Tew & Ors v BoS (Shared Appreciation Mortgages) No 1 Plc & Ors

Statutory fairness under the Unfair Terms in Consumer Contracts Regulations 1994 and the Consumer Credit Act 1974 requires a fact-sensitive assessment. Relevant individual circumstances cannot be excluded merely because claimants seek to proceed on common issues. Fairness is assessed in a single inquiry, considering both sides of the transaction and the real parties involved. A court should not decide fairness hypothetically or give abstract guidance detached from actual cases. In group litigation, a common issue such as the preliminary effect of Regulation 3 may be tried first, but fairness issues are generally best addressed through representative lead or test cases. A Group Litigation Order remains appropriate where it identifies genuinely common issues and provides an effective management framework.

More than 100 borrowers brought claims challenging the terms of shared appreciation mortgages offered by BoS and Barclays in 1997 and 1998. The claims relied on the Unfair Terms in Consumer Contracts Regulations 1994 and sections 140A to 140C of the Consumer Credit Act 1974.

The Chief Master had made a Group Litigation Order identifying issues concerning whether fairness could be determined by reference to common circumstances alone. BoS appealed and argued that the claims should instead proceed through lead cases. The claimants proposed revised and more elaborate GLO issues. The court had to determine the proper scope of the GLO and the appropriate method for managing the fairness questions.

1. The appeal and case-management application were determined by rejecting the claimants’ proposed formulation of the GLO issues. A GLO remained appropriate, subject to revised wording and further directions.
2. GLO issues identify common or related issues of fact or law which define the claims to be managed as a group. They must not be confused with the ultimate issues to be determined at trial. A GLO cannot accurately be framed so as to exclude individual circumstances which are legally capable of affecting fairness.
3. Regulation 4(2) requires all circumstances attending the conclusion of the contract and the other relevant contractual terms to be considered. Section 140A(2) similarly requires the court to have regard to all matters it considers relevant, including matters relating to the creditor and debtor. Individual circumstances such as understanding, advice, wealth and the reasons for entering the transaction may therefore be relevant.
4. The fairness inquiry is a single-stage inquiry. It should not be divided into a preliminary assessment based only on common circumstances followed by a possible adjustment based on individual circumstances. The court should assess fairness in the context of real borrowers and real transactions, rather than hypothesising a typical counterparty or giving abstract guidance.
5. The proposed questions whether the mortgage percentage was “excessive” or should have been capped did not themselves reflect the statutory test. They imported value judgments not contained in the legislation and could be relevant only as part of the overall fairness assessment.
6. Regulation 3 was a suitable common issue which might be tried as a preliminary issue. The fairness questions should then be addressed through lead or test cases representing different parts of the factual spectrum. The results would provide guidance for the remaining claims without technically binding all other litigants.
7. The final GLO issues and directions were to be settled or ruled upon promptly, with lead-case directions to be given.

• High Court (Chancery Division): Chief Master Winegarten made a Group Litigation Order on 5 October 2009. The order was appealed to Mr Justice Mann, who rejected the proposed formulation of the issues, retained the GLO in principle and directed that revised issues and lead-case arrangements be considered.