreement as a potential payment.

The Claim

In October 2023, Kasperczak issued a claim seeking rescission of the agreement and compensation, alleging that the commission payment was either a bribe or an accessory to a breach of fiduciary duty by the dealer. Alternatively, he argued that the agreement created an unfair relationship under the Consumer Credit Act 1974.

Legal Arguments

The appellant's counsel, Jonathan Butters, argued that the commission payment was not adequately disclosed, constituting a secret commission. The defence, represented by Harrison Denner, denied these claims, asserting that the agreement was settled early and that the appellant was not entitled to rescission or compensation.

Judgment

His Honour Judge Glen considered the recent Court of Appeal decision in Johnson v. FirstRand Bank Limited, which provided guidance on secret commissions. He concluded that the payment in question was not a secret commission due to its disclosure in the agreement, albeit partially. The judge also addressed the issue of rescission, noting that practical justice could be achieved without full restitutio in integrum.

Valuation of the Claim

The court examined the valuation of the claim, particularly the interest rate applied in the 'Account Reconstruction' provided by the appellant. The judge found no justification for awarding interest at the APR rate, suggesting a lower commercial rate would be more appropriate.

Track Allocation

The court upheld the decision to allocate the case to the Small Claims Track, despite the appellant's arguments for a higher track due to the complexity and nature of the allegations. The judge noted that similar cases were routinely handled in the Small Claims Track.

Conclusion

The appeal was dismissed, with the court finding no real prospect of success for the appellant's claims. The decision highlighted the importance of clear disclosure in financial agreements and the court's approach to determining the fairness of such agreements under consumer credit law.

Learn More

For more information on consumer credit and secret commissions, see BeCivil's guide to UK Consumer Credit Law.