Bank fails in appeal against interdict ruling in bid to recover debts from homeowner couple

The Inner House of the Court of Session upheld the decision of the Lord Ordinary to grant interim interdict, interdicting the financial institution from proceeding to apply for the couple’s sequestration.

Lady Paton, Lord Brodie and Lord Glennie heard that the defender Promontoria (Henrico) Limited was seeking recall of an interim interdict granted in November 2017, interdicting the bank ad interim from proceeding to apply for the sequestration of Barry Peart and Susan Peart in terms of a petition presented to Edinburgh Sheriff Court, or otherwise applying for the pursuers’ sequestration in reliance upon apparent insolvency constituted by charges for payment of £2.5 million served upon the pursuers.

The court was told that the pursuers owned and lived in the Old Golf House in Newbattle, Midlothian, until April 2011, having decided in 2007 to move to a smaller property, known as the Powerhouse.

Their plan was to purchase the Powerhouse, refurbish it as their home, and re-establish a working hydro-electric scheme to provide income, but they required loans for their project.

After a re-financing arrangement, they acquired two loan accounts with Clydesdale Bank, namely a homeowner’s loan and a loan for the purchase of the Powerhouse, both of which were repayable on demand, with standard securities placed over the properties.

While refurbishing the Powerhouse, the pursuers lived in the Old Golf House, at the same time advertising it for sale, and as the Old Golf House was valued at approximately £1.25 million any borrowing was expected to be quickly reduced as and when it was sold.

However, the bank had stated by letter dated 10 February 2010 that no offer should be declined without its consent, meaning that the lender had, in effect, a veto in any decision whether to accept an offer.

But the pursuers averred that, at a meeting on 3 February 2011 Nigel Cunningham, a bank representative, in effect undertook that the bank would not call up the loans until the Old Golf House had been sold, but Mr Cunningham’s position was that while the bank’s intention was to be supportive he did not agree to put enforcement on hold indefinitely until the Old Golf House had been sold.

An email sent to the pursuers the following day from another of the bank’s representatives documenting what had been agreed at the meeting made no reference to a variation of the loan documentation or to an undertaking not to demand repayment until the completion of the sale of the Old Golf House.

In the event the pursuers moved from the Old Golf House to the Powerhouse in April 2011 and later that year they received two offers for their former home, which were refused on the advice of the bank.

The property remained unsold and in about June 2015 the bank assigned the pursuers’ debt to the defender.

Subsequently, the pursuers received intimation that the loans would be called up, following which the couple made a complaint to the Financial Ombudsman concerning alleged “mis-selling” by the Clydesdale Bank.

In April 2016 Promontoria served charges on the pursuers for payment, but the pursuers responded with a petition for suspension and interdict, as a result of which Promontoria undertook not to take any further steps until the complaint had been dealt with.

In mid-2017 the Financial Ombudsman rejected the pursuers’ complaint and the defender served fresh charges for payment of £2.5m.

The pursuers sought legal advice on suspending the charge but in the interim the days of charge expired and the defender applied for the couple’s sequestration in the sheriff court.

The couple then sought declarator that the bank has “unilaterally varied its contract” and “waived its right to seek repayment”, as well as interdict from the defender proceeding to apply for their sequestration, and interim interdict.

The Lord Ordinary granted interdict ad interim after concluding that the pursuers had a “reasonably arguable case” and that the balance of convenience “overwhelmingly favoured” the couple since it appeared that they had been subjected to “unsatisfactory representation” by their legal agents, as they had lost the ability to mount a challenge to the charge before the expiry of the relevant days.

The defender reclaimed that decision, but appeal judges adhered to the Lord Ordinary’s ruling.

Delivering the opinion of the court, Lady Paton said: “In the result we consider that the Lord Ordinary was entitled to take the view that a prima facie case, although not the strongest, had been made out. The reasoning in relation to balance of convenience cannot be criticised. Again we are not persuaded that the Lord Ordinary erred in this context, or that there is any ground for challenging the exercise of the Lord Ordinary’s discretion.”