Outlook Finance Limited Against William Lindsay, Executor Nominate In The Estates Of Euan Mcintyre Lindsay
| Jurisdiction | Scotland |
| Judge | Sheriff Derek O'Carroll |
| Neutral Citation | [2016] SC LAN 58 |
| Court | Sheriff Court |
| Date | 05 August 2016 |
| Docket Number | B6/15 |
| Published date | 30 August 2016 |
Note: This judgment is not connected to the Sheriff Appeal Court judgment of 7 July 2016.
SHERIFFDOM OF SOUTH STRATHCLYDE DUMFRIES AND GALLOWAY AT LANARK
[2016] SC LAN 58
B6/15
JUDGMENT OF SHERIFF DEREK O’CARROLL, ADVOCATE
In the cause
OUTLOOK FINANCE LIMITED
Pursuers
Against
WILLIAM LINDSAY, executor nominate in the estates of EUAN McINTYRE LINDSAY
Defender
Pursuers: Mr Kinnear, Advocate, instructed by TLT LLP, Solicitors
Defender: Mr Stalker, Advocate, instructed by Wright, Johnston& Mackenzie LLP, Solicitors
LANARK, 5 August 2016
The Sheriff, having resumed consideration of the cause:
REPELS the defenders’ pleas-in-law 1 and 3; SUSTAINS the defender’s plea-in-law 5; FINDS it unnecessary to determine the defender’s remaining pleas-in-law; REPELS the pursuers’ pleas-in-law; DISMISSES the action; RESERVES meantime the question of expenses.
NOTE:
Introduction
[1] Put very briefly, this is an action in which the pursuers seek rectification of a standard security over the subjects known as Harperfield Farm, Sandilands, Lanark (“the subjects”), rectification of a calling up notice of that standard security, declarator that they are entitled to enter into possession of the subjects and warrant permitting the exercise of certain associated remedies. The defender resists the action on various grounds and seeks dismissal. The background is explained more fully below.
[2] This matter called before me for debate on the defender’s motion on 29 January 2016. Unfortunately, it was not possible to complete the debate on that date and the debate required to be continued on two further occasions, 22 April 2016 and 20 May 2016 when I made avizandum. I regret that owing to pressure of other court business, it was not possible to pronounce this interlocutor and Note any earlier.
The background
[3] The following matters were not in dispute and are agreed between the parties. The subjects comprise land and buildings known as Harperfield Farm. One of those buildings is used for residential purposes. On 29 September 2009, the late Euan McIntyre Lindsay (“the debtor”) entered into a loan agreement with the pursuers. The loan was £1,335,000 which was repayable in full on 30 September 2011. Interest on the loan was due each month of about £7,787. The debtor bound himself also to various other obligations which are not relevant for present purposes. In the event of default in the payment of the monthly interest, the agreement provided at clause 6 that the pursuer would call for immediate payment of the capital balance, plus interest due, plus additional interest on the sum outstanding at the rate of 0.1% per day until all sums were paid. In addition, costs incurred in the event of default would be added to the loan. Furthermore, clause 9 provided for other payments to be made by the debtor in the event of failure to pay sums due under the agreement including reimbursements of all losses and expenses incurred by the pursuer in consequence of default. The principal sum was loaned and interest was paid in terms of the agreement, at least initially.
[4] Unfortunately, the debtor died on 3 June 2011. The defender is the executor nominate of the debtor. That death entitled the pursuers to call up the loan. They did not do. Instead, the pursuers told the defender that the loan could continue on the same terms so long as the contractual monthly interest was paid. The loan continued on that basis. The interest was paid up to and including October 2012 so that as at that month, the sum outstanding due to the pursuers remained the original loan amount of £1,335,000. Thereafter no payments have been made by the defender by way of interest or otherwise. The pursuers claim that outstanding balance due by the defender to the pursuers as at 15 September 2014, the date of the calling up notice, had risen to £2,610,169 and as at 23 December 2014, following the expiry of the calling up notice, was £2,884,539: an increase of about £274,000 in about 14 weeks. The sum outstanding as at the date of the debate was said to be in excess of £3M.
[5] The loan agreement provided that the loan was to be secured over the subjects. To that end, an all-sums standard security was entered into which was executed by the debtor on 3 October 2009 and registered on 8 February 2010. The description of the subjects in that standard security contained both a description of the subjects by reference to the name of the subjects and by reference to a Sasines title recorded in the Register of Sasines on 24 November 1989 (all of which was accurate) as well as a particular description of the subjects contained in a schedule to the standard security. That particular description was taken from the description in the Sasines title and, as might be expected in the title to a sizable farm, is lengthy containing as it does various exceptions and reservations.
[6] Unfortunately, the solicitor who prepared that schedule did so incorrectly. Missing from the particular description, in about the middle, are about 8 lines which includes the end of the second (of four) exceptions from title and most of the third exception. Unfortunately, nobody, including the Keeper, noticed this at the time. When the calling up notice was prepared and served by agents for the pursuer in October 2014, the draftsperson copied the description of the subjects, both by reference and in particular from the standard security not noticing that the particular description was inaccurate. It was only in the course of this action that the error was noticed by the defender (or more likely, those instructed by him) who now claims in this action that owing to the error in both the standard security and the calling up notice, the action is incompetent and falls to be dismissed.
[7] The pursuers amended their pleadings seeking rectification of both documents in terms of sections 8 and 9 of the Law Reform (Miscellaneous Provisions) Scotland Act 1985 (“the 1985 Act”) (although their primary position is that rectification is not strictly speaking necessary but should be done anyway for clarity and convenience). The defender responds that rectification is essential but that in this summary application it is incompetent to seek rectification: that may only be done in an ordinary action in the Sheriff Court, or in the Court of Session. Furthermore, rectification must logically and legally precede commencement of this action. In addition, the defender says that the calling up notice is not a type of document that may be rectified under the 1985 Act. The defender says therefore that this action is incompetent and falls to be dismissed.
[8] There is a further issue that arises in this case. The parties have decided that the subjects include a building used “for residential purposes”, and therefore it follows that section 24(1C) of the Conveyancing and Feudal Reform (Scotland) Act 1970 (“the 1970 Act”), as amended by the Home Owner and Debtor Protection (Scotland) Act 2010 (“the 2010 Act”) applies. That section provides that before a creditor in a standard security may apply to the Court for the exercise of remedies as against a debtor who is in default, it must comply with the “pre-action requirements” imposed by section 24A of the 1970 Act. Those requirements in section 24A are to be read with the relevant Scottish Statutory Instrument being The Applications by Creditors (Pre-action Requirements) (Scotland) Order 2010, (“the Order”) and in particular article 2 thereof. The parties are agreed that “default” in this context occurred only after the expiry of the default notice. They are agreed that the only document relevant for this purpose which is relied on by the pursuer is a letter sent on their behalf by their agents to the defender on 23 December 2014 (“the December 2014 letter”). Put short, the pursuer contends that that letter contained all that was necessary to comply with section 24A of the 1970 Act and the Order. The defender says otherwise and that therefore the action is incompetent and falls to be dismissed.
The submissions
[9] The Court benefitted greatly from well-considered, detailed and knowledgeable submissions from junior counsel for both parties. Those submissions were clear, skilled and focused on the matters in dispute. The defender’s rule 22 note was well and concisely drafted. These matters are not at all straightforward. I am grateful to both counsel for the considerable assistance they provided to the Court. However, I hope that I will be forgiven if I do not attempt to rehearse their careful submissions here. Rather, I have referred to them above in my summary of the background to this case and will refer to them below in considering my decision on each of the principal issues put before me. I should make clear that I have taken account of all arguments put before the Court even if I do not make specific reference to every aspect of the submissions.
[10] I should also note that I was referred to a large number of authorities. In addition to the legislation referred to above, I was taken to the following. For the pursuer, I was referred to: Stair Memorial Encyclopaedia, Vol 15, 20, Reissue 5; Halliday Conveyancing Law and Practice (2nd ed.); Higgins The Enforcement of Heritable Securities; Swift Advances PLC v James Bain Martin and Others [2015] CSIH 65; Macphail Sheriff Court Practice Chp 24; Scottish Law Commission, Report 79, Report on Rectification of Contractual and Other Documents (1983); The Centre for Maritime and Industrial Safety Technology Ltd v Ineos Manufacturing Scotland Ltd [2014] CSOH 5; Rehman v Ahmad 1993 SLT 741; Matheson v Gemmell (1903) 5F 448; Murray’s Tr. v Wood (1887) 14R 856; Northern Rock Asset Management) PLC v Doyle 2012 HousLR 94; Westfoot Investments Ltd v European Property Holdings Inc. 2015 SLT (Sh Ct) 201.
[11] For the defender I was referred additionally to Scott v Livingston 1919 SC 1; Strathclyde Securities Co Ltd v...
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