Financial Services Ombudsman v Millar

• Jurisdiction: Ireland
• Judge: Mr. Justice Kelly
• Judgment Date: 24 June 2015
• Neutral Citation: [2015] IECA 127
• Date: 24 June 2015
• Court: Court of Appeal (Ireland)
• Docket Number: 2014/7 COA 2014/8 COA

In the matter of s. 57cl of the Central Bank Act 1942 (as inserted by s. 16 of the Central Bank and Financial Services Authority of Ireland Act 2004)

Between

Financial Services Ombudsman

Appellant

and

Kenneth Millar and Donna Millar

Respondents

and

Danske Bank (Formerly National Irish Bank)

Notice Party

[2015] IECA 127

Kelly J.

Finlay Geoghegan J.

Peart J.

2014/7 COA

2014/8 COA

THE COURT OF APPEAL

Banking and finance – Loan agreements – Breach of contract – Appellant seeking to appeal against an order of the High Court – Whether the appellant”s decision should be set aside

Facts: The respondents, Mr and Mrs Millar, entered into seven mortgage loan agreements with the notice party, Danske Bank, in respect of a number of properties in 2005. In November 2011, the bank increased the variable interest rate on those loan accounts by 0.95% on each loan. In May 2013, the Millars complained to the appellant, the Financial Services Ombudsman, claiming that the increase was a breach of the terms of the relevant loan agreements. The remedy which the Millars sought in respect of this alleged breach of contract was that the Ombudsman declare the loan agreements void with a cancellation of the balance on each of the outstanding loans. In addition, they sought compensation for hardship, stress and emotional upset caused by the bank and a refund to them of all payments made since October 2011, together with interest on the amount of the sums to be refunded. In addition, they sought a contribution towards their expenses and a commitment from the bank that it would desist from further damaging conduct towards them. In December 2013, the Ombudsman found that the complaint was not substantiated pursuant to s. 57CI(2) of the Central Bank and Financial Services Authority of Ireland Act 2004. The Millars exercised their entitlement under s. 57CL of the 2004 Act and appealed to the High Court. Having concluded that pure questions of law ought not to be shown curial deference, the trial judge went on to carry out an exercise in construing the provisions of clause 3 of the agreements in suit. The High Court allowed the Millars” statutory appeal against the Ombudsman”s December 2013 decision. The High Court set aside that decision and remitted the matter to the Ombudsman for a fresh determination of the Millars” complaint to be carried out in a manner consistent with the judgment of that court. The Ombudsman and the bank appealed to the Court of Appeal against the order of the High Court.

Held by Kelly J that the trial judge was correct in his conclusion that no curial deference is to be shown to the Ombudsman on what he described as ‘purely legal questions’; that was so not merely for the reasons which were relied upon by the trial judge, but also because such an approach was entirely consistent with the statutory scheme underpinning the jurisdiction of the Ombudsman. Kelly J took issue with the trial judge”s exercise in construing the provisions of clause 3 of the agreements. It was at that stage in his judgment that Kelly J took the view that the trial judge fell into error. Kelly J held that the issued raised by the Millars” complaint was not a pure question of law, but rather a mixed question of both law and fact. Kelly J held that the Ombudsman was correct in concluding that clause 3 is clear in its wording; the trial judge in his analysis came to a different conclusion, holding that the term ‘market conditions’ may be taken to refer to ‘market conditions generally’. Kelly J did not share that view nor did he agree that the clause in question was ambiguous. Kelly J held that the Ombudsman was correct in rejecting the contrived construction which the Millars sought to place on clause 3. He was also held to be correct in finding that its wording was clear; it was for him to then consider the factual material placed before him and he was entitled to curial defence in that regard. Kelly J was of the view that the Millars did not discharge the burden of proof demonstrating that the decision of the Ombudsman was vitiated by a serious and significant error or series of errors.

Kelly J held that he would allow the appeals, discharge the High Court order and restore the Ombudsman”s finding.

Appeals allowed.

Judgment of Mr. Justice Kelly delivered on the 24th day of June, 2015.

Introduction

1 These are appeals brought with the leave of Hogan J. granted on the 23rd October, 2014, from an order made by him on the 30th September, 2014.

2 The appeals have been brought by the Financial Services Ombudsman (the Ombudsman) and the notice party Danske Bank (the bank).

3 The appeals arise in circumstances where the High Court allowed a statutory appeal which had been brought by Kenneth Millar and Donna Millar (the Millars) against a decision of the Ombudsman of the 10th December, 2013. The Ombudsman had rejected the Millars' complaint against the bank. On appeal, the High Court set aside that decision of the Ombudsman and remitted the matter to him for a fresh determination of the Millars' complaint to be carried out in a manner consistent with the judgment of that court.

Jurisdiction of the High Court

4 The Ombudsman is a statutory officer set up under s. 16 of the Central Bank and Financial Services Authority of Ireland Act 2004, (the Act). That section inserts Part VIIB into the Central Bank Act 1942.

5 Part VIIB provides for the setting up of the Ombudsman's Bureau and specifies the functions and powers of the Ombudsman. It prescribes how consumer complaints are to be dealt with and confers jurisdiction on the Ombudsman in that regard.

6 Chapter 6 confers jurisdiction on the High Court to deal with both references and appeals from the Ombudsman.

7 Section 57C K subs. (1) confers an entitlement on the Ombudsman, either on his own initiative or at the request of parties before him, to refer for the opinion of the High Court a question of law arising in relation to the investigation or adjudication of a complaint. Subsection (2) confers jurisdiction on the High Court to hear and determine any question of law referred to it under that section. If a question of law has been referred to the High Court under this section, the Ombudsman may not make a finding to which the question is relevant while the reference is pending or proceed in a manner, or make a decision, that is inconsistent with the opinion of the High Court on the question.

8 Section 57CL provides for a right of appeal to the High Court from a finding of the Ombudsman. That right of appeal may be exercised either by the complainant or the regulated financial service provider. The Ombudsman may be made a party to the appeal.

9 Section 57CM requires the High Court to hear and determine an appeal made under s. 57CL. The High Court is entitled to make such orders as it thinks appropriate in the light of its determination.

10 Section 57CM(2) provides that the orders that may be made by the High Court on the hearing of such appeal include, but are not limited to, an order affirming the finding of the Ombudsman with or without modification, an order setting aside that finding or any direction included in it and an order remitting that finding or any such direction to the Ombudsman for review.

11 Section 57CM(4) provides that the determination of the High Court on the hearing of such an appeal is final, except that a party to the appeal may apply to the Court of Appeal to review the determination on a question of law, but only with the leave of either of those courts.

12 In the present case, it was the High Court that granted leave pursuant to subs. (4), hence this appeal.

13 Unfortunately, the question of law is not identified in the order. In future where leave is granted under subs. (4) the question of law for determination should be clearly identified in the court order.

The complaint to the Ombudsman

14 In 2005 the Millars entered into seven mortgage loan agreements with the bank in respect of a number of properties. In November 2011, the bank increased the variable interest rate on those loan accounts by 0.95% on each loan.

15 On the 22nd May, 2013, the Millars complained to the Ombudsman. They summarised their complaint in the following way:

‘Effective 11th November, 2011, National Irish Bank (the bank) increased the variable interest rate on Ken and Donna Millars (the Complainants) mortgage loan account by .95% on each loan. This increase is a breach of the terms of the relevant loan agreements. The terms of the loan agreements are that the variable rate of interest can only be increased in line with general market interest rates. When the Complainants sought an explanation from the bank for the rate increase, the Complainants were advised that the increase was due to the bank's funding difficulties. However, the bank's funding difficulties were not relevant to the definition of the variable rate referred to in the various loan agreements.’

16 That summary does not accurately reproduce the actual terms of the loan agreements dealing with the question of the variable rate of interest. The wording of the actual general terms and conditions is as follows:

‘Rates of interest are altered in response to market conditions and may change at any time without prior notice and with immediate effect.’

17 The Millars complained that when they sought an explanation from the bank concerning the increase, they were informed that it was due to funding costs. In November 2011, the bank wrote to them and told them that whilst ECB rates had decreased, the bank was not funded through the ECB and funding costs had increased substantially so that the bank was unable to continue to absorb those costs. The Millars argued that this explanation failed to offer to...