Stowe v Financial Services Ombudsman

JudgeMr. Justice Michael Twomey
Judgment Date18 April 2016
Neutral Citation[2016] IEHC 199
Docket Number[2014 No. 109MCA]
CourtHigh Court
Date18 April 2016



[2016] IEHC 199

Twomey J.

[2014 No. 109MCA]


Banking & Finance – Home loan mortgage – Fixed rate – S. 57CL of the Central Bank Act 1942 (as amended) – Appeal against the decision of Financial Service Ombudsman Jurisdiction of High Court – Delay

Facts: The appellants had filed an appeal against the decision of the respondent for refusing to uphold a complaint filed by the appellants against the notice party. The appellants contended that since their contract with the notice party for home loan included written as wells as oral representation, the respondent erred in law by dismissing their complaint on the ground that the said representation could not be relied upon as it was beyond statutory time limit.

Mr. Justice Michael Twomey refused to set aside the decision of the respondent. The Court held that the respondent was entrusted the sole responsibility for deciding whether the complaint was within its jurisdiction and the Courts could not interfere in the decisions made by the respondent unless there were significant errors in the said decision. The Court observed that the contention raised by the appellants required that the contract between the parties should be constructed afresh, which was not permissible on appeal. The Court held that the statutory limitations were in place to put a bar on challenging a claim endlessly notwithstanding that it could cause hardship to the persons falling outside limitation. The Court held that since the alleged representation concerning the standard variable rate took place beyond the prescribed six-year time limit, it could not be relied on by the appellant to make a case of “conduct complained of” so as to bring the case within the statutory time limit.

JUDGMENT of Mr. Justice Michael Twomey delivered on the day of April 2016.

In this case, the appellants, Mr. and Mrs. Stowe, seek an Order pursuant to s. 57CL of the Central Bank Act 1942 (as amended) setting aside the decision of the respondent, the Financial Services Ombudsman (‘FSO’), of 25th February, 2014. In that decision, the FSO refused to uphold a complaint made by the Stowes against the notice party, EBS Limited (‘EBS’).


The history of the complaint is that the Stowes agreed to a fixed rate home loan mortgage from the EBS in Sutton, Co. Dublin and signed a Home Loan Application Form dated the 23rd July, 2006, in relation to this home loan. They also signed a Fixed Rate Mortgage Application Form on the 1st September, 2006, which stated:-

‘I/We understand that when this fixed rate period has expired the loan will convert to the applicable variable rate then prevailing. The variable interest rate basis will be specified in the Loan Offer letter issued by EBS (if the loan is approved)’.


The Loan Offer letter duly signed and accepted by them a few days later, on the 12th September, 2006, confirmed that upon expiry of the five year fixed period (at an interest rate of 4.85%), their interest rate would revert to the “variable base” which on that date was stated to be 4.25%. This Home Loan Application Form, the Fixed Rate Mortgage Application Form and the Loan Offer constitute the main terms of the Stowes' home loan mortgage agreement (‘Mortgage Agreement’) with EBS.


Despite this documentation stating that upon the expiry of the fixed rate, their home loan would revert to the applicable variable rate, the Stowes believed that on the expiry of their home loan rate, their new rate would strictly follow the European Central Bank rate. In other words, the Stowes understood that when their five year fixed rate ended, they had effectively a tracker rate and not a traditional variable rate mortgage (where market conditions and commercial factors, as well as ECB rates, are taken into account in determining the variable rate which applies).


They say that they had a very good reason for this belief, namely that the branch manager of Sutton EBS, Mr. Manuel, explained to them that the term “variable rate”, in the Mortgage Agreement signed by them, meant ‘Standard Variable Rate’. Mr. Stowe avers that the EBS provided at this time, in September 2006, a general definition of Standard Variable Rate as follows:-

‘Standard Variable Rate – A mortgage rate which can rise and fall in line with the interest rate changes set by the European Central Bank (ECB)’.


No exact date has been provided by the Stowes as to when the alleged representation was made by Mr. Manuel, since in the letter of complaint of 27th May, 2013 regarding the Mortgage Agreement, which letter was signed by both of them to the EBS, it is stated:-

‘It was explained to me at the time of the mortgage offer from EBS, the standard variable rate could rise and fall in line with interest rate changes set by the European Central Bank.’

The final document signed by the Stowes in relation to their home loan was the Acceptance Form, which they signed on 12th September, 2006. Therefore, the last date that Mr. Manuel could have made the representation, in order for it to have influenced the Stowes' acceptance of the Mortgage Agreement was on the 12th September, 2006.


In addition to this Mortgage Agreement taken out in September 2006, the Stowes also took out a top up mortgage (‘Top Up Mortgage’), which is termed an EBS Lifechoice Loan, by loan offer letter dated 3rd September, 2007 from EBS to the Stowes, which had been signed previously by the Stowes on the 19th August, 2007. This loan offer letter signed by the Stowes contains an explicit provision regarding interest rates as follows:-

‘EBS reserves the absolute right to increase or decrease the rate of interest at its discretion’.

Despite this, the Stowes understood that this mortgage rate was effectively a tracker rate, since Mr. Stowe avers that this Top Up Mortgage was presented to them on the basis of the ‘Standard Variable Rate’ from its inception, which they understood to mean that it strictly followed ECB rates, for the same reasons as they believed that their Mortgage Agreement would strictly follow the ECB rates.


Based on the foregoing, it follows that the Stowes were surprised to receive a letter from EBS in April 2010, because in this letter the EBS outlined that it intended to adopt a new policy in setting variable interest rates. Three years after receiving this letter, when complaining to the EBS by letter dated 27th May, 2013, they outline the nub of their complaint when they state that having been led to believe that the standard variable rate would rise and fall in line with ECB interest rate changes:-

‘We were subsequently advised by letter on 22nd April 2010 by letter from Dara Deering, Directorship Membership Business that EBS would no longer adjust the variable rate in line with the European Central Bank interest rate movements.’


The Stowes complaint therefore is that the increase, flagged in this letter of 22nd April 2010, by the EBS to their Top Up Mortgage, which was subject to the Standard Variable Rate, was contrary to the explanation provided to them by Mr. Manuel on or prior to the 12th September, 2006. For the same reason, the Stowes allege that when their five year fixed home loan mortgage rate expired in September 2011, the increase in their interest rate in their Mortgage Agreement which took place after this date, and which was not solely in line with ECB rates, was also in direct contravention of Mr. Manuel's representation.


At this stage therefore in April 2010, the Stowes were aware that they were not on the equivalent of a tracker mortgage, but were on a “traditional” variable rate mortgage. This was contrary to what they say they were led to believe by Mr. Manuel in September of 2006. Therefore, based on the Stowes' account of what happened, on the 22nd April, 2010, the Stowes became aware that there was a breach by EBS of the representation made by Mr. Manuel in September of 2006.


These are the facts which formed the basis of the complaint to the FSO, and this Court is now asked to review the decision of the FSO. As regards the proceedings before the FSO, Mr. Stowe completed the FSOB Complaint Form in relation to this issue on 26th July 2013. In making its decision, the FSO considered in particular s 57BX(3)(b) of the Central Bank Act 1942, as amended (‘1942 Act’), which provides that:

‘A consumer is not entitled to make a complaint if the conduct complained of…. occurred more than 6 years before the complaint is made’.


It is stated in the letter of 5th September, 2013, from the FSO to Mr. and Mrs. Stowe, that the signed FSOB Complaint Form dated 26th July, 2013, was received by the FSO on 30th July, 2013. This has not been challenged as nothing turns on whether the complaint was received on the 30th July 2013 or a day or two earlier.


On the basis therefore that the complaint was received by the FSO at the end of July 2013, and applying the six year time limit in s. 57BX(3)(b) of the 1942 Act, this means that in the Stowes' case, they cannot make a complaint about conduct which took place prior to the end of July 2007.


Applying these principles, the FSO in its finding dated the 25th February, 2014, held that:-

‘As the alleged information was provided by Mr. Manuel more than 6 years before the [Stowes] registered their complaint with this Office, the conduct complained of cannot regarding any such advice/clarification cannot be examined by this Office.’


The issue for this court to consider is whether this was an correct interpretation by the FSO of s. 57BX(3)(b) of the 1942 Act in the context of the Stowes' complaint.

Claims by the Stowes

The Stowes allege that the representation made by Mr. Manuel should have been considered by the FSO, even though it...

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