As the tracker mortgage review continues to develop, it is becoming increasingly common for defendants in summary judgment and/or repossession proceedings to allege that the loan the subject of the proceedings is impacted by the tracker mortgage investigation, that this caused the defendants to fall into arrears on the loan and accordingly, that the relevant financial institution should not be entitled to judgment and/or possession of the underlying security. In essence, a tracker mortgage is “a type of home loan where the interest rate charged on the loan tracks that of another publicly available rate, typically the interest rate set by the European Central Bank”1 (“ECB”). One aspect of tracker mortgages was considered by the High Court in the context of repossession proceedings in a recent ex tempore decision of Ms. Justice O’Regan in the matter of Bank of Ireland -v- Adrian Blanc and Lucille Blanc2.
The case involved an appeal by the Defendants of a Circuit Court Order for Possession made in favour of Bank of Ireland (“BOI”) in April 2019 in respect of the Defendants’ family home in Foxrock. In September 2014, BOI acquired the loan and the mortgage the subject of the proceedings from ICS Building Society (“ICS”), following a transfer of a portion of the business of ICS to BOI. The original advance to the Defendants was in or around 2008 in the amount of €1.7m for a term of 15 years, with interest only payable during the first three years. However, arrears first began to accumulate in July 2010. The Defendants appeal was based on a number of grounds, 3 however the main assertion related to the impact of the change in the ECB lending rate to banks from a minimum bid rate to a fixed rate4. In particular, the Defendants contended that due to these “dramatic changes”, the applicable interest rate mentioned in the letter of loan offer (being the minimum bid rate) was essentially reduced to nil, as that rate was allegedly abandoned in favour of a fixed rate. In particular, the letter of loan offer provided that the interest rate applicable to the loan was a variable interest rate which is to be no more than 0.65% above the ECB main refinancing operations minimum bid rate. It was further provided that if, for whatever reason, that rate was unavailable, a certification to that effect was required in order for the loan to be repayable with interest accumulating on the prevailing home loan variable rate. The Defendants asserted that no such certification issued and accordingly, BOI unilaterally applied a third rate. They relied upon a CJEU judgment of 26 February 2015 Case C-143/13 (Matei) in support of their assertion that this was in breach of the Unfair Terms Directive (“the Directive”) 5. Conversely, BOI relied upon the decision of Mr. Justice Meenan in AIB -v- O’Donoghue6 in support of its argument that the main subject of a mortgage contract (being the advancement of monies with an agreement to repay, the provision of security and the charging of interest) is not covered by the Directive.
In refusing the Defendants’ appeal and affirming the Order for Possession granted by the Circuit Court, Ms. Justice O’Regan cited the decision of Ms. Justice Dunne in Anglo Irish Bank PLC -v- Fanning7 relating to the granting or withholding of possession and found that the investigation before her was for possession only. Further, she found that she was not asked to “make a judgment of any description as to the sums of money that are due and owing”, but whether there was a default in the loan repayment which was sufficient to enable BOI to commence the possession proceedings. As regards the Defendants’ argument regarding the alleged abandonment of the minimum bid rate, the Court found that the argument had no relevance to possession proceedings and further, that the evidence produced by the Defendants in support of that argument could not be relied upon as it amounted to hearsay evidence. Ms. Justice O’Regan further found that leaving aside the interest issue, the Defendants had still defaulted in respect of principal which was due to be discharged since March 2011 and accordingly, BOI were entitled to call in the entire indebtedness pursuant to the mortgage loan and to seek possession if same was not paid. Finally, it is noteworthy that Ms. Justice O’Regan stated obiter that while the argument may be superficially attractive, she was somewhat sceptical if it gave rise to a defence in summary judgment proceedings. As regards the unfair terms point, Ms. Justice O’Regan found that the Defendants were not sufficiently precise as to which of the loan offer or mortgage terms they asserted to be unfair. She speculated that if it were the entitlement of BOI to rely on “the change of circumstances within the ECB and apply the fixed rate lending”, then this was not one of the terms of the loan offer or the mortgage and in those circumstances, the Defendants were “complaining on a general global non-specific basis”, which she held to be unsustainable.
The decision provides comfort to lending institutions that a finding that a lending relationship is affected by the tracker mortgage investigation may not necessarily preclude that lending institution from seeking to enforce its security where a default has occurred.
2 Delivered on 15 January 2020
3 Namely that the contract terms imposed upon them were allegedly unfair, that there was a conspiracy against them to violate their rights, that there was a breach of the Consumer Credit Act, 1995 and that there was an ongoing investigation under the tracker mortgage scheme
4 The minimum bid rate procedure allowed for banks to bid for a pool of money that the ECB was prepared to lend into the system. Each bank would bid at a margin above the prevailing ECB reference rate and the available funding would be provided to the highest bidders. However, due to the pressures placed on the global financial system in September and October 2008, the ECB decided, as of 15 October 2008, to alter the method by which the main refinancing operations rate would be calculated by moving from a variable rate tender to a fixed rate tender process.
5 Unfair Contract Terms Directive (93/13/EEC)
6  IEHC 599
7  IEHC 141
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