Evans v Cherry Tree Finance Ltd & Anor

Where a lender concedes that any borrowing purpose outside the borrower’s trade, business or profession is sufficient, mixed-purpose borrowing may qualify for consumer protection. The non-business purpose need not predominate.

A personal obligation arising from a divorce settlement is a private purpose, even if the borrowing also benefits or preserves a business. The relevant purposes are assessed objectively from the parties’ pre-contract dealings. The court left the true construction of the statutory consumer definition for a future case.

Evans v Cherry Tree Finance Ltd & Anor concerned a secured credit agreement used to pay the claimant’s former wife’s interest in jointly owned property and to refinance an existing mortgage. The property contained both the claimant’s antiques restoration business and his home.

The claimant defaulted, and the lender recovered an early redemption penalty from the sale proceeds. HHJ Kaye QC held that the agreement was a consumer agreement and that the penalty term was unfair. The lender appealed, arguing that the objective purpose of the borrowing was exclusively commercial. The central issue was whether any purpose outside the claimant’s trade, business or profession was sufficient on the lender’s concession.

Appeal dismissed. Lord Justice Tuckey gave the leading judgment. Lord Justice Rimer agreed, and Sir Anthony Clarke MR agreed while adding a qualification.

1. The appeal proceeded on the lender’s concession that, if any purpose of the borrowing was outside the claimant’s trade, business or profession, he was a consumer. The court therefore did not need to decide the true construction of the statutory consumer definition.
2. The purposes of borrowing were to be ascertained objectively from the parties’ dealings up to the making of the loan. This was a question of fact.
3. On the concession, a mixed-purpose loan qualified where one purpose was personal or private. It did not matter whether that purpose was predominant or merely subsidiary.
4. Payment of the former wife’s equity under a divorce settlement was a personal purpose, not a business purpose, although it could have a business effect. The purpose of refinancing the existing mortgage was equivocal because the lender had not been told that it was commercial and had not asked.
5. The claimant’s failure to disclose that he lived at the property did not alter the result. He had not misrepresented the position, and the lender could have inferred from the information supplied that he both worked and lived there. Different considerations might arise if there had been a misrepresentation.
6. Sir Anthony Clarke MR stated that the true meaning of the consumer definition remained for a future case. He did not suggest that the lender’s concession was wrongly made.

The judgment below, including the order for repayment of the early redemption penalty with interest, therefore stood.

• Court of Appeal (Civil Division) On 6 February 2008, the court dismissed the lender’s appeal. The judgment is reported at [2008] EWCA Civ 331.
• Leeds District Registry HHJ Kaye QC, sitting as a deputy High Court judge, held that the claimant was acting as a consumer and gave judgment for repayment of the early redemption penalty with interest.