KA-2024-BRS-000027 - [2025] EWHC 2919 (KB)

Saxby has permission for a third ground of appeal (conditional on the failure of its first two grounds): that the Judge erred in relation to the remedy ordered under the Act, as the amount was wrong, and no explanation was given for the amount.

Ms Baker seeks permission for a cross-appeal on this point in the same terms (although of course she advances a different case). I formally grant permission for that cross-appeal, and consider the question of remedy from both perspectives and in the round.

Legal Framework

Section 140B of the Act opens as follows:

140B Powers of court in relation to unfair relationships

(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.

About this provision, Lord Leggatt JSC said this, in Smith v RBS at [25]:

… as well as requiring the court to make a very broad and holistic assessment to decide whether the relationship between the creditor and the debtor is unfair to the debtor, the legislation also gives the court, where a determination of unfairness is made, the broadest possible remedial discretion in deciding what order, if any, to make under section 140B. Section 140B gives the court an extensive menu of options from which to select but says nothing at all about how this selection may or should be made. On the face of the legislation the court’s discretion is entirely unfettered. It is, I think, clear that the court is not in these circumstances required to engage in the kind of strict analysis of causation, loss and so forth that would be required, for example, in deciding what remedy to award in a claim founded on the law of contract or tort. Some constraint is, however, imposed by consideration of the general purpose of an order under section 140B. In principle, the purpose must be to remove the cause(s) of the unfairness which the court has identified, if they are still continuing, and to reverse any damaging financial consequences to the debtor of that unfairness, so the relationship as a whole can no longer be regarded as unfair.

Earlier cases (see the review at [214] in Kerrigan v Elevate Credit International [2020] EWHC 2169 (Comm)) had emphasised that an order under section 140B should reflect, and be proportionate to, the nature and degree of the unfairness a court has found. It should not give the debtor a windfall, but should approximate as closely as possible to the overall position which would have applied had the matters giving rise to the unfairness not taken place. Smith confirmed that this does not, however, require a court to strive after unrealistic detail or accuracy; unfairness is a broad and holistic assessment, and the award of a money remedy for that unfairness can expect to be commensurately approximate.

Both parties seek to challenge the Judge’s exercise of his powers under section 140B both as to outcome and by reference to the duty to give reasons. The duty to give reasons is well established, and I was directed to the guidance of the Court of Appeal in Flannery v Halifax Estate Agencies [2000] 1 WLR 377 at pages 381-382, and in Simetra Global Assets v Ikon Finance [2019] 4 WLR 112 at [46]-[47] for particularly helpful summaries. The authorities emphasise the requirement of fairness that parties must know why they have won or lost, and to understand how and why a judge has preferred some evidence or submissions over others. What a judge is required to do will differ from case to case, but the watchword is transparency. Enough explanation must be given to reassure parties that the case they have advanced has been fully understood, considered, and dealt with according to the overriding objective.

The Decision Challenged

The Judge’s decision on remedy was as follows:

[129] The Court’s powers under s.140B having found an unfair relationship are, as Mr Skjøtt acknowledged, wide.

[130] Ms Baker’s Part 36 Offer made in April 2018 … was to pay £90,000 plus legal costs. That was against a demand of £144,221 using the compounded interest calculation. Had the Claimant been charging 5% simple interest rate since default, as it now says that it did do (internally) or meant to do, then the amount outstanding would have been £124,447.15 as at April 2018. I accept, of course, that no further sums have been paid by the Defendant to the Claimant since July 2018 but that, I find, was as a result of its own decisions and behaviour. No reasonable person in the Defendant’s position would have felt able to make payments to the Claimant knowing that it was a futile exercise unless and until the Claimant came to the negotiating table which it did not. If Ms Baker had been able to escape from the Claimant’s loan, and if she would have had to borrow the balance of what she did pay against the properly demanded sum, she would have been able to achieve a very reasonable interest rate in 2017 or 2018. Even if 5% per annum simple was charged (which was very high for those times), if that rate is calculated on £37,317 (the difference between £124,447 and £87,130) for a period of 6 years, the result is £11,195. This is assuming that no reduction could have been achieved from that £124,447 figure.

[131] Of course, had the Defendant been able to secure a second charge in time to pay the Claimant by May 2017, the sum paid by her would have been £80,307, and she would have had to borrow that sum until she was able to raise the £87,130 she raised in July 2018, which over 14 months would have cost her £4,684 in broad terms based on a 5%pa rate. Compared to this, the Defendant has already paid more than she would have done.

[132] There is the further possibility that the Defendant may not have been able to raise a sum to redeem the loan from the Claimant, in which case she would be in the same position as she is in now. However she was denied the opportunity of trying. Ms Baker says that she is still unable to establish precisely how much the Claimant is claiming in these proceedings. On the basis of an ever-increasing interest charge, that is not surprising. However, according to the Claimant’s schedule, as at the 1 February 2024, based on a 5%pcm simple interest charge since default, the Defendant would have owed £229,657.

[133] The aim of the Court’s task is to remove the unfairness of the relationship between the Claimant and the Defendant. As Lord Leggatt JSC said in Smith, the Court does not embark on the usual analysis of causation, loss etc, but must instead come to a judicially tempered exercise of the Court’s wide discretion based on the intended purpose of the legislation.

[134] Taking all of the above into account, and trying to achieve a fair result for the Defendant given that it was the Claimant’s behaviour that, I have found, largely brought about the failure to pay the debt in May 2017 or, at the latest June 2018, and the delay in bringing proceedings, I shall make an order under s.144B which will result in the Defendant being indebted to the Claimant in the further sum of £25,000.

[135] I will not make an order for possession and will give the Defendant a period (on the length of which I will hear submissions) in which to raise funds to pay this sum before entertaining an application for a charging order.

[136] I will also order that the default costs provisions contained in the loan agreement will not apply to the Defendant, and the costs of these proceedings will be subject to the normal CPR Part 44 rules and the authorities dealing with them. I shall hear Counsel and Ms Baker on this aspect of the matter at a hearing dealing with the consequences of this judgment, unless the parties can agree a way forward.

Analysing the Challenge

Both parties contend the Judge’s conclusion – to order Ms Baker to pay another £25,000 to Saxby – is ‘wrong’. But the focus of the submissions I received was very much on the issue of how and why this figure was arrived at in any event – in other words, they amounted to a ‘reasons’ challenge. The parties say they cannot in effect know whether that figure is wrong or not, because it is insufficiently explained or explicable.

Mr Loxton submits the Judge should have proceeded by identifying the sum Saxby was in fact contractually owed, and explaining how he considered the unfairness to have operated on that figure. He says the £25,000 awarded represents a little over 10% of the sum Saxby claimed it was owed, and that is an unexplained and inexplicable outcome. He also criticises the Judge for apparently not giving his mind to issues going to Ms Baker’s conduct as a balancing factor in considering what was in principle needed to remove the unfairness from the relationship.

Ms Baker on the other hand says she does not understand why she is being asked to pay anything more at all. She has paid the sum originally owed (with a little extra, having regard to an inevitable delay of some days in refinancing the loan which would have occurred even if she had not met the brick wall of her discovery of Aldermore’s previous refusal). That would, but for the delay occasioned by the unfairness, have ended her relationship with Saxby shortly after the original loan period. That is, she says, the position to which she should have been restored.

A reasons challenge is on the face of it surprising in relation to a remedy judgment which takes some pains to work through the detail of the figures. The question on appeal is whether perhaps the parties fail to see the wood for the trees for just that reason.

The starting point is of course the unfairness the Judge had identified – Saxby’s failure to have regard to Ms Baker’s legitimate interest in being kept informed, its failure to tell her about Aldermore’s refusal of permission (and its reasons), and its failure to engage constructively with her thereafter. From that starting point, the Judge had to – in this case – grant a suitable remedy to ‘reverse any damaging financial consequences to the debtor of that unfairness, so the relationship as a whole can no longer be regarded as unfair’. That required him to identify the damaging financial consequences of the unfairness.

The damaging financial consequences he had identified were principally the contractual accrual of interest arising out of Ms Baker’s default to Saxby. Had she known about, and had a full opportunity to address in good time, the Aldermore obstacle, she would have had at least a better opportunity to pay off the debt and not accrue the interest. But (and this is surely a large part of the answer to Ms Baker’s question) she is not entitled to a windfall. To pay off the debt would, on her own account, have required refinancing and the servicing of that refinancing. She is not entitled to be put in a position in which she had been able to pay off the debt without refinancing.

As I read his judgment, the Judge had embarked on a calculation designed to identify the difference between the interest she was being charged by Saxby on the defaulted short-term bridging loan, and the lower interest she would have been paying in an equivalent period on a refinancing package based on a conventional long-term remortgage, had she had fair opportunities to obtain one in time. That difference was, in broad terms, the financial loss to her consequential on the unfairness the Judge identified.

If that was indeed the Judge’s intention, that would, in my judgment, have been an approach well within the scope of his broad discretion. And there was a limit to the extent to which he could have been expected to descend into the minutiae of any ‘strict analysis’ of causation, contribution, loss, mitigation, and the other details attendant on assessing financial loss in other contexts. An approximate figure would have been fine.

The Judge, however, seems to have wanted to introduce some refinements into his calculation. For example, part of the unfairness identified was Saxby’s failure to respond to Ms Baker’s Part 36 Offer of £90,000 in April 2018, and that is brought into the picture. Some other variables relating to different dates for calculating the correct period of the default are introduced. The effect and timing of Ms Baker’s 7^th June 2018, payment of £87,130 to Saxby is brought in.

I do not think the Judge can be faulted for any of that in principle. He was clearly trying to be as fair – and indeed as accurate – as possible in unwinding the unfairness. The difficulty, however, is that, having descended to the level of detail he did, the final figure of £25,000 he reached is quite hard to relate to any of the detailed figures and calculations he went through. I share the parties’ difficulty in being able to account for it by reference to the figures used.

Conclusions

I cannot say definitively that the award of this figure is ‘wrong’. It is entirely possible that it is within the spectrum of what the Judge could quite properly have awarded, given the unfairness he had found and the overall approach I understand him to have taken to undoing it. I reject both Ms Baker’s contention that the Judge must in fairness have made no award against her, and Saxby’s contention that he must have taken enforcement of the full contractual debt as his starting point. The Judge took the correct starting point – the unfairness. I am satisfied the overall approach he took was along lines that were properly open to him. But I agree with the parties that the degree of computational complexity the Judge introduced into his analysis may have hindered rather than helped them understand, sufficiently for the purposes of the requirements of justice, how and why the final award was quantified. A detailed multifactorial computation may not be necessary. But where it is nevertheless attempted, the mathematical logic probably needs to be set out commensurately.

So the matter cannot be left there. I will allow Saxby’s appeal and Ms Baker’s cross appeal to the extent of setting aside the remedy determination.