Royal Bank of Scotland plc v John Patrick McCormack Wilson and another (Scotland)

A creditor who intends to require discharge of a debt secured by a standard security and, failing discharge, to enforce the security must serve a calling-up notice under section 19(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970. A notice of default or an application for a warrant under section 24 is not an alternative means of enforcing payment of the secured debt.

Summary ejection of a proprietor in personal occupation under section 5 of the Heritable Securities (Scotland) Act 1894 requires a formal requisition before proceedings begin. A calling-up notice satisfies that requirement. A certificate lodged during proceedings does not.

Two married couples owned neighbouring homes over which they had granted standard securities to the Royal Bank of Scotland. The securities covered personal obligations to pay indebtedness on demand. The Bank demanded payment from each husband, but did not refer expressly to the securities, serve the wives, or serve calling-up notices.

The Bank later sought warrants under section 24(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970 to possess and sell the homes, together with summary ejection. After a proof, the sheriff assoilzied the couples. The Extra Division allowed the Bank’s appeals and granted decree as craved: [2009] CSIH 36; 2009 SLT 729.

The central issues were whether section 19(1) required a calling-up notice before enforcement of the secured debt, and whether summary ejection could proceed without a prior formal requisition under section 5 of the Heritable Securities (Scotland) Act 1894.

1. The appeals were allowed unanimously. The Bank had pursued the wrong statutory procedure. The interlocutor of the Extra Division was recalled, the relevant pleas for the defenders were sustained, and both defenders in each appeal were assoilzied. Lord Rodger delivered the principal judgment. Lord Hope gave concurring reasons, with which Lord Walker agreed. Lady Hale and Lord Clarke also agreed that the appeals should be allowed.
2. Section 19(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970 is mandatory. Where a creditor intends to require discharge of the secured debt and, failing discharge, to exercise enforcement powers, the creditor must serve a calling-up notice. Parliament’s use of “shall” could not be read as merely permissive. The contrary construction in Bank of Scotland v Millward 1999 SLT 901 was overruled.
3. The statutory “debt” is not confined to the whole outstanding indebtedness. Its wide definition includes any obligation to pay or repay money and any obligation ad factum praestandum. Parliament used different language when it intended to refer to the whole amount due. The calling-up procedure may therefore apply when less than the entire indebtedness is demanded.
4. Standard condition 9(1)(a) concerns failure to comply with the requirement addressed by a calling-up notice. Standard condition 9(1)(b), particularly through the word “other”, concerns requirements arising from the security other than discharge of the secured debt. Neither a notice of default nor an application under section 24 permits a creditor to bypass section 19(1) when seeking payment and enforcement of the security.
5. Section 5 of the Heritable Securities (Scotland) Act 1894 permits the drastic remedy of summary ejection of an occupying proprietor only after default following a formal requisition. The requisition must precede proceedings and warn the proprietor that the secured principal is due and that enforcement may follow non-payment. A calling-up notice meets this requirement. A Schedule 7 certificate, created and lodged as evidence during proceedings, cannot constitute the necessary prior requisition.
6. The Bank had served neither a calling-up notice nor another qualifying formal requisition. Its demand to the husband did not expressly refer to the security, and the wife received no warning before proceedings. Consequently, the Bank was not entitled to the possession, sale and ejection orders sought.

1. United Kingdom Supreme Court: The appeals were allowed unanimously. The interlocutor of the Extra Division was recalled and the defenders in both actions were assoilzied: [2010] UKSC 50.
2. Inner House of the Court of Session, Extra Division: The Bank’s appeals were allowed and decree was granted as craved, including ejection: [2009] CSIH 36; 2009 SLT 729.
3. Edinburgh Sheriff Court: Following proof before answer, Sheriff Stoddart assoilzied the defenders on 2 May 2007.
4. Inner House of the Court of Session, Second Division: An earlier defence advanced by Mrs Wilson was rejected, and proof before answer was allowed: 2004 SC 153.