[2016] SC EDIN 74




In Summary Application under the Conveyancing and Feudal Reform (Scotland) Act 1970









First Defender



Second Defender



Third Defender


Pursuer:   Walker; HBJ, Edinburgh

Defender:   Ridley; Blacklocks, Edinburgh


Edinburgh, 1 November 2016

The Issue

[1]        The Clydesdale Bank (The Bank) held standard securities over 6 properties in Edinburgh granted in exchange for loans. The properties are owned by the defenders who rent them out as part of a commercial buy-to-let property business. The Bank assigned its interest in the secured debt to the pursuer who has called up the loans and now seeks to enforce its securities. The admitted total debt outstanding on the secured loans is in excess of £1.8 million. The calling up procedure is not disputed.

[2]        Also, the defenders do not dispute they are in default but maintain that on 14 June 2007 a representative of the Bank promised that their initial loan facility would be extended after 5 years and the securities not enforced. The defenders it is said relied on that promise. Upon that basis, the defenders’ plea-in-law states the present action is incompetent and the action should be dismissed. The defenders moved for an evidential hearing to establish the circumstances surrounding the making of the promise.


The Hearing on 23 September 2016

[3]        Ms Walker appeared for the pursuer and explained, by reference to the pleadings, that the Bank had extended commercial loan facilities to the defenders using a number of facility letters. In terms of facility letters dated 23 June 2009, 30 July 2010 and 15 July 2011, the Bank provided commercial loan facilities to the defenders described as Tailored Business Loans. The Tailored Business Loans have all now expired. In terms of a separate facility letter dated 29 September 2008, the Bank extended a loan facility to the defender by way of a Variable Rate Term Loan. That loan facility has also now expired.

[4]        In exchange for these loans the defenders granted standard securities over 6 properties, the titles of which are registered in the Land Register of Scotland under Title Numbers MID40349, MID117583, MID124319, MID110742, MID123668 and MID62604. The Standard Securities secured all sums which may at any time become due to the Bank by the First, Second or Third Defenders. This is admitted.

[5]        The standard securities now vest with the pursuer by virtue of an assignation by the National Australia Bank Limited and the Bank in favour of the pursuer dated 28 November 2014 and registered on 2 December 2014. The Bank's right, title, benefit and interest under, in and to the loan facilities was assigned by the Bank to the pursuer by virtue of an assignation by the National Australia Bank Limited and the Bank in favour of the pursuer dated 24 and 27 November 2014. This is admitted.

[6]        By a letter dated 10 September 2015, the pursuer wrote to the defenders advising that the facilities had expired and demanded payment of the sum of £1,803,954.84, being the amount of the defender's liabilities then outstanding.  Payment of the sum demanded was not made and remains unpaid. This is admitted.

[7]        On 19 January 2016, the pursuer's agents wrote to the defenders in compliance with the pre-action requirements specified in Section 24A of the Conveyancing and Feudal Reform (Scotland) Act 1970 ("the 1970 Act").  The pursuer recommended that the defenders seek advice from a solicitor, the Citizens Advice Bureau or other agency.  The pursuer advised the defenders to contact their local authority.  Payment of the sums due was not made by the defenders. A proposal was made on behalf of the defenders in relation to the indebtedness on 1 February 2016. The proposal was made on a without prejudice basis and was for a sum significantly less than the outstanding indebtedness. That proposal was not acceptable to the pursuer.

[8]        On 16 March 2016 the pursuer initiated a formal calling up process in terms of sections 19 and 20 of the 1970 Act. No objection has been stated to that and it is admitted to be conform to the procedure set down in the Act.

[9]        In those circumstances Ms Walker moved for decree as no relevant defence had been stated and all the statutory requirements for calling up standard securities in a case where the debtors are admitted to be in default have been complied with.

[10]      Ms Ridley appeared for the defenders and moved that I fix an evidential hearing on the basis of the defence lodged. She indicated that the calling up procedure was not challenged. She stated that the defenders admit they are in continuing default. I inquired as to the nature of the issue for proof at an evidential hearing and was referred to the averments of the defenders on record, the material part of which states:

“The purpose of the loan facility was to provide the Defenders with funds to purchase a number of ‘buy to let’ properties without the need to secure individual mortgage funding for each individual property. The loan facility would then be regularly restructured to allow the bank to take security over the newly acquired ‘buy to let’ properties. The facility was restructured with the Bank by way of facilities of the 29th September 2009, 23rd June 2009, 30th July 2010 and 15th July 2011.  The Third Defender negotiated the facility with the Banks’ Adam Heslop. The Third Defender stated that it was his intention to retain the ‘Buy to let’ properties for 20 – 30 years. On the 7th June 2007, the Defenders received correspondence from Mr Heslop detailing the provisional terms of the facility. The provisional terms stated the facility would last for a 5 year term. On the 14th June 2007, the Third Defender had a further meeting with Mr Heslop. The Third Defender told Mr Heslop that he was not happy with the 5 year term. The Third Defender told Mr Heslop that the term of the loan had to be 20 years. Mr Heslop told the Third defender that the 5 year term was a standard clause and had to remain in the contract. Mr Heslop told the Third Defender that the clause would not be enforced at the end of 5 year term. Mr Heslop stated to the Third Defender that the facility would be renewed at the end of the 5 year term. Mr Heslop said additionally, “Imagine the public outcry if Clydesdale Bank ever pulled in its business loans, it will never happen”. On a proper construction of those statements by Mr. Heslop the Bank thereby made a legally binding promise to the Defenders to extend the facility at the end of the 5 year term. By letter dated 16th July 2007, the bank agreed to provide the facility to the Defenders. The Defenders accepted the facility relying on Mr Heslop’s promises.  Mr Heslop’s promises are binding on the Pursuers. Had the Bank not breached the promised terms, the facilities would not have expired. Repayment of the facilities would not be due.”  


[11]      I was informed that the defenders contend that the present action is incompetent because a representative of the Bank at a meeting on 14 June 2007 promised that the loan facilities would be renewed and the securities not enforced as appears from the averments on record. No authority was cited.



[12]      I granted decree in favour of the pursuer, with expenses, because no relevant defence was stated and I considered myself bound by the decision in Regus (Maxim) Ltd v. Bank of Scotland plc [2013] CSIH 12, 2013 SC 331. In that case, Lord President Gill defined the nature of a unilateral voluntary obligation or promise in Scots law at paras 31 to 37:

“In my opinion, a promise in the law of Scotland is a unilateral juristic act. It acquires its binding force by reason of the declarant's expression of his will to be bound….. It follows, therefore, that because in Scots law a promise acquires its obligatory nature at the moment at which it is made, questions of acceptance and of actings in reliance on it are irrelevant…. A valid promise has serious consequences……. In my opinion, an obligation of this kind can be created only by clear words. Since any promissory obligation is intention-based, the court's task is to consider whether the evidence, objectively assessed, discloses an intention on the part of the alleged promisor to incur a legally binding engagement ……..That question, in my view, is to be decided on a consideration of the alleged promisor's own words. Bearing in mind the stringent consequences of a valid promise that I have described, I consider that a promise is binding only if the promisor's own words are clear and unambiguous.”


[13]      I considered that the averments made by the defenders, quoted above, singularly failed to state the relevant words of the promisor which either, clearly and unambiguously demonstrated the Bank’s intention to be legally bound to extend the loan facilities beyond 5 years and not to enforce the standard securities or, alternatively, amount to words which are capable, on a reasonable construction, by a reasonable recipient, of bearing the meaning contended for. The only words offered for proof of promise are those in parenthesis: “Imagine the public outcry if Clydesdale Bank ever pulled in its business loans, it will never happen”. I considered it inherently unlikely that the Bank’s representative would make a promise which destroyed the legal efficacy of the Bank’s securities. Notwithstanding that observation however, in my opinion, the words pled do not indicate a clear and unambiguous intention on the part of the Bank to extend the specific loan facilities beyond 5 years and not to enforce its 6 securities, nor do I consider a reasonable recipient considering the meaning conveyed by the words, who was in the process of executing formal legally binding standard securities over property, in a commercial context, would reasonably believe so. At most, I would characterise the language used and the sentiments conveyed in the words to be no more than an invitation to speculate about public opinion allied to a strong feeling of confidence and optimism, on the part of the maker in June 2007, that the Bank’s then practice in relation to business loans would not alter.  The words, even if proved, could never in my opinion, amount to a clear and unambiguous legally binding promise, on behalf of the Bank, to extend the specific loan facilities in question beyond 5 years and not to enforce the 6 specific standard securities in this case, in the event of default.  Accordingly, in my opinion, there was no useful purpose to be served by convening a court to establish whether these words were actually uttered by Adam Heslop.

[14]      Separately, it is said in the defences, not using the promisor’s own words but rather using indirect or reported speech, that the Bank’s representative, Adam Heslop, said certain things on 14 June 2007. Specifically, it is stated:

“Mr Heslop told the Third Defender that the clause would not be enforced at the end of 5 year term. Mr Heslop stated to the Third Defender that the facility would be renewed at the end of the 5 year term.”


In my opinion, these are not averments which are capable of proving a promise. What the pursuer is entitled to notice of and what the court has to determine is whether the words actually used by the promisor, ‘his own words’, in themselves or upon reasonable construction demonstrate or are capable of demonstrating that the utterer, by their use, intended to be legally bound, or, the circumstances are such that a reasonable recipient of the information contained in those words, in the context they were made, judged objectively, would be entitled to conclude a legally binding promise was made. Again in this context I considered myself bound by the case of Regus (Maxim) Ltd v. Bank of Scotland plc at para 38:

“It may be that the meaning of the promisor's words will be clear if they derive their meaning from the relevant factual background known to both parties. I agree with the view of Lady Paton in Ballast plc v Laurieston Properties Ltd that in a commercial context, the words of an alleged promise should be interpreted in the same way as any other alleged commercial obligation would be. Lady Paton accepted that the question of construction should be approached objectively on the basis of what a reasonable recipient with knowledge of the background would have understood by the documents in question (para 143).”


This means a reasonable recipient test may have to be applied to the promisor’s words by the court. The actual words used in the creation of the promise are therefore critical. In Regus (Maxim) Ltd and Ballast plc the words of the averred promises were contained in letters which the court was able to construe. In Royal Bank of Scotland v. Carlyle [2015] UKSC 13, 2015 SC (UKSC) 93 the critical words, which related specifically to a property deal, were made by a RBS representative to a property developer during a telephone call (co-incidentally also made on 14 June 2007) viz: ‘You’ll be pleased to know it’s all approved, Edinburgh are going for it, for both houses’. In the context of the negotiations in that case, the Supreme Court held the first instance judge was entitled to hold those specific words, in the context they were made, amounted to a promise (or collateral warranty as it was termed) and reversed the Second Division of the Court of Session, which had taken a different view on that point. Royal Bank of Scotland v. Carlyle did not overturn Regus (Maxim) Ltd v. Bank of Scotland plc, in fact, it did not mention it at all. In my opinion Regus (Maxim) Ltd states the law with regard to proof of promise in Scotland. As was made clearthe court’s task’ is to consider the promisor’s own words in the context they were uttered to determine objectively whether they amount to a legally binding obligation. It is the promisor’s intention, objectively judged, that is relevant, not the recipient’s understanding or belief. It will not do simply to assert, as the defenders have done in this case, that a promise was made. An assertion of promise is not an averment of promise. The function of the court is not to consider whether the defenders believed, wisely or unwisely, or hoped, or took a risk that the facilities would be extended and the securities not enforced. A promise is a unilateral voluntary obligation or as Lord President Gill expressed it, ‘a unilateral juristic act’.  At the outset the sine qua non of an inquiry into promise [any question of actings that may constitute promise, apart] is what the promisor said or wrote that amounts to, or may reasonably be taken to amount to a promise in the circumstances of the case, judged objectively. That being so, the court must be informed from the defenders’ averments, just as the pursuer is entitled to notice from the same source, of what was actually [done] said or written, that is said to amount to a promise, capable of legally binding and engaging the promisor, his assignees and successors, especially given the serious consequences that a valid promise carries with it. The outstanding debt in this case is in excess of £1.8 million. I took the view that in the absence of such critical averments, clearly and unambiguously averring promise, no justiciable issue was advanced by the defenders for determination by the court. Accordingly, in the absence of a relevant defence I did not consider that proof was necessary, standing the admitted position of the defenders on record.


Access to justice

[15]      Of course, I considered very carefully whether granting decree would deny the defenders access to justice. I came to the view that there is a duty of candour on a party pleading a promise. The defenders are able to aver, in parenthesis, certain additional words used by Adam Heslop.  Accordingly, I was surprised that all of the exact words he used that constituted the promise which the defenders assert binds the Bank and now the pursuer, were not averred. I considered the promisor’s own words critical and in their absence saw no purpose in fixing a proof. I also took the view that the court has a gatekeeper function to perform. Court time is a limited resource which ought not to be wasted on irrelevant claims.



[16]      As the pursuer in this case had complied with the pre-action protocols, under the 1970 Act, I asked parties during the course of argument, under reference to Westfoot Investments Limited v European Property Holdings Incorporated 2015 S.L.T. (Sh Ct) 201 whether they considered the substantial debtor protections and onerous pre-action protocols contained in the 1970 Act, as amended, were intended to apply to a creditor calling up standard securities granted by a debtor to fund a commercial buy-to-let property business. Neither party could advise. In any event, the creditor in this case did comply with the pre-action protocols and the defenders do not seek relief in terms of the debtor protections introduced by the 1970 Act, as amended. The discussion of Westfoot, such as it was, did not affect my view that no relevant defence has been stated in this case by the defenders.