The Court of Appeal has overturned Financial Services and Pensions Ombudsman decisions in two complaints against Ulster Bank DAC over borrowers’ attempts to return to tracker mortgage rates. It set aside findings that the bank acted contrary to law or otherwise improperly, along with orders for repayment of overpaid interest and €3,500 compensation in each complaint. The court remitted the improper-conduct issue to the ombudsman for reconsideration after an oral hearing.
The appeal concerned the ombudsman’s decisions under the Financial Services and Pensions Ombudsman Act 2017. The High Court had dismissed the bank’s appeals. The Court of Appeal, in a judgment delivered by Mr Justice Charles Meenan on 20 September 2024, allowed the bank’s appeal against that judgment.
In complaint A, two anonymised borrowers had a 2006 mortgage offer for €365,000 with an ECB tracker rate of ECB plus 1.15%. They later moved €190,000 of the loan to a 3% staff fixed rate. When they asked to return that portion to the tracker rate in 2010, the bank refused, saying tracker rates were no longer offered. The ombudsman had found that the borrowers retained a contractual right to the tracker rate and that the bank had not clearly explained that moving to the staff rate would remove it.
In complaint B, anonymised borrowers moved from a variable rate to a tracker rate in 2006, then to a fixed rate in 2007. When that fixed period ended in August 2010, they sought to return to the tracker rate. The ombudsman had found that they remained entitled to do so and that the bank had not made clear that the move to a fixed rate would end that entitlement.
The Court of Appeal concluded that the ombudsman’s contractual interpretation was incorrect in both complaints. It held that the first borrowers had agreed to a variation when they moved part of the loan to the staff rate, and that the documents in the second complaint did not provide an option to return to a tracker rate after the fixed period. The court set aside the ombudsman’s findings that the bank’s conduct was contrary to law.
The court also set aside the findings of otherwise improper conduct. It said the documentary record did not establish what the borrowers knew or understood when they changed rates. In complaint A, one or both borrowers were bank employees, a circumstance the court said raised questions about their knowledge. It concluded that assessing the borrowers’ understanding was subjective and remitted that issue to the ombudsman for an oral hearing.
The court upheld the High Court’s conclusions on the Central Bank’s tracker mortgage investigations and on the bank’s argument about earlier ombudsman decisions. It also rejected the criticism that the ombudsman had failed to give adequate reasons. On costs, it gave a provisional view that the bank should recover the High Court and appeal costs from the ombudsman, subject to written submissions; the ombudsman was to receive costs relating to an amendment in complaint B.