Party litigant who had decree in absence granted for recovery of cottage by bank fails in Outer House reduction action

The owner of a cottage in Ayrshire has failed to reduce a decree allowing a bank to take possession of his home under the terms of a standard security granted over it and prevent the bank from enforcing it.

Stewart McLeod sought to interdict Bank of Scotland Plc from enforcing a decree for recovery of possession granted in Kilmarnock Sheriff Court in 2014, as well as reduction of the original decree. He denied that he had been served a calling up notice in respect of the property.

The case was heard by Lord Turnbull in the Outer House of the Court of Session. The defenders were represented by Edward, advocate, with the pursuer appearing as a party litigant.

‘Created’ money

The pursuer granted a standard security over Corsehouse Cottage in Stewarton, Ayrshire, to Halifax plc in June 2001. Halifax’s interest in the security was later acquired by the defenders following the reorganisation of the HBOS Group in 2007 effected by the HBOS Group Reorganisation Act 2006, and they raised an action for recovery of possession of the secured subjects in October 2012. Decree in absence was granted by the sheriff in July 2014.

It was the defenders’ position that a calling up notice was served on the pursuer in June 2012 and that he signed for it in the same month. The pursuer denied this, stating that he was not resident in the property at that time, and raised an action for reduction in 2016. He admitted that he had granted the security to Halifax, however, maintained that the defender had no title to it.

In further support of his position, the pursuer averred that the granting of the standard security and the defenders’ actions in seeking to enforce it were tainted by fraud, and that there was insufficient evidence placed before the sheriff to allow for an award of decree. He relied upon the content of documents he had lodged setting out what he considered to be evidence of widespread bank fraud and contended that the bank had not lent him money but rather ‘created’ it when he signed the original loan document.

It was submitted for the defenders that the pursuer’s action was bound to fail as the effect of the 2006 Act was that the right to the standard security vested in them. Further, there were no relevant or specific averments of fraud that were in any way related to the granting of the security or on the obtaining of the original loan with which it was connected by the pursuer.

Concerning the granting of the decree in absence, counsel for the defenders submitted that the pursuer had no relevant defence to the merits of the sheriff court action. He did not deny being served with the action nor had he offered any explanation as to why he did not participate in the proceedings.

Entirely irrelevant

In his decision, Lord Turnbull said of the 2006 Act: “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.”

He went on to say: “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 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.”

Turning to the allegations of fraud, Lord Turnbull said: “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.”

On the validity of the decree in absence, he commented: “The pursuer states that he did not learn of the decree being passed against him until some months later. However, Lady Carmichael records 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.”

He concluded: “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.”

For these reasons, the action was dismissed.

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