Unfair creditor relationship? The bank wins again

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Unfair creditor relationship? The bank wins again

Published On: 1 July 2015

  • As is common practice with loans for this purpose, the terms of the loan agreement were negotiated on behalf of all the partners of the firm by the firm's financial officers, who the Bank was entitled to assume were acting in the best interests of the partners;
  • As an experienced and senior partner of an international law firm, McMillan was not a naïve or vulnerable consumer - the Bank could reasonably expect him to understand the clear terms of the loan agreement, and assess the financial implications of doing so;
  • The Court rejected an argument that the law firm had caused McMillan to enter into the loan agreement under duress. The Bank was entitled to assume, as it did, that McMillan freely and voluntarily entered into the agreement;
  • There was no question of misrepresentation by the Bank;
  • Rejecting an argument that the Bank made no assessment of McMillan's ability to repay the loan, the Court found that the Bank was entitled to assume that McMillan's earnings, as a senior partner in a law firm, would put him in a position to repay the loan;
  • The terms of the loan were not unusual, unfair or disadvantageous to McMillan;
  • McMillan was under no obligation to obtain finance from the Bank;
  • The Bank had no reasonable grounds to suspect the financial state of the law firm was such that the loan might not be repaid, and was entitled to assume McMillan, as a partner, had at least as much knowledge of the finances of the firm as was available to the Bank.


This judgment should provide further comfort to lenders that commercial lending continues to be protected by a common sense approach by the Courts. In particular, had the Defendant's case been successful, there would have followed a reassessment of law firm partners' loans.

That said, whilst the Court found evidence given by the Bank's relationship director was commendable, the Court did not seem able to rely on the evidence of McMillan, whom the Court felt was not "careful and straightforward". With this in mind, and with such a wide discretion available to the Court in applying s.140A CCA, as set out by the guidance in Plevin, lenders should continue to be wary.