Court accepts that a car dealer owed a consumer fiduciary duties when arranging finance for a consumer provided by major UK car finance provider.

F v Volkswagen Financial Services (UK) Limited

Factual Background

F entered into a Credit Agreement (“the Agreement”) with Volkswagen Financial Services (UK) Limited (“VWFS”). The Agreement required F to pay:

• An advance payment of £2,100.00
• 47 monthly instalments of £251.27
• A final instalment of £7,245.00

The stated APR under the terms of the Agreement was 8.1%.

The Agreement came to an end on 17 August 2017, which brought to an end the relationship between F and VWFS for the purposes of sections 140A-C of the Consumer Credit Act 1974 (“the unfair relationship provisions”).

The Agreement was arranged by the Dealer Broker (“DB”). F had sought to obtain a personal loan from his bank to purchase a vehicle but was declined despite his seemingly excellent credit score. Accordingly, F went to DB to try and obtain finance and DB asked F how much he was prepared to pay each month to purchase a car. In addition, DB took further details from F regarding his demands and needs.

F alleged that unknown to him, DB was paid commission of circa £1,030.00 (“the Commission”). VWFS relied upon disclosure of the Commission set out in clause 15 of the Agreement which informed F that a Commission may be paid. F argued that he had not been told of the Commission nor had his attention been drawn to clause 15 and so VWFS could not rely on it.

F invited the Court to determine three issues:

1. Was the Commission fully-secret or half-secret?
2. Did DB owe a duty of disinterested advice or Fiduciary Duty
3. Was the relationship unfair?

Submissions for G

1. The existence of clause 15 of the Agreement alone was not sufficient to prevent the Commission from being considered a secret relying on the dicta of Richards LJ in Wood at paragraph 120. VWFS and/or DB ought to have brought it to F’s attention.
2. DB had a role in the decision-making process given he had asked F what he felt he could afford each month, it is DB that took down details of F’s demand and needs, and it was DB who had access to the panel of lenders from which finance could be sought. Accordingly DB owed F a duty to provide disinterested advice.
3. In fact, DB owed a Fiduciary Duty to F as he had implicitly recommended the Agreement to F as being the most appropriate, given what F wanted to pay.
4. Relationship between F and VWFS was unfair insofar VWFS had procured a breach of fiduciary duty on the party of DB and because clause 15 of the Agreement was unfair and misleading – both the VWFS and DB knew that Commission would be paid and knew how much would be paid. Therefore, the statement that commission may be paid was inaccurate.

Submissions for CFP

1. Commission was not secret due to clause 15 of the Agreement.
2. DB did not owe F a duty to be impartial or to give disinterested advice, information, or recommendation as it was in the business of selling cars acting on its own behalf and the sourcing of finance was ancillary to that task.
3. No unfairness existed as F got the car he wanted for the monthly amount he wanted to pay at an interest rate that was not unreasonable.
4. C did not pay a fee to DB and did not pay the commission out of his own pocket.

Judgment

The judge concluded that given F’s witness evidence and the existence of clause 15 in the Agreement, the Judge could not conclude that this was a matter involving full secret commission. F signed the Agreement so was deemed to be aware of the terms and conditions. The Judge concluded that as F was not told how much the Commission would be, the Commission was to be deemed half-secret in accordance with Hurstanger.

The Judge was content that there was a fiduciary relationship and duties owed to F and VWFS knew or ought to have known that DB would be acting as his agent and was in a position to influence F’s decision regarding what deal to take.

However, the judge concluded that the existence of the Commission did not render the relationship unfair as F did not pay the Commission himself, it was paid as a part of the profit made by VWFS. Given these factors, the Judge concluded that the relationship between F and VWFS was fair.

Finally, following submissions on remedy, the Judge accepted that a sum equivalent to the Commission should be re-paid to F but disagreed that this should match the contractual rate of interest of 8.1% in the Agreement as put forward by C. Instead, interest was awarded at 3%.

F beat his own Part 36 offer and accordingly was awarded indemnity costs from the date of expiry of the offer. As the statement of costs served for trial did not split the costs pre and post the making of the Part 36 offer, the judgment ordered detailed assessment of the costs and made an order that VWFS pay F £7000.00 on account of costs pursuant to CPR 44.2(8).