CLYDESDALE BANK PLC v. MARGARET McCAW
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
| Lord Coulsfield Lord Cameron of Lochbroom Lord Abernethy | XA110/01 OPINION OF THE COURT delivered by LORD COULSFIELD in the cause CLYDESDALE BANK PLC Pursuers and Respondents; against MARGARET McCAW Defender and Appellant: _______ |
Act: MacSporran; Mitchells Roberton, Glasgow (Pursuers and Respondents)
Alt: Party (Defender and Appellant)
24 May 2002
[1]The pursuers in this action aver that they are the creditors in a standard security granted by the defender over subjects at 35 Locher Way, Craigends, Houston, registered in the Land Register on 27 September 1990. The defender is the proprietor of those subjects. On 11 September 2000, the pursuers served on the defender a calling-up notice requiring payment of a principal sum of £33,687.87 together with interest of £1,738.10, being the sums certified as due in a certificate dated also 11 September 2000. This action, to enforce the security, was raised in December 2000. Defences were lodged but on 1 February 2001 a solicitor acting for the pursuers moved the court to grant summary decree. Having heard the solicitor for the pursuers and the defender personally the sheriff granted summary decree. The defender appealed to the sheriff principal who heard the solicitor for the pursuers and the defender personally on 10 April 2001 and thereafter refused the defender's appeal. The defender now appeals to this court.
[2]It is common ground that the defender was sequestrated by an order of the sheriff at Paisley on 12 February 1992. In her defences, the defender claims that she is not due any sum to the pursuers and that the standard security is void and unenforceable. Her defences give no further explanation of these contentions. In a note of appeal to the sheriff principal the defender sets out a number of complaints about the conduct of the sequestration, to which we shall refer again later. So far as the heritable property which is the subject of this action is concerned, the defender's note of appeal states that the trustee had stated in a report that the market value of the property was likely to be less than the borrowing secured upon it and that it was unlikely that she would have any interest in the property. What then appears to have happened was that an arrangement was made between the pursuers, the trustee and the Department of Social Security whereby the pursuers would collect mortgage interest payments from the D.S.S. The pursuer had no income at the time. She had previously conducted a business but that business had been sold by the trustee. The arrangement for payment by the D.S.S. continued until May 2000 when the defender ceased to be entitled to income support. The defender has been in occupation of the subjects throughout.
[3]A previous hearing of this appeal was discharged because a question arose about the position of the trustee. There is produced in process in this appeal a letter dated 16 July 1996 from the trustee to the debtor and all known creditors stating that the trustee's final account had been examined and audited and that the trustee had applied to the Accountant in Bankruptcy for discharge. Apparently it was assumed that the trustee had in fact been discharged. However at the time of the previous hearing that was questioned and it was subsequently ascertained that the trustee had not been discharged. That was confirmed by a letter dated 12 November 2001 from the trustee's firm to the solicitors acting for the pursuers. The letter states that the trustee had been endeavouring to abandon the property due to the apparent negative equity but that if, as a result of a disposal of the property, any equity arose it would revert to the trustee. The letter further states that considering a conversation which had taken place between a member of the trustee's firm and the pursuers' solicitors, the trustee waived her right to have the calling-up notice served upon her. When the appeal was called before us, counsel for the pursuers informed us that attempts had been made to speak directly to the trustee on the previous day but they had not been successful. As a result, an initial question arose because of section 19(3) of the Convenyancing and Feudal Reform (Scotland) Act 1970. That subsection provides, inter alia, that where the person last infeft in the subjects of a standard security has been sequestrated, the calling-up notice shall be served on the trustee in the sequestration, unless discharged, as well as on the bankrupt. Counsel for the pursuers submitted that that was a requirement conceived in favour of the trustee and therefore that the trustee could waive compliance with it. Counsel further submitted that there were alternative methods of proceeding to enforce the security, by a default notice or an action under section 22 of the Act, which did not involve notice to the trustee and, in any event, that there was still an obligation to intimate to the trustee before any sale was completed, and he referred to Abbey National plc v. Arthur 2000 S.L.T. 103. The only person who could complain, he submitted, was the trustee and there was no question of any prejudice to the debtor. The defender, on the other hand, submitted that the trustee should come into the process in order to answer the points to be made against her. She said that her contention was that the whole security arrangement was entered into for an illegal purpose and that the trustee had been a party to that purpose.
[4]We are prepared to accept, in the circumstances of this case, that we can deal with the appeal without requiring any further formal notice to be served on the trustee or any other step taken. While section 19(3) is imperative in its terms, it is clear that the purpose of the section is to give the trustee an opportunity to intervene in any process of calling-up a standard security, no doubt to defend any interest the trustee may have on behalf of the general creditors. In the present case, however, the trustee had apparently, from any early stage, disclaimed any interest in the security subjects. She has been given a clear opportunity to intervene in this process if so advised and has declined to do so. It would be very unfortunate if this appeal were further delayed by any further procedure and, in the whole circumstances, we were prepared to allow the appeal to be heard and dealt with without any further communication with the trustee. For the avoidance of doubt, we should perhaps say that we do not think it necessary to consider the pursuers' submission that there are other methods of proceeding which do not involve notice to the trustee, and we express no opinion on that submission.
[5]When the matter was originally before the sheriff, the defender made submission to him in which she conceded that she had signed a standard security and received money from the bank in consideration of that security. She also conceded that she was still in debt to the bank and that the original security had not been obtained by fraud. She did, however, make certain complaints about the conduct of the sequestration. The sheriff considered what was said to him and reached the view that there was no stated defence to the action. In the appeal to the sheriff principal the defender lodged expanded grounds of appeal which give some further information as to the nature of her complaints about the sequestration. Nevertheless the sheriff principal concluded that those complaints did not amount to a stateable defence to the action. In her submission to us, the defender essentially repeated the same material as had been placed before the sheriff principal. Her grounds of appeal to the court include some complaint about the procedure before the sheriff principal, but these complaints were not pursued in her oral submissions. The defender's defences are, as both the sheriff and the sheriff principal pointed out, skeletal. However, because of the fact that this case was dealt with by a motion for summary decree there has never been an opportunity to adjust the pleadings and, if either the written or oral submissions disclosed any proper ground of defence, the defender would obviously require to be given an opportunity to state that defence in proper form. With that in mind, we have examined the written grounds of appeal and what the defender had to say about them.
[6]The defender's complaints about the proceedings against her can, we think, be brought under five heads.
(1)The defender complains that the sequestration was awarded as a result of a petition which proceeded on a false basis. The defender was engaged in litigation with the petitioning creditors (who were not the present pursuers) and the petition proceeded on a debt claimed by those creditors, notwithstanding the fact that the litigation was still in process.
(2)The trustee wrongly recorded ordinary claims in the sequestration to be much higher than they actually were to deceive the general body of creditors. Further, before the sequestration the defender had made arrangements to sell her business for a sum of £51,000 but after the sequestration the trustee sold the business to the same purchasers for £25,000. This was done with the connivance of the present pursuers.
(3)The pursuers had entered into the arrangement with the D.S.S. whereby they received payment of mortgage interest but were continuing to claim against her and against the security subjects in respect of other unsecured loans although they had received a dividend upon those loans.
(4)Notes which the defender had lodged at Paisley Sheriff Court in order to make complaints about the conduct of the sequestration had been refused.
(5)The defender also complained about the manner in which she had been removed from control of her business on the instructions of the trustee.
[7]In our opinion, when these complaints are set out it is manifest that none of them is capable of affording the defender a defence to the present proceedings. The essential facts of the situation are that the defender granted a standard security and received money in consideration of it: that the sum certified is due and outstanding and that the pursuers are entitled to take steps to realise the security. None of the matters raised by the defender has any bearing on the position of the pursuers in this action except, perhaps, the complaint in relation to the treatment of unsecured loans. Counsel for the pursuers, however, made it clear that the only sum which the pursuers would claim to set against the proceeds of sale of the subjects was the sum claimed in the action, together with continuing interest and any appropriate expenses. If there is any substance in the other complaints, they would have to be pursued in other proceedings or in opposition to the trustee's discharge.
[8]In all these circumstances, it is, in our opinion, clear that the sheriff and sheriff principal reached the correct result and that this appeal should be refused.