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

Saxby has permission for the following first two grounds of appeal: (1) the Judge was wrong to conclude that Ms Baker had sufficiently pleaded her defence/case on the alleged unfair relationship and (2) the Judge was wrong to find that the relationship between the parties was unfair.

Legal Framework

Section 140A of the Consumer Credit Act 1974 (‘the Act’) provides as follows:

140A 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).

(2)

In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor).

(3)

For the purposes of this section the court shall (except to the extent that it is not appropriate to do so) treat anything done (or not done) by, or on behalf of, or in relation to, an associate or a former associate of the creditor as if done (or not done) by, or on behalf of, or in relation to, the creditor.

(4)

A determination may be made under this section in relation to a relationship notwithstanding that the relationship may have ended.

…

Section 140B of the Act sets out the powers of a court consequential on finding an unfair relationship. Section 140B(9) also provides that where a debtor in debt recovery proceedings ‘alleges that the relationship between the creditor and the debtor is unfair to the debtor, it is for the creditor to prove to the contrary’.

The Supreme Court has given recent guidance on how this regime operates, in the leading judgment of Lord Leggatt JSC in Smith v Royal Bank of Scotland [2024] AC 955 at [12]-[25]. Of particular note for present purposes is the emphasis at [19] that the key question for a court is whether the relationship is unfair, rather than whether it was unfair – that is, the quality of the relationship must be assessed overall as at the time of the determination. The court must consider the whole of the relationship and its history ([23]), and all possible sources of unfairness, limited only by a court’s assessment of relevance ([22]). It must make ‘a very broad and holistic assessment to decide whether the relationship between the creditor and the debtor is unfair to the debtor’.

In relation to the reverse burden of proof imposed by section 140B(9) of the Act, the judgment in Smith v RBS says this (at [40]):

Where a claim is made by a debtor for an order under section 140B of the 1974 Act on the ground that the relationship arising out of the credit agreement is unfair, the burden is on the creditor to prove that the relationship is not unfair… This does not, however, mean that the claimant is absolved from pleading particulars of claim which identify concisely the facts on which the claimant relies. Nor does it mean that the claimant can make allegations of fact which the court is bound to accept unless the creditor disproves them; it is still the debtor who has the onus of proving facts on which he or she positively relies…

More generally, in relation to pleadings, Mr Loxton, Counsel instructed for Saxby in this appeal (although not for the trial), directed my attention to the survey of the authorities by Cotter J in Charles Russell Speechlys LLP v Beneficial (Birmingham) Regeneration LLP [2021] EWHC 3458 at [55]-[58], and ‘the overarching principle … that pleadings frame the limits of the action’.

These authorities remind courts that ‘the definition of the issues has an impact on such important matters as the disclosure of relevant documents and the relevant oral evidence to be adduced at trial. (Boake Allen Ltd v HMRC [2006] EWCA Civ 25 at [131]). In Lombard North Central v Automobile World (UK) Ltd [2010] EWCA Civ 20, Rimer LJ emphasised the role of pleadings in providing advance notice of what a party has to address at trial: ‘It is essential to the conduct of a fair trial that each side should know in advance what case the other is making, and thus what case it has to meet and prepare for’.

Again, in Satyam Enterprises Ltd v Burton [2021] EWCA Civ 287 at [35], Nugee LJ reminded courts that:

the reason why it is important for a party who wants to run a particular case to plead it is so that the parties can know the issues which need to be addressed in evidence and submissions, and the Court can know what issues it is being asked to decide. That is not to encourage the taking of purely technical pleading points, and a trial judge can always permit a departure from a pleaded case where it is just to do so (although even in such a case it is good practice for the pleading to be amended); in practice the other party often, sensibly, does not take the point, but in any case where such a departure might cause prejudice he is entitled to insist on a formal application to amend being made.

In Ali v Dinc [2022] EWCA Civ 34, a case to which Ms Baker drew my attention, the Court of Appeal underlined (at [25]) the concern of the authorities with ‘the interests of justice and, in particular, with circumstances which cause prejudice to the losing party.’ Pleadings, lists of issues and so on must give notice and define the issues, but a judge can always permit departure from a formally defined case where it is just to do so. A judge’s function is to try the issues the parties have raised before them, rather than reaching a conclusion on the basis of ‘a theory which never formed part of either party’s case’, but ‘the modern approach to the definition of issues requires judges to adopt a pragmatic approach in line with the overriding objective and not seek to be governed by unnecessary formality, provided always that it is just not to do so.’

The Decision Challenged

The Judgment under challenge runs to 141 paragraphs across 45 pages. It opens by setting out what the Judge understood to be the basic and uncontroversial facts about the loan. It sets out the evidence of the principal witnesses and summarises each party’s submissions. It proceeds to evaluation of the evidence and making findings of fact. It finishes with analysis and conclusions about the unfairness of the debtor/creditor relationship.

Background

The Judge understood the following factual narrative to be largely uncontested by the time of trial. Except in the respects addressed further below, I did not hear a material challenge to it with which I needed to deal on appeal.

On 31^st October 2016, Saxby provided Ms Baker with a £60,000 loan. She had requested this by way of short-term bridging finance. For reasons apparently connected with her business interests, she had wanted to release a cash sum immediately, and repay or refinance the loan within a six-month period. The loan was to be secured on her home. With the addition of fees, charges and six months’ interest, her initial indebtedness to Saxby totalled £80,307.76. That sum was due to be paid in full by 1^st May 2017, with interest accruing at 5% per month thereafter in the event of default.

Ms Baker already had a mortgage on her home. The value of the property was around £450,000. Her first mortgagee was Aldermore Bank plc (‘Aldermore’) and it had advanced her some £271,000.

The loan agreement between Saxby and Ms Baker included a provision making it the borrower’s responsibility to seek the permission of any first charge-holder for the lender to place a second charge on the property. However, Saxby itself approached Aldermore for permission in this case; and Aldermore declined it. Saxby understood and accepted that that left it with an equitable rather than a legal mortgage over Ms Baker’s property, a situation with which it was familiar, and content. Saxby did not inform Ms Baker of Aldermore’s refusal.

In ignorance of it, Ms Baker was proceeding with a plan to pay off the bridging loan by refinancing her indebtedness with a new long-term mortgage. On 26^th April 2017, shortly before the end of the six-month loan period, her broker got in touch with her, having identified three possible 22-year term secured loan schemes. She instructed her broker to pursue one of them, United Trust Bank (‘UTB’), which he did the following day. On 3^rd May 2017, with the Saxby debt now due, the broker reported that UTB had confirmed a mortgage deal acceptable to them in principle, but it was subject to certain conditions, including that she obtain Aldermore’s consent to a second mortgage charge. Her broker applied for that, but Aldermore refused, giving as its reason (in a letter of 22^nd June 2017) that ‘the customer is using the finance to repay a second charge that we have previously declined’. This was how Ms Baker found out about Aldermore’s previous refusal to Saxby.

Ms Baker and her broker then made efforts to secure alternative loan offers in the succeeding months. But she was of course by now in default to Saxby, and accruing inquiries and rejections which were damaging her credit rating. She obtained a provisional loan offer from a firm specialising in lending to clients with poor credit ratings (‘Kensington’), but it was subject to conditions, including requiring information about the stated circumstances of Ms Baker’s default (namely that she had not known about the history of Aldermore’s refusal of consent to a second mortgage, which had cut across her refinancing plans, rather than that she had simply and passively fallen into arrears), and reassurance that Saxby would not be commencing repossession proceedings.

Saxby considered it was being asked to confirm that Ms Baker ‘had not defaulted’ on the loan agreement, and declined to do so. It did confirm a delay, but ultimately threatened, and then instituted, legal proceedings. Ms Baker made a formal (Part 36) offer of settlement on 9^th April 2018 in the sum of £90,000 plus legal fees. It was not responded to. Saxby was at this point seeking compounded interest (calculating her accrued indebtedness at £144,221) – a position it pursued for some time, but no longer takes. On a simple interest basis her indebtedness at the time would have been £124,447. On 7^th June 2018, more than a year after the Saxby loan debt had fallen due, Ms Baker offered and paid Saxby the sum of £87,130 – a little over the £80,307.76 originally borrowed. Saxby issued proceedings at around the same time.

It appears that the parties’ working relationship, which had been under some strain at a personal level, effectively broke down and there were no further negotiations towards settlement. Saxby was continuing to pursue repayment on a compound interest base, culminating in a pre-trial claim for £1.5m.

Saxby’s claim came to trial in January 2024, by which time, on a simple interest basis accrued over a seven year period, it claimed Ms Baker owed Saxby a balance of £229, 657.

Evidence and Fact-finding

On ‘unfair relationship’, the Judge received written and oral evidence from Ms Baker, and from Saxby director Mr Jody Martin. Ms Baker had run a number of defences at trial besides ‘unfair relationship’. These additional defences were rejected by the Judge, and no challenge is now brought to those decisions.

The Judge found Ms Baker to be an honest and truthful witness, but in some respects inconsistent and not always reliable; he found her to have erroneously ‘convinced herself’ of more than one part of the history – including that Saxby had positively represented to her that Aldermore had consented to a second legal mortgage.

The Judge considered Mr Martin to have been generally an honest witness trying to assist the court, but at the same time to have been ‘disingenuous’ in more than one respect. The Judge found it ‘striking’ that Mr Martin ‘could not see, until pressed by me, that his choices (whether or not legally obligated), whilst leaving the Claimant in a satisfactory position, could have adversely affected the Defendant in a very significant way’.

The Judge also had before him a joint experts’ report, and heard from each expert orally. He found Saxby’s expert, Mr Bloomfield, had failed in his duty of disclosure, by not disclosing that Mr Martin had on two previous occasions been his client, and that he had been engaged to advise him on his business practices. The Judge considered this failure ‘extraordinary’ and declared he would approach the expert’s evidence ‘with caution’ in the circumstances. The expert was pressed on the matter of Saxby’s not having told Ms Baker when Aldermore first refused consent for a second legal mortgage, and the consequences of that for her. The Judge concluded that the expert’s ‘strong reluctance to depart from the lender’s perspective and acknowledge the situation from a borrower’s perspective demonstrated a lack of independence’.

The Judge set out his findings of fact, as material for present purposes, as follows:

[106] … At the core of Ms Baker’s evidence, is her determination to protect her family home for the benefit of her daughter. This clearly means a great deal to her, and I accept that she would have done almost anything to have preserved that. There is no question in my mind that, had she known of the peril that her home was in, once Aldermore had decided as it did, and why, she would have done anything in her power to correct the position.

[107] … Mr Martin … could have been of more assistance to Ms Baker if, as he claims, he wanted to help her. In fact, he wanted to be rid of Ms Baker, but in the sense that he wanted to no longer to have to deal with her (as he admitted in evidence). In summary, he washed his hands of her in March 2018 and left it to the lawyers thereafter.

…

[109] … To [Ms Baker], this was just a short-term loan which she would easily be able to refinance, and I don’t expect that she even considered the consequences of defaulting on it.

[110] I accept Ms Baker’s evidence that by asking her for her authority to approach Aldermore in order to obtain the second charge, she thought that the Claimant was adopting and accepting responsibility for the task. That was a reasonable assumption, and Mr Martin did not seem to seriously demur from it. From any reasonable borrower’s point of view, that was the logical conclusion to draw. I find, too, that the Claimant never informed the Defendant of Aldermore’s response, either in terms of the refusal itself and, perhaps most regrettably, the reason for that refusal. I accept Mr Bloomfield’s evidence that that reason was because there was no satisfactory valuation of the Property. I accept it because he could only have got the information from Mr Martin (who claimed not to be able to remember that aspect of it), or someone within the Claimant organisation, and it was the Claimant who dealt with Aldermore on this issue.

…

[112] I accept that Ms Baker would have acted differently had she been told about Aldermore’s refusal and, a fortiori, the reason for the refusal, not least because it would have been the obvious and natural thing to do. In my judgment, as Mr Martin and Mr Bloomfield eventually conceded, it was incumbent upon the Claimant to inform the Defendant of Aldermore’s response and the reasons therefore. Mr Martin knew that the inability to obtain a second charge on the Property would have serious consequences on the ability to re-finance the bridging loan: as Mr Bloomfield repeatedly pointed out, there are few in even the short-term lending sector who would provide secondary lending in the absence of a second legal charge, and almost no-one when the borrower was in default. As was said in Plevin, A sufficiently extreme inequality of knowledge and understanding is a classic source of unfairness in any relationship between a creditor and a non-commercial debtor. It is a question of degree. Not only did Ms Baker not know of Aldermore’s position, she would probably not have appreciated the implications of it. This, in the context of fairness, rendered it all the more important to inform the Defendant of these matters. I have no doubt that, had Ms Baker been informed of Aldermore’s position and its implications, she would have acted with alacrity to secure her position and that of her family home. She was experienced in credit matters, and she would have fully appreciated the need to be ready to refinance the Saxby loan when it was due. I entirely reject any suggestion that Ms Baker was in any way lackadaisical about the need to do so. She was confident (and with reason) that the refinancing would probably have been a matter of course. Although I have no specific evidence of the reasonableness of that confidence, I can assess the situation as at 2016 (a very buoyant time for mortgages) and take account of the equity in the Property. I therefore find that Ms Baker’s belief was reasonable. There was no incentive for her to refinance sooner than May 2017 because she had already paid the interest to Saxby for the full six-month period.

[113] Furthermore, the reason for Aldermore’s refusal, had it been communicated to the Defendant, could have been easily and relatively cheaply rectified by her. She had plenty of equity in the Property and, whilst it is not certain, the second charge issue may have completely fallen away by, say November 2016, if Ms Baker had been given the opportunity to satisfy Aldermore’s conditions for a second legal charge, namely the provision of a valuation.

[114] The evidence from both the UTB and Kensington offers supports the proposition that, had Ms Baker been applying for loans from these lenders in the period October/November to May 2017, she would have been successful in obtaining a refinancing of the Claimant’s loan before the 1 May 2017 deadline had she been able to secure a second charge on the Property. If a second legal charge had not been obtainable, the additional four months or so that full knowledge of the situation would have afforded to Ms Baker would have made it far more likely that she could have remortgaged the entire secured debt from a third party lender before she was in a position of default. She had a reputable broker and a property with meaningful equity.

[115] … at no point did [Mr Martin] acknowledge the significance of the Defendant’s ignorance of Aldermore’s position. The only reason he gave for offering any compromise was because he did not want to litigate with the Defendant because of her experience and profession. … Apart from the two recorded telephone calls which were open-ended and vague offers to react to an offer if made, he made no attempt whatever to negotiate further with the Defendant. This was most notable following the Part 36 Offer which he had invited, and failed to respond to at all, and neither did he instruct his solicitors to do so. I find this most regrettable given the fact that the Defendant was, by Mr Bloomfield’s evidence, trapped in a hopeless position by that stage. The truth is that Mr Martin washed his hands of the Defendant following their conversation in March 2018 and there is no evidence that he instructed the Claimant’s solicitors to engage in meaningful negotiations prior to the issue of proceedings. It was and remains Mr Martin’s position that the Claimant can simply rely on its contractual rights.

…

[118] In the context of Kensington, I find Mr Martin’s given reason for not agreeing to hold off from bringing proceedings pending the processing of the offer to have been disingenuous. Of course, he would not agree to refrain from issuing proceedings indefinitely, but that was obviously not what was being sought. Whether or not an agreement to hold off for a short period would have made a difference is unclear, but it rather reveals the prism through which Mr Martin approached Ms Baker’s position.

[119] … The fact that there is no written evidence that Mr Martin did anything to assist the Defendant out of a situation caused largely by the Claimant’s failures suggests to me that the Claimant had no real regard for the very difficult, trapped, situation in which the Defendant found herself. I accept, of course, as Mr Bloomfield was keen to emphasise, that the Claimant had no legal obligation to assist the Defendant at all (subject to s140A CCA), but I find Mr Martin’s rather glib approach to that to have been again somewhat disingenuous given his knowledge of the credit market and the consequences of being in the position that the Defendant found herself in.

Analysis and Conclusions

The Judge’s decision on the issue of unfair relationship was set out as follows:

[124] Although the Claimant’s demands in 2017 were not prompted by an improper motive as such, they were made using the compounded interest calculation and were confusing. I do find it troubling that the Claimant did not engage in any meaningful negotiations beyond the two telephone calls. I have already noted that neither Mr Martin nor the Claimant’s solicitors responded to the Defendant’s Part 36 Offer and at no point put any figure to Ms Baker other than the full demand using compounded interest calculations. This behaviour has to be taken in the context of the Claimant’s own expert’s assessment of the Defendant’s re-mortgaging position from May 2017 as being almost hopeless. Mr Martin did, I accept, engage a broker and sought a favour from that broker, but that was because he wanted to wash his hands of the Defendant. Again, in the context of Ms Baker’s dire position post-May 2017, that was not the assistance the Defendant needed: she needed to negotiate this loan away to put herself in a re-mortgageable position which she could not do unilaterally. Mr Martin wanted nothing further to do with Ms Baker which rather precluded her achieving what she needed to achieve. Mr Martin was right that the current position is to the detriment of both parties, but the evidence suggests that, post May 2017, it was only the Claimant that could have assisted in the way that the Defendant needed.

[125] Although perhaps counter-intuitive, the Claimant’s delay in bringing proceedings was also not in the Defendant’s interests, and contributes to the unfairness of the way that the Claimant exercised its rights under the loan agreement. Once Ms Baker was in the position she was in as 2017 progressed she was, I find, trapped into a position from which she seems to have been unable to escape otherwise than by selling the Property (according to Mr Bloomfield). Because, as Mr Martin said in evidence, the way that compound interest works meant that the debt was rising exponentially. And even if it was not compounded, the Defendant’s position was deteriorating and she could not force the Claimant to bring proceedings to crystallise the debt. She could, of course, have sought to sell the Property and then paid the Claimant, but that would have been entirely on the Claimant’s terms, which on the evidence that I have seen and heard, would likely have been on the basis of compound interest. Certainly, she could not have raised the issue of an unfair relationship.

[126] Having satisfied myself that the Defendant has sufficiently identified why she considers that the Claimant’s behaviour has been unfair (as well as some terms of the loan agreement), the burden of proof shifts to the creditor to prove that the relationship was fair. I consider that the Defendant in this case would not have needed to rely on that reversal of the burden of proof because of the unique position the Claimant was in vis a vis Aldermore; their understanding of the fact of and reasons for Aldermore’s position, and the Claimant’s superior knowledge of the effect of the failure of the Claimant to obtain a second legal charge would have on the Defendant all mean that the relationship was unfair unless the Claimant had taken a more proactive approach to informing the Defendant and assisting her in remedying it.

[127] In any event, the Claimant has failed in my judgment to discharge the burden on it to satisfy the Court that the relationship was not unfair.

[128] I find that, for the reasons set out above, the relationship between the Claimant and the Defendant was unfair pursuant to s140A(a) to (c) of the CCA. The confusion and uncertainty of the way that default interest would be calculated was unclear and confusing (particularly when the Forms CH1 are taken into account) which falls within 140A(a). However, it is the Claimant’s behaviour post-formation of the agreement which brings the relationship within sub-paragraphs (b) and (c) and which lies at the heart of my findings.

Analysis of the Challenge

Pleadings

It is apparent from the litigation history of this case, through which Mr Loxton carefully took me, that it had necessitated a certain amount of active judicial case management along the way. That included a substantial case management hearing before a Deputy District Judge (‘DDJ’) on 9^th November 2021, which dealt with a full range of issues on which directions were needed in order for the case to be ready for trial. The DDJ’s Order gave directions, amongst many other things, in relation to expert evidence. The section on expert evidence opened with the following recital:

7.

Expert evidence

Upon the Defendant confirming to the Court that the fairness of the interest rate charged by the Claimant is not challenged but explaining that issue is taken with the default interest being charged and calculated on a compound basis (ie interest on interest) and that doing so is relevant to the question whether the relationship between the parties is unfair, and upon the Defendant stating that she also relies on the following issues in support of her contention that the relationship between herself and the Claimant is an unfair relationship within the meaning of section 140A Consumer Credit Act 1974:

a.

That she had been told by the Claimant that permission had been given by Aldermore Bank Plc (‘Aldermore’) for the second charge;

b.

That it was a contractual obligation that the Claimant would obtain a charge over the Defendant’s property;

c.

That the lack of consent of Aldermore to the charge caused the delay in the Defendant redeeming the loan within the original 6 month period;

d.

That the Claimant had refused to give an undertaking not to issue possession proceedings whilst any application to re-mortgage was being processed;

e.

That the Claimant had unreasonably delayed issuing possession proceedings whilst informing the Defendant that it would waive the default interest;

And further upon the Claimant’s counsel informing the Court that the Claimant considers that items a, b and e have not been pleaded within the Amended Defence & Counterclaim; and upon the Court concluding that the matters relied upon by the Defendant, if proven as matters of fact, raised issues in relation to which the Court would benefit from the assistance of expert evidence as to the fairness or otherwise of the relationship between the parties, and accordingly…

When the case came to trial, Counsel for Saxby raised an objection that Ms Baker had not pleaded the necessary matters to support her case of unfair relationship. The Judge noted the parties’ agreement to the DDJ’s Order at the time, and the specific reference in the [7] recitals to the lack of pleading of points a, b and e. That, he thought, precluded subsequent objection to that matter, since these points had been part of the reason that permission had been given to instruct experts. He continued (at [100]):

Furthermore, and in any event, this has been a very long-running case, albeit with many distractions and side-shows, but it has been very clear for a long time that the Defendant’s complaints included (but I accept were certainly not limited to): (i) the fact that the Claimant agreed to approach Aldermore for permission to create a second charge; (ii) the fact that the Claimant failed to tell the Defendant that permission had not been granted (at the very least implicit in the allegation that it had told the Defendant it had been granted); (iii) the Defendant therefore was not put on notice that there might be a problem in refinancing the loan; (iv) the Defendant therefore did not do anything about refinancing the loan until later on in the term; (v) by the time she knew of the difficulties caused by Aldermore’s refusal, it was almost impossible to refinance the loan before a default occurred; (vi) once the default occurred, it was almost impossible for the Defendant to obtain refinancing, and (vii) all of that left the Defendant at the mercy of the Claimant’s decision to issue proceedings or not whilst (so far as she was aware) compound interest was being charged at 5%pcm.

In this appeal, Mr Loxton accepted the Judge had been entitled to regard the DDJ’s Order as fairly standing in the place of Ms Baker’s own antecedent pleading of an unfair relationship, to define the outlines of the case Saxby would have to meet at trial, including by way of its reverse burden to demonstrate fairness. He submitted, however, that the Judge had gone beyond the strict terms of the DDJ’s Order in defining at [100] (and ultimately accepting) her case of unfairness, that he had not been entitled to do that, and that Saxby had been prejudiced in its ability to meet the case and discharge its burden as a result.

Mr Loxton submitted in particular that the Judge’s findings (a) that Saxby had not informed Ms Baker of Aldermore’s refusal to permit it to register a second charge, (b) about the reason for that refusal and (c) that fairness had required Saxby to inform Ms Baker of Aldermore’s response and the reasons for any refusal – were not fairly open to him because these matters had not been pleaded by Ms Baker nor set out in the DDJ’s Order.

Mr Loxton argued the DDJ’s Order permitted Ms Baker to argue that Saxby had told her that Aldermore had consented to a second mortgage – but not that it had not told her Aldermore had not consented. He said it did not permit her to advance a case about the reason for that refusal, about how and why she would have acted differently, or about the likely outcome of her having been able to do so. It did not allow her to advance the history of Saxby’s pursuit of compounded interest or its failure to respond to her Part 36 Offer. It did not allow her to advance Saxby’s refusal to assist by engaging with the Kensington offer. He said the Judge acted wrongly and unfairly in permitting her to do all of this. He said that, had all these matters been dealt with as they should have been, via an application to amend pleadings, then Saxby would have instructed its experts differently (he gave as one example the Judge’s reference to the buoyancy of the mortgage market at the time, which he said had not at any time been put in issue).

It is not in any real dispute in this appeal that (a) pleadings must be adequate to frame the issues for trial in a way which is clear to a court and fair to the parties and (b) ‘a trial judge can always permit a departure from a pleaded case where it is just to do so’. It is fundamentally a matter of case management and ensuring the fairness of a trial and pursuit of the overriding objective of ‘enabling the court to deal with cases justly and at proportionate cost’. These are evaluative matters, and a trial judge’s discretion as to how best to achieve justice for both parties is a wide one, with which appellate courts are properly reluctant to interfere. Where its exercise is retrospectively challenged, there must be a clear focus on the question of fairness, and potential prejudice to a losing party.

As I read his observations, the Judge noted the DDJ’s Order had explicitly confirmed, as being in issue, default interest having been ‘charged and calculated on a compound basis’ and that doing so was ‘relevant to the question whether the relationship between the parties is unfair’, and took the view that the Order should also be read as having confirmed as in issue (a) what Saxby had (or had not) told Ms Baker about Aldermore’s consent, (b) the impact of Aldermore’s lack of consent, and (c) Saxby’s subsequent course of conduct.

The Judge would, in my view, have been entitled to take into account that the DDJ had chosen his words for the (limited) purpose of his case management decision as to the necessity of expert evidence rather than explicitly for the purpose of framing (exclusively) Ms Baker’s case. But in any event, from his perspective as a trial judge, whether as a matter of interpreting the Order, or going beyond it on the basis that it was ‘just to do so’, it is clear he directed his mind to the fairness of Saxby’s position and the fair conduct of the trial.

The Judge was, in my view, entitled to his conclusion that, by pleading her own erroneously recollected version of what Saxby had told her about Aldermore’s position, Ms Baker had put the question of what Saxby in fact had and had not told her – and what that said about the fairness of the relationship – fairly in issue. Saxby (a represented party) could have been in no reasonable doubt that Ms Baker’s allegation Saxby had told her Aldermore had consented would put in issue both its actions and its state of knowledge in the whole of that matter. Rebutting her allegation by establishing she had not been told of the refusal inevitably put in issue what she had been told by Saxby – that is, nothing – and the circumstances and reasons for that. The Judge was entitled to regard the truth of that matter, and its consequences, as fairly within the ambit of the trial; indeed to exclude it would itself have raised real issues of unfairness.

What Saxby had and had not told Ms Baker about Aldermore’s position, why, and how it had conducted the ensuing dispute between them, were all matters within Saxby’s own knowledge and plainly, indeed inevitably, the subject matter of the trial of the claimed unfair relationship between them. The Judge certainly had in mind that it had been ‘very clear for a long time’ before the trial that Ms Baker complained of all these matters as going to the unfairness of the relationship. I did not hear that denied on appeal. Indeed, I was taken by Ms Baker as far back as her Part 36 Offer of April 2018 where she clearly alleges her ignorance of Aldermore’s refusal of Saxby’s request. Mr Loxton did not indicate to me that Saxby had at any point since the DDJ’s Order of 9^th November 2021 formally applied to demand Ms Baker herself make a formal application to amend her pleadings, or given any reason to indicate that that was required of the Court’s own motion to clarify the issues between them.

In these circumstances I find it difficult to identify where any unfairness in the ambit of the trial the Judge allowed is said to be located. I agree that just because (a) the whole of a debtor/creditor relationship is inevitably put in issue by pleading section 140A and (b) the burden is on a creditor to demonstrate the relationship was fair – does not mean a defendant is excused adequately particularising the alleged nature and source of the unfairness. On the other hand, this is not especially fertile territory for the taking of pleading points to achieve the wholly artificial exclusion of key events in and aspects of that relationship which are both within the knowledge of the creditor and well known to the creditor to be complained of.

Mr Loxton did not identify to me any particular respect in which he says Saxby was disadvantaged by the Judge’s not having definitively excluded any aspect of this debtor/creditor relationship from consideration at trial. He did mention the matter of the buoyancy of the mortgage market at the time, and some other issues going to how realistic it would have been in practice for Ms Baker to have cleared her debt promptly by remortgaging, even if she had been immediately made aware of Aldermore’s refusal. These are, I think, in reality questions about the ultimate relevance of these matters to the Judge’s conclusions, and the evidence or otherwise for them, rather than strictly a point about pleading. Mr Loxton did not, within the matrix identified at [34] of Ali v Dinc, precisely identify any other step Saxby might have taken before or at trial of which it was unfairly deprived – no additional witness it would have wished an opportunity to call, no questions it was prevented from asking in cross-examination, no authority it might have cited.

I struggle in these circumstances to articulate much less identify any potential prejudice to Saxby in the Judge’s conduct of the trial. I cannot allow its appeal on this ground unless I am persuaded that the Judge identified and tried the issues in a way which amounted to something other than ‘a pragmatic approach in line with the overriding objective’. I have to bear in mind the Judge was trying a case in which there was some inequality of arms – a case moreover exploring the relationship between the parties qua debtor and creditor. Qua litigants, notwithstanding Ms Baker’s profession, she was a litigant in person, personally, financially and emotionally invested in the proceedings. The Judge identified some symptoms of that in her conduct of the litigation – she had in some respects overstated her case having honestly but mistakenly ‘convinced herself’ of some details of its history. The Judge was entitled – indeed required – to take a flexible and pragmatic approach in those circumstances. He had to achieve fairness to both parties, including, in principle, on the basis that an overstated proposition might be regarded as containing the elements of a more realistic one if that was where the evidence led, especially where at least some of the key facts engaged by it were undisputed.

In the end, the fairness of the trial, and the extent to which Saxby was fairly on notice of the case raised against it, has to be considered in the round. That was in the first place a matter for the Judge himself to assess at trial. Saxby has not advanced sufficient reason to persuade me to fault him for misdirection, procedural irregularity, error or excess of discretion by considering the fairness of the trial from the point of view of pleadings alone. I cannot uphold Ground 1 of its appeal. But I nevertheless hold the issue in mind in considering the sustainability of the trial outcome below.

Evidence and Analysis

There is no dispute that the Judge was required to – and did – take a compendious view of the whole of the relationship between Saxby and Ms Baker, up to and including the trial itself. There were a number of factual aspects of that relationship which were (and are) contested. But it is necessary to start by identifying the key facts the Judge relied on in finding an unfair debtor/creditor relationship, and which were not in the end disputed.

The core of the matter was this. After Saxby had made its loan to Ms Baker, it sought Aldermore’s permission for a second legal mortgage. Aldermore refused. Saxby did not inform Ms Baker of that refusal. None of that is or was disputed.

The detail of it had been disputed, including whether or not Saxby had requested or obtained express authorisation from Ms Baker to make its request to Aldermore, and whose responsibility it had been to make it in the first place. There had been some dispute about the reason for Aldermore’s refusal (but there seems to have been no evidence it came down to any substantive question about Ms Baker’s means, rather than matters such as the need for up-to-date valuations). The Judge made some findings about these matters. However, as I read his judgment, he maintained a clear focus on the simple core facts. Those facts amounted, in his evaluation, to a plain imbalance of knowledge.

The Judge correctly identified a ‘sufficiently extreme inequality of knowledge and understanding’ as a ‘classic source of unfairness in any relationship between a creditor and a non-commercial debtor. It is a question of degree.’

The Judge addressed the question of degree. He found Ms Baker’s ignorance of Aldermore’s refusal catastrophic for her opportunities to repay her debt to Saxby within (or very shortly after) its period by refinancing through a long-term replacement mortgage. She had planned for that outcome, but Aldermore refused the necessary consent to it, citing the fact that it had already made a refusal in relation to the Saxby debt – a fact of which she had previously been unaware. She then fell into increasing default with Saxby, and increasing and compounding difficulties in obtaining remortgaging solutions.

The Judge considered what Ms Baker could have done differently – short of the ultimate disaster of having to sell her home and the payment on Saxby’s terms of a debt assessed on a compound interest basis. He found no reason to criticise her working assumption at the time that Saxby must have obtained Aldermore’s consent, or her failure to verify the position for herself. He found no reason to criticise the plans she had built on that assumption. He found no reason to criticise her subsequent damage-limitation efforts.

The Judge considered what Saxby could have done differently. He noted it was indisputably in Saxby’s power to have informed Ms Baker of Aldermore’s refusal; it could easily have done so; and it could easily have inferred the jeopardy to Ms Baker’s situation arising out of any continued ignorance during the period of its loan of the fact of and reasons for the refusal. He found it did not give its mind to that issue, giving consideration solely to its own position. He found, and it was not materially disputed, that Saxby provided no reasonable or material assistance to Ms Baker in her subsequent efforts to regularise her position, and ignored or rebuffed her efforts to agree final or interim terms.

In all these circumstances, the Judge concluded that the relationship was essentially unfair. The core of his decision appears at the end of [126] of his judgment: Saxby’s unique knowledge of the facts and reasons for Aldermore’s refusal, and its professional advantage in being positioned to understand the jeopardy into which that inevitably placed Ms Baker’s opportunities to repay on time, rendered the relationship inherently unfair – unless Saxby had taken a proactive approach to informing her and assisting her in avoiding or minimising that jeopardy. There was a fundamental imbalance of knowledge which could easily have been addressed. There was no consideration at the time of the jeopardy to Ms Baker of failure to do so, or even of her legitimate interest in knowing what Saxby knew. That jeopardy was the reduction or loss of opportunities to repay the debt in good time. In that event, her difficulties would be compounded by her consequent default. Saxby did not help or engage with her in any positive way.

Mr Loxton says this decision is unsustainable. He submitted in particular that there was no, or no sufficient, evidence to support the Judge’s conclusions that: (a) Ms Baker knew for sure that Saxby was applying to Aldermore for permission, (b) she would in the ordinary course of events have found refinancing straightforward in a buoyant market at the time, or (c) she had planned for and received realistic and realisable refinancing offers which failed because of her spiralling situation and/or were unmitigated by Saxby’s failure to assist.

As to the first and third of these, the Judge at the very least had Ms Baker’s evidence, which he was entitled to accept and which was supported by documentary exhibits that were open to the interpretations she advanced. And the Judge’s conclusions were not in the end dependent on any extended theory of counterfactuals such as the ‘buoyancy’ point to which Mr Loxton made particular objection (although he did not identify any specific evidence that Saxby could have positively advanced that the market was not buoyant at the time). It was instead based on limited facts, which were not materially challenged, that (a) Ms Baker had ample equity in her home to support a refinancing package, (b) she had engaged a broker who was able to and did diligently pursue a range of refinancing options which were nevertheless refused or failed for reasons at the very least relatable to events in the course of her relationship with Saxby and (c) Ms Baker was a competent professional with relevant financial knowledge and expertise who, for personal reasons, was highly motivated not to place her home at unnecessary risk. In the end the Judge did not need to rely on findings as to precisely what Ms Baker would have achieved had she been in possession of the same knowledge as Saxby about Aldermore’s refusal of a second mortgage and the reasons for that. What he had identified at the core of his evaluation was the loss of opportunity, attributable to her ignorance of a key matter within Saxby’s knowledge which it failed to communicate, and Saxby’s failure to take any step to assist her to avoid or mitigate that lost opportunity.

Conclusions

The Judge indisputably had a very broad discretion in evaluating the nature of the relationship between Saxby and Ms Baker. He did so correctly by reference to ‘the way in which the creditor has exercised or enforced any of his rights under the agreement’ as well as ‘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)’.

He had particular regard to the core issues of Saxby’s failure to keep Ms Baker informed of its dealings with her first mortgagee; her obvious and legitimate interest in that knowledge; the foreseeable jeopardy to any refinancing plans of her ignorance about this matter; her potential loss of opportunities, if only as to the timing, to repay her debt to Saxby because of that ignorance; and Saxby’s subsequent failure to engage with her conscientious attempts to recover her position and settle her account.

These issues were all undoubtedly relevant to the fairness evaluation the Judge had to make. I am not persuaded otherwise than that Saxby was afforded a fair opportunity to address these core issues and the conclusions the Judge should or should not draw from them, in cross-examination and in submissions, and that it availed itself of that opportunity. The core issues were themselves referable to largely undisputed historical events. The Judge tested them factually and evaluatively with the key witnesses. The conclusions he drew were reasoned, and reasonable, by reference to these core issues, and sustainable by reference to those issues alone. And in the end, of course, Saxby had the burden of establishing that the relationship was fair, a matter the Judge was able to find advanced little beyond an assertion of Saxby’s strict legal entitlements.

I cannot in these circumstances find that this trial was otherwise than fairly and conscientiously conducted. I can identify no misdirection or error by the Judge. The relatively few facts on which he relied as indispensable to his conclusion were either uncontroversial or properly available to him on the evidence he had seen, heard and tested. His evaluation of that evidence, and the witnesses, were a matter for him and he gave clear reasons for either accepting, rejecting or tempering it. His overall evaluation and conclusions as to the unfairness of the relationship were well within the spectrum of sustainable decisions, in exercise of a broad discretion and taking a broad and holistic approach, properly available to him.

I cannot therefore find the Judge’s decision that the debtor/creditor relationship between Saxby and Ms Baker was unfair to be either ‘wrong’ or vitiated by procedural unfairness. I do not consider the matters objected to by Mr Loxton to be sustainable as material to the Judge’s decisions to the degree necessary to support such a finding. I cannot therefore uphold Saxby’s challenge to the Judge’s conclusion. I will dismiss both grounds 1 and 2 of Saxby’s appeal.