Holyoake v Candy: No Unfair Relationship
In Holyoake v Candy  EWHC 3397 (Ch) the Chancery Division dismissed a claim by a property developer (“Mr Holyoake”) against the defendants, who included the Candy brothers and CPC Group Limited (“CPC”), a company ostensibly owned by Mr Christian Candy. Mr Holyoake had financed the purchase of a development property with an unsecured £12m loan from CPC.
The Court considered a variety of allegations, but those of most interest are: (1) duress/undue influence, (2) abuse of process, (3) breach of the Data Protection Act 1998, (4) penalties and (5) unfair relationship.
Mr Christian Candy had allegedly warned that if Mr Holyoake did not sign a supplemental agreement rescheduling the loan, CPC would create a situation that would be extremely stressful for Mr Holyoake and his wife, saying “you need to think of your pregnant wife” and that he would “feel terrible if anything were to go wrong during the pregnancy for her or the baby” . Mr Candy knew that Mrs Holyoake had previously suffered a miscarriage. Mr Holyoake alleged that this amounted to duress to the person, a cause of action which encompassed a threat of physical violence to a close relation . Nugee J held that although these remarks were “ill-judged”, Mr Candy was “not threatening to do anything in particular” . It was merely a “reference … to what the consequences might be if agreement could not be reached” and did not constitute duress to the person .
The plea of economic duress arose from CPC’s threats of litigation if Mr Holyoake did not sign the supplemental agreements. The essential question was whether the pressure exerted by CPC was illegitimate . CPC was justified in threatening litigation if Mr Holyoake did not sign and therefore there was no economic duress. The reality was that once Mr Holyoake had signed the original loan, with its requirement for minimum net assets of £120m, he was always at risk of CPC taking a tough line and calling an event of default and hence he was always vulnerable to being sued [400-402].
As for undue influence, the paradigm cases concerned the abuse of a relationship of trust and confidence, and the relationship between CPC and Mr Holyoke was the very opposite of this . However, threats and improper pressure could suffice to found a plea of undue influence (RBS plc v Etridge (No 2)  2 AC 773) . Nonetheless, Mr Holyoake relied on the same factual allegations as in relation to his failed plea of duress, so his claim for undue influence was also dismissed .
Abuse of Process
CPC had issued a previous set of proceedings in the hope of achieving a settlement rather than proceeding to trial [419-420]. This was not abusive, unless the claimant was seeking a wholly extraneous benefit not connected with the relief sought, pursuing an ulterior purpose unrelated to the subject-matter of the litigation, or bringing the proceedings as a stalking-horse to coerce the defendant . CPC’s claim had been brought to enforce the loan, and the relief sought was repayment. CPC’s aim to achieve a settlement that would ultimately ensure repayment by some mechanism was well within the ambit of its claim and was not abusive .
CPC had disclosed the existence of its loan to Investec, a financial institution with which Mr Holyoake had ongoing dealings. Mr Holyoake alleged that this constituted unlawful processing of his personal data, contrary to the duty in s4(4) of the Data Protection Act 1998 (“the DPA”) to comply with the First Principle, namely not to process data unless one of the Sch 2 conditions is met, the relevant condition here being that the processing was necessary for the purposes of CPC’s legitimate interests. The Court assumed that CPC would have created some record (computerised or manual) of information about the loan, such that it was “data” within the meaning of DPA s1(1) . However, at the time of the telephone call, Mr Candy did not need to look at that record – he was by then very well aware of the loan. Accordingly, Mr Candy was not processing that “data” when he disclosed the loan. He was disclosing information which was in fact the same information as was recorded in CPC’s records, but without taking the information from the record. The purpose of the Act was to regulate what a data controller did with information stored in a relevant record, not to regulate what a person does with information in his head that has not been derived from the records. [457-458]
Sums payable upon early redemption are not payable upon breach and therefore cannot be penalties – obligations upon early repayment are primary obligations .
As for a £2m extension fee, the event that gave rise to this fee was the breach of the previous agreement, which led to the extension. In a loose sense, therefore, this sum was payable upon default and was an example of the “bad boy penalties” referred to by Mr Christian Candy . However, the previous agreement had not required payment of this fee and Mr Holyoake was not obliged to pay it at all until he entered into the new agreement granting him the extension. Therefore it was a payment in return for consideration, rather than a fee payable upon breach .
In another instance, the extension fee was required by the agreement being breached, and would be set off against the debt thereunder if promptly paid. Here the fee was expressly made payable in return for the extension. Therefore it was not a disguised penalty for failure to pay the specified sum at a certain time in reduction of the debt, but was consideration. [476-477]
The High Court sets out a useful summary of the factors likely to be “relevant” in assessing whether there is an unfair relationship by virtue of (a) the terms of the agreement, (b) the creditor’s conduct before and up to formation and (c) the creditor’s conduct following formation and up to enforcement .
In assessing whether there was an unfair relationship, the Court is likely to be slower to find unfairness in the context of high value lending between commercial parties . To a very large extent Mr Holyoake was the author of his own misfortune and his various deceptions went both to the question of unfairness and to the question of whether relief should be granted  and .
The parties had entered a Settlement Deed purporting to settle Mr Holyoake’s consumer credit claims arising out of conduct prior to the date of that Deed. By obtaining CPC’s agreement to another extension to the loan, the Settlement Deed was itself a credit agreement, or alternatively a “related agreement”. CPC said that the Court should not unpick the Settlement Deed and proceed to consider whether an ‘unfair relationship’ arose, otherwise it would never be possible to settle a CCA claim . The Court identified an obvious danger in holding that any agreement settling CCA claims was effective to oust the Court’s powers under ss140A-B, as it would open the way to lenders routinely requiring borrowers to settle potential CCA claims . Moreover, this was not a bona fide compromise of a genuine issue of fact that went to the applicability of the CCA, but a compromise of any claim Mr Holyoake had under the CCA. Therefore the Settlement Deed was not a jurisdictional bar to the Court considering whether the relationship was unfair, both in the period up to and including the entry into the Deed and thereafter . However, neither should the Deed be ignored – the Court should see whether a bona fide compromise was reached on legal advice and if it was, it should be slow to go behind it .
Ultimately, the Court found that the Deed was a bona fide compromise and should not be disturbed . The Court should not undertake a detailed examination of the merits of the underlying claims, as the whole purpose of the compromise was to avoid that. Therefore Mr Holyoake’s allegations concerning conduct prior to and including the date of the Deed did not fall to be considered. It was academic whether there was no unfairness because those issues had been compromised, or whether no relief should be granted because of the compromise .
In relation to the period after entry into the Deed, Mr Holyoake claimed that the extension fees of £2.5m gave rise to an unfair relationship. If he had not agreed to the terms of the extensions, the whole debt would have become immediately due. It was Mr Holyoake who had requested the extensions and CPC simply set out their terms. Nugee J was referred to Khodari v Tamimi  CTLC 269, where the claimant had charged a 10% fee to a gambler, but that was to reflect the credit risk, rather than the time value of the money. Khodari was not authority that the court’s role is not to regulate large returns, or that the mere size of a charge could not suffice to give rise to an unfair relationship . Charging a fee that was out of line with norms in the industry could by itself be unfair. Here the fees were steep, there was no rationale for their calculation (it was just what CPC thought Mr Holyoake would pay) and each extension had only been for a month or so [518-519] and .
However, Mr Holyoake was not a consumer, but a sophisticated borrower who was seeking to profit from a business venture. what he was buying was not so much credit, but the opportunity to continue to try to achieve a sale. CPC had correctly judged the price he would find it commercially worthwhile to pay . The CCA was not in general intended to enable the Court to intervene in a commercial negotiation between parties who were well able to look after themselves .