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Identifying the Irish “consumer”

A recent decision in Stapleford Finance Ltd v Lavelle [2016] IEHC 385 develops the meaning of a “consumer” under Irish law. The fact that a loan is being used to invest in a commercial transaction does not necessarily preclude a borrower from being considered a consumer where the investment is for personal (eg pension) purposes. The purpose of a loan is the key question, but its size is not necessarily determinative of the answer (a large loan could be used for personal purposes). The High Court also concluded that it was not readily apparent that the term “consumer” should be restrictively interpreted for the purposes of national consumer protection legislation. This decision confirms again that financial institutions ought to take a sophisticated approach towards customer categorisation, with it being prudent to fully test factors which might otherwise suggest an individual is a non consumer.

Consumers have added protection under Irish financial services law

Generally under Irish financial services law, a person will be considered to be a consumer when acting outside his or her trade, business or profession. Applying this definition in specific cases has given rise to difficulties and considerable case law in recent times, with borrowers seeking to test the limits of the definition in order to benefit from special protections afforded to consumers and potentially avoid loan repayments.

Ex-trader claims to be a consumer

The defendant was employed as a trader in London for eleven years, during which time he accumulated considerable wealth. He wanted to diversify his savings and put in place pension type investments. He sought advice from Anglo Wealth Management which introduced him to Quinlan Private, a private investment fund. The defendant invested in a number of commercial transactions promoted by the fund but, for tax reasons, he borrowed from Anglo Irish Bank (Anglo) to fund certain investments rather than investing his own money. Overall, he entered into five facility agreements with Anglo, drawing down seven loans in total. When the defendant failed to repay the loans, Anglo sought summary judgment, in the Irish High Court, against him in the sum of close to EUR 6 million.

In his defence, the defendant claimed that he was acting as a consumer for the purposes of all the loans and that the mandatory statutory requirements for the protection of consumers had not been met. Consequently, he argued, the loans could not be enforced against him.

Scale of the borrowing not determinative

Baker J found that the purpose of a loan is its defining or identifying characteristic and not the quantum of the loan, observing that “it is perfectly possible for a person to borrow a very substantial amount of money for the purposes of acquiring a private residence or a holiday home for personal use and in that circumstance, such a person would be readily identified as a consumer.”

This finding is significant as previous cases appeared to suggest that the size of the loan was a factor to be taken into consideration when determining whether or not someone was acting as a consumer.1

A person borrowing to invest in a commercial transaction may still be a consumer

While the plaintiff (to whom Anglo’s rights had been assigned) referred to a number of previous cases in which persons who entered into loans for commercial investment purposes were not considered to be acting as consumers, Baker J did not consider these authority for the proposition that a person who borrows money to make a personal investment in a commercial transaction can never be a consumer. According to Baker J, there were a number of factors that distinguished the present case from those earlier cases. Specifically, the defendant had borrowed so that he could invest in a fund which would own or manage property investments. He did not directly purchase or develop property himself nor was he engaged in the business of the underlying assets.

Baker J held that the question of whether a person who borrows money to make a personal investment in a commercial transaction is acting as a consumer is one that may not readily be determined on a summary hearing.

Meaning of “consumer” does not have to be strictly construed

The plaintiff relied on the judgments of the Court of Justice of the European Union (CJEU) in Benincasa v Dentalkit2 and Gruber v Bay3 to argue that the test of whether or not a person is a consumer must be strictly construed. Both of these cases concerned the Brussels Convention of 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters which allows certain derogations from the general rule on jurisdiction in the case of consumers. The CJEU’s judgments in those cases were partially based on the fact that a provision which derogates from a general rule should be interpreted strictly. According to Baker J, it is not apparent that the definition of a consumer for the purposes of national consumer protection legislation should also be strictly construed.

Parties’ characterisation of the loans not determinative

The plaintiff also relied, inter alia, on a certificate signed by the defendant stating that he was not acting as a consumer and that the relevant facility was being advanced for the purposes of his trade, business or profession. He had also confirmed that he understood the effect and importance of the certificate and was advised to take, and had been given the opportunity to take, separate legal advice.

Baker J observed that it is well established at law that the question of whether a person is a consumer is a matter to be determined objectively and irrespective of the characterisation that the parties have applied. She held that the defendant had made out an arguable defence that he could have been a consumer for the purpose of each of the loans and that the characterisation of the loans was not a matter that should be resolved at summary hearing.

Progress, but not much clarity

For many credit agreements as well as other types of contracts, the question of whether the borrower is acting as a “consumer” can be of critical importance. Consumers are afforded specific statutory protections not available to other borrowers under a diverse array of legislative measures. These additional protections have resulted in a considerable amount of case law on the topic as borrowers seek to use the protections as a shield in enforcement actions.

Baker J’s judgement in Stapleford Finance Ltd v Lavelle4 develops the case law on the significance of the size of a loan and whether a borrower who takes a loan to make a personal investment in a commercial transaction can be acting as a consumer. While the judge’s finding that the size of a loan is not determinant of whether someone is a consumer appears correct, it does not make the assessment of whether a borrower is acting as a consumer any easier.

Further information

This article is part of the European Finance Litigation Review,  a quarterly publication on recent developments in the finance litigation and regulatory sector in key European jurisdictions.  For more information please contact Amy Edwards


1. Ulster Bank Ireland Ltd v Healey [2014] IEHC 9.
2. C-269/95 Benincasa v Dentalkit [1997] ECR I-3763
Case C-464/01 Gruber v Bay [2005] ECR I-439.
Stapleford Finance Ltd v Lavelle [2016] IEHC 385.

Northern Europe