Barclays Bank UK v Terry And The Previously Hypothetical "Bifurcated Process"

• Published date: 17 January 2024
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Charges, Mortgages, Indemnities, Financial Services, Class Actions
• Law Firm: Herrington Carmichael
• Author: James Musallam

A recent High Court decision in favour of Barclays Bank (Barclays Bank UK Plc v Terry [2023] EWHC 2726 (Ch)) has sparked intrigue in the field of representative actions. As the first judgment to adopt a 'bifurcated process', it represents a move towards split decision-making on 'common' and 'individual' issues of the class of litigants.

What was the case about?

The factual background involved Barclays accidentally discharging over 5,000 mortgages from the Land Registry in error despite those mortgages still having outstanding balances. This mistake occurred while undertaking an audit of their security at the Land Registry.

Applying the law of rescission of a non-contractual voluntary disposition on grounds of mistake, summarised in Kennedy v Kennedy [2014] EWHC 4129, the Court found that Barclays had made an honest and serious mistake of fact having legal consequences and was thus theoretically entitled to rescind the discharges. However, the practicality of doing so was more complicated. Paul Matthews HHJ ruled as follows (para 29):

"In my judgment the jurisdiction of the court to reverse this mistaken transaction is engaged. However, and as set out in the extract from Kennedy v Kennedy, the law requires that the mistake be sufficiently serious or sufficiently grave so as to make it unconscionable for the customers to retain the benefit of it. That, of course, means that the court must consider the position of the claimant's customers."

With this reasoning, the High Court awarded summary judgment for Barclays against the two representative Defendants, Mr and Mrs Terry, on the basis that it was unconscionable for them to retain the benefit of the mistake. However, the same could not necessarily be achieved for the thousands of other customers without reviewing the facts of each case individually.

The Court in the Barclays Judgment also indicated that around 3,898 mortgages had "straightforward" titles but at least 936 contained issues of priority on the Charges Register. This further complicated the process of determining whether individual customers were 'unconscionable' in retaining the benefit of the mistake.

Hence, the Court 'bifurcated' its process: a decision was made on a global basis for the common issue of Barclays' mistake, with a second process necessary to assess individual facts for the many defendants. The bifurcated process enabled Barclays to correct their mistake with the Land Registry quickly without prejudice to potential individual...