In a landmark ruling on 24 November 2010, the Supreme Court decision in the case of Royal Bank of Scotland plc v Wilson could affect thousands of repossession cases in Scotland.
The Wilsons granted standard securities over houses in Loanhead in favour of the Bank in 1991, and ran up debts which the Bank sought to recover. A court action for repossession was raised by the Bank in 1998.
The Bank did not serve a "calling-up notice", as it did not consider it was obliged to do so in this case, in line with the widely held understanding and application in practice of the provisions in the relevant Act concerning enforcement of standard securities (the Conveyancing and Feudal Reform (Scotland) Act 1970).
The Wilsons did not repay any of the sums sought by the Bank, relying on technical legal issues to argue that the Bank could not enforce the securities.
Supreme Court Analysis
The Supreme Court undertook a detailed examination of the 1970 Act (which it agreed was a "maze") and of section 19(1) in particular, which provides that a creditor "shall" serve a calling-up notice. However, in practice, it had not been treated as requiring a creditor to serve a calling-up notice in these circumstances, and "shall" had been read "in a permissive and not a mandatory sense".
The Court stated that a "striking feature" of the case was that the letter before action the Bank had sent in 1995 did not make any express reference to the standard security. Mr Wilson did not realise at the time that the Bank were indicating that they would take steps to enforce the security. The Bank did not contact Mrs Wilson before raising the court action.
The Court ruled that in a case falling within the scope of section 19(1) such as this, the creditor must serve a calling-up notice. That would ensure that all debtors were treated alike, and, in particular, that they were all given a two-month period in which to pay, that is specified in the calling-up notice.
This case has serious implications for lenders and all lenders ought to review the way they enforce their securities.