Baynes v Financial Services and Pensions Ombudsman

• Jurisdiction: Ireland
• Judge: Mr Justice Cian Ferriter
• Judgment Date: 02 December 2022
• Neutral Citation: [2022] IEHC 678
• Court: High Court
• Docket Number: Record No. 2021/JR 907

Between:

Joseph Baynes and Ann Baynes

Applicants

and

Financial Services and Pensions Ombudsman

Respondent

[2022] IEHC 678

Record No. 2021/JR 907

THE HIGH COURT

JUDICIAL REVIEW

Judicial review – Misconduct – Financial Services and Pensions Ombudsman Act 2017 s. 51 – Applicants seeking an order of certiorari quashing the respondent’s decision declining to investigate the applicants’ complaint as to misconduct by a bank – Whether the respondent’s decision was unreasonable and irrational

Facts: The applicants, Mr and Mrs Baynes, applied to the High Court seeking an order of certiorari quashing the decision of the respondent, Financial Services and Pensions Ombudsman (the FSPO), of 5 August 2021 declining to investigate the applicants’ complaint as to misconduct by a bank on the basis that the complaint was out of time. The complaint was lodged in April 2020 and related to allegations of mis-selling in the provision of a mortgage loan to the applicants in October 2007 by IIB Home Loans, a subsidiary of KBC Bank (KBC). In the decision, the FSPO determined that she did not have jurisdiction to investigate the applicants’ complaint on the grounds that the complaint had not been made within the time limits set out in s. 51 of the Financial Services and Pensions Ombudsman Act 2017 and there was no basis for an extension of time as the requirements for such an extension in s. 51 had not been met. The applicants contended that the decision was unreasonable, irrational and failed to properly consider the provisions of s. 51(2)(a)(ii) and s. 51(2)(a)(iii) of the 2017 Act. The FSPO contended that the decision was not unreasonable or irrational and that the relevant statutory provisions were lawfully applied to the facts of the case.

Held by Ferriter J that in her decision under s. 51(2)(a)(ii), the decision-maker held that the applicants “were on notice of the issues in relation to the suitability of their mortgage and the repayment capacity in 2011” when they arranged the consultation with the Money and Budgeting Service. Ferriter J noted that the evidence of the issues they were on notice of appeared in the letter of 5 April 2011 from the applicants to KBC; the letter referenced “unforeseen changes in our personal position” being that Mrs Baynes was not working but was in receipt of disability benefit with the consequent impact on their ability to meet the loan repayments. Accordingly, Ferriter J held that there was evidence before the decision-maker as to their inability to repay at that time. He held that there was also evidence contained in the KBC submission before the FSPO to the effect that the bank had noted in January 2011 that “it seems only exit strategy on this account is to sell property and downsize as client income will never be at level to support the full repayment and clear the balance owed in 10 years, clients are willing to look at this but would only review this in 5 years time when their daughter finishes college and is no longer dependent” i.e. that their home was on the line at that point. Accordingly, Ferriter J held that there was clearly evidence from which a view could be reasonably formed that the applicants ought to have been aware by that point that the bank had failed to properly assess their suitability for the loan in the first place. Accordingly, he did not believe that the applicants had made out any unlawfulness as regards the FSPO’s decision on their application for an extension of time under s. 51(2)(a)(ii). Ferriter J did not believe it was a sufficient answer for the FSPO to say that following the rejection of the case under s. 51(2)(a)(ii), there was nothing left to expressly address in the s. 51(2)(a)(iii) application. He held that, while put in net terms, a separate case had been made under s. 51(2)(a)(iii) and required to be meaningfully addressed. He held that no elaborate reasoning was required but some reasoning was required as to why that case was not regarded as satisfying the test; none at all was provided. In his view, that aspect of the decision was unlawful in failing altogether to demonstrate any engagement with the case made under that subsection.

Ferriter J held that the FSPO’s decision under s. 51(2)(a)(ii) was lawfully arrived at but her decision under s. 51(2)(a)(iii) was not lawfully arrived at.

Application granted.

JUDGMENT of Mr Justice Cian Ferriter this 2 ^nd day of December 2022

Introduction

1 In these judicial review proceedings, the applicants seek an order of certiorari quashing the respondent's decision of 5 August 2021 declining to investigate the applicants' complaint as to misconduct by a bank on the basis that the complaint was out of time (“the decision”). The complaint was lodged in April 2020 and related to allegations of mis-selling in the provision of a mortgage loan to the applicants in October 2007 by IIB Home Loans, a subsidiary of KBC Bank.

2 In the decision, the respondent (the “FSPO” or “the Ombudsman”, as appropriate) determined that she did not have jurisdiction to investigate the applicants' complaint on the grounds that the complaint had not been made within the time limits set out in s. 51 of the Financial Services and Pensions Ombudsman Act, 2017 (“s.51” and “the 2017 Act”) and there was no basis for an extension of time as the requirements for such an extension in s.51 had not been met. The applicant contends that the decision was unreasonable, irrational and failed to properly consider the provisions of s.51(2)(a)(ii) and s.51(2)(a)(iii) of the 2017 Act. Those provisions empower the FSPO in defined circumstances to extend the time limits otherwise applicable for the making of complaints to the FSPO under the 2017 Act in relation to the conduct of financial service providers relating to long-term financial service products (such as typical mortgage loans). The FSPO contends that the decision was not unreasonable or irrational and that the relevant statutory provisions were lawfully applied to the facts of the case.

Background

3 The relevant factual background to the matter is as follows. The applicants (who are husband and wife) took out a loan with IIB Home Loans, a subsidiary of KBC Bank (“the provider”, “the bank” or “KBC”, as appropriate) on 19 October 2007. The loan was in the amount of €150,000 and was for the purpose of paying a deposit on the acquisition of an investment property in Portugal. At the time of the loan, the first applicant was 62 and the second applicant was 57. The first applicant was unemployed and the second applicant was earning some €2,000 net per month. The applicants mortgaged their principal private residence in Dublin as security for the loan. The loan was initially interest-only for twelve months, although this interest-only period was subsequently extended. The loan was to be repaid in thirteen years, i.e. at a time when both applicants would have been beyond retirement age. The loan facility letter contained the usual warnings about the applicants' home being at risk if they did not keep up repayments on the loan. The applicants had a solicitor who assisted them with the execution of the loan and the mortgage. The applicants signed a form of acceptance notice in which they accepted that they had been advised on the letter of offer and the lender's standard form of mortgage by their solicitors. The loan was in fact procured through a broker at the time.

4 It appears that the purchase of the Portuguese property did not go through as the applicants could not raise finance in Portugal and the deposit they had paid was then forfeited. The applicants subsequently ran into difficulties in meeting their repayments on the loan. It appears that this happened in 2011 when the interest-only period came to an end. The applicants contacted the Money and Budgeting Service (“MABS”) regarding the loan in 2011, after they had run into difficulty in servicing the debt. A restructuring agreement was reached with KBC between 2011 and 2014. A further deal was done between 2014 and 2019. The applicants were then introduced to Mr. Ben Hoey, a banking expert who advises individuals with distressed loans. He advised the applicants at the end of December 2019 that the loan that had been sold to them by the bank was inappropriate for their purposes on the basis that it was not suitable for them as they would never realistically have had the capacity to repay it and the bank was in breach of its obligations to assess their suitability for the loan at the time of its grant. The applicants say, as a result, that it was only at that point that they realised they had been mis-sold the loan.

5 Before addressing the complaint made by the applicants to the bank and thereafter, the FSPO, it is useful to briefly sketch the material provisions of the 2017 Act.

The 2017 Act

6 The Office of the FSPO was established by the 2017 Act. The 2017 Act (in s.2) defines a “ complaint” as a complaint made in accordance with the Act in relation to the “ conduct of a financial service provider… specified in section 44(1)(a) and (b)”. Section 44(1)(a)(i) deals with complaints to the FSPO about, inter alia, “ the conduct of a financial service provider involving the provision of a financial service by the financial services provider”.

7 Section 50 deals with the jurisdiction on the FSPO. Section 50(2) provides that “ where a question arises as to whether the Ombudsman has jurisdiction, under this Act, to investigate a complaint, the question shall be determined by the Ombudsman whose decision shall be final”.

8 Section 60 addresses the redress that may be ordered by the FSPO where a complaint is upheld and provides that the FSPO may direct the financial services provider to, inter alia, “ review, rectify, mitigate or change the conduct complained of or its consequences”, “ pay an amount of compensation to the complainant for any loss, expense or inconvenience sustained by the...