Hyde v Financial Services Ombudsman

• Jurisdiction: Ireland
• Judge: Mr. Justice Cross
• Judgment Date: 16 November 2011
• Neutral Citation: [2011] IEHC 422
• Court: High Court
• Date: 16 November 2011

[2011] IEHC 422

THE HIGH COURT

[No. 169 MCA/2011]

Hyde v Financial Services Ombudsman

IN THE MATTER OF SECTION 57CL OF THE CENTRAL BANK ACT 1942 (AS INSERTED BY SECTION 16 OF THE CENTRAL BANK AND FINANCIAL SERVICES AUTHORITY ACT 2004) AND

IN THE MATTER OF AN APPEAL FROM A FINDING OF THE FINANCIAL SERVICE OMBUDSMAN

BETWEEN

ROISIN HYDE

APPELLANT

AND

FINANCIAL SERVICES OMBUDSMAN

RESPONDENT

CENTRAL BANK ACT 1942 S57BK(4)

CENTRAL BANK ACT 1942 S57CI(2)

CENTRAL BANK ACT 1942 S57CL

CENTRAL BANK ACT 1942 S57CM

CENTRAL BANK ACT 1942 S57CM(1)

CENTRAL BANK ACT 1942 S57CM(2)

ULSTER BANK INVESTMENT FUNDS LTD v FINANCIAL SERVICES OMBUDSMAN UNREP FINNEGAN 1.11.2006 2006/56/11976 2006 IEHC 323

CENTRAL BANK ACT 1942 S57

MOLLOY v FINANCIAL SERVICES OMBUDSMAN UNREP MACMENAMIN 15.4.2011 (EX TEMPORE)

CENTRAL BANK ACT 1942 S57CI(2)(G)

J & E DAVY T/A DAVY v FINANCIAL SERVICES OMBUDSMAN 2010 3 IR 324 2010 2 ILRM 305 2010/24/5828 2010 IESC 30

RYAN v FINANCIAL SERVICES OMBUDSMAN UNREP MACMENAMIN 23.9.2011 (EX TEMPORE)

ORANGE COMMUNICATIONS LTD v DIRECTOR OF TELECOMMUNICATIONS REGULATION & METEOR MOBILE COMMUNICATIONS LTD (NO 2) 2000 4 IR 159 2000/15/5538

BANKING LAW

Financial services ombudsman

Loan - Terms - Remainder of agreed loan funds - Refusal of drawdown - Whether failure to hold oral hearing constituting serious and significant error - Whether erroneous analysis of correspondence - Whether compensation of €350 reasonable for failure to comply with instructions - Ulster Bank Investment Funds Ltd v Financial Services Ombudsman [2006] IEHC 323 (Unrep, Finnegan P, 1/11/2006) followed - J&E Davy t/a Davy v Financial Services Ombudsman [2010] IESC 30, [2010] 3 IR 324 considered - Central Bank Act 1942 (No 22), s 57CL - Central Bank and Financial Services Authority of Ireland Act 2004 (No 21), s 16 - Appeal allowed, matter remitted to respondent (2011/169MCA - Cross J - 16/11/2011) [2011] IEHC 422

Hyde v Financial Services Ombudsman

Facts The appellant had brought a complaint regarding a financial institution to the Financial Services Ombudsman ("the Ombudsman"). The Ombudsman had found in favour of the appellant in respect of one matter but not in respect of others. The appellant sought to appeal against the majority of the findings. It had been the contention of the appellant that a loan facility had been agreed upon for a certain amount. The Bank had allegedly reneged on providing the full amount promised and instead had demand repayment and attempted to alter the original conditions of the loan. In addition it was contended that a period of time had been granted to the appellant before payments would commence. The Ombudsman primarily found that the Bank was not at fault for missed payments and that the appellant must have seen certain correspondence (which had been disputed). It was also found that the Bank had not agreed to extend further finance to the appellant. On behalf of the appellant it was contended that the Ombudsman should have held an oral hearing to establish the veracity of certain claims which could not have been done by examining documents alone.

Held by Cross J in finding in favour of the appellant. Clearly the respondent enjoyed a broad discretion as to whether or not to hold an oral hearing. It was clear that the appellant's complaints in this instance could not have been fairly determined without an oral hearing so that witness's credibility could be properly assessed and this amounted to a serious error. The errors outlined were significant and the appeal would be allowed. The matter would be remitted to the Ombudsman for further consideration of the appellant's complaints.

Reporter: R.F.

1 JUDGMENT of Mr. Justice Cross delivered on the 16th day of November, 2011

1. Preliminary

2 2 1.1 This is an appeal against the finding by the Financial Services Ombudsman ("the Ombudsman") dated 27 ^th May, 2011, in which the majority of the appellant's complaints against the Bank for alleged failure to comply with instructions was not substantiated.

3 3 1.2 The appellant appeared in person and the respondent was represented by a Mr. Paul Anthony McDermott of counsel.

2. The Act

4 2 2.1 Section 57BK(4) of the Central Bank and Financial Services Authority of Ireland Act 2004, provides:-

"The Financial Services Ombudsman is entitled to perform the functions imposed, and exercise the powers conferred, by this Act free from interference by any other person and, when dealing with a particular complaint, is required to act in an informal manner and according to equity, good conscience and the substantial merits of the complaint without regard to technicality or legal form."

5 3 2.2 Section 57CI of the Act provides at subs. (2):-

"A complaint may be found to be substantiated or partly substantiated only on one or more of the following grounds:"

(a) the conduct complained of was contrary to law;

(b) the conduct complained of was unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant;

(c) although the conduct complained of was in accordance with a law or an established practice or regulatory standard, the law, practice or standard is, or may be, unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant;

(d) the conduct complained of was based wholly or partly on an improper motive, an irrelevant ground or an irrelevant consideration;

(e) the conduct complained of was based wholly or partly on a mistake of law or fact;

(f) an explanation for the conduct complained of was not given when it should have been given;

(g) the conduct complained of was otherwise improper."

6 4 2.3 Section 57CL of the Act provides for an appeal to the High Court against the findings of the Ombudsman and s. 57CM provides for the orders that may be made on an appeal and at subs. (1) and (2) provides that:-

7 2 "(1) The High Court is to hear and determine an appeal made under section 57CL and may make such orders as it thinks appropriate in light of its determination.

8 (2) The orders that may be made by the High Court on the hearing of such an appeal include (but are not limited to) the following:

9 (a) an order affirming the finding of the Financial Services Ombudsman, with or without modification;

10 (b) an order setting aside that finding or any direction included in it;

11 (c) an order remitting that finding or any such direction to that Ombudsman for review."

3. The Test for an Appeal

12 2 3.1 In Ulster Bank v. Financial Services Ombudsman & Ors [2006] IEHC 323, Finnegan P. (as he was) set out the following test for an appeal pursuant to s. 57 of the Act:-

"To succeed on this appeal the Plaintiff must establish as a matter of probability that, taking the adjudicative process as a whole, the decision reached was vitiated by a serious and significant error or a series of such errors. In applying the test the Court will have regard to the degree of expertise and specialist knowledge of the Defendant. The deferential standard is that applied by Keane C.J. in Orange v. The Director of Telecommunications Regulation & Anor and not that in The State (Keegan) v Stardust Compensation Tribunal."

13 3 3.2 This test was followed by MacMenamin J. in Molloy v. Financial Services Ombudsman (15 ^th April, 2011) where he broke down the requirements into the following distinct elements:-

14 i "(i) the burden of proof is on the appellant;

15 (ii) the standard of proof is the civil standard;

16 (iii) the court should not consider complaints about process or merits in isolation, but rather should consider the adjudicative process as a whole;

17 (iv) the onus is on the appellant to show the decision reached was vitiated by a serious and significant error or a series or such of errors; and

18 (v) in applying this test, the court may adopt what is known as a deferential stance and may have had regard to the degree of expertise and specialist knowledge of the Ombudsman."

19 4 3.3 I accept this standard and indeed the breakdown as suggested by MacMenamin J.

4. The History of the Case

20 2 4.1 The appellant is in architect and in March 2007, the appellant applied to the Bank for a loan facility for the purchase of a property. The appellant claims that she was offered a loan facility of approximately €965,000 which she required being a sum of €715,000 for the purchase of the property and the sum of €250,000 to fund renovation work upon it. The €715,000 portion of the loan was drawn down in April 2007 and is documented. A difficulty arose in that the appellant's repayments had not been debited from her account as she expected and a disagreement ensued as to whose responsibility it was to set up a standing order or debit. The appellant believed that she had been offered some "breathing space" to allow her to pay stamp duty and discharge her legal fees but on 24 ^th August, 2007, the appellant received a letter from the Bank notifying her that the Bank had just discovered that no payments had been received and requesting immediate payment. The appellant complains and this is in reality of the heart of the matter as I understand it that notwithstanding the fact that a loan facility was agreed in the sum of €965,000 that the Bank refused the additional amount of €250,000 for the refurbishment works.

21 3 4.2 The appellant further complained that the Bank refused to issue further finance unless she agreed to abide by a number of onerous conditions and to change the favourable terms that the €715,000 was advanced.

22 4 4.3 The Bank states that the letter of offer issued to the appellant and accepted by her on 23 ^rd March, 2007, was for €715,000, this sum was drawn down by the complainant on 29 ^th March, 2007, that no application was made for an additional €250,000...