The question as to who can be said to constitute a consumer has been played out ad nauseum before the courts over the past number of years. This question often appears in circumstances where the party has taken out loans for development purposes, but later claims to have acted as a consumer – such that it could be said that the transaction is one to which consumer protection legislation should apply. For the purposes of this article, we are primarily concerned with the Consumer Credit Act 1995 and the Unfair Terms in Consumer Contracts Regulations 1995 which implemented Directive 93/13/EEC.
Definition of consumer
A number of rather similar definitions of the word ‘consumer’ have been offered through various pieces of legislation. For example, s 2(1) of the Consumer Protection Act 2007 defines a consumer as ‘a natural person who is acting for purposes unrelated to the person’s trade, business or profession’. The Unfair Terms in Consumer Contract Regulations 1995 define a consumer as ‘a natural person acting for purposes which are outside his business.’ Lastly, s 2 of the Consumer Credit Act offers the following definition: ‘A consumer is a natural person acting outside his trade, business or profession.’ One would think that which such uniformity amongst the statutory definitions that the question as to what is a consumer would hardly be litigated at all – but this is far from true.
Higgins v Healy: The ‘private consumption’ test
Looking first to the Consumer Credit Act 1995, the dominant thinking is that for a person to be considered a consumer within the meaning of the Act, the loans which form the centre of the dispute must have been drawn down for personal use. This is what is called the ‘private consumption’ test, and it stems from an obiter comment in the ECJ case of Benincasa v Denkavit (Case C-269/95). This test was then cited with approval by Kelly J in the case of AIB v Higgins  IEHC 219, whereby the defendants had taken out a series of loans for development purposes through a partnership that they had formed. They claimed to have acted as consumers but this was rejected as private consumption test was not satisfied. There was a clear commercial element to the transaction.
A brief divergence from this position occurred in Ulster Bank v Healy  IEHC 96, where Barrett J found that it was at the very least arguable that an accountant for a construction company who had taken out development loans could be considered a consumer for the purposes of the 1995 Act. The rationale driving this decision was that the loan amounts were quite significant when considered in light of his income. The position laid down in Higgins – and indeed the ‘private consumption’ test contained therein – was then re-affirmed in Allied Irish Banks v Fahey  IEHC 334 by O’Malley J and this has been the position since.
As regards the test which is to be employed in deciding whether or not a party is a consumer within the meaning of s 2 of the Consumer Credit Act 1995, it has been contended that the approach laid down in Higgins is here to stay. Writing in a recent edition of the Commercial Law Practitioner, McGovern points to two recent decisions – McCambridge v Anglo Irish Bank Corporation  IEHC 327 and Hogan v Deloitte  IEHC 673 – where the ‘private consumption’ test was favoured as being evidence that this will remain the dominant position.
However, in the November 2019 edition of The Bar Review, Ken Bredin BL laments the ‘remarkably unsuccessful’ record of Irish litigants in invoking ‘consumer-oriented EU Directives’ before the courts in this jurisdiction. Bredin points to the difficulties inherent in surmounting the proverbial first hurdle – ie, satisfying the courts that you have in fact acted as a consumer – are the main reason as to why the rates are so low.
Bredin cites the facts of Hogan v Deloitte as being evidence that the ‘private consumption’ test is overly-restrictive. Here, a man inherited his family home, subject to a life interest which had accrued in favour of his father who remained in occupation. The son took out a mortgage on the property to help his father meet substantial debts which he had accrued over the course of his life. The court held in this instance that the son could not be considered a consumer as he had not drawn down the monies for his own ‘private consumption’.
To adequately deal with situations such as this, Bredin argues that a shift in emphasis is necessary, to focus more on whether the goods have been acquired for a purpose connected to one’s business, trade or profession. He does conclude by conceding that the potential effects of this very slight shift should not be overstated, as most of the cases in this area have been decided correctly – ie, loans totalling millions could hardly be considered consumer transactions as per Higgins.
The Unfair terms in Consumer Contracts Regulations 1995
We turn now the UTCC Regulations 1995, which gave effect to Directive 93/13/EEC. As we know, the effect of these Regulations is that a particular term in a contract which has not been individually negotiated is not binding on the consumer who is a party to the transaction. This is a mechanism for protecting consumers as the vulnerable parties in contracts with large corporate entities where there is a clear imbalance in bargaining power. The question as to who constitutes a consumer for the purposes of these Regulations has been considered in two recent cases involving mortgage contracts.
In Bank of Ireland v McMahon  IEHC 455, the question at issue here was whether the mortgage deed satisfied the requirement for plain and intelligible language contained in Regulation 4. Binchy J held that since the defendant would have received the advice of a solicitor who could explain much of the jargon in the document, it ought to have been clear enough. Moreover, the very suggestion that the 1995 Regulations should apply to a deed of mortgage was found to be an ‘absurd notion’ which could have the potential of undermining the domestic mortgage market.
Likewise, in Ulster Bank v Costelloe  IEHC 289, it was again submitted that a mortgage that a mortgage contract did not satisfy the UTCC Regulations 1995 in the context of possession proceedings which were being maintained in respect of a private residence. Faherty J, while commenting that an argument could be made in favour of viewing mortgagees as consumers, in this instance they knew in very clear terms that ‘the monies they were obtaining were repayable’ – not least because they had retained the services of a solicitor who ought to have explained this to them. Therefore, the salient terms of the mortgage could not be deemed unfair in the circumstances.
Writing in the October 2019 edition of the Law Society Gazette, Mr Justice Barrett points to the fact that many of these cases have taken on board the presence of expert legal advice as an evaluative factor in deciding whether or not a particular contract has strayed into unfairness as being misguided. This is inconsistent with the ECJ’s ruling in Faber (Case C-497/13), whereby the presence of legal assistance was deemed ‘not to alter the effectiveness of the protection of EU law’. Further, failing to scrutinise terms for this reason seems to imply that the advice was adequate and was understood by the consumer or mortgagee in question, which is not always the case.
The author of this post would agree with the argument put forward by Bredin, and suggests that perhaps a test ought to be deployed which looks more strictly to the letter of the statue, as opposed to so heavily relying on Benincasa v Denkavit. This reliance seems all the more strange when one considers that the decision in Faber has been all but disregarded when it comes to the seeming unwillingness of the courts to scrutinise mortgage contracts from the point of view of the 1995 Regulations. Indeed, as Mr Justice Max Barrett has submitted, perhaps we ought to look into placing the ex officio obligation of the courts to scrutinise all contracts from the point of view of the Directive on a legislative footing. This has been done in the UK with the enactment of the Consumer Rights Act 2015.