CBI Property Projects Limited v Tripipatkul & Tripipatkul
[2024] EWHC 3080 (Ch)
Seculink Limited v Eren Salih
11 July 2023
[2023] EWHC 1706 (KB)
High Court
A man borrowed money and couldn't pay back. The lender wanted a huge amount extra due to late payments, and the man said that was unfair. The judge said the man hadn't provided enough evidence. The appeal court said the judge was wrong; the lender needed to prove it was fair, not the borrower, and the whole case needs to be tried again.
Key Facts
- •Mr. Eren Salih appealed an order granting Seculink Limited judgment for £850,000 on a secured bridging loan agreement.
- •The appeal challenged the rejection of Salih's defenses: (i) the 12% compounded monthly default interest was a penalty, and (ii) the relationship was unfair under ss. 140A-D of the Consumer Credit Act 1974.
- •Salih defaulted on a £355,000 loan, resulting in a claimed debt of approximately £13.3 million due to the high default interest rate.
- •Seculink voluntarily capped its claim at £850,000.
- •The trial judge rejected Salih's defenses due to lack of evidence.
- •Salih was unrepresented at the appeal hearing due to illness.
Legal Principles
Whether a contractual provision is a penalty is a matter of construction; evidence may be relevant but is not always necessary.
Cavendish Square Holding BV v Makdessi [2016] AC 1172
The true test for a penalty clause is whether the provision imposes a detriment out of all proportion to the innocent party's legitimate interest in enforcing the primary obligation.
Cavendish Square Holding BV v Makdessi [2016] AC 1172
In unfair relationship claims under s.140A-B CCA, the burden of proof is on the creditor to prove the relationship is not unfair.
Consumer Credit Act 1974, s.140B(9)
High default interest rates may be legitimate in high-risk lending situations with minimal security.
Notting Hill Finance Ltd v. Hussein [2019] EWCA Civ 1337
Outcomes
Appeal allowed in part.
The trial judge erred in rejecting the penalty and unfair relationship defenses solely due to lack of evidence. The issue of penalty is one of construction, and the burden of proof regarding unfair relationships rests with the creditor.
Retrial ordered on penalty and unfair relationship issues.
The appellate court was not in a position to decide these issues at first instance due to the lack of evidence and procedural errors at the trial.