Court grants liberty to hear fairness of guarantee and charges despite prior judgment.

THE HIGH COURT

[2025] IEHC 747

[2019/303SP]

BETWEEN

PEPPER FINANCE CORPORATION (IRELAND) DAC

PLAINTIFF

AND

ANNE COLEMAN

DEFENDANT

Judgment of Ms. Justice Siobhán Stack delivered the 18th day of December, 2025.

Introduction

1. This is an application for an order for possession of certain lands comprised in two folios in the County Wexford, of which the defendant is registered owner.

2. In 2008, the defendant acted as guarantor for loans advanced by Bank of Ireland to her son and daughter-in-law and, for that purpose, entered into a written guarantee dated 19 February, 2008, by virtue of which she has guaranteed those debts up to a total of €820,000.

3. Subsequently, the defendant granted a charge over the lands comprised in both folios by way of deeds of charge dated 19 January, 2009. Those deeds of charge provide for a right on the part of the mortgagee to enter into possession of the charged lands and Bank of Ireland subsequently instituted these proceedings seeking possession for the purposes of selling lands.

4. Clause 22 of the guarantee provides that the bank should be free to assign and/or transfer the benefit of the guarantee to a third party and, in due course, the loans to the plaintiff’s son and daughter-in-law and the benefit of the guarantee were transferred to the plaintiff, who became substituted into these proceedings as plaintiff on 20 January, 2025.

Issues in the application for possession

5. The two principal bases for resisting the application for possession on a summary basis and seeking to remit the proceedings to plenary hearing were advanced on behalf of the defendant at hearing. First, it was argued that defendant granted the two charges by reason of the undue influence of her son and, secondly, it was argued that the defendant was a “consumer” within the meaning of Council Directive 93/13/EEC of 5 April 1993 on Unfair Terms in Consumer Contracts (“the Directive”), which has been incorporated into Irish law by European Communities (Fair Terms in Consumer Contracts) Regulations, 1995 (S. I. No. 27 of 1995) (“the Regulations”). It is contended that the entire guarantee agreement is “unfair” within the meaning of the Directive and/or Regulations because the defendant herself derived no benefit from it whatsoever. A significant point of dispute between the parties is whether the core terms of the guarantee can be challenged by reference to the Directive as, generally, this is precluded by Article 4 (2) of its terms.

Undue Influence

6. One of the striking features of the case is that the defendant did not have any independent legal advice before entering into the guarantee in February, 2008. At a meeting in the Bank’s premises on the day the guarantee was signed, she also signed a short handwritten note which states: “I understand the nature of the liability incurred and I have no wish to be independently advised by a solicitor. Anne Coleman.”

7. Counsel for the plaintiff is rightly critical of what appears to be contradiction between paras. 17 and 19 of the defendants replying affidavit: in para. 17 the defendant states that she wrote out the entire note at the direction of a named bank official and then signed it, whereas at para. 19 she states that the bank official wrote the note and that she simply signed it thereafter. It is unsatisfactory that the affidavit is not consistent on how this note came to be written. However, the substance of the note is not denied and, on the evidence at present, at least, there is no doubt that the defendant did not have the benefit of independent legal advice before she signed the guarantee.

8. It is also not in dispute that the guarantee was not a commercial transaction from the defendant’s point of view as she was guaranteeing repayment of loans advanced to her son and daughter-in-law. In my view, that distinguishes the case from a situation where a spouse (usually the wife) guarantees the other spouse’s business debts or guarantees loans to be advanced to a company of which she is a shareholder. In those cases, it does not necessarily follow that the guarantee is truly non-commercial, as the wife may well derive an indirect benefit from the advancement of the loans to the company or to the spouse on whom she depends for her living.

9. But in this case, it does not appear to be in dispute that, while the defendant was registered as owner of the lands, they were in fact being farmed by her son, the defendant’s husband having died very prematurely. It appears that the defendant had been a widow for the previous 22 years. While she was, as of 2008, aged only 58 and could hardly be said to be elderly, and while the affidavit is sparse on the nature of the relationship with her son, from the limited averments which have been put before the court, it does seem that the defendant may have been financially dependent on her son or that, at the very least, he was in control of the lands which were registered in her name. This latter point is not made clear. But it is certainly the case that the defendant herself did not benefit from the loan in any way and why the defendant would provide the guarantees and charges is not readily explicable other than by reference to her agreement to provide them at the request of her son.

10. In those circumstances, were there evidence of undue influence on the part of the defendant’s son, to the extent that the defendant could be said to have been pressurised into providing the guarantee and charges, the defendant would have a defence on the basis of Ulster Bank v. Roche [2012] IEHC 166, [2012] 1 I.R. 765 where Clarke J. (as he then was) stated at p. 780: “A regime which places no obligation on a bank to take any steps to ascertain whether, in the presence of circumstances suggesting a non-commercial aspect to a guarantee, the party offering guarantee may not be fully and freely entering into same, gives insufficient protection to potentially vulnerable sureties.”

11. In this case, the bank was aware that the defendant was furnishing a very extensive guarantee without the benefit of independent legal advice. Whether the defendant was directed to write out the note in full or whether she signed a note written by the bank official in question is immaterial: her evidence is that, in one fashion or another, the bank required the defendant to sign a note confirming that she was not in fact going to get independent legal advice. The defendant claims, in effect, that this was insisted upon and suggests that pressure was put on her not to get legal advice. If so, then that might even ground a defence that the defendant came under pressure from the bank to provide the necessary security. Whether that is even being asserted is unclear, given the contradiction in the defendant’s affidavit, and in the light of that uncertainty, it is not appropriate to exercise my discretion to refer this to plenary hearing as the required factual basis to justify a plenary hearing is absent.

12. In any event, by reason of the fact that this was – from the defendant’s perspective – a non-commercial transaction, and by reason of the fact that the bank was well aware that she had not had any legal advice, the bank are likely to be found to have notice of any undue influence which was exercised by the defendant’s son over her. The facts are entirely distinguishable from a case where, although a guarantee may have been procured by undue influence, the bank required written confirmation from a solicitor that independent advice had been given to the guarantor: see Everyday Finance DAC v. Flood [2024] IECA 8.

13. That begs the question as to whether sufficient evidence of undue influence has been tendered. In Roche, Clarke J. found that there had in fact been undue influence, and indeed there was evidence of a clinical psychologist to the effect that the guarantor was subject to the coercive control of the principal debtor.

14. In this case, the affidavit evidence is extremely thin, consisting of a single averment that: – “Its important to note that I had been a widow for around 22 years at that stage and my son Paul was really the head of the household at material times. Due to the pressure I was under, I felt I had to sign the documents, namely the guarantee and the alleged mortgages, and I feared for the consequences of what might happen if I did not do so in each situation.”

15. The defendant also refers to the “extreme pressure I felt was being applied from [the named bank official]… .”

16. Finally, she states: –

“When it came to the signing of the alleged Mortgages, I felt under the same pressure at all material times. I say and [believe] that my consent to do so was seriously undermined and impaired due to what I now understand is coercive control and/or undue influence.”

17. In general, bare assertions of this kind are not sufficient to justify referring a matter to plenary hearing. An allegation of undue influence is a serious one, and Order 19, rule 5(2) requires that, where it is pleaded, sufficient facts and particulars, including if necessary dates and times, must be given in the pleadings. The matters on affidavit at the moment are completely unparticularised. It would be pointless to refer the proceedings to plenary hearing on this basis as the defendant would be unable, it seems, to provide the required particulars in the statement of claim that would be directed as a consequence of such remittal.

18. I also note that in the affidavits sworn for the purposes of the summary proceedings, no allegation of undue influence is made. However, those affidavits are not evidence in these proceedings. The key issue is that the defendant has not raised this issue above the level of bare assertion. If the alleged undue influence were the only potential defence, therefore, I would grant possession at this point.

19. That is not the end of the matter, however. Closely related to undue influence is the concept of an unconscionable bargain.

20. In my view, the circumstances in which this guarantee and these charges were executed by the defendant potentially falls within that concept. In Re Cox deceased [2023] IEHC 100, at para. 33, this Court (McDonald J.) approved the following as a correct statement of the law in this jurisdiction:

“where one party is at a serious disadvantage by reason of poverty, ignorance and some other factors such as old age, so that unfair advantage may be taken of that party. The court will intervene particularly where a transfer of property is made for no consideration at all or where the consideration represents an undervalue and where the transferee acts without the benefit of independent legal advice.”

21. At para. 34, he also cited with approval the description of the circumstances which will warrant intervention on the part of the court given by Kitto J. in Blomley v Ryan [1956] HCA 81, [1956] C.L.R. 362 at p. 415: “whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.”

22. It is difficult not to be somewhat troubled in this case by fact that this defendant, whose personal circumstances are referred to in the averments already quoted above, seems to have ended up mortgaging valuable lands to secure loans which were not even advanced to her, but had no legal advice before taking on such extensive liabilities. She herself was not engaged in speculative investment and therefore seems to have no experience herself of such transactions, and her only role seems to have been to provide the security. Furthermore, the deeds of charge upon which the plaintiff now relies were signed 11 months after the guarantee, on 19 January, 2009. I think the court can take judicial notice that, by this point, the financial crash was well underway, and the viability of some (if not all) of the major banks in the country was in doubt as a result of poor lending practices. It is entirely possible that the bank itself was under severe pressure to perfect the security for the loans advanced to the defendant’s son and daughter-inlaw.

23. The facility letter dated 8 February, 2008, on foot of which the loans were advanced to the defendant’s son and daughter-in-law, was exhibited in the summary proceedings which resulted in judgment being entered in 2011. The defendant did not sign that letter. It is therefore unclear whether or on what basis the defendant owed any obligation to the bank, as of January, 2009, to provide the relevant charges.

24. More specifically, the defendant alleges that she was never told by the bank prior to signing the deeds of charge that it had already sought to call in the principal debt owed by her son and daughter-in-law in September, 2008. Insofar as the defendant was not already obliged to provide those charges, then arguably, the bank should have informed the defendant that it was already calling in the principal debt so that she could make a fully informed decision as to whether or not to provide the charges.

25. In view of the steps I propose to take pursuant to the Directive, it is not necessary at this point to remit the application for possession to plenary hearing.

26. However, in exercise of my discretion at this stage, I propose to give liberty to the defendant to file a further affidavit on her means of livelihood and assets at the time of the giving of the guarantee, as well as any other matters material to the issue of whether this was an unconscionable bargain. For the reasons set out below, it will be necessary in any event, for the purposes of the Directive, to tender further evidence relating to the circumstances in which the guarantee and charges came to be granted. Those circumstances are likely to be material also to a consideration of this issue. For that reason, it is not appropriate to come to any concluded view at this point.

Unfair Terms Directive

27. In my view, it is probable that the defendant was, in providing the guarantee and the related charges, a “consumer” for the purposes of the Directive and the Regulations. The loan was advanced to her son and daughter-in-law, apparently to permit them to engage in speculative residential development. However, the defendant was not engaging in that activity and was merely to provide security for the loans. She herself was not engaged in any trade or business and was assisting – as she saw it at the time – her son and daughter-in-law. It follows that she must be regarded as a “consumer”. Allied Irish Banks plc v. O’Callaghan [2020] IECA

318 is distinguishable as, in that case, the defendant who was claiming to be a “consumer” was borrowing lands in order to invest in property in Slovakia. Here, the defendant was providing a guarantee and furnishing security on a voluntary basis to assist her son and daughter-in-law and the transaction was unrelated to any trade or business carried on by her.

28. Counsel for the defendant squarely advanced his argument under the Directive on the basis that the entire guarantee was “unfair” as the defendant derived no benefit from it, with a similar unfairness applying to the charges. The plaintiff argues that the defendant cannot make that argument having regard to Article 4(2) of the Directive as this precludes an argument that the entire contract is invalid. Article 4(2) provides: “Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies in exchange, on the other, in so far as these terms are in plain intelligible language.”

29. I would add that Article 6(1) of the Directive provides: “Member States shall lay down that unfair terms used in a contract concluded with a consumer by a seller or supplier shall, as provided for under their national law, not be binding on the consumer and that the contract shall continue to bind the parties upon those terms if it is capable of continuing in existence without the unfair terms.”

30. The purpose of the Directive is, therefore, to render invalid any individual terms of a contract which are unfair, and not to set aside the entire contract, provided the contract is capable of continuing in existence without them. This is presumably why Article 4(2) excludes “the main subject matter of the contract” or the “adequacy of the price and remuneration”. However, this exclusion is subject to the precondition that the terms as to the “main subject matter” or the “price and remuneration” must be “in plain intelligible language”.

31. I think it is at least arguable that a lengthy guarantee document written in legal language is not “in plain intelligible language” where the consumer receives no legal advice as to the meaning of that document. A lay person could not be expected to review either the guarantee or the deeds of charge without legal advice and these documents could not be said to be either “plain” or “intelligible” without having the benefit of a lawyer’s advice on its meaning and effect.

32. For that purpose, the Annex to the Directive sets out examples of terms which may be regarded as “unfair” and which would, therefore, be void. However, none of these seem to apply here. For example, in this case, since the proceedings were instituted, the current plaintiff was substituted in having acquired some of the bank’s loan book in the interim. As a result, had judgment not already been entered in favour of the Bank, the example at para. 1(p) of the Annex to the Directive, would potentially have been relevant as it gives as an example of an unfair term in a consumer contract one which has the object or effect of: – “giving the seller or supplier the possibility of transferring his rights and obligations under the contract, where this may serve to reduce the guarantees for the consumer, without the latter's agreement….”

33. I understand that borrowers whose loans have been acquired by non-bank non-lenders frequently pay higher interest rates by reason of the transfer of their loans and this has been the subject of consideration by the Oireachtas recently: see, The impact of mortgage interest rate rises on non-bank customers (Houses of the Oireachtas, Research Service, 25 February, 2025).

34. However, whether that would give rise to any issue under the Directive and the Regulations is not for consideration in this case. Here, judgment was entered in 2011, before the plaintiff apparently acquired the mortgagee’s rights under the deeds of charge and the right to enforce the guarantee against the defendant. The claim now being made is that, since that time, interest has accrued pursuant to the Courts Act and the assignment of the charge has not resulted in the payment of any higher rate of interest as the result of the sale of the loan to an assignee who might, for example, operate a clause permitting variable interest in a different way: cf. Grant v. The County Registrar for Laois [2019] IEHC 185 where the loan had not been assigned and where, in any event, the interest rate had in any event reduced over the relevant time period.

35. Nevertheless, it remains the case that Article 4(1) of the Directive requires that the fairness of the terms of the guarantee and the deeds of charge should be assessed: “… taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.” [Emphasis added.]

36. That seems to require that I should consider the fairness of the deeds of charge against the backdrop not only of the circumstances in which it came to be signed, but also the circumstances in which the guarantee came to be signed. Any liability which is secured by the charges on the defendant’s lands is “dependent” on the defendant being liable under the guarantee. It also seems from Grant v. The County Registrar for Laois that this court should take some reasonable steps to inform itself of all of the circumstances in which the defendant came to give this guarantee and to provide her lands as security for the very substantial loans being advanced not to her, but to her son and daughter-in-law.

37. At hearing, the plaintiff put the booklets of the proceedings and affidavits in the summary proceedings before the court. Strictly speaking, those affidavits are not evidence in these proceedings. However, I have considered them for the purposes of this judgment. In those proceedings, both the defendant and her son swore affidavits to the effect that they were informed that any liability on foot of the guarantee would be postponed behind the other securities being given for the loans. This was denied by the bank.

38. If indeed it is the case – and again I am making no finding to this effect – that the defendant understood that her guarantee and the charges granted over her lands would not be called upon by the bank until after the other securities were realised, then that is pertinent to a consideration of whether the contract of guarantee was “unfair” within the meaning of the Directive and consequently of whether the charges themselves were “unfair”.

39. I reiterate that any examination of whether the core provisions of the charges were “unfair” rests on the absence of legal advice as, if the defendant had legal advice as to their meaning and effect, they can be regarded as being in “plain intelligible language” and are not subject to assessment for “unfairness” by reason of Article 4(2) of the Directive. However, as she did not have legal advice, the circumstances surrounding the execution of the guarantee and charges need to be clarified. Indeed, it is somewhat disconcerting that, in the summary proceedings, the bank official who dealt with the transaction appears to have believed that the charges were given in January, 2008, when in fact they were executed in January, 2009. On the basis of this mistake as to the date of the charges, she seems to have averred – the relevant averment is not entirely clear - that the defendant had a month to reflect on the giving of the guarantee before it was signed. However, as a matter of practice, I think it would always be the case that the guarantee would be executed at the same time as or before the related security. Otherwise, what would the charge be securing and why would it be granted if the mortgagor was not at the date of execution of the charge liable to the mortgagee for any debt? While it is understandable that there would be a mistake as to dates, this averment by the bank official in question does not give any confidence that the affidavits in those proceedings addressed the underlying reality of how this guarantee and these charges came to be executed by the defendant.

40. Based on that and on the absence of any reference to the defendant’s status as “consumer” or to the Regulations or Directive in those affidavits, it does not appear that there was any consideration in the summary proceedings of whether the circumstances surrounding the execution of the guarantee (which was all that was at issue in those proceedings) could be regarded as “fair” for the purposes of the Directive.

41. I therefore propose to give the parties liberty to file further affidavit evidence to explain in greater detail how the guarantee came to be signed and the circumstances in which the deeds of charge were signed. Any other documentation which is material to the terms of either the guarantee or the charges should also be exhibited, including the documentation which to date has only been exhibited in the summary proceedings.

The Rule in Henderson v. Henderson

42. The plaintiff complains that judgment was entered in 2011 on foot of the guarantee and that to explore any issues surrounding the fairness of its completion is precluded by the Rule in Henderson v. Henderson. However, that is not so much a rule of law as a discretion designed to prevent an abuse of process. Given that the court must act of its own motion pursuant to the Directive, I do not think the Rule in Henderson v. Henderson in any way precludes the court from now taking the necessary steps to inform itself of the matters which require consideration.

43. I think it is evident that that consideration did not take place at the time that liberty to enter judgment was granted in 2011 and, on the authority of Grant, it should occur now. Grant seems, in fact, to anticipate the judgments of the CJEU in Unicaja Banco (Case C-869/19), Ibercaja Banco (Case C-600/19), joined cases SPV Project 1503 and Banco di Desio e della Brianze and Others (Cases C-693/19 and C-725/19), and Impuls Leasing România (Case C- 831/19), which in essence held that, even where there was a prior judgment with an effect similar to that of the Order of this court giving liberty to the plaintiff to enter judgment, and where no consideration of the “fairness” of the terms of the contract was conducted by the court at that stage, the court at enforcement stage is still obliged to undertake that consideration at enforcement stage.

44. In addition, these are proceedings based on the charges rather than the guarantee. This potentially raises additional issues as to the “fairness” of the charges and how the defendant came to execute them almost a year after the provision of the guarantee. That could not have been an issue in the summary proceedings.

Conclusion

45. In exercise of my discretion, I will give the parties another opportunity to inform the court of the full circumstances surrounding the execution of the guarantee in 2008 and the grant of the charges in 2009. This is in pursuance of the court’s duty to examine, of its own motion, the “fairness” of these transactions which, due to the absence of legal advice, were not notified to the defendant in clear and intelligible language, which is required for Article 4(2) of the Directive to apply.

46. The circumstances of the case also suggest that the execution by the defendant of the guarantee and the charges may have constituted an unconscionable bargain.

47. I will hear the parties as to the appropriate directions that should now be made on foot of this judgment.