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Royal Bank Scotland Plc v. Lyon & Anor [2004] ScotSC 47 (20 July 2004) SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT INVERNESS

A567/01

		JUDGEMENT of SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC
		in the cause
		THE ROYAL BANK OF SCOTLAND PLC
		Pursuers and Appellants
		against
		KENNETH FRASER LYON
		First Defender and Respondent
		and MAUREEN DOUGLAS LYON Second Defender and Respondent

Act: Mr J P Sheridan, solicitor, Anderson Fyfe, Glasgow

Alt: (1) Mr G L MacColl, advocate, instructed by Drummond Miller WS, Edinburgh

(2) Miss K J McConnachie, solicitor, instructed by McKay & Norwell WS, Edinburgh

Inverness: 20^th July 2004

The sheriff principal, having resumed consideration of the cause, refuses the appeal and adheres to the interlocutor of the sheriff dated 31 October 2003; finds the pursuers and appellants liable to the first defender and respondent in the expenses of the appeal and allows an account thereof to be given in and remits the same, when lodged, to the auditor of court to tax and to report; of consent finds no expenses due to or by the pursuers and appellants and the second defender and respondent in respect of the appeal; quoad ultra remits the cause to the sheriff to proceed as accords.

Note

[1] In this case the pursuers and appellants are a well known bank. The first and second defenders and respondents are the heritable proprietors of a house in Inverness. On 6 January 1989 they granted a standard security over the house in favour of the pursuers in security of an obligation which they undertook in terms of the standard security to pay to the pursuers on demand all sums of principal, interest and charges which were then or which might at any time thereafter become due by them to the pursuers whether solely or jointly with any other person and whether as principal or surety. This standard security was recorded in the General Register of Sasines applicable to the County of Inverness on 16 January 1989.

[2] It is not in dispute that the sums secured by the standard security included sums due by the first defender to the pursuers in terms of two guarantees which he subsequently executed. It appears that he, Douglas Alexander Lyon and Michael Alexander Clark Mackenzie were at one time directors of a limited company named Video Network (Inverness) Limited. On 14 and 15 June 1990 the three of them signed a guarantee in favour of, and addressed to, the pursuers, the material part of which read:

I/WE KENNETH FRASER LYON ....... DOUGLAS ALEXANDER LYON ........ and MICHAEL ALEXANDER CLARK MACKENZIE ...... in consideration of your having given or agreed to give and/or continue certain Banking facilities and/or accommodation to VIDEO NETWORK (INVERNESS) LIMITED, having their Registered Office at Eighteen Greig Street, Inverness, (hereinafter referred to as "your customer/s") do hereby (jointly and severally, if more than one) guarantee to you full and final payment on demand of all sums of money which your customer/s, either solely or jointly with any other obligant/s, is/are now or may at any time hereafter be or become due or liable for to you in any manner of way whatsoever: But my/our liability to you under this guarantee shall not exceed the sum of TWENTY FIVE THOUSAND POUNDS with interest thereon or on such part thereof as may be due by me/us at such rate as may be charged by you to your customer/s at the time from the date of your last Annual Balance preceding application by you to me/us for payment.

[3] On 19 February 1992 the first defender and Mr Douglas Lyon granted a second guarantee in favour of the pursuers. In this document the Guarantors were defined as the first defender and Mr Douglas Lyon, the Debtors as Video Network (Inverness) Limited, the Bank as the pursuers, Interest as: "Interest at the rate(s) applicable to the Obligations of each of the Debtors" and the Obligations as: "Liabilities to the Bank of any kind (whether present or future actual or contingent and whether incurred alone or jointly with another) including interest banking charges and commission". In terms of clause 15.1 it was provided that, if (as in this case) the definition of Debtors included only one person, then any expression which included the word Debtors should be deemed to refer to such person only. In terms of clauses 15.5 and 15.5.1 it was provided that, if two or more persons were included in the definition of Guarantors, then the liability of such persons under the guarantee should be joint and several. Clauses 1, 1.1 and 1.2 provided as follows:

The Guarantors in consideration of the Bank giving time or credit or banking facilities to any one or more of the Debtors

guarantee to discharge on demand all the Obligations of each of the Debtors with Interest from the date of demand and

agree that any item or amount claimed by the Bank to be included in the Obligations of any one or more of the Debtors which is not recoverable from the Guarantors under this Guarantee for any reason on the basis of a guarantee shall nevertheless be recoverable from the Guarantors as principal debtors by way of indemnity and the Guarantors agree to discharge their liability in respect of that item or amount on demand with Interest from the date of demand

provided that the amount recoverable from the Guarantors under this Guarantee shall not exceed the aggregate of FIFTEEN THOUSAND Pounds Sterling (£15,000) and Interest on that sum since the date on which Interest was last compounded in the books of the Bank together with Interest on that aggregate from the date of demand and Expenses.

[4] Video Network (Inverness) Limited evidently went into liquidation early in 1993. On 25March 1993 a representative of the pursuers wrote to the first defender in the following terms:

Dear Sir

On the Fourteenth and Fifteenth day of June Nineteen Hundred and Ninety you, together with Douglas Alexander Lyon and Michael Alexander Clark Mackenzie granted to the Bank a Joint and Several Guarantee for the sum of £25,000 (TWENTY FIVE THOUSAND POUNDS) and Interest in respect of the borrowing in the Books of our Chief Office, Inverness in name of VIDEO NETWORK (INVERNESS) LIMITED. A photocopy of the relative Guarantee is enclosed.

As you may be aware, this Company has been placed in Liquidation and the initial indications are that we will require to rely on your Guarantee. Under this Guarantee your liability as at 25 March 1993 amounts to £26,269.18 (TWENTY SIX THOUSAND TWO HUNDRED AND SIXTY NINE POUNDS AND EIGHTEEN PENCE) which includes Interest to that date, but we would mention that Interest continues to accrue against you in terms of the Guarantee until the date on which settlement in full is effected.

In addition to the aforementioned Guarantee, on the Nineteenth day of February Nineteen Hundred and Ninety-two you, together with Douglas Alexander Lyon granted to the Bank a Joint and Several Guarantee for the sum of £15,000 (FIFTEEN THOUSAND POUNDS) and Interest in respect of the aforementioned Company. We will require to rely on this Guarantee and your liability as at 25 March 1993 amounts to £15,104.89 (FIFTEEN THOUSAND ONE HUNDRED AND FOUR POUNDS AND EIGHTY NINE PENCE) which includes Interest to that date but, as advised, Interest continues to accrue against you in terms of the Guarantee until the date on which settlement in full is effected.

We have been informed by our above Branch that your Guarantee Obligations will be met by the residual sale proceeds of 18 Greig Street, Inverness which we understand is currently being marketed by Messrs Graham & Sibbald but it may be the case that you would prefer to make interim payments pending the sale, and any monies received from you will be credited to an appropriate Account to be opened in our Books and will stop Interest accruing against you to the extent of such payments.

Should it be the case that you wish to submit interim proposals to the Bank we look forward to hearing from you in due course.

Letters in similar terms have been sent to Michael Alexander Clark Mackenzie and Douglas Alexander Lyon.

Yours faithfully,

[5] Following the liquidation of Video Network (Inverness) Limited the first defender commenced business on his own account trading as Air Talker Communications. To allow him to carry on this business the pursuers granted him overdraft facilities through the medium of a Business Account numbered 00196562. According to the pursuers, the sums due to them in terms of this facility were repayable on demand and they say that they have called upon the defenders for payment of these sums and that the defenders have defaulted in payment.

[6] In the present action the pursuers crave the court to grant warrant to them in terms of section 24(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970 to enter into possession of the defenders' house and to exercise in relation to it all powers competent to a creditor in lawful possession of security subjects including the power of sale thereof. The pursuers also crave the court to grant warrant to officers of court summarily to eject the defenders from the house. Section 24(1) of the 1970 Act provides that a creditor in a standard security, where the debtor is in default within the meaning of standard condition 9(1)(b), may apply to the court for warrant to exercise any of the remedies which he is entitled to exercise on a default within the meaning of standard condition 9(1)(a) (and which it is not disputed include the remedies sought in this case). Standard condition 9(1)(b) provides that the debtor shall be held to be in default where there has been a failure to comply with a requirement arising out of the security. According to article 3 of the condescendence the pursuers' position, in short, is that the sums secured by the standard security included not only the sum due by the first defender under the overdraft facility but also the sums due by him in terms of the two guarantees which the pursuers say were called up in terms of letters sent to the first defender by their solicitors on 14December 2001. The pursuers aver that, the defenders having defaulted in payment of the sums due under the facility and the two guarantees, they are entitled to warrant in terms of section 24(1) of the 1970 Act.

[7] In response, the defenders aver, in short, that they were not in default in respect of the overdraft facility since it was not secured by the standard security and since in any event payment in full of the sums due under the facility was offered to the pursuers and declined by them. As for the two guarantees, the defenders aver that the first defender's obligations thereunder are obligations to which section 6 of the Prescription and Limitation (Scotland) Act 1973 applies. Section 6(1) provides that: "If, after the appropriate date, an obligation to which this section applies has subsisted for a continuous period of five years - (a) without any relevant claim having been made in relation to the obligation, and (b) without the subsistence of the obligation having been relevantly acknowledged, then as from the expiration of that period the obligation shall be extinguished". Section 6(2) provides that schedule 1 to the Act shall have effect for defining the obligations to which section 6 applies, and it is not in dispute that these include the first defender's obligations under the two guarantees - see paragraph 1(g) of schedule 1. Section 6(3) in its application to the present case provides that in section 6(1) the reference to the appropriate date is a reference to the date when the obligations under the two guarantees became enforceable. The defenders aver that the letter of 25 March 1993 from the pursuers to the first defender constituted a demand for payment under the guarantees with the result that his obligations thereunder became enforceable on that date. The present action was not raised until 10 August 2001 and the defenders maintain accordingly that the first defender's obligations under the guarantees have been extinguished by prescription in terms of section 6(1) of the 1973 Act.

[8] Both defenders tabled pleas to the effect that, the pursuers' averments being irrelevant et separatim lacking in specification, the action should be dismissed. In the case of the first defender, this is his third plea-in-law, and it is the first plea-in-law for the second defender.

[9] In due course a debate took place before the sheriff on 9 October 2003. Subsequently, by interlocutor dated 31 October 2003, he sustained these last two pleas-in-law and dismissed the action against both defenders. It is this interlocutor which is the subject of the present appeal.

[10] In support of his interlocutor the sheriff prepared a very full and careful note. It is perfectly clear from this that, despite what is said in the pursuers' pleadings, it was not in the event argued before him that, quite apart from the first defender's obligations under the two guarantees, the pursuers were entitled to warrant under section 24(1) of the 1970 Act by reason of the defenders' failure to make payment of the sums said to be due in terms of the business overdraft facility. It is plain that, apart from a minor point of pleading, the only issues canvassed during the debate were whether the letter of 25 March 1993 had constituted a demand to the first defender for payment under the two guarantees and whether his obligations thereunder had prescribed accordingly. All this was confirmed at the appeal by counsel for the first defender who had also appeared before the sheriff (and who explained that at the debate it had been conceded that payment in full of all sums of principal, interest and charges due under the overdraft facility had been offered by the first defender to the pursuers).

[11] In his interlocutor of 31 October 2003 the sheriff reserved the question of expenses. He dealt with this question as between the pursuers and the first defender on 12 November 2003 when he found the pursuers liable to the first defender in the expenses of the cause and continued the hearing on expenses in respect of the second defender to 10 December 2003. On 26 November 2003 a note of appeal was lodged on behalf of the pursuers against the interlocutor dated 31 October 2003 quoad the first defender. It is said, in short, that the sheriff erred in law in dismissing the action against him and in support of this three grounds are stated. The first two of these relate to the question whether the letter of 25 March 1993 was a demand for payment under the two guarantees. The third relates to the minor pleading point to which I have already referred. There is nothing in these grounds of appeal to suggest that the pursuers were in any event entitled to the warrants which they sought on account of the defenders' default in payment of the sums due under the business overdraft facility.

[12] On 10 December 2003 the sheriff found the pursuers liable to the second defender in the expenses of the cause. On 17 December 2003 a second note of appeal was lodged on behalf of the pursuers in terms of which they appealed against the interlocutor dated 31 October 2003, this time quoad the second defender. Once again it was said, in short, that the sheriff had erred in law in dismissing the action. In this second note of appeal there were only two grounds of appeal which were in exactly the same terms as the first two grounds of appeal in the previous note of appeal. There was no reference in the second note of appeal to the minor pleading point, nor was there any reference to the business overdraft facility.

[13] At the hearing of the appeal the pursuers' solicitor initially stated that they did not maintain that they were in any event entitled to warrant in terms of section 24(1) of the 1970 Act on account of the defenders' default in payment of the sums due under the business overdraft facility, the defenders having previously offered to repay these sums in full. But at a later stage in his submissions the pursuers' solicitor withdrew this concession and submitted that, even if the letter of 25 March 1993 fell to be construed as a demand for payment of the sums due under the two guarantees, the sheriff should nonetheless have allowed a proof on the question whether or not the defenders had been in default of their obligations in terms of the business overdraft facility. Not surprisingly, counsel for the first defender (whose submissions were endorsed by the second defender's solicitor) protested that it was not open to the pursuers to advance this argument at this stage in the proceedings given that it had not been advanced before the sheriff and that no notice of it had been given in the pursuers' grounds of appeal. In my opinion counsel was quite right to make this protest, and I have had no hesitation in concluding that I ought not to entertain this argument.

[14] In opening the appeal, and before he changed his mind about the business overdraft facility, the pursuers' solicitor explained that the appeal was solely about whether or not the letter of 25 March 1993 had constituted a demand for payment under the two guarantees which had started the prescriptive period in relation to the first defender's obligations under these guarantees. He submitted that the letter was not such a demand with the result that the prescriptive period had not commenced, that the defenders' averments about prescription fell to be deleted and decree de plano granted against them or alternatively proof should be allowed restricted to the question whether or not there had been a default in respect of the first defender's obligations under the guarantees. In this last event certain other averments which had been made by the first defender about payments which he had made under the guarantees should also be excluded from probation. But he accepted that, if the letter of 25 March 1993 fell to be construed as a demand for payment, then the appeal must fail (since at that stage the argument about the business overdraft facility had not been advanced).

[15] In support of his submission that the letter of 25 March 1993 had not constituted a demand for payment, the pursuers' solicitor referred to Bank of Scotland v Laverock 1992 SLT 73. In that case the pursuers and appellants raised an action of payment in respect of sums due on two accounts with their Dundee branch. The defender and respondent averred that he had operated the accounts until 12 April 1977 after which they had been taken out of his control by the Law Society of Scotland. A judicial factor had been appointed to his estate in December 1978. After the factor had advertised for claims the pursuers wrote to him on 15 March 1979 enclosing a note of their claim and expressing the hope that adequate detail was included in the statement for the factor's purposes and volunteering to provide any further information which he might wish. The defender pleaded prescription, arguing that the letter of 15 March 1979 amounted to a written demand for payment and that accordingly the prescriptive period ran from that date. This was disputed by the pursuers and, on appeal, the Second Division held that the letter of 15 March 1979 was no more than an assertion by the pursuers of their rights in respect of the two bank accounts in question and did not amount to a written demand for repayment. At page 76E/F the Lord Justice Clerk (Ross) stated:

(Counsel for the respondent) also submitted that the letter of 15 March 1979 was a written demand for repayment. Under reference to the Oxford English Dictionary (1989), he pointed out that the primary meaning of "demand" is: "An act of demanding or asking by virtue of right or authority; an authoritative or peremptory request or claim". In the same dictionary the meaning of "demand" in law is given as "The action or fact of demanding or claiming in legal form; a legal claim". He recognised that the advertisement had asked for claims, and he drew attention to the dictionary definition of "claim". The primary meaning is given as "A demand for something as due; an assertion of a right to something".

He also referred to two English cases which I have not found of assistance. At the end of the day counsel for the respondent's submission was that claims had been invited, and that the letter showed that the pursuers were claiming because they wished to be paid, and that accordingly their letter should be regarded as a written demand for repayment.

I am satisfied that the letter of 15 March 1979 did not amount to a written demand for repayment. As is plain from the dictionary definition already quoted, a demand involves a peremptory request or claim, and there is nothing peremptory in the language of the letter. The advertisement invited claims, and as the dictionary definition shows a claim is a demand for something as due or an assertion of a right to do something. In my judgement the letter of 15 March 1979 was no more than an assertion by the pursuers of their rights in respect of these two bank accounts. It is significant that in the letter nothing whatsoever is expressly stated about repayment. Provided that payments of interest had continued to be made in respect of the overdrafts, there is nothing in the letter to suggest that the pursuers wished the accounts to be closed by payment of the total sums outstanding. In my judgement there is a clear difference between a claim on the one hand and a demand for repayment on the other, and what one sees in the letter is simply a claim made in response to an invitation to intimate claims.

[16] At page 78B/C Lord Murray stated:

In my opinion to succeed in the argument that the letter of 15 March 1979 was a written demand for repayment ...... the defender would have to show that, in its context, it could not reasonably be construed otherwise. It was accepted by both sides that the context is set by the existence of the judicial factory together with the public notice made by the judicial factor. The operative words of the notice are that all persons having claims against the debtor should "intimate such claims to me in writing ..... and that all persons indebted" to the debtor should similarly notify him. The invitation is to intimate claims within fourteen days not to lodge claims within that time. The pursuers' reply to that invitation is the letter of 15 March 1979 .....

The note referred to (in the letter) summarises the state of the two accounts as at 12 March 1979 and includes the observation in relation to each account that overdraft interest continues to accrue at a daily rate specified. Conspicuous by its absence from the wording of that letter or the note to which it refers is any reference to repayment of the overdrafts or settlement of the accounts. The letter and the note, which I read as essentially a statement of account, may reasonably be read as no more than a statement of the bank's interest as a creditor in the estate of the debtor. As the sheriff pointed out, it would have been open to a judicial factor to take over and operate the accounts at least in the interim in the course of administering the debtor's estate. If the letter can reasonably have that meaning it falls short, in my opinion, of being a written demand for repayment ...... This is sufficient for decision of the case.

[17] At pages 78L/79C Lord Morison stated:

........ In my opinion the sheriff was correct in holding that this letter (of 15 March 1979) did not constitute "a written demand for repayment". I consider that this expression ..... denotes an unequivocal requirement that repayment should be made immediately. Counsel for the respondent submitted that the letter did constitute such a requirement, having regard to its terms and to the fact that it was written in response to an advertisement placed by the judicial factor in which notice was given that "all persons having claims against" the respondent or his firm should intimate to him such claims in writing, giving full details thereof and the amount claimed. In respect of the respondent's overdraft, the bank did indeed have a claim against the respondent. But although the existence of that claim was intimated by the bank to the judicial factor for his purposes and in accordance with his request, it is nowhere in the letter expressed or implied that the bank were asserting that claim to the extent of demanding immediate repayment of the sum which the respondent owed them. The terms of the letter are quite consistent with the attitude that they were willing to postpone repayment until some later date, preserving the right to receive interest in the meantime, but that intimation of the existence of the debt should be made in accordance with the requirement contained in the advertisement to that effect. The averments made by the respondent that the letter constituted a "written demand for repayment" are therefore irrelevant.

[18] The pursuers' solicitor scrutinised the letter of 25 March 1993 in some detail and submitted that there was nothing peremptory about its terms and that it contained no request for payment to the pursuers. It was clear, said the pursuers' solicitor, that certain sums might be recovered by them in the liquidation of Video Network (Inverness) Limited and also from the other guarantors, so that until a formal demand was made to the first defender it was not possible to establish what sum was due by him. There was nothing in the letter which indicated a date for payment and hence when sums due under the guarantees were due by the first defender to the pursuers. This letter was to be contrasted with the letters which had been sent to him on 14 December 2001 by the pursuers' solicitors who had called upon him in appropriate terms for immediate payment of certain specified sums due by him under the guarantees.

[19] In response, counsel for the first defender laid emphasis on the terms of the two guarantees and pointed out that the pursuers' entitlement to interest thereunder did not arise until a demand for payment had been made. Counsel submitted that the letter of 25 March 1993 had been written in a manner which, when it was construed against the terms of the guarantees themselves, clearly indicated that there was a present obligation upon the first defender to pay the monies which were said to be due and payable under each of the guarantees. Counsel suggested that the language of the letter was framed in terms of the first defender's guarantee obligations and his liability under the guarantees and he submitted that, if the letter had not constituted a demand for payment, there would have been no such obligations or liability on the part of the first defender. In short, it was clear, said counsel, that in the letter the pursuers were saying to the first defender that he was due to make payment under the guarantees and should do so accordingly. It followed that the letter had set in motion the prescriptive period in relation to the obligations incumbent upon the first defender in terms of each of the guarantees. In any event, if it were to be said that the terms of the letter were not entirely clear (and counsel did not accept this) then any ambiguity would fall to be construed contra proferentem, in other words against the pursuers and in favour of the defenders. In the circumstances the appeal should be refused and the interlocutor of the sheriff dated 31 October 2003 adhered to.

[20] In my opinion counsel for the first defender was right to lay emphasis, in construing the letter of 25March 1993, on the terms of the two guarantees as setting the context in which the letter came to be written. In terms of the first guarantee dated 14 June 1990 the first defender jointly and severally with Mr Douglas Lyon and Mr Michael Mackenzie guaranteed to the pursuers full and final payment on demand of all sums of money which were or might thereafter become due by Video Network (Inverness) Limited to the pursuers. But then there was the important qualification to the effect that the liability under the guarantee should not exceed the sum of £25,000 "with interest thereon or on such part thereof as may be due by me/us at such rate as may be charged by you to your customer/s at the time from the date of your last Annual Balance preceding application by you to me/us for payment" (the emphasis is mine).

[21] I turn then to the letter of 25 March 1993, and in particular the second paragraph. In the first sentence of this it is said by the pursuers that "the initial indications are that we will require to rely on your Guarantee". It is no doubt true that this hardly reads like a demand for payment under the guarantee. But in the very next sentence it is said: "Under this Guarantee your liability as at 25 March 1993 amounts to £26,269.18 ...... which includes Interest to that date ......" As just noted, the first defender's liability under the guarantee was fixed at a maximum of £25,000 with interest thereon from the date of the pursuers' last Annual Balance "preceding application by you to me/us for payment". So the excess of the sum of £26,269.18 sought over £25,000, namely £1,269.18, could only have been attributable to such interest, and this in turn could only have been calculated when the date of the pursuers' last Annual Balance preceding application by them to the first defender for payment had been identified. Accordingly, in calculating the interest due, the pursuers must have identified this date, and they could not have done this unless they had made, or were making, application to the first defender for payment. It follows that, unless they had made such application to him before 25 March 1993 (and there was no suggestion of this), the letter which they sent that day to the first defender could only have been understood as an application then for payment under the guarantee.

[22] In the final part of the second sentence in the second paragraph of the letter the pursuers go on to say: "...... but we would mention that Interest continues to accrue against you in terms of the Guarantee until the date on which settlement in full is effected". There are two points that may be made here. In the first place, there could have been no question of interest continuing to accrue against the first defender unless an application had been made to him by the pursuers for payment under the guarantee. And in the second place, the phrase "until the date on which settlement in full is effected" plainly envisages, not that an account in the name of either Video Network (Inverness) Limited or the first defender might continue to be operated subject to continuing payment of interest, but that "settlement in full" (that is, of principal and interest) should be effected. This too only makes sense in the context of a demand having been made to the first defender for payment under the first guarantee.

[23] In terms of the second guarantee dated 15 February 1992 the first defender and Mr Douglas Lyon guaranteed to discharge on demand all the liabilities of Video Network (Inverness) Limited to the pursuers with interest from the date of demand. So it is at once made clear that there could have been no possibility of the first defender becoming liable under the guarantee unless and until there had been a demand made of him by the pursuers. In the case of this guarantee his liability was limited by the qualification that the amount recoverable under the guarantee should not exceed the aggregate of £15,000 "and Interest on that sum since the date on which Interest was last compounded in the books of the Bank together with Interest on that aggregate from the date of demand and Expenses". So here it is made clear that any interest sought to be recovered by the pursuers in terms of the guarantee could only have become due following a demand by them to the first defender for payment.

[24] In the third paragraph of the letter dated 25 March 1993 the pursuers refer in the first sentence to the second guarantee. Then in the second sentence they make a number of points. In the first place they state that they "will require to rely on this Guarantee". In itself, this may perhaps be read as a statement of intention rather than a demand. But the pursuers go on to say that the first defender's "liability as at 25 March 1993 amounts to £15,104.89 ..... which includes Interest to that date". As in the case of the first guarantee, the excess of £15,104.89 over £15,000, namely £104.89, was plainly attributable to interest, and this in turn could only have been calculated once the date "on which Interest was last compounded in the books of the" pursuers had been identified. Accordingly, in calculating the interest due, here too the pursuers must have identified this date, and they could not have done so unless they had made, or were making, a demand to the first defender for payment. Again it was not suggested that they had made such a demand before 25 March 1993, so the letter of that date could only have been understood as a demand then for payment.

[25] Finally in this third paragraph of the letter the pursuers add the same advice to the first defender as they had in relation to the first guarantee, namely that interest continued to accrue against him in terms of the guarantee until the date on which settlement in full was effected. Again, this advice only makes sense in the context of a demand having been made to the first defender for payment under the second guarantee.

[26] In the fourth paragraph of the letter dated 25 March 1993 the pursuers stated that they had been informed that the first defender's "Guarantee Obligations" would be met by the residual sale proceeds of 18 Greig Street, Inverness. They then suggested to the first defender that he might prefer to make interim payments pending the sale and, in short, they stated that any monies received from him would be credited to an appropriate account and would stop interest accruing against him. Once again, the references in this paragraph to the first defender's obligations under the guarantees and to interest accruing against him only make sense in the context of his obligations under the guarantees having become enforceable which in turn could not have happened unless the pursuers had made, or were making, a demand to the first defender for payment under each of the guarantees.

[27] Finally in the fifth paragraph of the letter dated 25 March 1993 the pursuers wrote: "Should it be the case that you wish to submit interim proposals to the Bank, we look forward to hearing from you in due course". Again it may be asked why the pursuers might have supposed that the first defender would wish to submit interim proposals to them otherwise than upon the basis that his obligations under the guarantees had become enforceable.

[28] In summary, looking to the context in which the letter dated 25 March 1993 was written, I consider that it cannot be intelligibly construed otherwise than as a demand addressed to the first defender by the pursuers for payment under the two guarantees. And in reaching this conclusion I do not feel myself discomfited by anything that was said in Bank of Scotland v Laverock since the terms of the letter under consideration in that case, and the circumstances in which it came to be written, were entirely different from, respectively, the terms of the letter dated 25 March 1993 and the circumstances in which that letter was written.

[29] For the sake of completeness, I should mention that in the course of his submissions counsel for the first defender drew attention to two letters which were sent by the pursuers to the first defender after 25 March 1993. The first of these (no. 6/4 of process) was a letter dated 5 April 1993 which was sent to the first defender by the Corporate Manager of the pursuers' Inverness Chief Office. It was headed: "Video Network (Inverness) Limited" and ended with the following paragraph:

In closing, I note that you have now received a letter from my colleagues in the Bank's Legal Department officially calling up your Guarantees which again serves to reinforce the need to take speedy action with regard to the disposal of the Greig Street premises in particular.

[30] It will be noted that this letter was sent to the first defender only ten days or so after the letter dated 25 March 1993. The second letter to which counsel referred (no. 6/3 of process) was dated 29 March 2000. It was sent to the first defender by the Manager of the pursuers' Retail Credit Services department in Edinburgh. It was headed: "Re: Your Guarantee Liabilities in respect of Video Network Ltd", and included the following passage:

Upon the Liquidation of Video Network Ltd, these guarantees were called in on 25 March 1993. Interest will therefore accrue from this date, until such time as repayment is effected. No monies have ever been received for either of these liabilities and as such, I enclose copy interest calculations which show the current amount outstanding. These sums are as follows:-

Guarantee Liability for £25,000 - £47,157.72

Guarantee Liability for £15,000 - £28,294.59

[31] Counsel for the first defender suggested that it was clear from the terms of these two letters that the pursuers had themselves seen the letter dated 25 March 1993 as a demand for payment under the guarantees. But quite rightly he did not argue that these later letters affected the proper construction of the earlier letter. I dare say that they are an embarrassment to the pursuers but the statements made in them by their officials are nothing to the point in construing the letter dated 25 March 1993, and I have left them out of account accordingly.

[32] On the whole matter I am of the opinion that the sheriff was correct to hold that the first defender's obligations under the two guarantees had been extinguished by prescription by the time the present action was raised and to dismiss the action accordingly. I have therefore refused the appeal.

[33] In addition to the authorities which I have already mentioned, I was referred to The Royal Bank of Scotland Limited v Brown 1982 SC 89, David Johnston: Prescription and Limitation at page 60, and Halliday's Conveyancing Law and Practice (2^nd Edn), Volume 1, at paragraph 7-30.

[34] It was accepted that the expenses of the appeal as between the pursuers and the first defender should follow success, and I have therefore found the pursuers liable to the first defender in these expenses. I was advised that it had been agreed by the pursuers and the second defender that no expenses would be found due or by either of them whatever the outcome of the appeal.