This case concerned a creditor's bankruptcy petition founded on a judgment debt arising from a £200,000 loan secured against the debtor's property. The loan carried interest at 20% per annum and, following default, the creditor obtained a possession order and a money judgment in 2022 for £390,357.13 plus interest.
In June 2025, the creditor obtained a bankruptcy order after the district judge declined to go behind the judgment debt and rejected the debtor's arguments based on undue influence, duress and an unfair relationship under the Consumer Credit Act 1974 (CCA). The debtor appealed.
At first instance, the debtor argued that she had been compelled to enter into the loan agreement as a result of the coercive and controlling behaviour of her former partner, a longstanding friend and business associate of the creditor. Whilst the court accepted that the debtor had been subjected to coercive and controlling behaviour, it found there was insufficient evidence that the creditor had knowledge of that conduct. That finding was not challenged on appeal.
However, the High Court held that the trial judge had erred in concluding that the loan fell outside the unfair relationship provisions in sections 140A to 140C of the CCA. Although the loan was an exempt agreement, it remained capable of review under the statutory unfair relationship regime. The court concluded that the relationship was unfair, having regard to the debtor's constrained decision-making, the non-arm's-length nature of the transaction, and the high rate of interest charged despite the substantial security provided.
The High Court also reviewed the principles governing a bankruptcy court's ability to go behind a judgment debt, confirming that the jurisdiction is a narrow one and will generally only be exercised where the court is satisfied that nothing was, or very likely would have been, due. The court held that this threshold had not been met.
Nevertheless, the court emphasised that the making of a bankruptcy order is discretionary. It concluded that permitting enforcement of the judgment debt by way of bankruptcy would be disproportionate and unjust because, had the unfair relationship issue been considered in the possession proceedings, the recoverable debt would likely have been substantially reduced. In addition, the creditor had already achieved a significant recovery through the sale of the secured property. The bankruptcy order was therefore set aside and the petition dismissed.
Maher v Holmes [2026] EWHC 1337 (Ch)
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