Danske Bank A/S v Financial Services and Pensions Ombudsman

• Jurisdiction: Ireland
• Judge: Ms. Justice Niamh Hyland
• Judgment Date: 19 February 2021
• Neutral Citation: [2021] IEHC 116
• Docket Number: RECORD NUMBER: 2020 121 MCA
• Court: High Court
• Date: 19 February 2021

In the Matter of Section 64 of the Financial Services and Pensions Ombudsman Act 2017

Between

Danske Bank A/S

Appellant

and

Financial Services and Pensions Ombudsman

Respondent

and

Martin Moore and Martina Moore

Notice Parties

[2021] IEHC 116

RECORD NUMBER: 2020 121 MCA

THE HIGH COURT

Mortgage – Improper conduct – Financial Services and Pensions Ombudsman Act 2017 s. 60(2)(b) and (g) – Appellant appealing against the respondent’s decision – Whether the respondent was entitled to uphold the complaint

Facts: The appellant, Danske Bank A/S, appealed to the High Court pursuant to s. 64 of the Financial Services and Pensions Ombudsman Act 2017 against the decision of the respondent, the Financial Services and Pensions Ombudsman, dated 7 April 2020 (the Decision) upholding a complaint that, when switching to a new fixed rate mortgage in 2006, the complainants were not adequately informed by the bank that the ECB tracker rate applicable to their first loan in 2005 would not be available to them at the end of the three-year fixed period or that they were taking out a new loan. The heart of the appeal against the Decision was that the mortgage documents signed by the complainants made the position clear, that the complainants’ subjective understanding of the documents and wrongful assumptions were irrelevant and that, where there was no illegality identified on the part of the appellant, the respondent was not entitled to uphold the complaint.

Held by Hyland J that this argument failed to recognise the import of the jurisdiction being exercised by the respondent under s. 60(2)(b) and (g) of the 2017 Act, which respectively permit him to uphold a complaint on the basis that the conduct was unreasonable, unjust, oppressive, or improperly discriminatory in its application to the complainant or that the conduct complained of was otherwise improper. Having regard to this jurisdiction, Hyland J held that it was open to the respondent to uphold the complaint under s. 60(2)(b) and (g), irrespective of whether the appellant had acted in accordance with law. Hyland J held that even where the complainants had signed up to the mortgage documentation and where the appellant had no black letter duty under statute, or “soft” law obligation under a regulatory standard, to give information in a specific form as to the redemption of the tracker mortgage and the inability to return to a tracker rate under the new mortgage, the respondent was still entitled to find an ambiguity and lack of clarity in the information provided. Hyland J held that the statutory scheme and the case law on same make clear that the mere absence of a breach of law does not immunise a financial services provider from a finding of unreasonable and improper conduct under s. 60(2)(b) and (g).

Hyland J held that she would refuse the relief sought by the appellant.

Appeal refused.

JUDGMENT of Ms. Justice Niamh Hyland delivered on 19 February 2021

Introduction

1 This is an appeal by Danske Bank A/S (the “appellant”) pursuant to s. 64 of the Financial Services and Pensions Ombudsman Act, 2017 (the “2017 Act”) against the decision of the Financial Services and Pensions Ombudsman (the “respondent”) dated 7 April 2020 (the “Decision”) upholding a complaint that, when switching to a new fixed rate mortgage in 2006, the complainants were not adequately informed by the bank that the ECB tracker rate applicable to their first loan in 2005 would not be available to them at the end of the three-year fixed period or that they were taking out a new loan.

2 The heart of the appeal against the Decision is that the mortgage documents signed by the complainants made the position clear, that the complainants' subjective understanding of the documents and wrongful assumptions were irrelevant and that, where there was no illegality identified on the part of the appellant, the respondent was not entitled to uphold the complaint.

3 I conclude for the reasons set out in this judgment that this argument fails to recognise the import of the jurisdiction being exercised by the respondent under s.60(2)(b) and (g) of the 2017 Act, which respectively permit him to uphold a complaint on the basis that the conduct was unreasonable, unjust, oppressive, or improperly discriminatory in its application to the complainant or that the conduct complained of was otherwise improper. Having regard to this jurisdiction, it was open to the respondent to uphold the complaint under s. s.60(2)(b) and (g), irrespective of whether the appellant had acted in accordance with law. Even where the complainants had signed up to the mortgage documentation and where the appellant had no black letter duty under statute, or “soft” law obligation under a regulatory standard, to give information in a specific form as to the redemption of the tracker mortgage and the inability to return to a tracker rate under the new mortgage, the respondent was still entitled to find an ambiguity and lack of clarity in the information provided. In short, the statutory scheme and the case law on same make clear that the mere absence of a breach of law does not immunise a financial services provider from a finding of unreasonable and improper conduct under s. 60(2)(b) and (g).

Factual Background

2005 Mortgage

4 The complainants obtained a loan facility from the appellant's predecessor, National Irish Bank, advanced pursuant to a facility letter dated 22 August 2005 for the purposes of the purchase of their home at 7 The Avenue, Lakepoint Park, Mullingar, Co. Westmeath. The interest rate applicable was a tracker interest rate of the ECB plus 0.99% per annum. They had no right to a fixed interest rate under that loan.

Final financial summary letter 2006

5 Some eight months later, the complainants decided they wanted to fix their interest rate. They met with representatives of the appellant's predecessor in June and on 28 June 2006 were furnished with a letter entitled “Final Financial Summary” that referred to the meeting. That document summarised the main features of the loan, such as the purpose of the loan, the amount borrowed, and the loan repayment term. The letter provided an individualised table showing how the complainants' financial status would change after taking out the mortgage. This letter was signed by the complainants on 3 July 2006.

Housing Loan Agreement 2006

6 A Housing Loan Agreement was also drawn up on 28 June 2006, referred to in this judgment as the “fixed rate home loan” as this is how it is identified in the Decision. This identified important information such as the amount of credit advanced, period of agreement and total amount repayable. The Schedule to the letter provided further information, including the purpose of the loan, property to be mortgaged, rate of interest, period of fixing, repayment intervals and security. The letter included statutory warnings in capital letters, identifying inter alia the risk of losing their home if they did not keep up payments. On page 3, the following warning, again in capitals, appeared: “WARNING – THIS IS AN IMPORTANT LEGAL DOCUMENT AND YOU ARE STRONGLY ADVISED TO SEEK INDEPENDENT LEGAL ADVICE BEFORE YOU SIGN YOUR ACCEPTANCE”. The letter also included the bank's general conditions for annuity home loans.

7 On 3 July 2006, the complainants signed the letter signifying their acceptance and it was also signed for and on behalf of the bank. A line was struck through the section providing for witnessing of the letter.

8 Under the heading “Schedule” the letter provides at p. 2, inter alia, as follows:

‘Rate of interest: 4.18% per annum, fixed.

4.24% per annum, variable.

Fixed rate: Roll-over date: 1 October 2009. The Roll-over Date is the start date of the standard variable interest rate at that time. The fixed rate period expires on the date preceding this day.’

9 The appellant has emphasised the General Conditions, referring to Clause 11.4 which states that at the end of the fixed rate period ‘…the Loan will revert to our then applicable variable home loan rate’ and to Clause 12.1: ‘ If the Loan is a variable rate loan which is not linked to the ECB Refinance rate, the rate of interest applicable to the Loan will be our applicable variable home loan rate.’ Clause 12.2 refers to the conditions that apply to the ECB Tracker Variable Rate Home Loan.

10 The appellant also identifies that the post-contractual documentation informed the complainants that the tracker mortgage had come to an end, with the closing mortgage statement for the Tracker Account that issued on 3 July 2006 stating, “to close ecb tracker”.

The complaint to the respondent

11 In September 2015, a complaint was made to the respondent to the effect that, when the complainants applied to fix their mortgage interest rate for three years in 2006, the appellant did not inform them that the ECB tracker rate interest applicable to their first loan in 2005 would not be available to them at the end of the three-year fixed interest period. They said they did not realise that in 2006 they were taking out a new loan facility with different terms and conditions than the 2005 mortgage, and they assumed the mortgage loan would revert to a tracker rate. They said they only learnt of this in 2009, when the fixed rate expired and they sought to go back on the tracker rate.

12 The respondent notified the appellant of the complaint by letter on 20 May 2016 and requested certain information and documentation from the appellant on 21 January 2019. The appellant responded on 13 February 2019, submitting that the complaint should be dismissed on several grounds including that the 2006 loan agreement had been clear and transparent about the terms and conditions which would apply to it, and that the complainants ought reasonably to have been aware that they had entered into a new loan agreement.

13 The complainants made further submissions to the...