Supreme Court Ruling in Rukhadze Case Could Impact Mis-Sold Motor Finance Commission Claims
On 19 March 2025, the UK Supreme Court handed down its decision in Rukhadze and others v Recovery Partners GP Ltd and another [2025] UKSC 10, a key ruling that could influence the outcome of mis-sold motor finance commission claims, especially in relation to undisclosed commission payments made to car finance brokers.
Although the Rukhadze case itself involved commercial fiduciaries, the principles reaffirmed by the Supreme Court are strikingly relevant to ongoing legal arguments in the Johnson and Others appeals on secret commissions in car finance agreements, which the Supreme Court heard from 1 to 3 April 2025.
The Core Issue: Fiduciary Duties and Unauthorised Profits
In Rukhadze, the Supreme Court reinforced a fundamental principle of equity: an agent acting on behalf of a principal must not profit from that relationship without full authorisation. This rule stems from the fiduciary’s duty of undivided loyalty. If an agent receives a financial benefit—such as a commission—without disclosing it to the principal, they are obligated to hand it over in full.
Lord Briggs, delivering the leading judgment, made it clear that the “no profit rule” remains a central part of fiduciary law:
“The rigour of the profit rule… continues to underpin adherence by fiduciaries to their undertaking of single-minded loyalty to their principals.” — [75]
He further clarified that this duty arises the moment a profit is received, regardless of intent:
“The duty arises at the moment when the profit is received and… obliges the fiduciary to treat the profit as belonging to his principal.” — [22]
Relevance to Mis-Sold Car Finance Commission Claims
These principles lie at the heart of many current mis-sold car finance claims, where credit brokers, such as car dealerships, arranged hire purchase or PCP agreements while receiving secret commissions from lenders—commissions the customer was unaware of at the time of the agreement.
In the upcoming Johnson and Others appeals, lenders are arguing that car dealers do not owe fiduciary duties to consumers and that even if such duties existed, they should not be held liable for any alleged breach. However, if the Court follows the precedent laid out in Rukhadze, it may conclude that:
- Car dealers (as credit brokers) owe a fiduciary duty to act solely in the interests of the consumer.
- Undisclosed commissions violate that fiduciary duty.
- Lenders who knowingly paid commissions may be liable as accessories to that breach.
The Equitable Allowance Caveat
While the ruling in Rukhadze strongly supports claimants seeking recovery of undisclosed commissions, there is an important nuance: the equitable allowance.
This legal concept allows a fiduciary—in rare cases—to retain some profit if they expended significant skill and effort in earning it. As Lord Briggs noted:
“A discretionary way of alleviating the potential injustice of transferring to a beneficiary the whole of the fruit of a fiduciary’s hard work and skill.” — [55]
However, Lord Burrows clarified the exceptional nature of this rule:
“There should normally be no equitable allowance for a deliberate or cynical breach of fiduciary duty.” — [295]
In the context of motor finance commission cases, the situation is more complicated. Unlike professional agents in commercial cases, car dealers typically don’t charge a fee to the consumer—they earn solely through commission from the lender. If the equitable allowance were to apply, it might allow dealers to keep a portion of these unauthorised commissions, reducing what claimants could recover.
That said, given the nature of consumer finance, the Supreme Court may find the all-or-nothing approach more appropriate. As Lord Burrows stated:
“The stringent application of the account of profits remedy for breach of fiduciary duty is more appropriate today than it ever was.” — [299]
What This Means for Car Finance Commission Litigation
The judgment in Rukhadze reinforces the idea that agents must be held accountable for secret financial gains, and this could weigh heavily on how the Supreme Court ultimately rules in the Johnson, Wrench, and Hopcraft appeals involving mis-sold car finance.
With three of the same judges—Lord Briggs, Lord Reed, and Lord Hodge—sitting on both Rukhadze and the motor finance commission appeals, there’s strong reason to believe that strict fiduciary standards will continue to be upheld.
Looking Ahead
The Supreme Court’s ruling in Rukhadze may set the tone for how car finance commission claims are resolved going forward. Whether consumers will be entitled to a full recovery of undisclosed commissions, or whether some allowance will be made for dealers’ efforts, remains to be seen.
We’ll continue to provide updates on the mis-sold motor finance litigation landscape, particularly around fiduciary responsibilities, accessory liability, and consumer rights under the Consumer Credit Act 1974.
🔗 Read the full Supreme Court judgment in Rukhadze and Others [2025] UKSC 10 here:
👉 https://supremecourt.uk/cases/judgments/uksc-2023-0062
