High Court, hearing an appeal of a decision of the Financial Services Ombudsman, remits back for fresh consideration a matter relating to the circumstances in which a variable interest rate may fluctuate, on the grounds that: (a) the High Court is obliged to examine afresh the Ombudsman's construction of the relevant term; and (b) he erred by finding that the relevant term was clear in its meaning and by failing to have regard to the factual background against which which the contract was entered into.
Challenge to decision of Financial Services Ombudsman ("Ombudsman") - Ombudsman rejected complaint made against Danske Bank ("Bank") by two borrowers - complaint relates to increase by bank of variable interest rate - main issue relates to definition in loan agreements between bank and borrowers of variable interest rate - loans are being serviced and are not in arrears - borrowers claim that in light of terms of loan agreements, bank has raised interest rates despite general interest rates set by ECB being at historically low levels - Ombudsman determined that relevant clause of loan agreements clear in its meaning - according to relevant term, bank may alter variable rate "in response to market conditions" - Ombudsman held that variation not necessarily tied to fluctuation of general interest rate - borrowers relied on explanatory note dating from 2009 on bank's website explaining loan rate changes in accordance with general interest rate - also relied on representations made by bank staff to effect that variable rate would change in line with general interest rate - whether Ombudsman's construction of relevant clause discloses legal error - whether High Court should defer to Ombudsman's construction of relevant contractual clause - decision of Ombudsman based on contract between parties - Ombudsman also entitled pursuant to provisions of Central Bank and Financial Services Authority of Ireland Act 2004 to have regard to principles of fairness going beyond contract law - Court finds that in matter of pure contract law, decision of Ombudsman is not binding on it and must be examined - nor is decision of Ombudsman on question of statutory interpretation binding on Court - Court should defer to Ombudsman's decision as it relates to application of principles of fairness set out in 2004 Act - Ombudsman erred in law by holding that relevant term governing variation of interest rate was "clear in its wording" - relevant term was not a specialist term of art and therefore must be viewed in its ordinary meaning and how, objectively, it would be viewed by a reasonable person - as term was ambiguous, Ombudsman also erred in failing to have regard to factual background in which contract was entered into - even if terms were not ambiguous, Ombudsman erred by failing to consider whether borrowers could successfully establish existence of collateral contract having regard to promotional material - Court also finds Ombudsman failed, having regard to his extended powers given by 2004 Act, to examine whether term of contract was fair and reasonable.