Couple lose legal appeal

The rejection of a couple’s complaint that a bank breached a loan contract by increasing the variable rate on their mortgages was a correct decision, the Court of Appeal has ruled.

Last September, the High Court ordered the financial services ombudsman to reconsider the complaint by Kenneth and Donna Millar, Strand Road, Portmarnock, Co Dublin. The Court of Appeal yesterday said the ombudsman was correct in his decision rejecting the complaint.

It overturned the High Court decision after finding the Millars had sought to put “a contrived construction” on certain words in the loan agreement. The Millars have a home mortgage and six other buy-to-let investor mortgages on variable rates with Danske Bank, with a value of about €1.5m.

They complained about Danske’s decision to increase the variable rate of 3.4% to 4.35% in November, 2011. They claimed the increase was not in line with their loan agreement and also eroded the value of a 0.4% discount they had also been given. They said the agreement meant the increase would only be in line with “general” market interest rates.

The bank disputed this and said the wording of the agreement clearly meant the rate could be altered in response to “market conditions”. The bank also said while ECB rates had decreased, Danske is not funded through the ECB, that its funding costs had increased substantially and it was unable to continue to absorb those costs. The ombudsman did not uphold the complaint.

The Millars appealed to the High Court which found the question of construction of the loan contract was one which the court is required to examine afresh.

Then High Court judge, Mr Justice Gerard Hogan, said the matter should be remitted back to the ombudsman for reconsideration. The ombudsman appealed that decision to the Court of Appeal which, yesterday, overturned the High Court decision.

The three-judge court said Mr Justice Hogan had erred in his decision and restored the ombudsman’s finding. In one of two separate judgements, Mr Justice Peter Kelly said he disagreed with the High Court’s conclusion that the clause in the loan agreement referring to “market conditions” meant “market conditions generally”.