Catherine Nimmo Cooper V. The Bank Of Scotland+andrew Cooper
| Jurisdiction | Scotland |
| Judge | Lord Tyre |
| Neutral Citation | [2014] CSOH 16 |
| Court | Court of Session |
| Docket Number | CA141/12 |
| Published date | 30 January 2014 |
| Date | 30 January 2014 |
| Year | 2014 |
| OUTER HOUSE, COURT OF SESSION | |
| [2014] CSOH 16 | |
| CA141/12 | OPINION OF LORD TYRE in the cause CATHERINE NIMMO COOPER Pursuer; against (FIRST) THE BANK OF SCOTLAND PLC; and (SECOND) ANDREW COOPER Defenders: ________________ |
Pursuer: McIlvride; Harper Macleod LLP
Defender: AF Stewart QC; Anderson Strathern LLP
30 January 2014
Introduction
[1] The pursuer seeks reduction of a standard security in so far as granted by her in favour of the first defenders over her one half pro indiviso share of a dwellinghouse in Mauchline, Ayrshire ("the house"), where she has at all material times lived with her husband, Andrew Cooper. In response to a plea of "all parties not called" by the first defenders, the pursuer convened her husband as a second defender. He has not, however, entered the process and for the sake of easier reading I shall refer to him hereafter as "Mr Cooper" and to the first defenders simply as "the defenders". The debt secured by the standard security was a business debt of a company of which Mr Cooper was director and 50% shareholder. The action came before me for proof before answer. Witness statements by the pursuer and Mr Cooper were lodged; both also gave oral evidence. Further witness statements by Mr Jeffrey Halliday, a solicitor who acted for Mr and Mrs Cooper throughout the period with which this action is concerned, and by Mr John Clyde, a solicitor employed at the material time by Messrs Golds, Solicitors, Glasgow, who acted for the defenders, were lodged and agreed to be the evidence of these two witnesses respectively.
Facts not in dispute
[2] In 1994 Mr Cooper and the pursuer purchased a plot of land in Mauchline and constructed the house on it with the assistance of a building society mortgage. Their son David Cooper and his wife constructed a house on an adjacent plot. At this time Mr Cooper was a self-employed joiner and kitchen fitter and the pursuer was in full time employment as a nurse. In the course of construction of the two houses, Mr Cooper and his son discovered an artesian well within the latter's property. The water appeared to be of good quality and Mr Cooper and his son formed the view that there might be a profitable business in bottling and selling it. In 1996 they incorporated a company, Burnswell Spring (Mauchline) Limited ("Burnswell"), with Mr Cooper and his son as directors and 50% shareholders and his son as secretary. The pursuer, however, was not enthusiastic; at a time when she and her husband were approaching retirement, she did not regard it as appropriate to be taking on a new business venture.
[3] In January 2002, Mr Cooper and the pursuer accepted an offer of a loan by the defenders and repaid the existing building society loan. The amount of the loan by the defenders was £65,000, repayable over a period of 12 years at a rate (including interest) of £626.80 per month. On 16 January 2002, Mr Cooper and the pursuer granted a standard security over the house in favour of the defenders, securing "the Debtor's [i.e. their joint and several] Present and Future Debts" to the defenders. The standard security included an undertaking "...to pay and perform to the Bank the Debtor's Present and Future Obligations (including but not limited to the Debtor's Present and Future Debts) to the Bank". Incorporated into the standard security were the standard conditions specified in Schedule 3 to the Conveyancing and Feudal Reform (Scotland) Acts 1970 and 1971, as varied by a Deed of Standard Security Conditions made by the defenders and registered in the Books of Council and Session on 31 July 1989. The latter conditions included a definition of the expression "the Debtor's Present and Future Debts" which so far as material was in the following terms:
"all Debts for which any one or more of the Named Persons is or becomes obliged to the Bank, whether solely or jointly with any other person or persons (including another one or more Named Persons), whether as principal debtor, cautioner, guarantor or surety or otherwise howsoever..."
The standard security was recorded in the Register of Sasines on 12 September 2002.
[4] At about that time Mr Cooper and his son decided, despite the pursuer's resistance, to take their water bottling business plans forward. They obtained an overdraft for Burnswell from the defenders (and a small start-up grant from the local authority) to fund the set-up costs of the company's business. They purchased equipment and began to pump and bottle water from the well. They took stalls at trade shows and attracted interest in their product. However, in order to progress the business they required an external investor. None was forthcoming and, as time went on, the amount of Burnswell's overdraft steadily increased. The defenders required Mr Cooper and his son to provide personal guarantees of Burnswell's indebtedness. Despite a number of such requests by the defenders, it appears that no personal guarantee was ever signed by David Cooper and that none was provided by Mr Cooper until January 2006. In the meantime, however, on 4 November 2003, one of the defenders' business managers sent a memorandum to their mortgage department stating , in relation to Mr Cooper and the pursuer:
"I refer to the above and would be obliged if you could note on your files that the security is not the [sic] be discharged without contacting the Relationship Manager, Mr Blair Millar... This property is looked to for Business borrowing."
[5] By the end of 2005 the company's overdraft had risen to £72,000. David Cooper resigned as a director during 2005 and Mr Cooper was becoming increasingly worried about the extent of the debt and the absence of outside investment. On 12 January 2006 Mr Cooper executed a guarantee of all debts owed from time to time by Burnswell to the defenders, subject to a maximum of £75,000 plus interest from the date of demand. Mr Cooper's signature was stated to have been witnessed by his son-in-law, Ewan Shankland, who lived nearby. It may be noted that, having regard to the conditions of the standard security granted by Mr Cooper and the pursuer, including those incorporated by the Deed of Standard Security Conditions which I have quoted, the effect of execution by Mr Cooper of this guarantee was to secure Burnswell's debt to the defenders on the house. At about this time the company ceased to carry on any trading activities. Mr Cooper executed a second guarantee in favour of the defenders, this time for a maximum sum of £80,000 plus interest, on 15 February 2007; again this was stated to have been witnessed by Ewan Shankland.
[6] During the period between 2002 and 2007, Mr Cooper continued to carry on business as a kitchen fitter, most of his work being instructed by one manufacturer. According to Mr Cooper's accounts, the pursuer was paid a salary of £3,000 during each of these years, which sum was deducted in computing his profits for tax and other purposes. The services provided by her included cleaning, laundry and answering the telephone.
[7] Towards the end of 2006, the defenders instructed Golds to act on their behalf in completing a re-mortgage of the house to Halifax plc. The reason why this re-mortgaging took place is not clear. According to the pursuer and Mr Cooper it was instigated by the defenders, by now a member of the HBOS group, because they desired for internal reasons that the lender of home loans be Halifax rather than the Bank of Scotland. For reasons explained below, I do not think that this is likely to be the true explanation. In any event, Golds wrote to Mr Cooper and the pursuer on 8 November 2006 intimating that they had been instructed to act for Halifax plc in completing the re-mortgage. Golds noted that they were not acting for the borrowers and that if the latter were unsure in any way about the transaction they should obtain separate representation. The letter stated that Golds' re-mortgage service consisted inter alia of writing to the existing mortgage lender to ascertain the outstanding balance due, and repaying it on behalf of the borrower. On 17 November 2006, Halifax plc sent a letter addressed to Mr Cooper and the pursuer at their home address setting out details of the mortgage offered. This document indicated that the amount of the new loan was £71,000 plus an arrangement fee of £199. The loan was for a period of two years and was on an interest-only basis. The monthly payments, leaving aside the arrangement fee, were stated to be £350.76, ie significantly less than was being paid under the existing mortgage because no capital was now being repaid. There was no clear evidence as to what happened at the expiry of the two-year period.
[8] On 30 November 2006, the defenders' mortgages department wrote to Golds to advise that the redemption figure for the loan obtained in 2002 was £46,214.50, increasing at £8.77 per day. The defenders also noted, however (in bold type):
"In addition - Bank of Scotland Business/Corporate Banking, [address], has a debt secured on this property. Our charge will not be released until all indebtedness to the Bank is fully repaid."
It appears from what follows that Golds overlooked this instruction.
[9] On 5 December 2006, Golds carried out the settlement of the re-mortgage on behalf of Halifax plc. Of the £71,000 new loan received, about £46,283 (less a bank charge) was paid to the defenders in accordance with their redemption statement. The balance, amounting to £24,717, was paid into a bank account in the name of Mr Cooper. Mr Cooper explained that he used this to pay off personal debts including a credit card account.
[10] On 13 December 2006, a standard security in favour of Halifax plc over the house was recorded in the Register of Sasines. This deed grants security for all money advanced by Halifax plc to "the debtor", defined as Mr Cooper and the pursuer, all obligations being undertaken jointly and severally. It bears to have been signed by Mr...
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