The Court of Appeal has dismissed Kenneth and Donna Millar’s appeal against a Financial Services Ombudsman decision rejecting their complaint about interest rate increases on their loans with Danske Bank, formerly National Irish Bank.
The judgment, delivered by Ms Justice Finlay Geoghegan on 24 June 2015, allowed appeals by the Ombudsman and the Bank against a High Court order that had vacated the Ombudsman’s decision and sent the complaint back for a fresh determination. The Court of Appeal set aside that order and itself dismissed the Millars’ appeal against the Ombudsman’s finding of 10 December 2013.
The Millars had entered into seven mortgage loan agreements with the Bank in 2005. Each described the interest rate as variable, at 0.4 per cent below the Bank’s variable mortgage rate at the time. Clause 3 said rates could change in response to market conditions, at any time and without prior notice. In 2011, the Bank increased rates, saying its funding costs had risen and it could no longer absorb them.
The Millars argued that the agreements allowed increases only in line with general market interest rates. They also referred to information on the Bank’s website, past movements in European Central Bank rates and assurances they said Bank staff had given. The Ombudsman found the wording did not restrict the Bank to following ECB rates and accepted that increased funding costs could form part of market conditions.
The High Court had concluded that it should examine the contract’s meaning afresh and found serious errors in the Ombudsman’s decision, including a failure to consider the complaint more broadly and whether the Bank’s reliance on the clause was fair and reasonable.
The Court of Appeal said a High Court appeal from an Ombudsman finding still required the appellant to show, on the balance of probabilities, that the decision involved a serious and significant error, considering the adjudicative process as a whole. A court should not defer to the Ombudsman on a pure question of law, but that did not permit it to reconsider the contractual construction afresh. Contract construction, the court said, is generally a mixed question of law and fact.
The court also held that the Ombudsman was not obliged to consider broader fairness in this complaint. Whether such an issue should be considered depended on the complaint and the facts presented. On the material before it, the Court of Appeal was not satisfied that the Millars had shown serious error in the Ombudsman’s treatment of funding costs as a market condition or in rejecting their complaint as unsubstantiated.