Natalie Louise Maher v Darren Holmes [2026] EWHC 1337 (Ch)

[2026] EWHC 1337 (Ch)Case No CH-2025-BHM-000028IN THE HIGH COURT OF JUSTICEVenue BUSINESS AND PROPERTY COURTS IN BIRMINGHAMCHANCERY APPEALS (CHD)Venue ON APPEAL FROM THE COUNTY COURT AT BIRMINGHAMCase No 0217 of 2024
Before
HHJ RICHARD WILLIAMS(sitting as a Judge of the High Court)
Between
NATALIE LOUISE MAHERAppellantAppellant/DebtorAppellantDARREN HOLMESRespondentRespondent/Petitioning CreditorRespondentNATALIE LOUISE MAHERAppellant/DebtorDARREN HOLMESRespondent/Petitioning Creditor
Alexander Bradford (instructed by Coleridge Law Ltd.) for AppellantTimothy Raggatt KC (instructed by Rollasons Solicitors LLP) for Respondent
Hearing Hearing dates: 27 April and 3 June 2026(draft judgment sent to the parties’ representatives by email on 27 May 2026)
JUDGMENTHHJ Richard Williams:Introduction and backgroundDate 2026-06-03
[1]Ms Maher (“the Appellant”) and Mr Holmes (“the Respondent”) entered into a loan agreement dated 5 October 2017 (“the Loan Agreement”) whereby the Respondent lent the Appellant the sum of £200,000 for a term of 2 years subject to interest of 20% per annum and secured against the Appellant’s freehold property at 36 Coombe Park Road, Coventry, CV3 2NX with title number WK165570 (“the Property”). The Respondent was a longstanding friend and business associate of the Appellant’s then partner, Terrance Conlan.[2]The Appellant failed to repay the loan, and, on 8 July 2022, the Respondent obtained(i) a money judgment against the Appellant in the sum of £390,357.13 together with contractual interest at £213.89 per day and costs, and(ii) an order for possession of the Property (together “the possession proceedings”).[3]On 25 July 2024, the Respondent petitioned the court for a bankruptcy order against the Appellant on the basis of the judgment debt and that the “sum of £129,751.65 remains outstanding after enforcement proved unsuccessful.”[4]This is an appeal against the bankruptcy order made by District Judge Rouine (“the judge”) on 27 June 2025 following a 2 day trial (on 12 and 13 May 2025) when the judge declined to go behind the judgment debt. In doing so the judge rejected the Appellant’s claim that a properly conducted judicial process would have revealed that the Loan Agreement was voidable for undue influence and/or duress, and/or that the relationship between the Appellant and the Respondent was unfair under the Consumer Credit Act 1974 (“the 1974 Act”), or both, in circumstances where the Appellant had been compelled to enter into the Loan Agreement as a result of Mr Conlan’s alleged coercive and controlling behaviour.[5]In his judgment,

the judge set out the background and applicable legal framework as follows:

“[7.] In order to put these petition proceedings in their full context, I need to set some factual background out in a fair degree of detail. Ms Maher’s former partner is a man called Terrence Conlan. Mr Conlan will feature significantly in the remainder of this judgment. I am entirely comfortable in further describing Mr Conlan as a friend and associate of Mr Holmes. [8.] In 2017, Mr Holmes lent Ms Maher £200,000 to fund the development of a number of new-build homes. The interest rate on this loan was 20 per cent per annum, and the loan was secured by a charge over a property owned by Ms Maher at 36 Coombe Park Road in Coventry (“Coombe Park Road”). The loan agreement between Ms Maher and Mr Holmes is dated 5 October 2017. It appears that the new build development project did not proceed as everyone would have hoped, resulting in a partially completed development being sold in 2021. Mr Holmes sued Ms Maher for the return of the money loaned, interest and costs and within the same proceedings, sought to enforce his security in the form of a charge over Coombe Park Road. [9.] On 8 July 2022, Mr Holmes obtained a possession order in respect of Coombe Park Road, together with a money judgment against Ms Maher for in excess of £390,000 plus interest and costs. Ms Maher subsequently made an unsuccessful application to stay enforcement of the 8 July 2022 order, and I refer to the order of District Judge Whitehouse dated 18 August 2023 in this context. [10.] Counsel for Ms Maher helpful reminds me in his Skeleton as to the starting point for bankruptcy proceedings. Here, I am referring to paragraphs 17 to 20 inclusive of that Skeleton, which I will summarise as follows. A bankruptcy petition must be based on a good petition debt. What that effectively means is that the debt is due and owing from the debtor to the petitioning creditor, and the debt must be unsecured. A judgment debt is normally sufficient to be a good petition debt. [11.] I am reminded that the making of a bankruptcy order remains a matter of discretion. It is suggested to me that a judgment does not prohibit the court from looking into the events and circumstances giving rise to the judgment, to ensure that a bankruptcy is not instituted in circumstances which amount to injustice, even to the extent of going behind judgments, even where the time for bringing an appeal has expired. [12.] It is said on behalf of Ms Maher, that the grounds on which a bankruptcy court can go behind a judgment, are more extensive than the grounds upon which an ordinary court of law or equity may set it aside. It is said that the court can look into the consideration for the debt and, if appropriate, may treat the judgment as not creating or evidencing any debt enforceable in bankruptcy proceedings. [13.] The test, I am told, for me to go behind an existing judgment, is that I should be shown something from which it can concluded that had there been a properly conducted judicial process, it would have been found, or very likely would have been found that nothing was, in fact, due to the claimant.”

Coercive and controlling behaviour

[6]The judge found as a fact that the Appellant had been compelled by Mr Conlan’s coercive and controlling behaviour to enter into the Loan Agreement. In doing so, the judge said this: [16.] It is particularly in relation to the questions of undue influence and/or duress that Mr Conlan, in my judgment, looms large over these proceedings. As I said earlier, Ms Maher and Mr Conlan previously were involved in what appears to have been a longstanding personal relationship and, indeed, my understanding is that they share a number of children together. In her evidence, Ms Maher made serious and significant allegations about Mr Conlan’s behaviour towards her, over what appears to be a significant period of time. She says Mr Conlan was an abusive and controlling partner throughout their relationship, and that he is at present facing a number of very serious criminal charges, directly arising out of his behaviour towards her during their relationship. [17.] Here is where Mr Conlan’s involvement, or rather his significant lack, in my judgment, of involvement in these proceedings is relevant. As I said previously, Mr Conlan has produced a witness statement in these proceedings, and I again confirm that I have read it. What has not happened, however, is that I have not heard evidence from Mr Conlan, nor have I seen him being cross-examined about his evidence, nor have I had the opportunity to question him myself. It was clear to me that Mr Conlan was available to give evidence in person, and be cross-examined at the hearing in May. My interaction with Mr Raggatt King’s Counsel at that hearing on this point, has led me to the very clear conclusion that a positive decision was taken by Mr Holmes, presumably on advice, not to call Mr Conlan and, therefore, not to offer him for either cross-examination or questioning by me. [18.] I find that the impact of that decision has the following effect on my decision-making process. Absent seeing Mr Conlan being cross-examined live, and having the chance to question him myself, I have not and do not place any weight whatsoever on Mr Conlan’s witness statement. That conclusion also, I find, has the following consequences. [19.] Given that Mr Conlan’s evidence seems to have no weight, and given that at no time under cross-examination do I recall Ms Maher being asked about her relationship in any detail with Mr Conlan, I am entirely comfortable in accepting in its entirety, Ms Maher’s evidence as to the controlling and coercive nature of Mr Conlan’s behaviour towards her in their relationship, and I have no difficulty at all in extending that conclusion to encompass a finding to the effect that Mr Conlan’s coercive and controlling behaviour extended to compelling (and I use that word deliberately), Ms Maher to enter into the loan agreement with Mr Holmes. I therefore confirm that I do make findings to that effect.” Undue influence and/or duress[7]The judge also found that Mr Conlan’s behaviour towards the Appellant could be sufficient to underpin arguments based upon undue influence and/or duress as between the Appellant and Mr Conlan, but the Appellant had failed to demonstrate that the Respondent had actual knowledge of Mr Conlan’s behaviour towards the Appellant.[8]The judge concluded (at para [35.]) that the “absence of actual knowledge on the part of Mr Holmes in respect of Mr Conlan’s behaviour towards Ms Maher, is fatal in my judgment to any argument Ms Maher sought to run, to undermine the loan agreement by reference to undue influence and/or duress.” The Appellant does not seek to challenge the judge’s decision in that regard.

Unfair relationship

[9]However, the Appellant does seek to challenge the judge’s decision in relation to unfair relationship. In his judgment,

the judge said this:

“[23.] Matters do not, however, rest there. Ms Maher also seeks to argue that the loan agreement between herself and Mr Holmes was unfair. In my judgment, the first issue which I need to turn my mind to in this context is the following. Whether or not the loan agreement between Ms Maher and Mr Holmes is an exempt agreement, as that has a bearing on whether or not the provisions of the Consumer Credit Act, 1974 bite in the particular circumstances of this case. The answer to this question is, I find, as follows. [24.] The starting point in this context is regulation 60C(3) of the Financial Services and Markets Act, 2000 (Regulated Activities) Order 2001 and that said: “ A credit agreement is an exempt agreement if— (a) the lender provides the borrower with credit exceeding £25,000, 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.” [25.] For these purposes, Mr Holmes is the lender, Ms Maher is the borrower. Two facts are clear to me about this case in the context of the application of that regulation:- 1. Everybody appears to agree that Mr Holmes lent Ms Maher more than £25,000. £200,000 to be precise. Insofar as it might be necessary for these purposes, I make a finding that the credit provided by Mr Holmes to Ms Maher exceeded £25,000. 2. The loan was for a residential development project, which I have no difficulty in finding, as I do, comes within the definition of wholly or predominantly for the purposes of a business carried on or intended to be carried on by the borrower. That is to say the development project. [26.] I am satisfied therefore and, inevitably, drawn to the conclusion that the loan agreement at the heart of these proceedings is an exempt agreement by reference to the definition I have just set out. [27.] Insofar as it was argued on behalf of Ms Maher that I should exercise any of the powers conferred upon me by section 150(b) of the Consumer Credit Act, 1974, the definitive answer to that point is found, in my judgment, by reference to section 140(a)(5) which says as follows, “An order under section 140B shall not be made in connection with a credit agreement which is an exempt agreement.” [28.] Having found, as I have, that this particular loan agreement was an exempt agreement then I must, and I do, conclude that none of the remedies set out in section 140(b) of the Consumer Credit Act, 1974 are available to Ms Maher due to the operation of section 140(a)(5).” “ A credit agreement is an exempt agreement if— (a) the lender provides the borrower with credit exceeding £25,000, 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.”

Grounds of appeal

[10]The Appellant’s grounds of appeal dated 16 July 2025 are as follows:
“[1.] The learned Judge made an error of law in that he wrongly held that sections 140A-140C of the Consumer Credit Act 1974 (‘Unfair relationships’) did not apply to the loan agreement between the Debtor and the Petitioning Creditor, which forms the basis of the petition debt. Section 140A(5) of the 1974 Act provides that: “An order under 13 section 140B shall not be made in connection with a credit agreement which is an exempt agreement for the purposes of Chapter 14A of Part 2 of the Regulated Activities Order by virtue of article 60C(2) of that Order (regulated mortgage contracts and regulated home purchase plans).”
(emphasis added). The learned Judge wrongly applied the definition of “exempt agreement” under article 60C(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 544/2001), rather than article 60C(2) as required by s.140A(5). [2.] The learned Judge wrongly did not set out what he would have found if the Unfair Relationships provisions of the 1974 Act did apply to the agreement.” Permission to appeal[11]By order dated Michael Green J granted permission to appeal on both grounds. His stated reasons for doing so were as follows:
“1. The Appellant raises a short point of law under the Consumer Credit Act 1974 (“the Act”). It is argued on her behalf that the Judge wrongly considered whether the credit agreement between the Appellant and the Respondent was an “exempt agreement” under article 60C(3) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 544/2001) (“RAO 2001”) in order to determine whether sections 140A-140C of the Act (unfair relationships) applied to the credit agreement. The Appellant says that by virtue of s.140A(5) of the Act, it is only agreements that are exempt under article 60C(2) of RAO 2001, not article 60C(3), that fall outside those sections of the Act. Basically the Appellant is saying that the Judge looked at the wrong article. It seems to me that there is a real prospect of the Appellant succeeding on this ground. 2. But that will not necessarily mean that the Judge was wrong to make the Order, which was based on a judgment debt. The Appellant’s second ground of appeal leads on from the first and is that the Judge did not set out what he would have found in relation to the bankruptcy petition if he had found that the unfair relationships provisions, ss.140A-140C of the Act, applied to the credit agreement. It seems to me that, if she is right on this, it could potentially have affected the exercise of the Judge’s discretion as to whether it would be just and fair to make a bankruptcy order. Accordingly there is a real prospect of the Appellant succeeding on her appeal.”

Ground 1

[12]The unfair relationship regime is governed by ss.140A-C of the 1974 Act, which were introduced by amendments made by the Consumer Credit Act 2006 and which came into force on 6 April 2007.[13]S.140A states (with my emphasis added):
“Unfair relationships between creditors and debtors (1) The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following— (a) any of the terms of the agreement or of any related agreement; (b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement; (c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).”
[14]S.140C(1) provides that in interpreting ss.140A and 140B: “… ‘credit agreement’ means any agreement between an individual (the ‘debtor’) and any other person (the ‘creditor’) by which the creditor provides the debtor with credit of any amount.[15]There are limited exceptions under s.140A whereby:
“(5) An order under section 140B shall not be made in connection with a credit agreement which is an exempt agreement [for the purposes of Chapter 14A of Part 2 of the Regulated Activities Order by virtue of article 60C(2) of that Order (regulated mortgage contracts and regulated home purchase plans)]. (6) An order under section 140B shall not be made in connection with a credit agreement entered into under the Bounce Back Loan Scheme.”
[16]The words in square brackets in s.140A(5) above were substituted by article 20(39) of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No 2) Order 2013. Those words were omitted from the judge’s quote of s.140B(5) at paragraph [27.] of his judgment above.[17]On my reading, the unfair relationship regime under ss.140A-C is drafted in very broad terms and applies to any credit agreement with an individual debtor, including any exempt agreement, save for the limited exception set out in s.140A(5) where the agreement is exempt by virtue of being a regulated mortgage contract or regulated home purchase plan. That interpretation is reflected in Chitty on Contracts 36 Ed. (at para 42-225):
“It is important to note four points concerning the application of the “unfair relationship” provisions. First, the scope of the provisions is wide in generally extending to all consumer credit agreements with individuals and hence they apply irrespective of the size of the loan or purpose of the credit. The provisions apply not only to regulated credit agreements but also to most “exempt agreements”, as well as “non-commercial agreements” (and even, in theory, “small agreements”). They do not, however, apply to an agreement that is an exempt agreement by virtue of being a regulated land mortgage or home purchase plan or a “bounce back loan”.”
[18]The judge directed himself that the Loan Agreement was a credit agreement that was an exempt agreement by virtue of article 60C(3) of RAO 2001 (business purpose loans above £25,000). However, he then proceeded on the basis that his conclusion that the Loan Agreement was an exempt agreement was determinative of the Loan Agreement not falling within the unfair relationship regime under ss.140A-C, but without considering the limited category of exempt agreements excluded by s.140A(5), namely only those exempt by virtue of article 60C(2) of RAO 2001 (regulated mortgage contracts and regulated home purchase plans).[19]In my judgment:a. The judge was correct to find that the Loan Agreement was an exempt agreement under article 60C(3) of RAO 2001 (business purpose loans above £25,000) and so was not a regulated credit agreement for the purposes of the 1974 Act generally; butb. The judge erred in law by finding that the unfair relationship regime under ss.140A-C of the CCA 1974 did not apply to the Loan Agreement in circumstances where the narrow exception under s.140A(5) only disapplies from that regime exempt agreements under article 60C(2) of RAO 2001 (regulated mortgage contracts and regulated home purchase plans).[20]It follows that the judge was wrong to have declined to consider whether the relationship between the Appellant and the Respondent was unfair within the meaning of s.140A. The question then arises whether that error was material to the exercise of his discretion in making the bankruptcy order.

Ground 2

[21]It is not in dispute that the bankruptcy court has jurisdiction to look behind a judgment debt. In McCourt and Siequien v Baron Meats Ltd and the Official Receiver [1997] BPIR 114 Warner J described the scope and reason for such jurisdiction as follows: “(1) A court exercising the bankruptcy jurisdiction (a “bankruptcy court”), although it will treat a judgment for a sum of money as prima facie evidence that the judgment debtor is indebted to the judgment creditor for that sum may, in appropriate circumstances, go behind the judgment, that is to say, inquire into the circumstances in which the judgment was obtained and, if satisfied that those circumstances warrant such a course, treat it as not creating or evidencing any debt enforceable in bankruptcy proceedings. (2) The reason for the existence of that power of a bankruptcy court is that such a court is concerned not only with the interests of the judgment creditor and of the judgment debtor, but also with the interests of the other creditors of the judgment debtor. The point was succinctly made by James LJ in Ex Parte Kibble, Re Onslow (1875) LR 10 Ch App 373 at pp 376–377, in the following words: ‘It is the settled rule of the court of bankruptcy, on which we have always acted, that the court of bankruptcy can inquire into the consideration for a judgment debt. There are obviously strong reasons for this, because the object of the bankruptcy laws is to procure the distribution of a debtor's goods among his just creditors. If a judgment were conclusive, a man might allow any number of judgments to be obtained by default against him by his friends or relations without any debt being due on them at all; it is, therefore, necessary that the consideration of the judgment should be liable to investigation.' (3) It follows that the grounds upon which a bankruptcy court may go behind a judgment are more extensive than the grounds upon which an ordinary court of law or equity may set it aside. (4) In particular, a bankruptcy court will go behind a judgment if satisfied that the judgment creditor manifestly had no claim against the judgment debtor on which the judgment could have been founded. Thus, in Ex Parte Kibble the court went behind a judgment obtained by default which was founded on a bill of exchange drawn by the debtor during his infancy. In Ex Parte Banner, Re Blythe (1881) 17 Ch D 480 it went behind a judgment giving effect to a compromise of an action brought by one party to a fraud against the other party to it for the fruits of it. Re Lennox, ex parte Lennox (1885) 16 QBD 315 was a somewhat similar case. In that case the court ordered an inquiry into the facts because the debtor, who had submitted to the judgment, tendered evidence to the effect that the debt on which the judgment was founded never really existed but was based on the fraud of the creditor. Lastly, in Re Fraser (above) the court went behind a judgment obtained by the holders of a bill of exchange against a former partner in the firm in whose name the bill had been accepted. He was not liable on the bill, but his defence to an action on the bill had been so ineptly conducted that judgment had been obtained against him under Ord 14 and that an application made on his behalf for the judgment to be set aside had failed.” ‘It is the settled rule of the court of bankruptcy, on which we have always acted, that the court of bankruptcy can inquire into the consideration for a judgment debt. There are obviously strong reasons for this, because the object of the bankruptcy laws is to procure the distribution of a debtor's goods among his just creditors. If a judgment were conclusive, a man might allow any number of judgments to be obtained by default against him by his friends or relations without any debt being due on them at all; it is, therefore, necessary that the consideration of the judgment should be liable to investigation.'[22]This passage was cited with approval by Etherton J (as he then was) in Dawodu v American Express Bank [2001] BPIR 983 before adding:
“My only qualification to the summary by Warner J. is that the cases establish that what is required before the Court is prepared to investigate a judgment debt, in the absence of an outstanding appeal or an application to set it aside, is some fraud, collusion, or miscarriage of justice. The latter phrase is of course capable of wide application according to the particular circumstances of the case. What in my judgment is required is that the Court be shown something from which it can conclude that had there been a properly conducted judicial process it would have been found, or very likely would have been found, that nothing was in fact due to the Claimant. It is clear that in those circumstances the Court can enquire into the judgment and the judgment debt, even though the debtor himself has previously applied to have the judgment set aside, and even though that application has been refused and that refusal has been affirmed by the Court of Appeal — see In re Fraser [1892] 2QB 633.”
[23]By reason of his conclusion that the statutory regime did not apply, the judge did not consider whether the relationship between the Appellant and the Respondent was unfair within the meaning of ss.140A-C of the 1974 Act, nor whether any such unfairness should affect the exercise of his discretion. That was not because the point lacked potential relevance, but because it was erroneously excluded from consideration.[24]Ss.140A-C of the 1974 Act replaced an earlier regime that gave the court power to re-open a credit agreement found to be “extortionate”. Briggs LJ (as he then was) explained in Plevin v Paragon Personal Finance Ltd [2013] EWCA Civ 1658 that the earlier regime was regarded as having been too technical, and as having set the bar for court intervention too high.[25]The new regime is intended to provide consumers with greater protection based on the concept of a relationship that is “unfair to the debtor”as a result of one or more of the three factors in s.140A(1) being so far as relevant in the present case:(a) any of the terms of the Loan Agreement,(b) the way in which the Respondent has exercised or enforced his rights under the Loan Agreement, and(c) any other thing done (or not done) by, or on behalf of, the Respondent (whether occurring before or after the making of the Loan Agreement).[26]Further, in determining whether one or more of the three factors in s.140A(1) give rise to an unfair relationship s.140A(2) provides that the “the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor).”[27]Fancourt J in Pilgrim Rock v Iwaniuk[2019] EWHC 203 (Ch) held that, by reason of the language of s.140A(2), the court is not confined to the bilateral dealings between creditor and debtor when assessing whether a relationship is unfair. Conduct and influence emanating from third parties, even those who are not associated persons as defined by s.140A(3), may form part of the relevant factual matrix where it bears upon the circumstances in which the agreement was made. Therefore, in that case, background information as to the person who controlled the corporate creditor (that person and the debtor being joint venturers and friends and not dealing at arm’s length) was relevant.[28]In the present case, the judge made a specific finding “that Mr Conlan’s coercive and controlling behaviour extended to compelling (and I use that word deliberately), Ms Maher to enter into the loan agreement with Mr Holmes.” Whilst that finding was insufficient to undermine the Loan Agreement by way of undue influence or duress in the absence of knowledge on the part of the Respondent, it was nevertheless capable of informing the assessment of whether the relationship was unfair under s.140A. However, because the judge concluded that the statutory regime did not apply, he did not evaluate whether those matters rendered the relationship unfair, or what consequences, if any, should follow.[29]In those circumstances, the judge’s error of law led to a failure to take into account a potentially material consideration in the exercise of his discretion. It cannot be said that that failure was immaterial. Had the judge concluded that the relationship was unfair, that conclusion was capable of affecting both the question whether it was appropriate to go behind the judgment debt and the discretionary decision whether to make a bankruptcy order.

Re-exercise of discretion

[30]Having allowed the appeal on Grounds 1 and 2, the parties are agreed that it falls to me to re‑exercise the discretion as to whether a bankruptcy order should be made. I do so on the basis of the findings of fact made by the judge, none of which have been challenged.[31]I accept, in particular, the judge’s findings that:a. “[29.]….. The fact that Ms Maher may not have taken a full and active part in every stage of [the possession proceedings], including but not limited to her non-attendance at the hearing on 8 July 2022, does not render the way in which those proceedings were conducted as in any way improper.”b. “[32.] [The extract from Ms Maher’s witness statement dated 14 August 2023] appears to me at least a tacit acknowledgment on the part of Ms Maher, that arguments upon which she now seeks to rely were live before the court on 8 July 2022. The conclusion I have drawn in this respect further weakens, in my judgment, any suggestion that the procedure leading to the 8 July 2022 order was anything other than the result of a process which was properly conducted.”[32]Whilst I accept that the possession proceedings cannot be impugned as procedurally defective, it remains the case that the question whether the relationship was unfair within the meaning of s.140A was not determined before the 8 July 2022 order was made in circumstances where(i) the Appellant did not attend that hearing, and(ii) the order records at paragraph 5 that the Appellant’s application for relief from sanctions dated 18 May 2022 was dismissed.[33]For the following reasons, I am satisfied that the relationship between the parties was unfair within the meaning of s.140A:a. By virtue of s.140B(9), the burden is upon the Respondent to show that the relationship was not unfair once the issue has been raised.b. In his written evidence before the judge, the Respondent stated that the rate of interest was negotiated only to the extent that he had originally proposed 25% but settled on 20%.c. The loan was secured against the Property. The Respondent enforced the security through the sale of the Property, which resulted in the Respondent receiving £266,009, a sum materially in excess of the original capital sum advancedd. 20% per annum is, on its face, a high rate of interest for a loan. A high rate of interest may be justified where there is material risk to a lender of the loan not being repaid. However, a20% interest rate is very high for a loan secured against a property that provided a high degree of security.e. As found by the judge, the Appellant was compelled by the coercive and controlling behaviour of her then partner, Mr Conlan, to enter into the Loan Agreement with the Respondent, who was a longstanding friend and business associate of Mr Conlan.f. The Equal Treatment Bench Book describes (at Chapter 6, para 49) controlling or coercive behaviour as follows – “[It] does not relate to a single incident. It is a purposeful pattern of behaviour which takes place over time in order for one individual to exert power, control or coercion over another through a range of acts designed to make a person subordinate and/or dependent by isolating them from sources of support, exploiting their resources and capacities for personal gain, depriving them of the means needed for independence, resistance and escape, and regulating their everyday behaviour…”g. Whilst the absence of actual knowledge on the part of the Respondent of Mr Conlan’s abusive behaviour was fatal to establishing undue influence or duress as between the Appellant and the Respondent, it was nevertheless a material consideration in assessing unfairness for the purposes of s.140A.h. The combination of(i) the Appellant’s constrained decision-making,(ii) the non-arm’s length nature of the transaction, and(iii) the imposition of a very high rate of interest notwithstanding the strong level of security for the loan against the Property, is sufficient to render the relationship unfair to the Appellant within the meaning of s.140A.[34]S.140B gives the court wide powers in reopening a credit agreement including altering the terms of the agreement and reducing or discharging any sum payable by the debtor. Had the issue been properly considered in the possession proceedings there is a real likelihood that the court would have found the relationship unfair to the Appellant and varied the terms of the Loan Agreement to reduce significantly the rate of interest to reflect properly the substantial level of security provided for the loan.[35]That does not, of itself, determine the outcome of the petition. As I have already noted, the test for going behind a judgment debt, as described in Dawodu, is a stringent one requiring the court to be satisfied that nothing was, or very likely would have been, due. The present case does not meet that test.However, as r.10.24 of the Insolvency (England and Wales) Rules 2016 makes explicit, the making of a bankruptcy order is a matter of discretion. It has long been established that the bankruptcy court ought not to make a bankruptcy order in circumstances that would amount to an injustice – Eberhardt v Mair [1995] B.C.C 845. Therefore, rather than seeking to go behind the judgment debt per Dawodu, therelevance of the unfair relationship lies in the separate question whether, in the light of all the circumstances, it is just to permit enforcement of the judgment debt, in its full amount, by way of bankruptcy. In my judgment it is not for the following reasons:a. The Appellant failed to attend the possession hearing.b. The Equal Treatment Bench Book recognises the significant challenges that victims of domestic abuse face in engaging in the court process including as a result of the psychological erosion of self-esteem and self-worth. In her witness statement dated 30 October 2024, the Appellant stated – “[13] …… Errors have been made by me (due to my poor mental health and inability to cope with everything). I did not properly oppose the Possession Proceedings and or the Money Judgment obtained…”c. Had the issue been properly considered in the possession proceedings then the relationship between the Appellant and the Respondent arising out of the Loan Agreement would very likely have been found to be unfair to the Appellant and the terms of the Loan Agreement varied to reduce significantly the rate of interest payable.d. Following the possession order and the forced sale of the Property, the Respondent has already achieved a substantial return on his investment in addition to the original capital sum advanced.e. It would be disproportionate and unjust to allow the Respondent to seek to enforce the entirety of the judgment debt by way of a collective insolvency process when, had the issue of the unfair relationship been properly considered in the possession proceedings and the terms of the Loan Agreement reopened, the sum already received by the Respondent may well have satisfied, or substantially satisfied, the recoverable debt re-calculated by reference to the rate of interest substituted under s.140B.[36]In conclusion, although the judgment is valid, I am satisfied that it would be disproportionate and unjust to permit its enforcement, in its full amount, by way of the collective insolvency process in circumstances where, had the unfair relationship been properly considered in the possession proceedings, the recoverable debt would very likely have been substantially reduced.

Overall conclusion

[37]The appeal is allowed.[38]The Bankruptcy Order is set aside.[39]The Petition is dismissed.