When it comes to the consequences of ignoring a bank’s demands for repayment of debt, a recent case heard in the Court of Session perhaps serves as a cautionary tale. In Hull v Campbell ([2011] CSOH 24), the court itself admitted it was taken by surprise by the facts and events that led the parties to court. The outcome could have a bearing on anyone who would have diligence (the process where a creditor recovers money from a debtor) by way of adjudication (where the creditor can apply to the court to prevent the debtor selling the property and after a ten year period can sell it) done against their property by a lender.
Back in 1992, the defender, Mr Campbell owed the bank £9600 and failed to make any attempt to pay this by 1998. The debt had now increased, with interest, to over £18,000.
Next, the bank raised an action of adjudication which was granted, effectively putting Mr Campbell into a situation where his property rights are effectively ‘seized’ by the bank He was prevented from selling the property. After a period of ten years, know as the ‘legal’, the bank would then become able to foreclose on the property and sell it, even if the value of the property exceeded the debt. This is exactly what they attempted, and believed they were entitled to do.
Astonishingly, the £9600 debt has now grown to £52,272.87. Also astonishing is that no-one - neither the bank nor Mr Campbell - seemed to remember why the original debt arose in the first place. The bank sought confirmation that they were entitled to sell the property after the ten year period, as Mr Campbell had not settled his debt. They also asserted that this was not contrary to Article 1 Protocol 1 (the right to peaceful enjoyment of one’s possession) because the legislation as laid down did not have to take this into account and was not applicable under these circumstances.
It had been so long since any such case had come before the courts that there was some debate as to the interpretation of the statute which dated back to 1672. The bank argued that the court had no discretion in interpreting the legislation. If a literal interpretation was taken, the person in debt could effectively lose the entire value of their property, even if the bank made more on the sale than was owed to them. The court held this was not equitable and not in the spirit of the law. They also did not accept they had no discretion.
Strangely, the bank appeared to be interested in an ‘all or nothing’ outcome, and in this occasion, the court gave them nothing. Following an unusual alternative motion by the pursuer for a decree of dismissal or absolvitor (meaning the defender is effectively absolved), the court did dismiss the case, letting Mr Campbell off the hook at this stage. Furthermore, there was the issue of Mr Campbell’s wife – she was jointly entitled to the matrimonial home, meaning she would have been left with a situation where she co-owned her home with a bank, thus adding a further complication for both parties.
So by simply ignoring the bank’s demands, Mr Campbell seems to have escaped his responsibilities as debtor. But caution should be exercised by anyone in a similar situation: whilst the bank may have been reluctant to pursue the claim further even though they were entitled to do so provided the profit was paid back to Mr Campbell after payment of debt, this is not to say that in a similar situation, that debt could not be assigned to a third party who would be prepared to recover the money with more rigour and far less sympathy.
If you need advice on any debt-related matter, contact Gus Macaulay on 0141 229 0880 or send Gus an email.