The High Court has upheld the Financial Services Ombudsman’s findings in appeals brought by Irish Life and Permanent plc, trading as Permanent TSB, involving mortgage customers who switched from fixed rates and later lost the option to revert to tracker rates.
In a judgment delivered by Mr Justice Hogan on 3 August 2012, the court affirmed the findings in the Thomas and Healy appeals. It set aside the Ombudsman’s findings and directions in the Foley and Lavery-Whelan appeals and remitted those matters for reconsideration. The court stressed that the complaints in those two appeals could still succeed on other grounds.
Christy and Joseph Thomas had switched from a fixed rate to a variable rate in February 2009 and paid a redemption fee. The Ombudsman found that the bank had not clearly explained that breaking the fixed term could remove their entitlement to a tracker rate, or discussed that consequence when they sought advice. The High Court agreed that the mortgage condition was unclear and that the Ombudsman was entitled to find that the bank should have alerted the customers to the potential consequences of switching. It dismissed the bank’s appeal, leaving the Ombudsman’s direction to apply a tracker rate to the mortgage and backdate it to September 2010 in place.
The Healys had also switched from a fixed rate to a variable rate in January 2009, after seeking advice about reducing their payments. The High Court upheld the Ombudsman’s finding that the bank should have discussed the loss of the tracker option and that the relevant mortgage condition did not adequately explain the consequence of ending the fixed rate early. However, the court directed that passages suggesting the bank’s failure to charge a break fee had distorted the customers’ decision be removed. It said the complaint could be upheld on the failure to explain the long-term consequences, without relying on the break-fee issue.
The other two appeals concerned Pat and Mary Foley and Damien Lavery and Linda Lavery-Whelan. In both, the Ombudsman had treated the bank’s failure to charge a break fee as an inducement to switch. The High Court found that the evidence showed a computer failure had prevented fees being calculated and that the bank honoured no-fee quotations made before the problem was discovered. It held that there was no evidential basis for finding that the bank deliberately waived the fees to encourage those customers to switch. The matters were sent back to the Ombudsman, who could reconsider the complaints without relying on those findings.
The judgment also said a bank does not generally owe mortgage customers a fiduciary duty. But where customers approach a bank’s mortgage advice service for guidance about its own products, the Ombudsman may assess whether the bank gave clear information about serious consequences of a switch.