Ejection of Proprietors in Possession - Reflections on RBS v Wilson

Posted On: 04 April 2011

Author: Alan A. Summers QC

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Alan Summers QC reflects on the case of Royal Bank of Scotland v Wilson. The case called before the Supreme Court in October 2010 and Alan acted for the successful appellants.



EJECTION OF PROPRIETORS IN POSSESSION

Reflections on Royal Bank of Scotland v Wilson

By Alan Summers QC

Introduction

  1. The decision of the Supreme Court in Royal Bank of Scotland v Wilson marked the end of a long running saga whose course can be charted through the law reports.  Although it is not obvious from the case title, there were in fact two cases running side by side.  Initially the husbands and wives were separately represented. The husbands argued initially that their liability as guarantors of the partnership debts was not a liability “arising” from the security under standard condition 9(1)(b) but from the guarantees they had signed. Sheriff Craik rejected this argument. The wives for their part argued that they were not liable as cautioners for their husbands’ debts, seeking to rely on Smith v Bank of Scotland; see 2001 S.L.T. (Sh Ct) 2.  This argument was also rejected. The wives appealed.  Their appeal was heard by the 2nd Division which upheld the Sheriff’s decision.  The Inner House’s views are recorded in 2004 S.C. 153.  The matter went back for proof before Sheriff Stoddart and representation was conjoined again.  At proof the Defenders complained inter alia that section 5 of the Heritable Securities (Scotland) Act 1894 required the Bank to send a “formal requisition” before commencing proceedings to eject and that because the Bank had failed to do so the application should be refused.  He upheld this contention.  The Bank appealed to the Inner House where the Extra Division soundly thrashed the Respondents and granted warrant to eject to the Bank (2009 S.L.T. 729).  The Wilsons then appealed to the Supreme Court.  The decision is reported at 2010 S.L.T. 1227 and will shortly be reported in the Session Cases.

  2. The Supreme Court held that the Inner House was wrong to equate a Schedule 7 certificate (which the Bank had supplied during the course of proceedings) with a “formal requisition”.  Lord Rodger explains why at p 1233H.  The principal problem with the certificate was that it was not a requisition or demand. It was simply a convenient means provided by section 24 by which creditors could certify certain matters and thus obviate the need for proof at the hearing of the application.  The pro forma certificate in schedule 7 indicates that its primary purpose was to obviate the need to prove a default under standard condition 9(1)(b). In fairness this was not an argument that Counsel for the Bank had advanced before the Inner House and as the Supreme Court recognised was palpably wrong.  The Bank’s main argument was that the 1970 Act had overridden section 5 of the 1894 Act in the case of applications for warrant under section 24.  It was argued section 24 provided an independent remedy which was not contingent on a prior demand as for example a section 19 Calling Up Notice. See the judgement of the Inner House (2009 S.L.T. 729) at para. 42.  The weakness of that argument however was that it cut out section 5 of the 1894 Act completely (see p1233J-L).  Section 5 had not been repealed or disapplied in the case of applications under section 24 of the 1970 Act. It was evident that a formal demand for payment was designed to give prior warning to a debtor that the security subjects were liable to be sold after ejection of the proprietor; it was difficult to accept that such a valuable protection should be removed by implication.

  3. In a way that is only possible in a Court not fettered by authority (in this case Bank of Scotland v Millward 1999 S.L.T. 901) and (largely) unaware of the reputation of Professor Halliday, Lord Walker of Gestingthorpe pointed out on Day One that the wording of section 19 of the 1970 Act did not give any hint that the creditor who was seeking to rely on the failure of the debtor to pay sums due had any alternative to the Calling Up Procedure.  Lords Roger and Hope having had an opportunity to consider matters overnight joined the fray on Day 2.  The real culprit was Professor Halliday who had suggested in his commentaries that the three remedies in the 1970 Act were alternatives to one another.  While that might make sense in the case of Notices of Default and Calling Up Notices since a debtor may be both in arrears and in default of his other security obligations e.g. to maintain the premises, it made no sense of section 24 which specifically limited itself to 9(1)(b) and 9(1)(c) defaults.  Section 24 could only be broadened out to include monetary defaults if 9(1)(b) could be read so as to cover such a default.  As Lord Hope and Roger explain at length (p1234F-G, p1235E- 1236F, p1239C-F, p1240C-G) however the wording makes it clear that the purpose of the statute was to require creditors who wished to enforce their security where there had been failure to pay interest or capital or both, to the Calling Up procedure.  Once that was appreciated the statutory scheme fitted neatly with the terms of section 5 of the 1894 Act since the Calling Up Notice constituted a formal requisition.

  4. The Court in the event granted the appeal and restored the interlocutors of Sheriff Stoddart.  The grounds of appeal advanced by the Appellants were upheld, Millward overruled and Professor Halliday’s comments on the meaning of the Act disapproved. 

(Continued......To read the full article please click on the link at the top of the page)