The High Court has reserved its judgment in Ulster Bank’s appeal against a number of tracker mortgage cases, the outcome of which the lender says may affect thousands of its customers.
The court heard closing remarks on Wednesday in the six-day hearing of the bank’s appeal against the Financial Services and Pensions Ombudsman (FSPO) finding that the borrowers in three instances were entitled to refunds and compensation.
The three cases related to borrowers who were excluded from redress in an industrywide examination overseen by the Central Bank between late 2015 and mid-2019.
The ombudsman issued binding decisions that customers in the three cases had an “enduring contractual entitlement” to tracker loans, which are tied to the European Central Bank’s (ECB) main interest rate, after periods on fixed-rate loans.
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The court heard on Wednesday that the parties had agreed that one of the decisions under challenge will be set aside, with the matter to be remitted to the ombudsman for fresh consideration.
They will await the outcome of Ms Justice Marguerite Bolger’s judgment before requesting an order in the case, as the ruling could inform directions that accompany the remittal, the court heard.
Ms Justice Bolger said she did not anticipate concluding her judgment in the “very near future”, but she appreciated it was important she was expeditious in coming to her decision.
During the hearing of the appeals the parties focused primarily on one of the three cases.
The contested case involved two borrowers who took out a mortgage in April 2004 that initially had a one-year reduced interest rate, before reverting to Ulster Bank’s so-called home loan rate, its standard variable product.
They signed a so-called flexible mortgage transfer form in 2006, entitling them to move on to a tracker loan. They subsequently applied in May 2007, as ECB rates were rising, to fix their interest rates until August 2010.
The relating loan documents said the bank may offer to extend the fixed period at the end of the fixed term or offer alternative available products. However, if these were not accepted, the contract stated, the borrowers would automatically revert to the bank’s home loan rate.
As they did elect the alternatives, the borrowers reverted to the home loan rate.
Making final submissions for the bank on Wednesday, Marcus Dowling SC submitted it was “impossible” for the court to uphold the decisions.
Not only was the ombudsman’s findings inconsistent with previous rulings of the FSPO’s predecessor, the Financial Services Ombudsman, but there has been no explanation for this departure from precedent, counsel said.
Mr Dowling said the case cannot be resolved without the court examining how to correctly interpret a contract between the lender and borrowers.
He submitted that the ombudsman erred in his interpretation by not recognising the level of discretion the contract afforded to the bank in relation to offering alternative mortgage products.
If the court agrees on this “central” point, the rest of the analysis in the decision cannot survive, he said.
Previously, lawyers for the ombudsman’s office submitted it was “inappropriate” for the court to examine the contractual interpretation.
Eileen Barrington SC said the bank presented a “vast thicket” of points, some of which were unrelated to the ombudsman’s findings. She said there was a “high threshold” for overturning a decision of the FSPO, and the judge must find that he fell into “serious and significant error”.
