Court endorses “bifurcated process” in a representative action under CPR 19.8

The summary judgment decision of the High Court in Barclays Bank UK PLC v Terry & Anor [2023] EWHC 2726 (Ch) is an example of bifurcated proceedings in a representative action brought under CPR 19.8. The Court decided that the “common issues” applicable to all defendants in the representative action were to be dealt with in the summary judgment decision, with individual issues to be decided at a later stage. The decision is one of the first cases to apply the bifurcated process recommended by the Supreme Court in Lloyd v Google [2021] UKSC 50.

Background

The Bank undertook a long-term project to identify cases where a mortgage from the Bank had been redeemed but not discharged. The Bank identified over 40,000 mortgages and approved the automatic discharge of the charges, with simultaneous applications to the Land Registry to remove the charges from the registered title. It subsequently transpired that some 5,141 of the mortgages were discharged by mistake, as the customers still owed money to the Bank.

The Bank started Part 8 proceedings (where a claimant seeks the Court’s decision on an issue that is unlikely to involve a substantial dispute of fact) to rescind the discharged mortgages on the grounds of mistake. It brought the claim against two defendants on their own behalf and pursuant to CPR 19.8 as representatives of the other 500 defendants, all of whom were more or less in the same factual position. The Bank applied for summary judgment against the defendants on the basis they had no real prospect of successfully defending the claim and there was no other compelling reason why the claim should be dealt with at a trial.

Judgment

(i) Equitable mistake

The judge, HHJ Paul Matthews, referred to the authorities on equitable mistake and, specifically, the principles applicable to “rescission of a non-contractual voluntary disposition for mistake” (see Kennedy v Kennedy [2014] EWHC 4129 (Ch) and Pitt v Holt [2013] UKSC 26). The judge considered that the Bank took care to produce an accurate list of discharged mortgages and that it did not intend to run the risk of being wrong. In applying the law to the facts, the judge was satisfied that there was a distinct mistake and that the law allowed the transactions to be rescinded for mistake.

The judge next had to decide whether the Bank’s mistake was sufficiently serious or grave as to make it unconscionable for the defendants to retain the benefit of it. In relation to the named defendants only, the judge was satisfied that it would not be unconscionable to prevent the named defendants from retaining the benefit of the Bank’s mistake, and so he ordered summary judgment in the claim to have the mistaken discharge of the named defendants’ mortgage set aside.

(ii) The application of Lloyd’s “bifurcated process”

The judge refused to grant summary judgment in relation to the represented customers, holding that it was “necessary to look at the facts of their cases”. The judge considered that with the remaining chargors, there might be individual circumstances which may change the decision as to whether it would be unconscionable for the customer to retain the benefit of the mistake. Similarly, there may be exceptional circumstances preventing the Court from exercising its discretion to order an update of the Land Register. Where an individual assessment of an issue was required, the judge applied the “bifurcated process” recommended in Lloyd v Google [2021] UKSC 50, meaning such an assessment would take place at a later, separate stage of proceedings.

Key takeaways

By following Lord Legatt’s suggestion in Lloyd regarding bifurcated proceedings, the Court has shown that there may be flexibility in the representative action procedure where a group action involves a large number of similar but not necessarily identical claims. The present case confirms that while common issues may be decided in the representative action, individual issues will need to be decided under the second part of the bifurcated procedure.

With thanks to Kirsty Bailey for her assistance in preparing this post.