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As is immediately apparent from the fact that Mr and Mrs Wilson have not paid any of their indebtedness to the Bank, the appeal relates to rather technical legal issues which are said to stand in the way of the Bank enforcing their security. Ratio |
Moreover, both Mr and Mrs Wilson have for many years been aware of the debt and of the steps which the Bank are taking to enforce their security. Ratio |
But a striking feature of the case is that the letter which the Bank sent to Mr Wilson on 20 June 1995 did not make any express reference to the standard security. Ratio |
Indeed, as already mentioned, at the time Mr Wilson did not realise that the Bank were indicating that they would, if necessary, take steps to enforce their security. Ratio |
The steps taken to alert Mrs Wilson were even less satisfactory. Ratio |
Although, by virtue of the personal obligation in the standard security, she was personally liable for her husbands indebtedness under the partnership letters, the Bank have never sought to enforce that liability against her. Ratio |
Had they done so, they would have required to demand payment from her and she would have become aware of the situation. Ratio |
But presumably the Bank thought that there would be no point in trying to enforce her liability to pay the debt since she would not have had the resources to do so. Ratio |
What the Bank did, however, was to take steps which they considered would be sufficient to enforce the standard security that she and Mr Wilson had granted as proprietors of their home at Dalum Grove. Ratio |
The Bank wrote to Mr Wilson to demand payment. Ratio |
When he did not pay, they treated him as being in default and chose to enforce their security by applying to the court under section 24(1). Ratio |
This meant that the Bank did not contact Mrs Wilson at any stage before they launched these proceedings by serving the initial writ. Ratio |
This Court has to decide whether the Bank were entitled to enforce their standard security and obtain a decree of ejection of Mr and Mrs Wilson in this way. Ratio |
The 1970 Act STA |
In Multi-Link Leisure Developments v North Lanarkshire Council 2010 SC 302, 308, para 24, Sir David Edward QC, giving the opinion of an Extra Division of the Inner House, indicated that their Lordships were more familiar with the mindset of the Scots conveyancer than with the mindset of the man on the Jubilee line on h... |
But even if the man on the Glasgow underground on his way to Buchanan Street were familiar with the mindset of the Scots conveyancer, he would often find his language and approach somewhat challenging. STA |
As its title suggests, the 1970 Act deals with matters of conveyancing. STA |
Moreover, it does so in a manner which makes few concessions to those not steeped in the article Indeed, even Professor Gretton and Professor Reid have felt moved to warn that The law about the enforcement of standard securities is a subject of great and unnecessary complexity: it is a veritable maze: Conveyancing (thi... |
The Court must try to find a way through that maze. STA |
Part II of the 1970 Act created a brand new form of security over heritable property, the standard security. STA |
Although securities granted in the old forms remained valid, all new securities had to take the form of a standard security. STA |
But, as Mr Summers QC emphasised on behalf of Mr and Mrs Wilson, Part II of the 1970 Act did not create a comprehensive code to regulate the way that the standard security was to operate. ARG |
Rather, Parliament created the new form of security and laid down certain rules as to its operation but, for the rest, slotted it into a modified version of the existing statutory and common law regulating heritable securities. ARG |
To see this, it is sufficient to refer to section 20(1), which provides that the creditors rights are to be in addition to any right conferred by any enactment or by any rule of law, and to section 32: The provisions of any enactment relating to a bond and disposition or assignation in security shall apply to a standar... |
It may therefore be necessary to travel outside the 1970 Act to see how the standard security works in particular situations. ARG |
The scheme of the 1970 Act is sometimes confusing, since it requires the reader to go backwards and forwards between the provisions contained in the body of Part II and the contents of Schedules 2 to 9. Ratio |
For example, section 9(2) provides that it is to be competent to grant and record a standard security to be expressed in conformity with one of the forms prescribed in Schedule 2 to the Act. STA |
Schedule 2 contains two forms of standard security, Form A, to be used where the personal obligation is included in the deed, and Form B, which is to be used where the personal obligation is constituted in a separate instrument or instruments. STA |
Appended to Schedule 2 are various notes telling the conveyancer what to do in certain situations. Ratio |
But, in order to discover the meaning of Form A, the reader has to return to section 10. Ratio |
That section explains what is meant by the personal obligation in Form A, thus avoiding the need for the draftsman of the standard security to spell it all out. Ratio |
The technique is familiar from, say, section 119 of the Titles to Land Consolidation (Scotland) Act 1868, with its (1594-word) commentary on Form No 1 of Schedule FF to that Act. Ratio |
The effect of recording a standard security under section 9(2) is to be found in section 11. Ratio |
But, to discover the conditions which are to regulate the standard security (subject to any variations validly agreed by the parties), section 11(2) directs the reader to Schedule 3. Ratio |
This schedule contains the Standard Conditions, the first six of which impose various obligations on the debtor, e g, to maintain and repair the security subjects and to insure them. Ratio |
Conditions 7 to 10 relate to powers of the creditor, while 11 concerns the exercise of the debtors right of redemption. Ratio |
For present purposes conditions 8, 9 and 10 are of importance. STA |
They must therefore be set out, so far as relevant: 8. STA |
The creditor shall be entitled, subject to the terms of the security and to any requirement of law, to call-up a standard security in the manner prescribed by section 19 of this Act. STA |
9. STA |
(1) The debtor shall be held to be in default in any of the following circumstances, that is to say (a) where a calling-up notice in respect of the security has been served and has not been complied with; (b) where there has been a failure to comply with any other requirement arising out of the security; (c) where the ... |
10. STA |
(1) Where the debtor is in default, the creditor may, without prejudice to his exercising any other remedy arising from the contract to which the standard security relates, exercise, in accordance with the provisions of Part II of this Act and of any other enactment applying to standard securities, such of the remedies... |
(2) He may proceed to sell the security subjects or any part thereof. STA |
(3) He may enter into possession of the security subjects and may receive or recover feuduties, ground annuals or, as the case may be, the rents of those subjects or any part thereof. STA |
(4) Where he has entered into possession as aforesaid, he may let the security subjects or any part thereof. STA |
(5) Where he has entered into possession as aforesaid there shall be transferred to him all the rights of the debtor in relation to the granting of leases or rights of occupancy over the security subjects and to the management and maintenance of those subjects. STA |
(6) He may effect all such repairs and may make good such defects as are necessary to maintain the security subjects in good and sufficient repair, and may effect such reconstruction, alteration and improvement on the subjects as would be expected of a prudent proprietor to maintain the market value of the subjects, an... |
(7) He may apply to the court for a decree of foreclosure. STA |
It is not the practice of conveyancers to set out these conditions in the standard security itself. Ratio |
So the debtor cannot discover the conditions regulating the security simply from reading it. Ratio |
To set them out would, of course, increase the length of the deed and so defeat one of Parliaments aims in devising this form of shorthand deed. Ratio |
But, further than that, listing the contents of standard condition 10 would be potentially misleading, unless, at the very minimum, various sections in Part II of the Act were also reproduced. Ratio |
For example, it is only by consulting section 20 that the reader finds confirmation that, when a debtor fails to comply with a calling-up notice under section 19, the creditor can indeed exercise any appropriate power under standard condition 10. Ratio |
Equally, it is only by consulting section 23 that the reader discovers that by contrast if the debtor fails to comply with any other requirement arising out of the security after the service of a notice of default under section 21, the creditor can actually only exercise his powers under standard condition 10(2), (6) a... |
Bearing in mind the structure of Part II of the Act, I turn to look more closely at the way that the legislation operates in the present case. Ratio |
The application under section 24(1) Ratio |
As already explained, the Bank set events in train by writing to Mr Wilson in June 1995. Ratio |
Although he did not understand their letter in this way, by sending it, the Bank intended to warn him that they would take steps to enforce their standard security if he did not pay. Ratio |
Since his personal obligation under the standard security was to pay on demand, his liability to pay was not triggered until this demand was made. Ratio |
In other words he was not in default until he failed to comply with the demand. Ratio |
The question is: what steps does the 1970 Act envisage that a creditor in the position of the Bank will take in those circumstances? Ratio |
As Lord Walker pointed out at an early stage in the hearing, subsections (1) and (2) of section 19 seem to provide a clear answer, that the creditor shall serve a calling-up notice: (1) Where a creditor in a standard security intends to require discharge of the debt thereby secured and, failing that discharge, to exerc... |
(2) Subject to the following provisions of this section, a calling-up notice shall be served on the person last infeft in the security subjects and appearing on the record as the proprietor, and should the proprietor of those subjects, or any part thereof, be dead then on his representative or the person entitled to th... |
Form A in Schedule 6 is in these terms: TAKE NOTICE that CD (designation) requires payment of the principal sum of with interest thereon at the rate of .................. per centum per annum from the .................. day of ........................ (adding if necessary, subject to such adjustment of the principal su... |
If the Bank had served a calling-up notice, by virtue of section 19(2), it would have had to be served on Mrs Wilson, as one of the proprietors of the security subjects. STA |
Under a calling-up notice Mr Wilson would have had two months in which to pay the full amount due to the Bank after which he would have been in default within the meaning of standard condition 9(1)(a). Ratio |
By virtue of section 20(1) and (2), the Bank would then have been entitled to exercise any of their rights under the security and, in particular, their right to enter into possession and to sell the house. Ratio |
In fact, however, the Bank did not proceed under section 19, but took an entirely different course. Ratio |
The Bank treated Mr Wilson as having failed to comply with a requirement arising out of the security, other than a requirement under a calling-up notice. Ratio |
So they treated him as being in default under standard condition 9(1)(b). Ratio |
Assuming, for the moment, that this was permissible, when Mr Wilson failed to comply with the demand to pay the debt, the Bank would have been entitled to serve a notice of default under section 21, calling on him to purge his default by paying the debt within one month. Ratio |
If Mr Wilson had been aggrieved by the requirement to pay, he could have applied to the court under section 22. Ratio |
If he had not objected, or his objection had been rejected and the notice of default upheld, then Mr Wilson would have been required to comply with the requirement in the notice. Ratio |
Failing which, the Bank would have been entitled to exercise their powers under standard condition 10(2), (6) and (7). Ratio |
As explained already, the Bank did not go down this route. Ratio |
Instead, eventually, in April 1998 still on the basis that Mr Wilson was in default under standard condition 9(1)(b) they made an application to the court under section 24, which provides: (1) Without prejudice to his proceeding by way of notice of default in respect of a default within the meaning of standard conditio... |
(2) For the purposes of such an application as aforesaid in respect of a default within the meaning of standard condition 9(1)(b), a certificate which conforms with the requirements of Schedule 7 to this Act may be lodged in court by the creditor, and that certificate shall be prima facie evidence of the facts directed... |
As the first crave (at para 9 above) shows, the Bank asked the court to grant warrant to enter into possession of the house at Dalum Grove (standard condition 10(3)) and to exercise in relation to the house all powers competent to a creditor in lawful possession, including the power of sale (standard condition 10(2)). ... |
By granting decree in terms of the first crave, the Extra Division granted the Bank warrant to exercise those powers. Ratio |
The Banks crave for ejection Ratio |
In the Inner House and in the hearing before this Court much of the argument was directed, however, to the Banks second crave as amended, which, it will be recalled, is a crave for the ejection of Mr and Mrs Wilson and their family from their home. Ratio |
Assuming that the Bank were granted the power under standard condition 10(3) to enter into possession of the subjects, under standard condition 10(1) they could only exercise this power in accordance with the provisions of Part II and of any other enactment applying to standard securities. Ratio |
Paragraphs 18 to 24 of Schedule 8 to the 1970 Act show that section 5 of the Heritable Securities (Scotland) Act 1894 (the 1894 Act) is among the provisions of that Act which apply to standard securities. STA |
Section 5 provides: Where a creditor desires to enter into possession of the lands disponed in security, and the proprietor thereof is in personal occupation of the same, or any part thereof, such proprietor shall be deemed to be an occupant without a title, and the creditor may take proceedings to eject him in all res... |
As counsel for the Bank accepted, this section applies in the present case where the Bank wish to enter into possession of security subjects which are in the personal occupation of the proprietors, Mr and Mrs Wilson. Ratio |
In that situation section 5 allows the creditor to take summary proceedings for ejection, provided that the proprietor has made default in the punctual payment of the interest due under the security, or in due payment of the principal after formal requisition. Ratio |
(The language of the section is not well adapted to a case where only one of the proprietors is in default.) Ratio |
Mr McIlvride acknowledged that the Bank had not established that Mr Wilson had failed to make punctual payment of any interest due under the security. Ratio |
So they have to show that there has been default by Mr Wilson in due payment of the principal after formal requisition (emphasis added). Ratio |
For his part, Mr Summers accepted that, if the Bank had served a calling-up notice in Form A in Schedule 6, this would have met the requirement of a formal requisition. Ratio |
He pointed out that the terms of such a calling-up notice were comparable in their material respects to the Form of Schedule of Intimation, Requisition, and Protest, which is Form No 2 in Schedule FF to the Titles to Land Consolidation (Scotland) Act 1868 the form that would have been in use at the time when section 5 ... |
But, he submitted, since the Bank had proceeded under section 24 of the 1970 Act, they had never served any kind of notice which could constitute a formal requisition for purposes of section 5 of the 1894 Act. Ratio |
So they were not entitled to ask the court for decree of eviction. Ratio |
The Extra Division dealt with this point in para 44 of their judgment, 2009 SLT 729, 738: We agree with the submission by counsel for the Bank that the Sheriff erred in holding that warrant for ejection can only be granted if a formal requisition of payment has been made in terms of section 5 of the 1894 Act. Ratio |
For the reasons given above, warrant for ejection may competently be granted where the debtor in a standard security is in default in terms of standard condition 9(1)(b). Ratio |
The only voucher that is required is a Schedule 7 certificate. Ratio |
No separate requisition is required. Ratio |
The effect of section 24 of the 1970 Act is that such a certificate constitutes a formal requisition for the purposes of section 5. Ratio |
In any event, there is no difference between these provisions. Ratio |
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