Friends First Finance Ltd v Lavelle [2013] IEHC 201

Facts: This judgment was given in relation to two related cases and the defendants were also related by way of marriage. The defendant, Charlotte Lavelle, was claimed by the plaintiff to have borrowed €1.75m for the purposes of investing in a fund held by a private investment firm. Charlotte Lavelle claimed the defence of "non est factum".

The plaintiff also claimed that the defendant Peter Lavelle guaranteed the loan and Peter Lavelle stated that his guarantee was dependent on the validity of the principal contract and that without an enforceable contract, the guarantee was without consideration.


The well-established principle that a contract of guarantee must be supported by consideration was not disputed in this case. It was submitted and accepted that if the loan on which a contract of guarantee is based was not entered into by Charlotte Lavelle, then the guarantee is empty of the essential characteristic of consideration.

Non est factum:

The Judge acknowledged that this defence very rarely succeeds and referred to Allied Irish Bank plc v Higgins and Ors [2010] which set out the elements of a defence of non est factum.

In this particular case, the Judge accepted the evidence of Charlotte Lavelle that at the time that the loan documents were signed, she was aware that a family trust was being set up for her and her children and that she had signed various documents in connection with the establishment of that trust. She had no recollection of signing the documents relating to the loan but accepted her signature as it appeared on the documents. The Judge accepted that she had relied on and trusted her husband completely in relation to the documents she had signed and that there was nothing in evidence that suggested deception on her part.

The Judge also stated that he would regard it as "repellent" that a financial institution could hold someone to a bargain in the borrowing of a huge amount of money when there was no meeting of mind or in person and whereby that individual could truly not be called a borrower as a matter of contract.

The claim of non est factum was upheld.

Consumer Credit Act 1995:

Section 30 of the Consumer Credit Act 1995 was referred to which obliged a lender to forward a copy of the guarantee to a consumer within ten days of the making of the agreement. The judgment also refers to Section 38 of the CCA which confers a discretion on the court to excuse non-compliance with provisions of the CCA but not in respect of Section 30.

Financial Institutions obligations in lending:

The Judge was very critical of how the plaintiff handled the lending process and stated that where a financial institution is seeking to make someone bound by a loan agreement, face-to-face meetings should be held to explore the borrower requirements and ensure that the documents are signed by the correct persons to ensure mutuality of obligations of borrower and lender.

In this case, the plaintiff dealt only with Peter Lavelle and did not know the circumstances under which Charlotte Lavelle signed any of the relevant documents, they never met her, did not know whether she received any of the letters in relation to the borrowing in her name and did not witness the documents. They entrusted a private investment firm to do what they should have done as a matter of procedure and this represented a radical departure from the procedures of the plaintiff financial institution.

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