Further Announcement - "Hopcraft" Judgment

On 11 December 2024, Close Brothers Limited ("CBL") obtained permission from the Supreme Court of England and Wales (the "Supreme Court") to appeal the Court of Appeal's judgment against CBL in respect of the "Hopcraft" motor finance commissions case (the "Appeal").

The Appeal was heard by the Supreme Court between 1 April 2025 and 3 April 2025.

On 1 August 2025, the Supreme Court gave its judgment,[1] in which CBL successfully overturned the Court of Appeal's judgment in respect of the "Hopcraft" case. The Supreme Court has determined that motor dealers (acting as a credit broker) do not owe fiduciary duties to their customers. As a result, the Supreme Court dismissed the Hopcrafts' claims against CBL entirely. The Supreme Court reached the same conclusion on these issues in relation to the "Wrench" and "Johnson" cases against FirstRand Bank Limited ("FirstRand").

On the issue in "Johnson" relating to unfairness under s.140A of the Consumer Credit Act 1974 ("CCA"), the Supreme Court made clear that the test for unfairness is highly fact sensitive and takes into account a broad range of factors. On the facts of Johnson, the Supreme Court upheld the Court of Appeal's decision that the relationship between Mr Johnson and FirstRand was unfair and required FirstRand to pay Mr Johnson the value of the commission paid to the dealer plus compensatory interest at an appropriate commercial rate.

Close Brothers Group plc ("the group" or "Close Brothers") welcomes the outcome of the Appeal, which provides clarity on important legal and commercial principles. Following the publication of the Supreme Court's judgment, the Financial Conduct Authority (the "FCA") announced that it will confirm whether it will consult on a redress scheme pursuant to its current review of motor finance commissions, before markets open on 4 August 2025. Until the FCA confirms whether it will consult on a redress scheme and, if so, confirms the design and scope of that scheme, there remains uncertainty as to the range of outcomes, and the financial impact to the group, including any impact on its provisioning assessment. In parallel, Close Brothers is continuing to assess the impact of the principles set out in the Supreme Court's judgment on its motor finance loan portfolio.

In the meantime, Close Brothers continues to focus on maintaining our strong client franchise by serving our customers, delivering excellent service, providing specialist expertise and building strong, lasting relationships. We have strengthened our capital position and maintained high levels of liquidity, substantially above regulatory requirements. The group's Common Equity Tier 1 ("CET1") capital ratio was 14.0%[2] at 30 April 2025, reflecting significant progress on our capital actions. This already includes the impact of a £165 million provision in relation to motor finance commissions. In addition, the recently announced sale of Winterflood Securities is expected to increase the group's CET1 capital ratio by c.30 basis points, from 14.0% to c.14.3%, on a pro-forma basis upon completion, with further CET1 capital benefits of up to c.25 basis points expected from a reduction in operational risk weighted assets in due course[3]. Underlying financial performance has remained robust with Adjusted Operating Profit of £75 million reported in the first half of the financial year and a continued resilient performance in Q3, as set out in our trading update on 21 May 2025. We continue to review our businesses and portfolios in line with our strategy set out at the half year results in March 2025.

The group will make any further announcements as and when appropriate.