Supreme Court shakes things up for conveyancers

Having shoogled the criminal lawyers in Cadder, the Supreme Court shook up the orderly world of conveyancing and repossession from defaulting debtors with its judgment in Royal Bank of Scotland v Wilson [2010] UKSC 50, issued on 24 November 2010.

RBS v Wilson was a case about how the creditor in a standard security might eject the defaulting debtor from the property over which the debt was secured.  The relevant legislation stated that the debtor's default had to be preceded by "formal requisition"; the creditor bank argued that a certificate of default lodged in court under section 24(2) of the Conveyancing and Feudal Reform (Scotland) Act 1970 met this requirement.  This was practice established over the last forty years, even although section 19(1) of the 1970 Act said that the creditor intending to exercise the power to eject "shall serve a notice calling-up the security in conformity with Form A of Schedule 6 of this Act" (with which the certificate of default under section 24(2) did not comply).  Practice allowing the certificate of default procedure to be enough was based upon the writings of the late Jack Halliday, sometime Professor of Conveyancing at Glasgow University and "architect" (although not draftsman) of the 1970 Act.  Halliday had written that the creditor in our situation "may" serve a calling up notice, which was an "additional" remedy (see para 47 of the Supreme Court judgment, per Lord Rodger).  But, said Lord Rodger (as a Glasgow graduate), "in the end even a word from Professor Halliday would have to yield to the words of Parliament" (para 49).  "Shall" here was an imperative word; and properly understood, Professor Halliday had not said anything different.  Only a calling-up notice would do before the debtors could be ejected; this was an important piece of debtor protection.  Lord Hope (an Edinburgh graduate) is more dismissive of Professor Halliday's reading (see para 68) and says, "The answer to the problem is to be found in the words of the statute, to which all too frequently insufficient attention appears to have been given" (para 72).

Scots Law News recalls wise words from the Wilson Lecture given by Professor Eric Clive as the Scottish Parliament began its life as a legislature in 1999:

‘Shall’ is an imprecise word with several shades of meaning. When it states a result brought about by the Act itself, it is better replaced by ‘is’. …. The New Zealand Law Commission has recommended the use of the present tense and indicative mood whenever possible, and the replacement of ’shall’ by ‘must’ where a duty or prohibition is intended. … I would like to see the routine use of the word ’shall’ banned from Acts of the Scottish Parliament.” (Edinburgh Law Review vol 3 (1999) at p 143)

Professor Clive attacked the famous opening provision of the Scotland Act 1998 – “There shall be a Scottish Parliament.”  “But what,” asks Professor Clive, “does ’shall’ mean in that sentence?”  RBS v Wilson, where in the end everything turned on whether "shall" meant "may" or "must", confirms the Clive line, I fear.  See here for further comment from Brian Heaney on the UKSC blog.

A week earlier, on 17 November 2010, the Supreme Court also surprised some with its decision in Multi-Link Leisure Developments Ltd v North Lanarkshire Council [2010] UKSC 47, which was about the interpretation of a lease between the parties, in particular the method of valuation to be deployed in fixing the sale price when the tenant (Multi-Link) exercised an option to buy the land in question from the Council.  The conflicting interpretations made a difference of near enough £5 million.  The surprise lies in each of the contrasting approaches of Lords Hope and Rodger to what seems to have been a bungled piece of self-contradictory drafting. 

Lord Hope solves the problem of ambiguity (which he says is a pre-requisite for going beyond the document in the search for meaning, so going against a categoric but un-cited statement to the opposite effect by the First Division in Luminar Lava v Mama Group [2010] CSIH 1, para 38) by setting aside some of the wording used as making no commercial sense (but not disclosing the basis on which he is able to reach that conclusion).  This although he criticises the court below for taking inadequate account of all the words in the contract.

Lord Rodger imposes no requirement of ambiguity but says that in such cases of bungled drafting one should start with the words one can understand to see if they help with the ones you can't – a new approach to this difficult subject.  It leads him to decide that the parties' agreed meaning for a particular section cannot be accepted.  Then he finds that words which were not in the contract at all can be used to decide what the commercial sense of the document must have been.

All very interesting.  At least their Lordships reach the same conclusion (the Council wins), and also uphold the Extra Division's conclusion to the same effect ([2009] CSIH 96), while being critical of its reasoning.  Their fellow Supreme Court Justices divide 2-1 as to which of the alternative approaches they prefer, Lord Rodger winning out here.  Since Lord Glennie in the Outer House reached a different conclusion as to the correct result ([2009] CSOH 114), the case viewed as a whole provides a fascinating example of judges offering at least four distinct approaches to the solution of an admittedly knotty problem.  Advisers meantime must wonder what the law is. 

It is however noteworthy that Lord Glennie handed down his Multi-Link opinion on 31 July 2009 and the case then sped through to its final decision in the Supreme Court less than 18 months later.  Compare RBS v Wilson, which began with proceedings in Edinburgh Sheriff Court in April 1998.