Since LASPO 2012 and the Civil Liability Act 2018, firms once reliant on personal injury work have struggled to adapt. Some chased low-value claims; others turned to consumer work like Plevin. Now, motor finance commission claims face a reckoning. In Hopcraft v Close Brothers [2025] UKSC 33, the Supreme Court sides with lenders, narrowing available causes of action. Retainers based on wider claims may now be redundant. Firms must review terms, prepare for more complex work, and anticipate client dropout as a redress scheme looms. Solicitors may face new fiduciary challenges over fees, funding, and variations to retainers. Trouble ahead.
In the years since the implementation of the Legal Aid Sentencing and Punishment of Offenders Act 2012 on 1st April 2013, and then latterly the Civil Liability Act 2018 on 31st May 2021, solicitors and claims management companies who act for consumers have been pondering their role in the world. Prior to the implementation of those statutes, many firms concentrated on personal injury claims. Representing a claimant in a low value personal injury claim could be a lucrative business, with initially at least standard basis costs paid by a defendant or its insurance company, success fees on basic charges recoverable from the defendant or its insurers, and other income streams from the benefits of owning a medical agency, or commissions paid by ATE insurers.
A move to fixed costs, the end of the recoverability of success fees and ATE insurance, and above all, the introduction of a tariff scheme for whiplash injuries and the raising of the Small Claims track limit for personal injury claims, has prompted an exodus of firms in recent years from the personal injury space. But what has taken its place? Some firms have pursued the phantoms of cavity wall insulation claims, or data breach claims. But many of these cases are simply Small Claims matters, a fact realised too late by firms, and also the funders they have borrowed money from. Yet other firms have moved successfully into diverse areas such as housing disrepair claims, and other consumer claims have proved extremely profitable for firms which have managed to position themselves correctly: in particular Plevin claims, succeeding from the PPI fiasco.
The forensic spotlight is currently shining on two particular areas of practice: claims in respect of undisclosed commissions in energy supply contracts, and claims in respect of undisclosed commissions in motor finance contracts. It is this latter class of claim which is currently in the news. At 4.35pm last week, the Supreme Court released a bunker buster of a judgment, dealing with three conjoined appeals relating to claims for undisclosed commission in the motor finance space. The Supreme Court judgment is available here: Hopcraft and another v Close Brothers Limited [2025] UKSC 33. The decision represents a major victory for the finance companies, overturning as it does the judgment of the Court of Appeal in two of the cases on a claim for breach of fiduciary duty, or a claim in the tort of bribery. The decision also varies the basis in the third appeal on which the Court of Appeal decided that there was an unfair relationship contrary to the provisions of the Consumer Credit Act 1974: the judgment of the Court of Appeal can be found here: Johnson v Firstrand Bank Limited ta Motonovo Finance [2024] EWCA Civ 1282.
The decisions repay careful reading: for anyone who wishes for a useful summary of the appeals, the Supreme Court has kindly rendered my task a little easier with its publication of a non authoritative summary which can be found here: UKSC Press Summary Lawyers will read with interest the Supreme Court’s views on fiduciary duties, and when they will be arise through assumption or implication, rather than imposition, the requirements of the tort of bribery, and how a claim for an unfair relationship should be considered with the background matrix of facts intensively marshalled being critical to a claim’s success. But stepping back from the black letter law of the judgment, supplementing it in a very real sense, is the announcement by the FCA that they are going to consult on a redress scheme, and indeed did so, making the announcement at the weekend: https://www.fca.org.uk/news/statements/fca-consult-compensation-scheme-motor-finance-customers
The upshot of these two developments, is that claims for undisclosed commission survive, but in a more limited sense, and on a different basis to that contemplated a year ago. Yet in the intervening year it is readily apparent that firms and funders will have invested heavily in the expectation of a bumper crop of motor finance claims: book building, and signing up clients to retainers, whether those be Damages Based Agreements (DBAs) or Conditional Fee Agreements (CFAs). All of those retainers should now be subject to review. That is because not only has the potential to bring these claims on the widest possible basis been diminished by the decision of the Supreme Court, but the type of claim that survives and must now be made, is going to require more intensive work to investigate and formulate, than was hitherto believed to be the case. That in turn begs the question, as to whether the retainers that have been made, are apt for the job now in prospect.
The possibility of a redress scheme also opens up the prospect of a solicitor’s firm or CMC, taking on a claim under a retainer, only for the client to “drop off” during the course of the claim, when the prospect of compensation is in sight, whether a “win” has been formally achieved or not. In those circumstances, the retainers will also require review, in order to ensure that the termination provisions are watertight so that the firm can be compensated for the work that it has done prior to termination. It should also be noted that in this space, just as much as whiplash, compensators liked to cut solicitors and CMCs out of the picture, by settling directly with clients. A retainer (and the correspondence to the compensator) needs to ensure that a solicitor can rely on the equitable lien, or the CMC the tort of wrongful interference with a contract, to protect their interests.
The judgment will also prove of interest I predict, outside the realm of motor finance claims. There are interesting questions on the scope and discharge of a solicitor’s duties, when putting together retainers or effecting variations to them. It is trite law that when a retainer is initially incepted, the solicitor is not assuming a fiduciary duty, because they are negotiating in their own financial interest. But given that the solicitor and client relationship is stated by the Supreme Court as a classic example of a relationship where fiduciary duties arise, to what extent, and with what scope, will a fiduciary duty arise, when a retainer is varied? Or part way through the case a client incepts an ATE insurance policy with a commission? Or most ominously, when a client pays the solicitor’s fees through the mechanism of a litigation funding agreement, the price of which will eat substantially into the client’s damages? How will a solicitor be able to assert they are under no alleged duty, or more likely, demonstrate that they have discharged the duty which does exist?
I think ATE claims related to personal injury will decrease due to QOCS being in place.
One potential growth area is where parties acting as litigants in person have been treated unfairly by the courts – its quite common, especially in the lower courts, for LiPs not to be listened to and for cases to be unfairly struck out, LiP conduct to be unfairly criticised, spurious orders made, etc.