In the case of Pilgrim Rock Ltd v Iwaniuk, Lee Stafford, a Partner in our Litigation & Dispute Resolution team, successfully defended his client’s claim (in this case the debtor) for the creditor’s contractual entitlement to interest to be reviewed and reduced due to the ‘unfair’ nature of the relationship. This has paved the way for the original loan agreement being varied in favour of our client, thus saving them over £1.5m in unfair interest charges.

This judgement is a rare occurrence in finding that a relationship between a creditor company and a debtor may be unfair under the Consumer Credit Act 1974.

The background to the case and final judgement are detailed below:

1. The trial judge re-wrote a loan agreement, relieving our client of some £1.3m in interest. The first instance was  reported at [2017] GCCR 15027. That decision was upheld on appeal.
2. The decision was reached on the basis of the Judge’s determination that the relationship was unfair for the purposes of s.140A of the Consumer Credit Act 1974.
3. The reason why the Judge held the relationship was unfair was because of his determination that (i) aspects of the terms of the agreement were unfair and (ii) aspects of the means by which the loan had been enforced were unfair.
4. In having regard to those matters, the Judge took account of the acts of an individual, a Mr Semka, in order to determine the true nature of the lending relationship, i.e. whether it was commercial lending or an uncommercial loan. He held that the lending was uncommercial, and that the friendship between Mr Semka and the debtor and the informal property development joint venture which they entered into and which underlay the lending were relevant factors for him to take into account in his reasoning summarised at 3) above.
5. On appeal, the creditor argued that the judge had erred by taking into account those matters, in circumstances in which he had not held that Mr Semka was either an agent or an “associate” (within the meaning of that term in the 1974 Act) of the creditor company.
6. Fancourt J dismissed that argument, holding that the wide terms of s.140(A)2, under which the Court must have regard to all matters it thinks relevant in determining whether or not a relationship is unfair, made the judge’s findings permissible. The creditor’s argument failed to distinguish between the question of attributing to the creditor the acts or omissions of an agent or associate under s.140A(1)(c) and s.140A(3), as considered in Plevin , and the consideration under s.140A(2), which necessarily involves determining the true nature, identity and role of the creditor.