PRESS RELEASE: 6th October 2009

SHARED APPRECIATION MORTGAGES

CLAIMS AGAINST BOS AND BARCLAYS

GROUP LITIGATION ORDER

Background

Shared Appreciation Mortgages (“SAMs”) were sold throughout Great Britain in 1997 and 1998. There may have been some 12,000 altogether and a total of around 7,000 may still be unredeemed.

Nine subsidiaries of Bank of Scotland (“BOS”) sold SAMs in 1997 and 1998 on a fixed interest basis or on a zero interest basis, and one subsidiary of Barclays Bank (“Barclays”) sold SAMs in 1998 on a zero interest basis.

In the case of fixed interest SAMs, the fixed rate was approximately two thirds of the rate of interest payable in respect of conventional residential mortgages at the date the SAMs were marketed.

The overwhelming majority of SAMs were sold on a zero interest basis.

In the case of fixed interest SAMs, the homeowner could borrow up to 75% of the then value of the property: in the case of zero interest SAMs, the homeowner could borrow up to 25% of the then value of the property.

In the case of all SAMs, when the original loan came to be repaid, the Lender was also to be paid an amount equal to a share of the increase in value of the property over the period since the original loan was made (“the Lender’s Share of the Appreciation”).

In the case of fixed interest SAMs, this share was calculated as one times the original loan to value percentage, so that where the original loan amounted to 75% of the value of the property, the Lender’s Share of the Appreciation amounted to 75%.

In the case of zero interest SAMs, this share was calculated as three times the original loan to value percentage, so that where the loan amounted to 25% of the value of the property, the Lender’s Share of the Appreciation amounted to 75%.

In all cases, the homeowner was free to repay the loan (and the Lender’s Share of the Appreciation) at any time but was not required to do so until (at the latest) 18 months after the death of the homeowner or (in the case of joint homeowners) the surviving homeowner.

In the fixed interest cases, where a sale takes place today, the Lenders typically receive up to 75% of the increase in value of the property over the period since the original loan was made, as well as interest on the original loan over the period since the original loan was made and repayment of the original loan in full, in exchange for having lent up to 75% of the value of the property at the time of the original loan.

In the zero interest cases, where a sale takes place today, the Lenders typically receive up to 75% of the increase in value of the property over the period since the original loan was made, as well as repayment of the original loan in full, in exchange for having lent up to 25% of the value of the property at the time of the original loan.

The relevant percentage of the increase in value in any particular case is here referred to as “the Share of Appreciation Percentage”.

Existing Claims

Proceedings have been issued by SAM holders against each of the ten companies which sold SAMs seeking relief under the Unfair Terms in Consumer Contracts Regulations 1994 (“the 1994 Regulations”) or alternatively under the Consumer Credit Act 1974 (“the 1974 Act”).

In the case of each claim (which is a claim against the relevant company):

(1) the relief sought under the 1994 Regulations is a Declaration that the terms in the SAM Loan Agreement providing for the payment by the Claimant to the Defendant of the Lender’s Share of the Appreciation were unfair terms for the purposes of the 1994 Regulations and were not binding on the Claimant: and

(2) the relief sought (in the alternative) under the 1974 Act is an Order under Section 140B varying the terms of the SAM Loan Agreement:

(a) by reducing the Share of Appreciation Percentage in the Loan Agreement to a level to be specified or identified in the proceedings or to such other level as the Court may think fit: alternatively

(b) by introducing a cap or limitation on the Lender’s Share of the Appreciation payable under the Loan Agreement, in terms to be specified or identified in the proceedings or in such other terms as the Court may think fit: or alternatively

© in such other manner as the Court may think fit, for example by a combination of (a) and (b).

The Unfairness Allegations

The claims against each of the Lenders which sold SAMs are founded on the following allegations (“the Unfairness Allegations”):

(1) the allegation that the Share of Appreciation Percentage under each SAM Loan Agreement was excessive:

(2) the allegation that the Lender’s Share of the Appreciation ought to have been capped or otherwise limited:

(3) the allegation that the Brochures issued in respect of each SAM Loan Agreement, when objectively viewed by a prospective Borrower who was a reasonably well-informed and circumspect consumer, were misleading as to the costs involved.

The Group Litigation Order

On 5 October 2009 a Group Litigation Order (“the SAMs GLO”) was made in the Chancery Division of the High Court of Justice by Chief Master Winegarten with the consent of the Chancellor of the High Court the Right Honourable Sir Robert Andrew Morritt.

The SAMs GLO applies to any claim made by a sole Claimant or joint Claimants against one of the Defendants listed below seeking the determination by the Court of the Issues specified in the Schedule to this Notice (“the GLO Issues”) or some of such Issues or similar Issues in relation to the SAM Loan Agreement entered into by such Claimant or Claimants with that Defendant. All such claims will together constitute “the SAMs Group Litigation”.

The Defendants are:

BOS (Shared Appreciation Mortgages) No. 1 plc (“BOS 1”)
BOS (Shared Appreciation Mortgages) No. 2 plc (“BOS 2”)
BOS (Shared Appreciation Mortgages (Scotland)) Limited (“SAMSCO 1”)
BOS (Shared Appreciation Mortgages) No. 3 plc (“BOS 3”)
BOS (Shared Appreciation Mortgages) No. 4 plc (“BOS 4”)
BOS (Shared Appreciation Mortgages (Scotland) No. 2) Limited (“SAMSCO 2”)
BOS (Shared Appreciation Mortgages) No. 5 plc (“BOS 5”)
BOS (Shared Appreciation Mortgages) No. 6 plc (“BOS 6”)
BOS (Shared Appreciation Mortgages (Scotland) No.3) Limited (“SAMSCO 3”)
Barclays SAMS Limited (“Barclays SAM”)

The SAMs GLO provides for the establishment of a group register (“the Register”) on which claims which are or become the subject of the GLO are to be entered.

The SAMs GLO further provides that the Chancery Division of the High Court will be the Court which will manage the claims on the Register (“the Management Court”) and that any future claims to which the GLO applies are to be issued in that Court and entered on the Register.

The Register is to be kept by Ms Vicky Bell, The Chancery Lawyer, Room TM 5.06, Thomas More Building, Royal Courts of Justice, Strand, London WC2A 2LL (“the Chancery Lawyer”) and is to be maintained by the Lead Solicitors, rwp solicitors limited of Meadow House, 22 Reading Road, Pangbourne, RG8 7LY (“the Lead Solicitors”).

Claims issued prior to the application for the GLO (15 May 2009) are entered on the Register with immediate effect.

Claims issued after the application for the GLO (and before or after the date of the SAMs GLO) are to be entered on the Register and Claimants in respect of such claims should apply by letter to the Chancery Lawyer to be entered on the Register and joined as Claimants under the terms of the SAMs GLO. Such applications should be made by the Solicitors for the relevant Claimant or Claimants or (where there are no Solicitors acting) by the relevant Claimant or Claimants.

Under the SAMs GLO, claims entered on the Register are allocated to one of the following seven Classes:

Class 1: Claims against BOS 1 or SAMSCO 1 in respect of Loans made at a fixed rate of interest of 5.75% per annum.

Class 2: Claims against BOS 2 or SAMSCO 1 in respect of Loans made at a zero rate of interest.

Class 3: Claims against BOS 3 or SAMSCO 2 in respect of Loans made at a fixed rate of interest of 5.95% per annum.

Class 4: Claims against BOS 4 or SAMSCO 2 in respect of Loans made at a zero rate of interest.

Class 5: Claims against BOS 5 or SAMSCO 3 in respect of Loans made at a fixed rate of interest of 5.99% per annum.

Class 6: Claims against BOS 6 or SAMSCO 3 in respect of Loans made at a zero rate of interest.

Class 7: Claims against Barclays SAM (all in respect of Loans made at a zero rate of interest).

The SAMs GLO contains detailed provisions relating to the maintenance of the Register, its updating (by the addition or removal of claims), the service or provision of details of entries on the Register and its examination and similar administrative matters.

The Judge responsible for the management of all claims to which the SAMs GLO applies is Mr Justice Mann (“the Management Judge”). Subject to the provisions of the SAMs GLO, he will be responsible for giving directions as to the procedure to be applied for determining, in relation to each of the seven Classes referred to above (and any other distinct class of claims which may be identified), the GLO Issues and for the selection of claims to proceed as test cases for that purpose, and in due course he will be responsible for dealing with such test cases.

Pending directions from the Management Judge, all claims entered on the Register will be stayed with effect from the date of the SAMs GLO or (if later) the date of their entry on the Register and until further order. Notwithstanding that stay, where a claim is added to the Register after the date of the SAMs GLO, provision is made for the service by the Claimant or Claimants on the Defendant of a Schedule setting out certain details relating to that claim.

The SAMs GLO contains detailed provisions as to the Claimants’ liability for common costs.

This Press Notice (and the Schedule) set out in outline certain key details of the SAMs GLO but is not exhaustive.

The full text of the SAMs GLO (excluding Schedules A and B which contain details relating to claims issued prior to the application for the GLO) is available on the dedicated website: www.samgroupaction.com

Details of the SAMs GLO will also become available on H M Courts Service website: www.hmcourts-service.gov.uk/cms/150.htm

Appeal

BOS has stated that the BOS Companies intend to apply for leave to appeal against the SAMs GLO.

Barclays SAM has stated that it reserves the right to apply for leave to appeal against the SAMs GLO.

Notice by the Lead Solicitors

Any individual or individuals (not already a Claimant) who may intend to make a claim against one of the Defendants listed above in respect of an existing SAM (i.e., one which has not yet been repaid) should contact the Lead Solicitors without delay.

In the case of claims against BOS 1, BOS 2, BOS 3, BOS 4, BOS 5, BOS 6 and Barclays SAM (in relation to all of which the law of England and Wales on limitation will apply), a 12 year limitation period commencing as early as the date of the acceptance of the offer may be applicable. Claims against BOS 1 and BOS 2 (if not already issued) will be statute barred since SAM Loan Agreements with such Lenders were not entered into after 30 June 1997 or thereabouts. In the case of any claim against BOS 3, BOS 4, BOS 5 and BOS 6, immediate action may be necessary to ensure that a claim which is still capable of being made does not become statute barred. In the case of some claims, if you delay further even by a matter of days you may lose any right you have to claim.

The restriction of the 12 year period is not applicable in relation to claims against SAMSCO 1, SAMSCO 2 and SAMSCO 3 (in relation to all of which the law of Scotland on prescription and limitation will apply). Notwithstanding this difference, any individual or individuals (not already a Claimant) who may intend to make a claim against any of these three companies in respect of an existing SAM should contact the Lead Solicitors without delay.

Individual SAM holders who wish to contact the lead solicitors should do so on: 0845 003 9355 or register at www.samgroupaction.com

Contacts:

Hilary Messer, RWP Solicitors: 0118 984 2266 Hilary@rwp-solicitors.co.uk www.rwp-solicitors.co.uk

Tim Maltin, Maltin PR: 020 7887 1357 tim@maltinpr.com www.maltinpr.com

Notes to editors:

A photograph of Hilary Messer is available at www.maltinpr.com/hilary-messer

Further information is also available at www.samgroupaction.com

This Press Release is issued by the Lead Solicitors pursuant to Paragraph 19 of the SAMs GLO.

The Schedule

The GLO Issues

(1) Can the questions of (a) the fairness or unfairness of a term arising under Regulation 4(1) of the 1994 Regulations and (b) the fairness or unfairness of a relationship arising under Section 140A of the 1974 Act be determined by reference to “the Common Circumstances” alone, and without reference to “the Individual Circumstances” of each case, having regard in particular to Section 140B(9) of the 1974 Act?

(2) Are “the Relevant Provisions” in the SAM Loan Agreements in plain and intelligible language within the meaning of Regulation 3(2) of the 1994 Regulations?

(3) If the answer to Issue (2) is “yes”, are “the Relevant Provisions” exempt from assessment for fairness under the 1994 Regulations by virtue of Regulation 3(2) because they either define the main subject matter of the contract or concern the adequacy of the price or remuneration, as against the goods or services sold or supplied?

(4) If the answer to Issue (2) or (3) is “no”, having regard to “the Unfairness Allegations” (to the extent that they are proved at trial):

(a) is the Court in a position to conclude that “the Relevant Provisions” in the SAM Loan Agreements are unfair (for the purposes of Regulation 4(1) of the 1994 Regulations), having regard to “the Common Circumstances” but whatever “the Individual Circumstances” of any particular case might be: and

(b) does the Court so conclude?

(5) If the answers on Issues (2) and (3) above are “yes”, or if the answer on Issue (4)(a) or (4)(b) above is “no”, then, having regard to “the Unfairness Allegations” (to the extent that they are proved at trial):

(a) is the Court in a position to conclude that the relationships between the lender and the Borrower are unfair (for the purposes of Section 140A of the 1974 Act), having regard to “the Common Circumstances” but whatever “the Individual Circumstances” of any particular case might be: and

(b) does the Court so conclude?

(6) If the answer to Issue (5)(b) is “yes”, can the appropriate remedy under Section 140B be determined having regard to “the Common Circumstances” but without reference to “the Individual Circumstances” of each case?

(7) If the answer to Issue (6) is “yes”, what is the appropriate remedy under Section 140B of the 1974 Act?

For the purpose of the above:

- “the Relevant Provisions” means the terms in the SAM Loan Agreements which make provision for amounts related to the increases in the values of the mortgaged properties during the terms of the loans to be paid to the lenders upon redemption and, where applicable, for the payment of monthly interest at the relevant rate.

- “the Common Circumstances” means any factual circumstances which the Court considers to be relevant in relation to any GLO Issue and the applicable statutory provision or provisions and which are common either to Borrowers under SAM Loan Agreements, or to Borrowers under any distinct class of SAM Loan Agreement (and Paragraph 1(33) of the SAMs GLO sets out further provisions as to the matters included (without limitation) among such Circumstances).

- “the Individual Circumstances” means any factual circumstances (not being Common Circumstances) which the Court considers to be relevant in relation to any GLO Issue and the applicable statutory provision or provisions (and Paragraph 1(34) of the SAMs GLO sets out further provisions as to the matters included (without limitation) among such Circumstances).

- “the Unfairness Allegations” has the meaning assigned to it in the body of this Press Release.

The formulation of the GLO Issues set out in this Schedule is without prejudice to the power of the Management Court to direct that the GLO Issues should be amended, supplemented or otherwise varied and to the right of the Claimants or the Defendants to apply at any time or times to the Management Court to request the Management Court to do so.