PTSB High Court upholds Ombudsman's findings against PTSB on loss of tracker mortgages

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Brendan Burgess

Brendan Burgess

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The full judgment in these cases is here and is worth reading in full. I will attempt to summarise the issues so that people can check their relevance to their own cases.

All four complainants complained to the Ombudsman that
1)They had tracker mortgages
2) They fixed the interest rate
3) They broke out of the fixed rate
4) They did not know that by doing so they would lose their right to a tracker
5) In all cases they dealt with a department or people from ptsb who were described as "mortgage advisors" and therefore they should have been advised of the implications of breaking the fixed period early.

The Ombudsman upheld their complaints and gave them back their trackers
PTSB appealed the decision to the High Court
 
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Summary of High Court rulings on the PTSB challenge to the Ombudsman

Summary of my summary

This judgment is great for those of you who have cases challenging your loss of the tracker.

The Ombudsman ruled that PTSB had a duty to make it quite clear to customers that breaking out of a fixed rate mortgage would lose them their tracker.

The High Court ruled that the Ombudsman was right to take this view.

56. ... In other words, the Ombudsman was entitled to conclude that a retail Bank should properly alert its customers- if only in the most general of terms - of the potentially serious adverse consequences of a particular decision, especially where it seems clear where those customers were seeking advice and guidance from the Bank's mortgage advice centre and that these are standards which modem retail Banks might reasonably be expected to uphold.
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The Ombudsman ruled that the terminology was unclear.
The High Court ruled that the Ombudsman was entitled to form this opinion.

The construction of the special condition
42. So far as special condition 7 is concerned, I cannot disagree with the Ombudsman's finding that the clause lacks sufficient clarity on the key question of whether a break in the fixed rate would affect the entitlement of the borrower to revert to the tracker rate. In fact, special condition 7 says nothing which would alert even a prudent borrower to the fact that he or she would not be entitled to a tracker mortgage at the end of the otherwise fixed period if the previously agreed rate had been broken.
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The only minor negative in the judgment
Two of the complainants had claimed that PTSB had not charged them a breakage fee to induce them to break out of their fixed rates and so lose their trackers.
PTSB said that this was simply a systems fault and not anything underhand.
The Ombudsman dismissed PTSB's attribution of the failure to charge a breakage fee to the systems fault.
The High Court ruled that the evidence supported PTSB's position and that the Ombudsman was wrong in this.
The High Court made no comment on the substance of the claimants' cases, but told the Ombudsman to review the cases again.
 
The Healy Case
The Lavery & Lavery Whelan case
These had argued as part of their case that PTSB did not charge them a breakage fee to break out of their fixed rates. This was to induce them to break.

PTSB argued that the reason they were not charged a breakage fee was due to a computer fault.

The Ombudsman said that this was disingenuous.

The High Court ruled that the Ombudsman should not have ruled that there was no evidence for a computer fault and as a result, he allowed the appeal.

The Ombudsman must reconsider the claims but must accept PTSB's evidence that there was a computer fault.

The Ombudsman may still rule in favour of the claimants. The High Court expressed no opinion on the merits of the case or on the other issues raised.
 
The Thomas case

The Thomases did pay a redemption fee.

Conclusion (for those of you who don't want to read the rest of this post)


56. ... In other words, the Ombudsman was entitled to conclude that a retail Bank should properly alert its customers- if only in the most general of terms - of the potentially serious adverse consequences of a particular decision, especially where it seems clear where those customers were seeking advice and guidance from the Bank's mortgage advice centre and that these are standards which modem retail Banks might reasonably be expected to uphold.
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The complaint was nevertheless upheld on essentially two distinct grounds:
1. That the contents of the applicable special condition (special condition 7) was not sufficiently clear so as to advise Mr. and Ms. Thomas "of the fact that the right to a tracker rate may be lost if the fixed term is broken" and that the agreement lacked clarity as a result.
ii. That when the Mr. and Ms. Thomas contacted ILP "for advice regarding interest rates", the Bank "should have specifically discussed the loss of the tracker rate" with them and there is no evidence that it did so.

The following quote is very important for a lot of cases, so I reproduce it here in full.


The construction of the special condition
42. So far as special condition 7 is concerned, I cannot disagree with the Ombudsman's finding that the clause lacks sufficient clarity on the key question of whether a break in the fixed rate would affect the entitlement of the borrower to revert to the tracker rate. In fact, special condition 7 says nothing which would alert even a prudent borrower to the fact that he or she would not be entitled to a tracker mortgage at the end of the otherwise fixed period if the previously agreed rate had been broken. It is true that special condition 7's commitment to the tracker rate is prefaced by the words "on expiry of the fixed rate period." The Bank contend that these words ("...on expiry ...") necessarily mean- or perhaps imply- that the commitment subsists only for so long as the borrower does not switch during that period, because otherwise the fixed rate period would not have "expired".


43. This, undoubtedly, is a sophisticated and clever argument which, for example, had it been advanced in an undergraduate law examination would have attracted high praise from the examiners as an original demonstration of legal craft and skill. But this type of argument should really have no place in the construction of financial documents involving retail customers, even if- as the Bank contends, but the Healys deny- the customers are to be regarded as experienced investors and even if (as here) they had access to independent legal advice. Given the huge implications for the customer, if a key clause of this kind is to bear this sophisticated construction, it behoves the Bank to spell this out in plain language for the benefit of all customers, and not simply those who have either an amateur or professional interest in the niceties of the law relating to the construction of contracts who might otherwise be able to glean this vital piece of information unaided. Or, at all events, the Ombudsman is entitled so to think.


More great stuff:

47. While all of this [that banks do not have a fiduciary duty their clients] is true, at the same time some measure of realism must also temper this analysis. The banking system is, by its nature, a highly regulated one which, is- or, at least, ought to be- based on trust: see, e.g., Director of Corporate Enforcement v. D 'Arcy [2006] 2 I.R. 163, 177, per Kelly J. The laissez-faire rules which might apply in the case of the borrowing and lending on the international capital markets cannot be applied in exactly the same way in the case of the domestic mortgage market, given that these are matters which gravely affect the long term welfare of most members of the general public. The very fact that the Office of the Financial Services Ombudsman was established by the Oireachtas is itself living testimony ofthis.


48. All of this means that the engagement by a Bank with its customers in relation to the domestic mortgage market must be viewed in this light. Just as with the construction of contractual documents, it would be unrealistic to suppose that retail customers should be aware of the finer points of the law in relation to fiduciaries. Nevertheless, it is important to recall that in all four appeals, the customers dealt with representatives of ILP's "Mortgage Advice Department" and these representatives were frequently described by the Bank as "mortgage advisors" or "advisors": see, e.g., the letter from ILP to the Ombudsman on 161h May 2011 in relation to the Healy appeal. The voluminous documentation accompanying these appeals are replete with references (by both customer and Bank alike) to mortgage advisors.



49. While counsel for the Bank, Mr. Murray SC, emphasised that ILP saw its role as simply giving information and not advice, this is not quite the picture which emerges from the documentation, or, again, at least, the Ombudsman- who, after all, is possessed of special skill and competence in this area - was entitled so to think.

...
53...
In the present cases ILP - with its reference to mortgage advisors and a mortgage advice centre - appears to have created something of a similar aura and expectation on behalf of customers. In these circumstances, I consider that the Ombudsman was entitled to hold that Mr. and Ms. Thomas had contacted ILP for advice as well as for information in relation to their mortgage products and that the Bank's response should be judged against that background. The Ombudsman was, moreover, entitled to find that the Bank had not given the appropriate information as to the implications of a switch.
54. For good measure I would also add that the Ombudsman was entitled to invoke Chapter 2.12 ofthe Consumer Protection Code (2006) which provides that:



    • "A regulated entity must ensure that that all information it provides to a customer is clear and comprehensive and that key items are brought to the attention of the consumer. The method of presentation must not disguise, diminish or obscure important information."
 
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The Healy Case


59. Finally, it remains to consider the Healy case. They too elected to break their fixed rate mortgage in January, 2009 following discussions by telephone with the Bank's call centre. While ILP could not source a copy of these telephone conversations, Ms. Healy's letter of gth January, 2009, stated that she understood that they "will not incur any penalty in doing so". This in tum might be thought to suggest that the Healys had gleaned this information from discussions with Bank officials where, clearly, they were seeking to make the best decision as was in their immediate financial interests.



60. The Ombudsman observed that:




      • "In the context of the apparent reason for [the Healys] contacting the Bank in early 2009, I consider that there was an onus on the Bank to highlight that they were losing the tracker rate option by availing of the fixed interest rate break."

61. For my part, applying the Hummingbird test, I am of the view that the Ombudsman was entitled to reach these findings and draw these inferences, not least given that the whole context of the Healys approaching ILP was to seek advice and guidance as to what was best for them and to reduce their monthly outgoings. The Onmbudsman was also clearly entitled to take the view that the applicable special condition (in this instance, special condition 6) did not sufficiently spell out the consequences of exiting early from the fixed rate condition.

 
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This is very interesting as the same thing happenend me and the Ombudsman ruled against us saying the bank had no obligation to tell us by breaking out of the fixed rate that we would lose our right to revert to tracker. We made a phone call which was not submitted during our enquiry as they could not find it. Just want to see how many other people will get their tracker back (people that broke their fixed rate in Jan / Feb 09). it also baffles me how the central bank has not investigated this as a whole because according to everyones post that this has haapened to not one was advised by the bank that they would lose their right to tracker why ca't they request all phone calls from jan-feb 09 i know it would be a lot of work but they would soon realise the bank did not act in the way it should of.
 
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Can someone clarify for me.. Are the 4 cases above related to people who had been on a tracker, then went to fixed, then broke out of fixed and lost their right to tracker?

We bought our house in 2007. 2 Year fixed. Like many others, contacted PTSB to break out of fixed. I specifically asked during the phonecall if there were any penalties for breaking out, (as some friends had been charged a fee from other banks) and was told not at all, she could do it there and then, but just needed us to fax through a confirmation letter stating we wished to break out. It was only a few months later, I came across a post on this site about PTSB/Tracker issue, so went back to check the very very tiny print on my original contract and indeed we were due to go onto a tracker after the 2 year fixed.

The 4 cases that have been adjudicated on...are the relevant to my situation?
 
Another appeal, add another 12 months to this so! This must be to the supreme court now.

I have not heard from FSO yet so will wait till I have confirmation to say for sure in my case.
 
I am wondering is there anything that can be done for the people that the FSO said that PTSB were not obliged to let us know that if we broke out of our fixed rate we would lose our right to revert to tracker. Why and how are they reverting some customers back to tracker only through the courts every person that this happenend to has the same story. why is the Central Bank not looking at this like they did with the B.O.I case in 2011 where it was found over 2000 of its customers were not informed correctly that by fixing there rate or switching to SVR they would lose their tracker. B.O.I were made to put all customers affected back to tracker rate and awarded €2000 compensation.
 
Hey all

Just to let you know we recieved a letter from FSO yesterday saying they were waiting on confirmation that ptsb were appealing to the Supreme Court. If it was confirmed they would ask the courts to speed it up as it has been dragging on so long and they were very conscious of the situation we and others waiting are in.
 
Yep - I got confirmation from FSO this is going to the Supreme court, no date yet though. We started our complaint with the bank in May 2011 so i do not expect it sorted before another 6 months at least.
 
same here, got a letter saying this is going to supreme court and wont comment on case until then,

My case is with the ombudsman since feb 2011, so in for the long haul.
 
Just wondering if anyway had a similar story to mine and lodged a case with FSO.

Took mortgage in november 2006 for 3 years fixed.
Recieved options letter in 2009 following end of fixed rate.
Options DID include tracker but rate was ECB+3
The lowest rate was variable @ 3.79

Selected variable as mortgage advisor advised same (regrettably we listened) and rates sky rocketed soon after.

My original loan offer letter states I am entitled to tracker at end of fixed rate but it does not state at what rates so I guess this was left to the bank to decide.

Would be interested to see if anyone else had a similar situation.

Would love to appeal this as currently on a rate of 4.34 costing us 1250 per month for the next 28 years. Really frustrating considering house is now worth a third of what we paid for it. I try to ignore it but when I receive my bank statements and see that only 26k has come off the mortgage in 7 years and yet we have paid on average 13500 per year for 7 years for a total of nearly 100k in payments. So almost 75% of payments have being interest.
 
If there was not a guaranteed margin over ECB on your loan offer then I don't know what basis you would have for appeal if you chose not to take the margin they were offering when the fixed rate ended. Does it definitely not give ECB+ some figure anywhere on the loan offer?
 
I was in PTSB branch today for the first time in quiet a while and I noticed they have all their rates displayed. It states that their Mortgage Tracker rate (for those whose contracts stipulates tracker) is 3.75%.

So I suppose for those (like myself) whose contracts simply states return to tracker and does not state a certain % above ECB, then they must be offering a standard 3.25% plus ECB.

So at least I know if I do ever get my tracker back it will be ECB plus 3.25% by the looks of it.
 
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Loggergirl I was listening to NewsTalk at the weekend and the ombudsman was speaking on it. He was asked about them having ruled for and against people with similar cases. He said that if you feel your case was ruled against, whilst others were not you should come and speak to them. He said that normally what they find then is there is distinct differences between the cases, but if you are concerned to come and speak to them.

He also said that the first quarter of next year they will be able to publish the institutions details, i.e. you will be able to clearly see if there are quiet a number of cases for particular institutions. He said some institutions are fighting them on every decision, wonder who he's talking about here :) But it will be interesting to see these figures early next year.
 
Thanks fuzzy10, hard to know how long it's going to take for an outcome to this, at this stage I'd welcome a ruling and at least you'd know where you stand then.
 
Gahfan i have to agree id be the same id welcome a ruling now aswell as its ridiculous that it can be held up this long
 
Hi has anyone had any further info on this case as it really is gone on far to long. I wonder has brendan any update or advise for those of us that are in this position
 
Itchy Feet?? :)

I want a decision asap as much as anybody but the amount of money at stake now is no joke, actually its life changing in our case. Every month it goes up hundreds of euro`s. I would rather this took x amount of years more if it means we get the decision we 100% deserve which will include our money back!! We have already waited 4 years so whats another couple at this stage. :)
 
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