In 2005 Kenneth and Donna Millar entered into seven separate Mortgage loan agreements with Danske Bank (formerly known as National Irish Bank) (“Danske”) in respect of a number of residential properties. The Millars’ complaint before the Financial Services Ombudsman (“the Ombudsman”) in 2013 was that, despite the fact that Interest rates had fallen since the onset of the global financial crisis in 2008 (save for a short period in 2011 when interest rates were (briefly) raised twice by the ECB) Danske had allowed its variable interest rate to increase.
These were not “tracker” mortgages!
It is important to emphasize that these mortgages were not “tracker” mortgages, i.e., where the interest rate tracked the interest rate set by the Governing Council of the European Central Bank.
Decision of the High Court
This case first came for decision before the Civil Courts on the 30th September 2014 before Mr Justice Gerard Hogan in a High Court Decision titled Kenneth Millar and Donna Millar –v- Financial Ombudsman and Danske Bank [2013 No. 422 MCA].
The Millars issued a statutory appeal to the High Court pursuant to the provisions of s. 57CL of the Central Bank Act 1942 (as inserted by s. 16 of the Central Bank and Financial Services Authority of Ireland Act 2004). They challenged a decision made by the Ombudsman on 10th December, 2013 to reject their complaint against Danske. The issue related to the definition of variable interest rate contained in the applicable terms and conditions governing the loan arrangements of these parties.
To be altered in response to market conditions
Clause 3 of the general terms and conditions stated: ‘Rates of interest are altered in response to market conditions and may change at any time without prior notice and with immediate effect.’
The Millars asserted that the Bank was only entitled to amend or alter the applicable rate of interest ‘in line with the general market interest rates’. The Millars therefore argued that the Bank’s decision to increase the rate of interest when the ECB rate has declined was a breach of the agreement. The Ombudsman rejected this assertion and the Millars appealed his Decision to the High Court. Mr Justice Hogan set aside the Decision of the Ombudsman and made an Order remitting the matter to the Ombudsman for a fresh determination of the Complaint in a manner not inconsistent with his judgment.
Appeal to the Court of Appeal
Judge Hogan`s Decision was appealed by both the Ombudsman and the Bank to the new Court of Appeal which heard the Appeal on the 13th February 2015. The Court of Appeal has reserved its Decision, which will be eagerly awaited.
In an Article in the Irish Independent 14th February 2015 titled “Banks face having to slash interest rates on thousands of mortgages and paying refunds”, the founder of the Askaboutmoney.com website Brendan Burgess is quoted as saying : “The banks are scared stiff that the High Court judgment … will be upheld by the Court of Appeal. The implications for this are huge. It could affect almost everyone with a variable rate mortgage”.
If the Millars win this Appeal before the Court of Appeal most Banks will be obliged to reduce their variable rates and compensate consumers for being overcharged.