The Keeper of the Registers of Scotland has been ordered to rectify a title to a flat bought from a repossessing creditor, to remove references to postponed securities, despite the fact that the repossession was not in accordance with the procedure required by the UK Supreme Court in the RBS v Wilson appeal.
Lord Doherty in the Court of Session granted the order sought by Clive Aronson, the purchaser of a flat in Dean Street, Kilmarnock. Mr Aronson bought the property from the Bank of Scotland after it repossessed it from a borrower who failed to heep up his mortgage payments.
Repossession took place following uncontested proceedings in spring of 2010. Completion of the sale took place in February 2011. In November 2010 the Supreme Court decided in RBS v Wilson that a calling-up notice should be served in such cases, which the bank had not done.
When Mr Aronson's title was registered the Keeper excluded indemnity in respect of any loss arising from the disposition being found void due to failure to follow the statutory procedures. She also kept in the charges section references to three further standard securities granted by the previous owner in favour of two other creditors, also with certain exclusions as to indemnity. Mr Aronson sought rectification of the register by deleting these entries, relying on the effect of section 26 of the Conveyancing and Feudal Reform (Scotland) Act 1970.
For the Keeper it was argued that the register was accurate because section 26, which lifted the effect of a security and any others postponed to it if a property was sold, only applied to a sale in accordance with one or other of the procedures set out in the Act, which were there for the protection of debtors. Where a sale had not complied with those requirements it was unlawful and outwith the scope of section 26.
Lord Doherty commented that the rationale for the Keeper's approach, which was set out in her Legal Manual for staff, was unclear in that it removed the bank's security but not the postponed securities from the register. Her approach to exclusion from indemnity was also odd. She would have had no basis for refusing to register the disposition, which was valid unless and until reduced.
However the real question was as to the effect of section 26, and Lord Doherty ruled that its plain meaning was that “'sale' is apt to include any case where the subjects have been sold by a creditor in a standard security – whether or not there has been any irregularity in the proceedings which preceded the sale". Section 27, dealing with proceeds of sale, only made sense if it had a similar effect. Protection of the debtor was not the only object of the Act; it also intended to facilitate the sale of security subjects by disburdening them of postponed securities. It was inappropriate to regard it as a case of the bank benefiting from its own wrong.
The Keeper was ordained to rectify the register by deleting references to the postponed securities.