Jurisdiction(s):
United Kingdom

England and Wales: Consumer loan bankruptcy petitions defeated by unfair relationship and penalty default interest; county court to assess under CCA 1974 s140B (Ciddy v Natalia)

Published on: 31 July 2025

Published by a LexisNexis Restructuring & Insolvency expert

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Article summary

Ciddy Ltd v Natalia [2025] EWHC 1616 (Ch) What are the practical implications of this case?

Ciddy v Natalia will be of keen interest to practitioners acting for both lenders and borrowers, as it affirms that a debtor may resist a bankruptcy petition grounded on a credit agreement where the contractual terms are capable of being impugned, or where the character of the relationship arising from that agreement can properly be attacked as unfair. That conclusion applies whether the challenge is aimed at the small print itself or at the fairness of the dealings generated by the agreement between the parties. The judgment underscores that lenders must stay alive to how they treat borrowers on an individual basis, attending to borrower-specific circumstances throughout the borrowing journey, from initial arrangement through to enforcement. It also stands as a clear reminder that clauses imposing a high default rate of interest may amount to an unenforceable penalty, and that a borrower’s specific attention must be drawn expressly to any such provisions. For those representing borrowers, the ruling importantly confirms that bankruptcy proceedings brought in respect of a consumer loan can be challenged on the footing that an unfair relationship exists between the petitioner and the...

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