Royal Bank of Scotland v Wilson
| Jurisdiction | Scotland |
| Judgment Date | 09 July 2003 |
| Date | 09 July 2003 |
| Docket Number | No 7 |
| Court | Court of Session (Inner House - Second Division) |
SECOND DIVISION
Cautionary obligations -Execution of standard security by wife - Alleged misrepresentation by failure to indicate extent of borrowings - Whether averment of misrepresentation by silence sufficient to instruct case of bad faith
The second defenders in both actions were wives who had signed standard securities along with their respective husbands in favour of the pursuer, a bank. Subsequently, 'partnership letters' were entered into by both husbands in respect of firm loans. Both firms and the first defenders defaulted on the loans and the pursuer enforced the standard security against the defenders.
The second defenders defended the respective actions, inter alia, on the basis that they had individually been misled into believing that the standard security secured only the loan for which it was granted, and that the pursuer was in bad faith for procuring from her the cautionary obligation which the standard security contained. Solicitors had acted for the second defenders in constituting the standard securities. Counsel for the second defenders submitted that the standard security in making the second defenders cautioners for their respective husbands in each case gave the pursuer security far beyond the immediate purpose of the transaction. This placed the pursuer in bad faith from the outset since it would know that no solicitor could responsibly advise the wife to grant such a security.
Held that: (1) the second cautioners did not incur the cautionary obligations gratuitously (Smith v Bank of ScotlandSC1997 SC (HL) 111applied)(para 24); (2) no relevant defence either of misrepresentation or bad faith had been pled, there being no averment of any positive misrepresentation and therefore no actionable wrong on the part of the husband (paras 25-27); (3) no circumstances were averred which would have given the creditor reason to think the solicitors acting had not discharged their professional duties nor that the pursuer made any representations as to the effects of the standard security, and the averments anent the creditors' bad faith and misrepresentation were accordingly irrelevant (Royal Bank of Scotland v Etridge (No 2)ELRWLRUNK [2002] 2 AC 773; [2001] 3 WLR 1021; [1998] 4 All ER 705distinguished (para 34); Forsyth v Royal Bank of Scotland 2000 SLT 1295 approved (para 78)) (paras 37-42; 62, 63; 65); and appeals dismissed.
ROYAL BANK OF SCOTLAND plc raised actions seeking warrant to enter into possession of security subjects and for removing of Francis John Wilson and Mrs Annette Wilson; and John Patrick McCormack Wilson and Mrs Norma Wilson in the Sheriffdom of Lothian and Borders at Edinburgh. The sheriff repelled both the first and second defenders' defences on the merits as being irrelevant and allowed a proof before answer restricted to quantum.
The defenders appealed to the Court of Session. The first defenders abandoned their appeals and the second defenders insisted on theirs only in so far as relating to misrepresentation and bad faith. At the appeal hearing, the pursuer was granted leave to amend the crave for removing to one for ejection and the second defenders were allowed to amend their defences and add a new, third, plea-in-law.
The full facts and averments of the parties are sufficiently set forth in the opinion of the Lord Justice-Clerk (Gill).
Cases referred to:
Ahmed v Clydesdale Bank plc 2001 SLT 423
Barclays Bank plc v O'BrienELR [1994] 1 AC 180
Braithwaite v Bank of Scotland 1999 SLT 25
Clydesdale Bank plc v BlackSC 2002 SC 555
Falconer v North of Scotland Banking CoUNK (1863) 1 M 704
Forsyth v Royal Bank of Scotland 2000 SLT 1295
Mumford v Bank of Scotland 1996 SLT 392
Royal Bank of Scotland v Etridge (No 2)ELRWLRUNK [2002] 2 AC 773; [2001] 3 WLR 1021; [1998] 4 All ER 705
Royal Bank of Scotland v GreenshieldsENR 1914 SC 259
Smith v Bank of ScotlandSC 1997 SC (HL) 111
Textbooks etc referred to:
W M Gloag, Law of Contract (2nd ed, W Green, Edinburgh, 1929)
W M Gloag and J M Irvine, Law of Rights in Security (1897, W Green Edinburgh)
D M Walker, The Law of Contract and Related Obligations (3rd ed, T&T Clark, Edinburgh, 1995)
The causes called before the Second Division, comprising the Lord Justice-Clerk (Gill), Lord Osborne and Lord Hamilton for a hearing on the summar roll. At advising, on 9 July 2003 -
LORD JUSTICE-CLERK (GILL) -
[1] These are appeals from decisions of the sheriff at Edinburgh in two actions by the pursuer as holder of standard securities over houses at 98 Dalum Grove and 100 Dalum Grove, Loanhead. In these actions the pursuer seeks (1) warrant in terms of sec 24(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970 (cap 35) to enter into possession of the security subjects and (2) removing of the defenders with a view to selling the security subjects.
[2] In the first action (the Francis Wilson action), the pursuer sues Francis John Wilson and his wife, Mrs Annette Wilson. The action relates to their house at 100 Dalum Grove. In the second action (the John Wilson action), the pursuer sues John Patrick McCormack Wilson and his wife Mrs Norma Wilson. The action relates to their house at 98 Dalum Grove. Francis Wilson and John Wilson are brothers.
[3] The standard security in the Francis Wilson action was granted by Francis Wilson and his wife on 12 July 1991 in consideration of a loan for the purchase of their house. The standard security in the John Wilson action was granted by John Wilson and his wife on 28 November 1991 in consideration of a loan for the construction of a conservatory.
[4] The standard security in each case, so far as relevant to these appeals, provides as follows:
'We [name] and [name], Spouses (hereinafter referred to as "the Obligant") hereby undertake to pay to The Royal Bank of Scotland plc (hereinafter referred to as "the Bank", which expression includes its successors and assignees whomsoever) on demand all sums of principal, interest and charges which are now and which may at any time hereafter become due to the Bank by the Obligant whether solely or jointly with any other person, corporation, firm or other body and whether as principal or surety;
DECLARING THAT; (2) in the event of the foregoing personal obligation being granted by more than one person the expression "the Obligant" means all such persons together and/or any one or more of them; and in all cases the obligations hereby undertaken by the Obligant shall bind all person(s) included in the expression "the Obligant" and his, her or their executors and representatives whomsoever all jointly and severally without the necessity of discussing them in their order; '.
[5] Francis Wilson and John Wilson were partners in two firms, F J Wilson Associates and Wilson Brothers. On 8 October 1992 and 15 October 1993 each of them signed so-called 'Partnership Letters' in favour of the pursuer. The 1992 letter was granted in respect of borrowings by F J Wilson Associates. The 1993 letter was granted in respect of borrowings by Wilson Brothers. Each letter authorised the pursuer to open or continue an account in its books in the name of the firm and to establish joint and several liability on the part of the signatories 'for the repayment of any indebtedness or liability incurred by the firm and interest and charges thereon.'
[6] Both firms defaulted on the loans. The pursuer then sought recourse against the first defenders. The first defenders in turn defaulted. The pursuer then enforced the standard security against both defenders in each case.
[7] In each case, both the first and the second defenders lodged defences on the merits and on quantum. On the merits, the first defender's defence in each case was that he was not liable to repay any debt due by either firm. The second defenders took the same line; but in each case the second defender also pled that she was misled into believing that the standard security secured only the loan for which it was granted, and that the pursuer was in bad faith in procuring from her the cautionary obligation that the standard security contained.
[8] In the Francis Wilson action, the pursuer avers that the pursuer advised the defenders that they would require to instruct solicitors to act on their behalf in connection with the standard security; that the defenders instructed Allan McDougall and Co, solicitors, Penicuik, who acted on their behalf in the constitution of the security and were at all material times independent of the pursuer; that the pursuer has at no time been advised by the defenders that that firm failed to advise them on the import and effect of the standard security; and that in accepting the standard security the pursuer reasonably believed that both defenders had been properly advised by that firm on those matters (cond 2).
[9] The second defender admits that Allan McDougall and Co acted on the defenders' behalf in the constitution of the security (ans 2). Her averments about the granting of the standard security are as follows:
'All the defenders' financial affairs were ordinarily handled by the first defender. The second defender relied on the first defender in such matters. The defenders had a joint personal bank account with the pursuers' Penicuik branch. The pursuers were or ought to have been aware that the defenders were husband and wife. The pursuers were or ought to have been aware that the second defender had no interest in the said businesses of Wilson Brothers and F J Wilson Associates. The second defender attended the pursuers' Penicuik branch with the first defender to sign application forms for a house purchase mortgage. Neither the pursuers' branch manager nor the first defender indicated to the second defender that the standard security would secure any borrowings other than the house purchase loan. The pursuers' branch manager was or reasonably ought to be [si...
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