“15. An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory. 16. While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people's memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate. 17. Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. In fact, psychological research has demonstrated that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is true even of so-called ‘flashbulb’ memories, that is memories of experiencing or learning of a particularly shocking or traumatic event. (The very description ‘flashbulb’ memory is in fact misleading, reflecting as it does the misconception that memory operates like a camera or other device that makes a fixed record of an experience.) External information can intrude into a witness's memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else (referred to in the literature as a failure of source memory). 18. Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time. 19. The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces. 20. Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been “refreshed” by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events. 21. It is not uncommon (and the present case was no exception) for witnesses to be asked in cross-examination if they understand the difference between recollection and reconstruction or whether their evidence is a genuine recollection or a reconstruction of events. Such questions are misguided in at least two ways. First, they erroneously presuppose that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such questions disregard the fact that such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth. 22 In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”
“(3) In this Chapter— (a) …a contract is a “regulated mortgage contract” if, at the time it is entered into, the following conditions are met— (i) the contract is one under which a person (“the lender”) provides credit to an individual or to trustees (“the borrower”); (ii) the contract provides for the obligation of the borrower to repay to be secured by a mortgage on land in the EEA; (iii) at least 40% of that land is used, or is intended to be used— (aa) in the case of credit provided to an individual, as or in connection with a dwelling; but such a contract is not a regulated mortgage contract if it falls within article 61A(1) or (2).”
“investment property loan” is a contract that, at the time it is entered into, meets the conditions in paragraphs (i) to (iii) of article 61(3)(a) and the following conditions— (a) less than 40% of the land subject to the mortgage is used, or intended to be used, as or in connection with a dwelling by the borrower or (in the case of credit provided to trustees) by an individual who is a beneficiary of the trust, or by a related person; and (b) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower;”
“ For the purposes of this article, if an agreement includes a declaration which— (a) is made by the borrower, and (b) includes— (i) a statement that the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower, (ii) a statement that the borrower understands that the borrower will not have the benefit of the protection and remedies that would be available to the borrower under the Act if the agreement were a regulated mortgage contract under the Act, and (iii) a statement that the borrower is aware that if the borrower is in any doubt as to the consequences of the agreement not being regulated by the Act, then the borrower should seek independent legal advice, the agreement is to be presumed to have been entered into by the borrower wholly or predominantly for the purposes specified in sub-paragraph (b)(i) unless paragraph (4) applies.”
“(4) This paragraph applies if, when the agreement is entered into— (a) the lender (or, if there is more than one lender, any of the lenders), or (b) any person who has acted on behalf of the lender (or, if there is more than one lender, any of the lenders) in connection with the entering into of the agreement, knows or has reasonable cause to suspect that the agreement is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower.”
“Section 140A is deliberately framed in wide terms with very little in the way of guidance about the criteria for its application, such as is to be found in other provisions of the Act conferring discretionary powers on the courts. It is not possible to state a precise or universal test for its application, which must depend on the court's judgment of all the relevant facts. Some general points may, however, be made. First, what must be unfair is the relationship between the debtor and the creditor. In a case like the present one, where the terms themselves are not intrinsically unfair, this will often be because the relationship is so one-sided as substantially to limit the debtor's ability to choose. Secondly, although the court is concerned with hardship to the debtor, subsection 140A(2) envisages that matters relating to the creditor or the debtor may also be relevant. There may be features of the transaction which operate harshly against the debtor but it does not necessarily follow that the relationship is unfair. These features may be required in order to protect what the court regards as a legitimate interest of the creditor. Thirdly, the alleged unfairness must arise from one of the three categories of cause listed at sub paras (a) to (c). Fourthly, the great majority of relationships between commercial lenders and private borrowers are probably characterised by large differences of financial knowledge and expertise. It is an inherently unequal relationship. But it cannot have been Parliament's intention that the generality of such relationships should be liable to be reopened for that reason alone.”
“In the case of the two provisions that are at issue here by virtue of the master’s order, it seems to me that individually and particularly together they impose a high charge at a high rate for the use of this facility but it is a rate that is clear on the face of the documents. It cannot be said to be buried in small print. It is there to be seen on the face of the documents in very legible print and something that can be clearly evaluated by somebody entering into those documents. In the present case, the defendants were legally advised. There is a separate certificate of a solicitor to the effect that he has advised them upon the contents of the document they were signing. Mr Dean is himself a lawyer, a barrister in private practice although not in the civil field. He and his wife are clearly intelligent consumers and able both to read and understand the documents themselves and to absorb the effect of the advice that they were given. They, therefore, must be taken to have known the bargain that they have made, and it seems to me they cannot say, and have not sought to say, that they were in any way misled by the documentation or did not understand what they were signing up for. The rate of interest, whether one adds the facility fee to it or not, is high. It is not, however, it seems to me, even in combination so high that it would lead the court to the conclusion that the relationship between the two parties to such an agreement was unfair even if the consumer was fully aware of all the terms he was entering into. There may, of course, be such cases but it seems to me that they would require a very much higher interest rate than even the combination of these two amounts gives rise to in this case. What the defendants signed up to was a stiff commercial bargain no doubt but it was not, in my judgment, an unfair one, and the relationship it created was not unfair by virtue of those terms.”
“55. These sorts of considerations – the fact that the rate was clear and not buried in small print, that the borrowers knew what they were doing and were legally advised, that they were intelligent consumers and not misled – seem to me to be precisely the sort of considerations which were likely among other things to be relevant to the assessment of whether a relationship is unfair by virtue of a particular term and to have foreshadowed in advance, as it were the list of matters which Lord Sumption specifically refers to at [17] of Plevin: “… the characteristics of the borrower, her sophistication or vulnerability, the facts which she could reasonably be expected to know or assume, the range of choices available to her, and the degree to which the creditor was and should have been aware of these matters.” 56. In this case too, the judge found as facts – and it has not been suggested that he was wrong to do so – not only that the defendant was legally advised … but also that ….: “She appears to know her own mind and is certainly not naïve when it comes to lending and mortgages, albeit that she may not have taken out a bridging loan before these two bridging loans. She knew that they were short term loans which had to be repaid.”
“Again there are some significant differences between that case and this. The borrowers in that case were said to be clearly intelligent, they were legally advised and Mr Dean was a barrister, albeit practising in a different area of law. The rate was the contractual rate and it was not “hidden away in the small print”
“Given that I do not intend working through the issue of relief in the individual cases, it may assist if I summarise the factors that I have found relevant to unfairness when considering the interest rate (and any other charges). (i) First there is the absolute level of the rate. I do regard 29% per month as very high. I appreciate that this is a high risk market for lenders, and the overall return has to justify the overall risk of lending. But that is not an answer in the individual case. (ii) Secondly the relative rate. I agree with Ms Bala that the court should look at the market rate. This is to include charges so that the real costs rather than the headline interest rate is considered. (iii) Thirdly, where the borrower was “fully aware” of the rate. No HCST borrower is going to have the benefit of legal advice, but HHJ Cooke’s approach in Chubb reflects an important point. A rate which is high may not lead to an unfair relationship if the borrower knows or ought to know the bargain they are making, but the position may be different if they do not. Here it is relevant to look at how the rates are presented to the borrower in the course of the application process. The Defendant does quite a good job. The use of the tick box without the need to scroll down and the fact that none of the claimants reads the terms is a worry. But the overall cost of this borrowing is made plain. (iv) Fourthly the potential for the borrower to suffer harm, particularly when that is something which was or ought to be known by the lender. Higher rates are likely to create a greater risk of harm for those who are marginally eligible. That in turn will affect the fairness of the relationship. That is not an exhaustive list, and there may be other matters which arise in individual cases. The Claimants do not suggest that any unfairness arises from any of the other terms.” (i) First there is the absolute level of the rate. I do regard 29% per month as very high. I appreciate that this is a high risk market for lenders, and the overall return has to justify the overall risk of lending. But that is not an answer in the individual case. (ii) Secondly the relative rate. I agree with Ms Bala that the court should look at the market rate. This is to include charges so that the real costs rather than the headline interest rate is considered. (iii) Thirdly, where the borrower was “fully aware” of the rate. No HCST borrower is going to have the benefit of legal advice, but HHJ Cooke’s approach in Chubb reflects an important point. A rate which is high may not lead to an unfair relationship if the borrower knows or ought to know the bargain they are making, but the position may be different if they do not. Here it is relevant to look at how the rates are presented to the borrower in the course of the application process. The Defendant does quite a good job. The use of the tick box without the need to scroll down and the fact that none of the claimants reads the terms is a worry. But the overall cost of this borrowing is made plain. (iv) Fourthly the potential for the borrower to suffer harm, particularly when that is something which was or ought to be known by the lender. Higher rates are likely to create a greater risk of harm for those who are marginally eligible. That in turn will affect the fairness of the relationship. That is not an exhaustive list, and there may be other matters which arise in individual cases. The Claimants do not suggest that any unfairness arises from any of the other terms.”
“(1) An order under this section in connection with a credit agreement may do one or more of the following— (a) require the creditor, or any associate or former associate of his, to repay (in whole or in part) any sum paid by the debtor or by a surety by virtue of the agreement or any related agreement (whether paid to the creditor, the associate or the former associate or to any other person); (b) require the creditor, or any associate or former associate of his, to do or not to do (or to cease doing) anything specified in the order in connection with the agreement or any related agreement; (c) reduce or discharge any sum payable by the debtor or by a surety by virtue of the agreement or any related agreement; (d) direct the return to a surety of any property provided by him for the purposes of a security; (e) otherwise set aside (in whole or in part) any duty imposed on the debtor or on a surety by virtue of the agreement or any related agreement; (f) alter the terms of the agreement or of any related agreement; (g) direct accounts to be taken, or (in Scotland) an accounting to be made, between any persons.”
“The Claimant [or Third Party as the case may be] denies that the Defendant is entitled to the sums claimed pursuant to the statements of account appended to the Re-Amended Defence and Counterclaim, as the amount claimed in respect of the ADL guarantee exceeds the amount that the Defendant is entitled to claim pursuant to that guarantee. It is the Claimant’s [or Third Party’s] case that the amount that can be claimed under the ADL guarantee is capped by Clause 2.3 of the same to the amount of the commitment (i.e. the loan amounts). The maximum that could be demanded under the ADL guarantee at the date of that demand on5 August 2020 was£2,501,500 .”
“ (a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted; (b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission; (c) a very late amendment is one made when the trial date has been fixed and where permitting the amendment would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept; (d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done; (e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation; (f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay; (g) a much stricter view is taken nowadays of non-compliance with the CPR and directions of the court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately and that the courts enable them to do so.”