Andrew Foyle: Calling up notices case raises more questions than answers

Andrew Foyle

Andrew Foyle reasons that new case law on calling up notices has simply raised more questions for lawyers in search of answers.

In 2010 the Supreme Court ruled that in every case where a secured creditor seeks possession of a property following a monetary default, a calling up notice must be served. In the absence of such a notice, any subsequent court action seeking possession will be incompetent.

The Conveyancing and Feudal Reform (Scotland) Act 1970 sets out the procedure for serving such a notice. For brevity, notice is generally only served by recorded delivery post unless specific exceptions apply. Those exceptions are (1) where the address of the person upon whom service is desired is unknown; (2) where it is not known whether the person is still alive; or (3) where the recorded delivery packet containing the calling up notice is returned to the creditor with an intimation that it could not be delivered. In all of these cases, the notice can be sent to the Extractor of the Court of Session, which will be deemed as equivalent to service on the person.

In the recent Sheriff Appeal Court case of Royal Bank of Scotland v Jamieson ([2019] SAC (Civ) 29) the court was asked to consider these exceptions in order to determine whether service of the notices was validly made to the Extractor.

The facts

The facts of the case are far from unusual. The lender attempted to serve calling up notices on the customer by recorded delivery post. After a period of time the lender’s solicitors checked the Royal Mail’s “Track & Trace” service and noted that the current status was listed as “no answer”. The calling up notice does not appear at any time to have been returned to the solicitors. However, in light of the online confirmation that the package had not been delivered the solicitors lodged a fresh notice with the Extractor of the Court of Session. The lawyers then relied upon that notice in their subsequent court action.

The precise wording of the act states that service on the Extractor is competent “if the packet containing a calling-up notice is returned to the creditor with an intimation that it could not be delivered” (emphasis added). The issue identified by the court was that in this case, regardless of whether or not the notice had actually been delivered, there was no evidence that it had been returned.

The court held that the provision of the act should be read and applied strictly. As such it was not competent to serve the notice on the Extractor unless the package had actually been returned. As none of the other exceptions applied, the notice was not valid.

As the notice was found to be incompetent, the action was also incompetent and was accordingly dismissed by the Appeal Sheriff.

From questions we may find clarity

Whilst the judgment does appear to accord with the strict wording of the act, it seems unlikely to have been the intention. The case also raises a number of unanswered questions.

First, what is the status of an undelivered notice that is not returned? The 1970 act only says that the notice “may be sent by” recorded delivery post. If this postal method is used, the act is silent on the question of whether delivery must actually be effected and only speaks of service on the extractor where the package is returned. Arguably, an undelivered but unreturned package would be validly served on a literal reading of the act. That seems undesirable. However, this argument was not raised in the case and so it remains an uncertainty.

Second, if the undelivered notice is not validly served, what is the lender’s best course of action? Logic would dictate that it would be to serve a further notice by recorded delivery post. However, what if that notice isn’t returned? As mentioned in this judgment, it has already been held by a court that service of the notices by a Sheriff Officer is not effective, so at what stage can a lender be extricated from this loop?

Unfortunately, for lawyers tasked with advising and representing their clients on such matters, the judgment gives no guidance on these issues. Consequently, we need to await further case law on these points in the hope the unanswered questions are clarified.

Andrew Foyle is a partner at Shoosmiths LLP