Car dealers do not owe a fiduciary duty to customers when arranging finance, the Supreme Court heard Tuesday morning in opening remarks of the landmark motor finance case.

Mark Howard KC argued that exercising judgement in pre-selecting finance options does not impose a duty of loyalty. “The key point in the Hopcraft case, there is no finding of fact of an undertaking to act on or on behalf of this or any advice on findings, or any suggestion the dealer said the best deal would be obtained,” he stated.

The barrister, acting for Fristand Bank, emphasised that the legal test applied in this case could lead to absurd conclusions.

He cited an example: “Take the salesman in the shop, one goes to a salesman plays a role in the decision making processes… but if you were to apply the respondents approach… the salesman owes by those reduces. Of course, we all recognise this is nonsense.”

Howard KC was kicking off the hearing addressing ground one of the appeal, fiduciary duty. A fiduciary duty is a legal obligation requiring an individual or entity to act in the best interests of another party, prioritising their interests.

Today, lenders are aiming to overturn a ruling that could cost the industry billions of pounds in compensation over motor finance.

The Lord Justices are listening to Laurence Rabinowitz KC for Close Brothers and Howard KC for Firstrand Bank today on their arguments for their application for appeal.

This comes as shares in FTSE 250 lender Close Brothers were volatile during early trading on Tuesday after this case kicked off.

Lawyers for the consumer groups and the interveners, the Financial Conduct Authority (FCA), and the National Franchise Dealers Association will present their arguments on Wednesday and Thursday.

However, according to the FCA’s written submissions, as seen by City AM, the City watchdog believes the Court of Appeal’s approach was ‘too far’.

“The sweeping approach of the Court of Appeal in (effectively) treating motor dealer brokers as owing fiduciary duties to consumers in the generality of cases goes too far,” they stated.