The recent decision of the High Court in Irish Life and Permanent plc (trading as Permanent TSB) v the Financial Services Ombudsman shows that while the Irish Courts are bound by findings of facts by the FSO, the Courts are prepared to set aside findings of fact where there is little or no evidence to support the finding. The Court also made some interesting comments in relation to the legal status of the Consumer Protection Code.
The case was a joint appeal of four decisions of the FSO brought by Irish Life and Permanent PLC (“ILP”), concerning customers of ILP who had fixed-interest mortgages which reverted to tracker mortgage rates at the end of the fixed period. During the fixed-interest period, a number of these customers changed from the fixed interest rate to a variable interest mortgage rate. The customers complained to the FSO that ILP did not alert its customers that this course of action would lead to the loss of the right to revert to a tracker mortgage when the original fixed period had expired.
The FSO found that ILP’s explanation for its failure to charge a break fee to a number of these customers was ‘disingenuous’ and a ‘clever tactical manoeuvre, which amounted to an ‘inducement’ to the customers to break the existing contract. The FSO also found that ILP should have alerted customers to the fact that a change from a fixed-interest rate to a variable-interest mortgage rate would have led to a loss of the right to revert. ILP appealed the FSO’s finding to the High Court.
The High Court acknowledged that it was bound by findings of fact by the FSO, unless the findings could be regarded as unsustainable. In two of the four appeals, the High Court found that there was no evidential basis for the FSO’s finding that the failure to charge a break fee was disingenuous. There was uncontradicted evidence before the Court that ILP had in fact experienced a computer systems failure which resulted in customers not being charged a break fee. As a consequence, the findings of the FSO in these two appeals were set aside by the High Court and remitted to the FSO for reconsideration.
Judge Hogan considered that although the lender / borrower relationship does not impose fiduciary duties on a lender, where the lender provides advice on mortgages, it is under a duty to alert customers to the consequences of their financial decisions. In each of the four appeals, the customers dealt with representatives of ILP’s ‘Mortgage Advice Department’ and the High Court held that the FSO was entitled to find that this created an expectation on behalf of the customers.
The High Court made some interesting comments in relation to the status of the Consumer Protection Code (the “CPC”). The High Court has previously held that the consequences of a breach of the CPC is administrative sanctions and the CPC cannot be relied upon for any other purpose. However Judge Hogan observed that that CPC is not entirely “soft law” and expressed the view that regulatory authorities are entitled, in principle at any rate, to consider its provisions in assessing appropriate standards for financial institutions. The FSO was therefore entitled to invoke the CPC in this finding. It will be interesting to see how the case law in this areas evolves.