Lipsett & Anor v Aib Group UK Plc

Factual and Procedural Background

The Appellants, a couple acting together, entered into mortgage arrangements with the Defendant Bank for the purchase of a residential property (the Crumlin property), financed by the sale of their existing home (the Saintfield property). The mortgage product was a Flexi Tracker with an initial interest-only period of five years followed by repayment of capital and interest. The Appellants claimed they were entitled to pay interest only for the entire 15-year term, contrary to the Bank's position.

The dispute arose following the expiry of the interest-only period, when the Bank required capital and interest repayments. The Appellants requested to remain on interest-only payments until the sale of their existing home, which was delayed and sold for less than anticipated. The Bank refused and possession proceedings were issued in July 2015.

The Appellants initiated a separate claim for unliquidated damages against the Bank alleging negligence, misrepresentation, breach of contract, breach of statutory and equitable duties related to the mortgage arrangements.

The two cases were consolidated and tried together in the Queen's Bench Division (Commercial List) over four days in February 2019. Judgment was reserved and delivered in April 2019, with final orders made in May 2019. The Appellants appealed the orders concerning possession and judgment against them on their claim for damages.

Legal Issues Presented

1. Whether the contractual terms between the parties included a 15-year interest-only mortgage, or only an initial five-year interest-only period followed by repayment.
2. Whether the tariffs document formed part of the legally binding contract and entitled the Appellants to alter the repayment method.
3. Whether the trial judge erred in law regarding the application of Mortgage Conduct of Business (MCOB) rules.
4. Whether there was procedural irregularity or bias affecting the trial judge’s impartiality.
5. Whether the trial judge misapprehended or misconstrued factual matters relevant to the case.

Arguments of the Parties

Appellants' Arguments

• The Appellants contended that an employee of the Bank represented they could elect to pay interest only throughout the entire 15-year mortgage term.
• They relied on the tariffs document, which they argued formed part of the contract and allowed switching between interest-only and repayment mortgages upon payment of a fee.
• They asserted the Bank breached contract and made misrepresentations, causing financial loss due to the forced repayment schedule.
• The Appellants challenged the trial judge’s impartiality based on undisclosed commercial connections with the Bank.
• They alleged procedural irregularities, including omission of documents from evidence bundles and failure to consider material evidence.

Defendant's Arguments

• The Bank maintained the mortgage contract was for an initial five-year interest-only period followed by repayment, as clearly set out in the formal mortgage offer and conditions.
• The Bank asserted the tariffs document was provided solely to comply with regulatory requirements (MCOB) and was not a contractual right to switch repayment methods at will.
• The Bank denied making any legally actionable misrepresentations and emphasized the Appellants were advised to seek legal advice before accepting the mortgage offer.
• The Bank opposed the amendment of the Notice of Appeal and challenged the merit of the alleged procedural irregularities and bias claims.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the contractual documents and the factual matrix objectively, concluding that the binding contract was formed on the date the mortgage funds were drawn down and the deed of charge executed (2 April 2007), not at the earlier acceptance of the mortgage offer.

The court found the mortgage offer and acceptance clearly set out a 15-year mortgage with an initial five-year interest-only period followed by repayment of capital and interest. The Appellants’ claim of a 15-year interest-only mortgage was rejected as not credible, particularly given their knowledge of other mortgage products and the contractual documentation.

The tariffs document, provided with the formal offer, was held to form part of the contract as required by the Mortgage Conduct of Business rules. The court reasoned that the document was directly related to the contractual obligations and liabilities of the Appellants and was not a peripheral or extraneous document. However, the court noted that the trial judge had failed to properly analyze the contractual effect of the tariffs document and conflated breach of contract and misrepresentation claims in his findings.

The court also rejected the Appellants’ allegations of misrepresentation by the Bank’s employee, characterizing the disputed statements as "mere chat" or "mere verbiage" without legal effect.

Regarding the procedural and bias grounds, the court found the evidence for alleged pre-determination of the trial outcome to be insubstantial and dismissed it. The apparent bias claim was acknowledged as serious but was not pursued further pending retrial. Other procedural complaints were found to lack substance.

Ultimately, the court concluded that the dismissal of both breach of contract and misrepresentation claims at first instance could not be sustained due to inadequate reasoning and analysis, particularly concerning the tariffs document. The court held that these issues were better suited for determination at a fresh trial, given their factual and legal complexity.

Holding and Implications

The court ALLOWED THE APPEAL IN PART and ordered a fresh trial before a differently constituted court on the breach of contract and misrepresentation claims, particularly concerning the contractual effect of the tariffs document and alleged representations by the Bank’s employee.

The orders for possession and judgment against the Appellants were set aside to the extent necessary to permit the retrial of these issues. The court strongly encouraged mediation to resolve the dispute and ordered case management directions within 28 days.

The Appellants were, in principle, entitled to costs against the Bank, subject to further submissions.

No new legal precedent was established; the decision primarily rectifies procedural and analytical deficiencies in the first instance judgment and clarifies that certain contract interpretation issues require trial-level fact-finding.