Natalie Louise Maher v Darren Holmes

The unfair-relationship provisions in Consumer Credit Act 1974 apply broadly to credit agreements with individual debtors, including business-purpose agreements exempt from regulation under article 60C(3) of the Regulated Activities Order. The statutory exclusion is limited to agreements exempt under article 60C(2), including regulated mortgage contracts and regulated home purchase plans.

Third-party coercive or controlling conduct may be relevant to whether the creditor–debtor relationship is unfair. Although unfairness may not establish that no judgment debt was due, it may make enforcement of the judgment debt by bankruptcy disproportionate or unjust. The bankruptcy court may therefore refuse to permit enforcement in its full amount.

The Respondent lent the Appellant £200,000 under a secured loan agreement carrying interest at 20 per cent per annum. After the Appellant defaulted, the Respondent obtained a money judgment and possession order. He later presented a bankruptcy petition based on the judgment debt, and a district judge made a bankruptcy order.

The district judge found that the Appellant had been compelled by her former partner’s coercive and controlling behaviour to enter into the loan agreement. He nevertheless held that the agreement was exempt from the unfair-relationship provisions of the Consumer Credit Act 1974 because it was a business-purpose loan exceeding £25,000. The appeal concerned whether the wrong exemption had been applied and whether the error affected the bankruptcy decision.

1. The appeal was allowed. The Bankruptcy Order was set aside and the petition was dismissed.

2. The district judge correctly found that the loan was exempt under article 60C(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, as a business-purpose loan exceeding £25,000. That exemption did not, however, remove the agreement from the unfair-relationship regime in sections 140A–140C of the Consumer Credit Act 1974. Section 140A(5) excludes only agreements exempt by virtue of article 60C(2), namely regulated mortgage contracts and regulated home purchase plans. The judge therefore erred in law by declining to consider unfairness.

3. In assessing unfairness under section 140A, the court must have regard to all relevant matters. That inquiry is not confined to bilateral dealings between creditor and debtor. Third-party conduct and influence may be part of the factual matrix where they bear upon the circumstances in which the agreement was made.

4. On the undisputed findings, the relationship was unfair. Relevant matters included the Appellant’s constrained decision-making, the non-arm’s-length connection between the parties, the 20 per cent interest rate, the substantial security provided by the Property, and the coercive and controlling conduct that compelled entry into the agreement. The Respondent bore the burden of showing that the relationship was not unfair once the issue had been raised.

5. The stringent test for going behind a judgment debt was not satisfied. The unfair relationship did not establish that nothing was, or very likely would have been, due. It nevertheless mattered separately to the discretionary bankruptcy decision. Under rule 10.24 of the Insolvency (England and Wales) Rules 2016, the court had to consider whether permitting enforcement of the judgment debt in full through collective insolvency would be just.

6. It would be disproportionate and unjust to permit full enforcement. Had unfairness been considered earlier, the interest would very likely have been substantially reduced, and the proceeds from sale of the Property might have satisfied or substantially satisfied the recalculated debt.

• Chancery Appeals: Appeal from the bankruptcy order made by District Judge Rouine on 27 June 2025. The appeal was allowed, the Bankruptcy Order was set aside, and the petition was dismissed.
• County Court at Birmingham: Bankruptcy order made following a two-day trial. The district judge declined to go behind the judgment debt and held that the unfair-relationship provisions did not apply.