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Cite as: [2021] ScotCS CSOH_76, 2021 Hous LR 56, [2021] CSOH 76, 2021 GWD 25-340

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OUTER HOUSE, COURT OF SESSION

[2021] CSOH 76

A220/19

OPINION OF LORD TURNBULL

In the cause

STEWART McLEOD

Pursuer

against

BANK OF SCOTLAND PLC

Defenders

Pursuer: Party

Defenders: Edward; Blacklocks

23 July 2021

[1]

In this action the pursuer seeks reduction of a decree granted in Kilmarnock Sheriff

Court and interdict against the defenders preventing them from enforcing that decree. At a

procedure roll hearing on 9 July 2021 the defenders moved me to dismiss the action in terms

of their first plea-in-law.

Background

[2]

For the purposes of this decision, the relevant facts and history can be drawn from

the pleadings as set out in the closed record. These may be supplemented by the content of

the affidavit sworn by the pursuer on 5 July 2021 and lodged by him in advance of the

procedure roll hearing.

[3]

The pursuer is the owner of Corsehouse Cottage, Old Glasgow Road, Stewarton in

Ayrshire. His title to the property is recorded in the Land Register of Scotland under title

number AYR3860. In around June 2001, the pursuer granted a standard security in favour of

Halifax plc over the property. In October 2012 an action for recovery of possession of the

subjects under security was raised in Kilmarnock Sheriff Court by the present defenders.

Decree in absence was granted on 23 July 2014. The decree was extracted on 25 August

2014.

[4]

The defenders aver that a calling up notice was served on the pursuer on 25 June

2012 and that he signed for this notice on 30 June 2012. The pursuer denies that a calling up

notice was served on him and states he was not residing at the premises at that time.

[5]

In 2016 the pursuer raised an action in the Court of Session (A210/16) for reduction of

the decree which is the subject of the present action. In those proceedings he sought interim

interdict against the defenders from enforcing the decree. At the hearing of his before

calling motion for interdict, the defenders gave an undertaking that they "will not take or

instruct steps to enforce the decree dated 23 July 2014 pending the judicial resolution or

extrajudicial settlement of these proceedings". Thereafter the summons was not lodged for

calling.

Submissions for the defenders

[6]

On behalf of the defenders, Mr Edward submitted that the pursuer's pleadings set

out three apparent arguments in support of reduction of the sheriff court decree. First, the

defenders had no title to the standard security over his property. Second, that the granting

of the standard security and the defenders' actions in seeking to enforce it were tainted by

fraud. Third, that there was insufficient evidential material placed before the sheriff to

entitle her to award decree in the defenders favour.

[7]

Since the pursuer admitted granting a standard security to Halifax plc his claim that

the present defenders had no title to enforce it was bound to fail. The effect of the HBOS

Group Reorganisation Act of 2006 was that the right to the standard security vested in the

defenders.

[8]

Whilst the pursuer made certain vague and contradictory averments concerning

fraud it was clear that a standard security was registered. On the pursuer's own averments

he accepted making repayments towards a mortgage loan. There were no relevant or

specific averments of fraud which could bear in any way on the obtaining of the loan by

the pursuer, or on the circumstances in which he granted a standard security.

[9]

The decree granted in the sheriff court was a decree in absence. The pursuer did

not address the fact that the requirements for raising such an action by way of summary

application are set out in section 24 of the Conveyancing and Feudal Reform (Scotland)

Act 1970. The pursuer does not specify which if any of those requirements was not

complied with. His third argument was irrelevant and lacking in specification.

[10]

The pursuer's conclusion for interdict flowed from an interlocutor pronounced by

Lord Doherty in action A210/16. On 14 June 2016, in a motion for interim interdict before

calling, counsel appearing for the defenders gave the undertaking referred to at paragraph

[5] above.

[11]

The undertaking was recorded in the minutes of proceedings. The summons in that

action was not lodged for calling and the instance had fallen. The interpretation of the

undertaking was a matter of law. The defenders' submission was that it was an undertaking

given in connection with the previous proceedings and could not be held against them a

number of years later when that case had not been progressed by the pursuer. The

contention that the undertaking existed for all time without further action being taken to

address the merits of the defenders' entitlement to decree was untenable. An application for

interim interdict in the present case, based on the pursuer's contention as to the

interpretation of the undertaking, had been refused on 16 July 2019 by Lady Carmichael. On

13 March 2020 the Inner House refused the pursuer's motion for review of that interlocutor.

[12]

Mr Edward submitted that the relevant legal framework within which to consider

an application for reduction of a decree in absence could be found in the opinion of

Lord Woolman in the case of Jandoo v Jandoo [2018] CSOH 14. He submitted that the pursuer

had set out no relevant basis upon which he could have a defence to the merits of the sheriff

court action. He did not deny being served with that action and offered no explanation as to

why he did not enter the proceedings. His application for interdict would fall with the

conclusion for reduction but in any event had no relevant foundation.

[13]

In all of these circumstances Mr Edward moved me to uphold the defenders' first

plea-in-law and to dismiss the action.

Submissions for the pursuer

[14]

The pursuer's principal submission was that the defenders had no legal basis upon

which to obtain a decree for recovery of possession against him as they did not lawfully

hold a standard security over his property. He contends that the HBOS Group

Reorganisation Act 2006 has no effect, as a contract entered into between private parties

could not be affected without the prior consent of each party to that contract.

[15]

Separately, the pursuer argues that the standard security granted to Halifax plc was

obtained through deception.

[16]

The third proposition advanced by the pursuer is that there was insufficient evidence

placed before the sheriff to entitle her to grant decree on 23 July 2014. He avers that no

principal or verified copy of the calling up notice was lodged in court. In his submissions to

this court he contended that the original standard security required to be produced to the

sheriff.

[17]

In support of his contentions the pursuer read the content of the affidavit sworn by

him on 5 July 2021. He contended that support for his proposition regarding principal

documentation could be found in what Lord Tyre had said in his opinion in a previous case

seeking reduction of a decree for recovery brought by the pursuer in May 2014 - McLeod v

Prestige Finance [2016] CSOH 69. He relied in particular on the passage at para [8] of his

opinion where Lord Tyre had said:

"Where a party comes to court founding upon a document as the basis of the right

which it seeks to vindicate the `best evidence' rule requires production of the

principal document. There is no relaxation of that rule to be found in procedure

for summary applications".

[18]

Various other references were made to legal principles which the pursuer contended

ought to apply, such as were to be found in the Requirements of Writing (Scotland) Act 1995

and the Companies Act 2006 and he sought support from what was said in the 12

edition of

Gloag and Henderson The Law of Scotland.

[19]

In support of the allegations of fraud set out in his pleadings the pursuer drew

attention to various documents which he had lodged setting out what he considered to be

evidence of widespread fraud within the banking industry and within the defenders group.

The pursuer's motion was that the case should be allowed to proceed to a proof on the

merits.

Discussion

Reduction

[20]

The legal framework within which an application for reduction of a decree in

absence should be considered was conveniently summarised by Lord Woolman in the case

of Jandoo v Jandoo [2018] CSOH 14. Drawing upon the legal propositions set out in the cases

of Robertson's Ex v Robertson 1994 SC 23 and Nunn v Nunn 1997 SLT 182, he articulated the

following propositions:

a. a court decree is not to be lightly set aside

b. there is no precise test

c. the pursuer must show that:

i. the decree ought not to have been granted on the merits

ii. there is a reasonable explanation why he did not enter the proceedings

iii. the whole circumstances of the individual case justify reduction

[21]

Although the pursuer rejected the suggestion that Lord Woolman had accurately set

out the applicable legal propositions in this summary he was unable to identify what he

claimed the correct legal approach would be, asserting only that the decree which he was

attacking was different because of fraud.

[22]

I adopt Lord Woolman's summary as the correct approach to be followed in

assessing the submissions in the present case.

[23]

On this basis then, the first question to determine is whether the pursuer has set out

any ground upon which the decree obtained in the sheriff court ought not to have been

granted. Put another way, does the pursuer have any defence which might have been

presented in opposition to decree being granted?

[24]

Section 2 of the HBOS Group Reorganisation Act 2006 provides that the term

"transferor company" means, amongst other organisations, Halifax plc. The same section

provides that "undertaking" means the business and all property and liabilities of a

transferor company and "the Bank" means the Bank of Scotland. Section 10 provides for the

vesting of the undertaking being transferred to the Bank and that the Bank shall succeed to

the relevant undertaking as if in all respects the Bank were the same person as the transferor

company.

[25]

The Act of Parliament plainly has the effect which Mr Edward explained and there is

no basis upon which the court could decline to give effect to it. The pursuer's contention

that the present defenders had no right to raise an action in respect of a standard security

granted to Halifax plc is misconceived.

[26]

In the first condescendence for the pursuer (where he replies to the answer for the

defenders) the pursuer admits that he granted a standard security to Halifax plc in

June 2001, which he understood formed a binding contract. He makes averments in

Article 3 of condescendence which acknowledge the existence of a mortgage debt in relation

to the property and he explicitly states in the first article of condescendence that he stopped

making payments. These averments make it clear that he accepts the existence of a loan

and the fact of an outstanding debt.

[27]

However, he then goes on to make an averment to the effect that in 2013 it was

"brought to the attention of the pursuer" that the defenders' companies were engaged in

fraud. He then sets out an averment that they did not lend any money to him but merely

created what he calls a "deceptive document" in order to make a pretence that they were the

lender and thereby managed to deceive him to grant a standard security over his property.

He goes on to make various averments about subsequently contacting Halifax plc, or those

acting on its behalf, seeking production of a signed contract with him and seeking

confirmation that they did lend him money. He avers that this correspondence was not

responded to.

[28]

There are no averments anywhere in the pleadings which explain the circumstances

in which the pursuer came to grant a standard security over the property known as

Corsehouse Cottage. There are no averments to support a claim that he was deceived into

granting a standard security.

[29]

When given an opportunity in court to explain in what way there had been

deception, the pursuer offered two explanations. First, he stated that Halifax plc had not

lent him any money. He created the money involved by putting his signature to the original

document. Until he had done that the document had no life. Second, he believed that "the

Bank" had sold on the security, that was where the fraud was. The Bank did not have a

contract.

[30]

The pursuer's averments relating to fraud are entirely irrelevant. Such general

allegations of fraudulent behaviour as are made are not linked in any way to the security

which he admits granting. The allegations of fraudulent conduct contained within the

various documents which the pursuer relied on have nothing at all to do with the loan

granted to him, nor have they anything to do with the standard security granted in

connection with that loan. It is clear that the pursuer has failed to identify any defence on

the merits to the defenders' claim for recovery of possession.

[31]

The pursuer's contention that there was insufficient evidence before th e sheriff to

entitle her to grant decree is not a defence on the merits of the action. In any event his

propositions are again misconceived.

[32]

The pursuer contends that what he refers to as "original documentation", or some

other "verified documentation supported by an affidavit from a director" required to be

presented to the court. He avers that decree was granted without a principal copy of the

calling up notice being lodged and without witnesses speaking to the claim made by the

creditor. In court he explained that the original standard security should have been lodged.

He seeks to advance his argument in the second article of condescendence by averring that

the sheriff "may" have erred in law by failing to inspect the documentation for validity.

The defenders respond to this contention by averring that they complied with all the

procedural documentary requirements necessary for granting the decree sought. As

Mr Edward explained, what the pursuer refers to as the principal calling up notice was

served on him. He explained that the copy notice together with certification of service as

signed for by the pursuer was lodged in the sheriff court action.

[33]

As a separate strand of this argument the pursuer appears to think that the defenders

cannot enforce their rights against him without responding to his demand that they provide

him with sight of the original loan documentation. Various averments to this effect appear

in his pleadings and similar propositions were set out in the affidavit which he read to the

court. As he explained in responding to Mr Edward's submissions, had the defenders

produced the original agreement he would have made all the necessary payments. They

have not done so because they do not have it or are unwilling to supply it and, in his view,

that proves the case.

[34]

This is a similar argument to one of the propositions which the pursuer appears to

have presented to Lord Tyre at the hearing in his case against Prestige Finance. At para [15]

of his opinion, Lord Tyre explains that it was unnecessary as a matter of law for Prestige to

seek or obtain the pursuer's consent to an assignation of his debt and he had no legal

entitlement to have the principal assignation exhibited to him. "Nor was he entitled to

demand sight of the principal agreement as a condition of settling any debt due by him to

Prestige as an assignee of the original lender." The pursuer did not explain why he

continued to argue the same point despite being told by Lord Tyre that his view did not

correspond with the law of Scotland.

[35]

Section 19 of the Conveyancing and Feudal Reform (Scotland) Act 1970 provides that

where a creditor in a standard security intends to exercise any power conferred by that

security he shall serve a calling up notice in conformity with Form A of Schedule 6 to the

Act. Subsection (6) provides for the methods of serving a calling up notice. Schedule 3 to

the Act provides for the standard conditions. Paragraph 9(1)(a) of that schedule provides

that a debtor shall be held to be in default where a calling up notice has been served and not

complied with. Section 24(1B) of the Act permits a creditor in a standard security to apply

to the court for a warrant to exercise any of the remedies which the creditor is entitled to

exercise on a default within the meaning of standard condition 9(1)(a). Section 24

subsection (1D) provides that an application of this sort may be made by summary

application and subsection (3) requires the creditor to serve on the debtor a notice in

conformity with Form E of Schedule 6 to the Act. Subparagraph (4) provides for how such a

notice may be served. Before making an application to the court the creditor is required in

terms of subsection (1C) to comply with the pre-action requirements imposed by section 24A

of the Act.

[36]

It can be seen then that the procedural requirements associated with actions for

recovery of possession are set out in statute. Such actions are common within the Sheriff

Court. The pursuer makes averments in Article 3 of condescendence about an entitled

resident Anne Steel attending at the court and making proposals for repayment. After

decree was first granted a minute for recall was lodged by Ms Steel and consideration of that

minute was continued twice. The decree now sought to be reduced was ultimately granted

on 23 July 2014. It is plain from these facts alone that the application and the circumstances

upon which it was based were brought to the sheriff's attention on a number of occasions.

[37]

There is no reason to question the procedural propriety of the decree pronounced in

the sheriff court action. There is a presumption of regularity which applies in the law of

evidence (omnia rite et solemniter acta praesumuntur), see Walker and Walker The Law of

Evidence in Scotland 5

edition paragraphs 3.6.1 to 3.6.6. In any event, the decree in question

was a decree granted in absence. This distinguishes it from the circumstances described by

Lord Tyre in the case of McLeod v Prestige Finance where decree was pronounced at what

was a contested evidential hearing.

[38]

Unless the pursuer is in a position to make a vouched and relevant statement about

what documentation was or was not available to the sheriff the presumption of regularity

should be given effect to. Even if there was a relevant procedural deficiency this would not

necessarily lead to decree of reduction being granted.

[39]

Finally, there is the question of why the pursuer did not enter the sheriff court

proceedings and why he did not apply for recall of the decree. The action for recovery

would have been served on the pursuer in a lawful manner. Certification of such service

would accompany the summary application. The sheriff must have been satisfied that there

was lawful service. The pursuer makes no averments at all as to why he did not enter the

sheriff court proceedings.

[40]

In Article 3 of condescendence the pursuer states that he did not learn of the decree

being passed against him until some months later. However, Lady Carmichael records at

para [10] of her opinion that when the pursuer appeared before her at the interim interdict

hearing he explained that he had been made aware of the decree being granted on the day

that it was granted. As she also notes, the pursuer was aware of the procedure for recalling

a decree in absence as he had successfully enrolled such a motion in the earlier case brought

by Prestige Finance.

[41]

In conclusion, and returning to the legal framework, the pursuer has failed to set out

any basis upon which he might legitimately argue that the sheriff court decree ought not

to have been granted on the merits of the case. He has failed to provide a reasonable

explanation for not entering the sheriff court proceedings and there are no other relevant

circumstances which would justify reduction of the decree. I am therefore satisfied that the

pursuer has failed to state a relevant case in law for reduction of the decree granted to the

defenders. As this limb of his case is bound to fail no further enquiry into the facts is

necessary and I shall uphold the defenders' first plea-in-law insofar as directed towards the

conclusion for reduction.

Interdict

[42]

The pursuer's third conclusion is for interdict against the defenders from enforcing

the decree awarded in the sheriff court. Mr Edward's submission was that this part of the

action fell with the conclusion for reduction. The pursuer's contention is that his entitlement

to interdict flows from the undertaking given to the court on 14 June 2016. His contention is

that through this undertaking the defenders in effect abandoned their right to enforce the

decree. There are no averments explaining why the defenders would give up their rights

under the security which they hold. There are no averments which otherwise suggest the

existence of circumstances pointing towards the interpretation argued for by the pursuer

being reasonable or appropriate. In this state of affairs the argument contended for by the

pursuer is simply untenable. The undertaking was not one for all time coming but was

framed so as to continue until those proceedings were at an end. In light of the pursuer's

decision not to present the summons for calling those proceedings are at an end and the

undertaking has no further effect.

[43]

It follows that the pursuer has also failed to set out any relevant basis upon which

interdict might be granted against the defenders and I shall also uphold the defenders' first

plea-in-law insofar as directed towards the conclusion for interdict.

[44]

The pursuer's action is therefore dismissed. I shall reserve the question of expenses

meantime.