The Court of Appeal has this morning handed down its judgment in CFL Finance Ltd v Gertner [2021] EWCA Civ 228, concerning the issue of what is ‘credit’ in the context of an agreement by way of Tomlin Order. The decision has significant repercussions for litigators settling a claim.

Giving the lead judgment Newey, L.J. considered the appeal raised “an important and difficult issue as to when, if ever, the Consumer Credit Act 1974 (“the CCA”) applies to agreements settling litigation.”  Popplewell L.J. agreed, with David Richards L.J. further noting it to be a “point of real difficulty”.

Jonathan Kirk QC, Fred Philpott and Lee Finch appeared on behalf of the Appellant before the Court of Appeal. The Respondent was not represented.


The case had a very long history, primarily relating to issues of insolvency law. An IVA was proposed by Mr Gertner. This was successfully challenged against him.  The case went to the Court of Appeal and, following that, a new IVA was proposed.

It was asserted on behalf of Mr Gertner that the Tomlin Order settlement on which the bankruptcy petition was based was a regulated consumer credit agreement. Accordingly, it was alleged to be unenforceable the absence of an Office of Fair Trading licence (as was then required) and the creditor’s failure to comply with the documentary requirements of the CCA.  Further, on the basis that the agreement was a regulated consumer credit agreement, the failure to give statements and notices under sections 77A and 86B of the CCA further rendered the agreement unenforceable and interest referable to the period of non-compliance irrecoverable.  The rate of interest and length of time meant that, by the time of the appeal, the interest in question ran to tens of millions of pounds.

Decisions below

When the matter was argued at first instance before Chief Insolvency and Companies Court Judge Briggs ([2019] CTLC 229). He held that the schedule to the Tomlin Order did not involve the granting of credit.  A bankruptcy order was made and Mr Gertner and the assignee of the major creditor appealed to the High Court which resulted in the hearing before Marcus Smith J. ([2020] CTLC 241) (in which Kate Urell of Chambers also appeared and was successful in the arguments relating to consumer credit and penalties).

The Judge at first instance had held that the fact that the agreement was constituted in a schedule to the Tomlin Order resulted in the agreement not being a regulated consumer credit one.  He also held that there was no credit because its effect was merely to reschedule Mr Gertner’s obligations.  On appeal Marcus Smith J. said he could “See no reason why the fact that a contractual agreement is scheduled to a Tomlin Order would cause the Consumer Credit Act to cease to apply if it otherwise did apply”.

Marcus Smith J. said that the underlying debt was as a result of Mr Gertner giving a guarantee. Thus, “the effect of the Settlement Agreement was to dispose of CFL’s claims against Mr Gertner under the guarantee and replace them with a new (primary) obligation … There is nothing in the Settlement Agreement that involves the provision of any kind of credit or financial accommodation.”

Court of Appeal’s analysis

Both Marcus Smith J. and the Court of Appeal rejected one of the tests which Judge Briggs used being the “essential character test” relating to the provision of credit (as per McMillan Williams v. Range [2004] 1 WLR 1858). However, Newey L.J. noted Lord Hobhouse’s comment in Dimond v. Lovell [2002] 1 AC 384, that there are many other circumstances where payment may be deferred but it does not amount to credit.

A major factor in the Court’s analysis concerned the question of consideration for the deferment of the debt.  It was said: “On the other hand, the giving up by a defendant of a defence which he himself recognises to lack even a bare chance of success cannot of itself constitute consideration.” (at [37]).

Further, at [48] and [50]:

“… where a creditor agrees to accept instalments in place of a claim for immediate payment to which there was, in truth, no defence, there is a common sense for considering a debt to have been deferred and so the debtor to have been provided with “credit”.” 

“It seems to me that there must come a point at which the existence of a debt is sufficiently clear that an agreement providing for future payment will confer “credit” within the meaning of the CCA regardless of whether the debtor has denied that anything is due.”

More broadly the Court raised concerns that the approach favoured by Marcus Smith J. ran risk of undermining the protection afforded to debtors by the CCA.

Perhaps the key concept introduced by the Court’s of Appeal decision is of a “dividing line” between a debt versus a claim. In particular, at [51] and [52]:

“There is room for argument as to quite where the dividing line is between a debt (in relation to which the CCA could apply) and a mere claim (to which it could not).  One possibility is that a debt should be considered to exist when the only defence advanced is clearly invalid in law.”

“Not having the benefit of adversarial argument, I do not think we should express a concluded view on exactly where the dividing line lies unless that is necessary to resolve Mr Gertner’s cross-appeal, and I do not think it is.”

The reason for this was that the defence put forward by Mr Gertner did not “have even a fair chance of success”.  There was therefore a genuine triable issue in the bankruptcy proceedings as to whether the agreement was within the CCA and hence unenforceable for non-compliance with one or more of Sections 40, 61-64-78A and 86B of the CCA.  The defence to the bankruptcy petition was therefore “disputed on genuine and substantial grounds”. 


The decision is therefore one of substance which is likely to have a wide-ranging impact. It is not difficult to envisage numerous circumstances in civil litigation where disputes which have been previously settled are now challenged under the CCA. For example:

  • A landlord may agree with a tenant (who is an individual) as to the payment of arrears by instalments. It may be, because the landlord does not carry on a consumer credit business, that most of the legislation under the CCA will not apply but it may be that the unfair relationship provisions in Section 140A will apply.
  • An agreement between an existing creditor and debtor to clear arrears under a consumer credit agreement by instalments may now, of itself, constitute a regulated consumer credit agreement. Although there would be no question of lack of authorisation, it may be that the documentary requirements of the CCA may not have been complied with. For example, in relation to a modifying agreement under section 82(2) or a re-finance under section 13(b).

The context in which the appeal arose (i.e. the setting aside of a bankruptcy petition) means that the issues which arose are by no means settled by the decision. In particular, where the “dividing line” might be drawn in future cases, which question has echoes of Lord Sumption’s ‘tipping point’ in Plevin v Paragon Personal Finance Ltd [2014] WLR 4222.

The full judgment can be read here: CFL Finance Limited v Gertner

NLJ article on the CA’s decision here: NLJ Gertner

Report by Thomas Samuels