Donna Breeze and Others v TSB Bank Plc

Hearing dates: 20–21 January 2026

APPROVED JUDGMENT

This judgment was handed down remotely at 10.30am on 30 January 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Introduction

This is an appeal by the Claimants, brought with permission granted by Holgate LJ, against an order made by Thompsell J (as he had then become) on 21 January 2025 determining two preliminary issues in favour of the Defendant (“TSB”) for the reasons he gave when sitting as a Deputy High Court Judge in a judgment dated 25 September 2024 [2024] EWHC 2427 (Ch).

Background

The Claimants are 392 individuals who entered into residential mortgage contracts with Northern Rock plc. Northern Rock proved to be one of the early casualties of the global financial crisis of 2008. In February 2008 Northern Rock was nationalised, with its entire issued share capital being transferred to HM Treasury. Following the implementation of a restructuring plan in 2010, Northern Rock was transferred to UK Asset Resolution Ltd, a wholly owned subsidiary of HM Treasury, and ceased to operate as an active lender. Northern Rock was subsequently transferred to an affiliate of Cerberus Capital Management. In July 2016 a portfolio of the mortgages still held by Northern Rock was transferred to TSB (this statement is a simplification of what actually happened, but it will suffice for present purposes). TSB operates these mortgages under its Whistletree brand name, and therefore they have been referred to in these proceedings as “Whistletree Mortgages”. Similarly, the Claimants are referred to as “Whistletree Borrowers”.

At the time when TSB acquired the Whistletree Mortgages in July 2016, the standard variable rate (“SVR”) that applied to the Whistletree Mortgages was 4.79%, which was 4.29% above the Bank of England's base rate (“the BoE Base Rate”) at that time. Following its acquisition of the mortgages, TSB has subsequently varied this SVR (“the Whistletree SVR”) from time to time, both up and down, and in each case consistently with changes to the BoE Base Rate. Thus it has remained 4.29% above the BoE Base Rate.

TSB also maintains and applies other SVRs to different categories of variable-rate mortgages. These other SVRs include:

i) its Homeowner Variable Rate, which is the rate being advertised and used for newmortgage loans;

ii) its Standard Variable Mortgage Rate (“the TSB SVMR”), which is a rate that is appliedto a portfolio of variable rate residential mortgages applied for before 1 June 2010 (which TSB subsequently acquired from Lloyds Bank); and

iii) a Buy to Let Variable Rate.

The Claimants contend that they are so-called “mortgage prisoners” who have been trapped into paying unduly high variable rates on their mortgages, and they have brought various claims against TSB. These include claims for damages for breach of their mortgage contracts by charging the Whistletree SVR rather than the TSB SVMR, which has been 2% above the BoE Base Rate over the period in question.

Most of the Claimants' mortgages are regulated under the Financial Services and Markets Act 2000 (“ FSMA”), and are thereby subject to the rules in the Mortgages and Home Finance: Conduct of Business Sourcebook (“MCOB”). Those Claimants with regulated mortgages also claim damages for breach of statutory duty in relation to alleged contraventions of MCOB.

In addition, some of the Claimants were offered a package by Northern Rock comprising a mortgage loan (a “Together Mortgage”) and an unsecured loan (a “Together Loan”). The Together Loan was linked to the Together Mortgage in that the interest rate under the unsecured loan was set to match that applicable from time to time to the Together Mortgage, but would increase to a substantially higher rate if the Together Mortgage was repaid. Through these arrangements borrowers could borrow on a mortgage up to 95% of the value of their residential property, and at the same time obtain an unsecured loan up to a further 30% of the value of the property (capped at £30,000). By taking both loans, some borrowers were able to borrow well over 100% of the value of the property that was mortgaged. These Claimants (“the Together Claimants”) claim a declaration that the relationship between each of such Claimants on the one hand and Northern Rock and/or TSB on the other hand was and/or is unfair within the meaning of section 140A of the Consumer Credit Act 1974 (“CCA 1974”) and an order for TSB to repay such sums as would redress that unfairness. More specifically, they claim an order that TSB repay payments made under their Together Mortgages such as would redress the unfairness, including a sum to reflect interest on such payments.

The preliminary issues

On 19 October 2023 Deputy Master Hansen made an order for the trial of three preliminary issues. The parties subsequently reached agreement as to the second of the preliminary issues, which concerns an implied term in the Claimants' mortgage contracts, and therefore the judge only had to determine the first and third issues.

Issue 1 is: “Has [TSB] breached the express terms of the Claimants' mortgage contracts by charging the Claimants interest rates based on the Whistletree SVR and not on the TSB SV[M]R …?” This issue depends on the correct interpretation of the relevant terms of the contracts, and in particular the General Conditions incorporated in them.

Issue 3 is: “Does section 140A(5) [CCA 1974] preclude an order [being made] under section 140B(1) in relation to a regulated mortgage contract, or quantified by reference to sums payable under a regulated mortgage contract, irrespective of whether that regulated mortgage contract is the ‘credit agreement’ or a ‘related agreement’?” This issue depends on the correct interpretation of section 140A(5).

The parties sensibly agreed a statement of agreed facts and issues for the purposes of the trial of the preliminary issues, and therefore the judge heard no evidence. The judge determined both issues in favour of TSB.

Issue 1

Applicable principles

There is no significant dispute as to the applicable principles of contractual interpretation. TSB relied, both before the judge and in this Court, on a convenient summary of the general principles given by HHJ Pelling QC at first instance and adopted by Sir Geoffrey Vos C in Lamesa Investments Ltd v Cynergy Bank Ltd [2020] EWCA Civ 821 at [18]:

“i) The court construes the relevant words of a contract in their documentary, factual and commercial context, assessed in the light of (i) the natural and ordinary meaning of the provision being construed, (ii) any other relevant provisions of the contract being construed, (iii) the overall purpose of the provision being construed and the contract or order in which it is contained, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions – see Arnold v. Britton [2015] UKSC 36, [2015] AC 1619 per Lord Neuberger PSC at paragraph 15 and the earlier cases he refers to in that paragraph;

ii) A court can only consider facts or circumstances known or reasonablyavailable to both parties that existed at the time that the contract or order was made — see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 20;

iii) In arriving at the true meaning and effect of a contract or order, thedeparture point in most cases will be the language used by the parties because (a) the parties have control over the language they use in a contract or consent order and (b) the parties must have been specifically focussing on the issue covered by the disputed clause or clauses when agreeing the wording of that provision – see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 17;

iv) Where the parties have used unambiguous language, the court mustapply it – see Rainy Sky SA v. Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900 per Lord Clarke JSC at paragraph 23;

v) Where the language used by the parties is unclear the court can properlydepart from its natural meaning where the context suggests that an alternative meaning more accurately reflects what a reasonable person with the parties' actual and presumed knowledge would conclude the parties had meant by the language they used but that does not justify the court searching for drafting infelicities in order to facilitate a departure from the natural meaning of the language used – see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 18;

vi) If there are two possible constructions, the court is entitled to preferthe construction which is consistent with business common sense and to reject the other – see Rainy Sky SA v. Kookmin Bank (ibid.) per Lord Clarke JSC at paragraph 2 — but commercial common sense is relevant only to the extent of how matters would have been perceived by reasonable people in the position of the parties, as at the date that the contract was made – see Arnold v. Britton (ibid.) per Lord Neuberger PSC at paragraph 19;

vii) In striking a balance...