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Mortgage Repossession - borrowers may be able to claim compensation where lenders try to enforce a court order obtained before a change in the law

Sheriff Daniel Kelly QC has allowed proof (civil trial) in a claim by Brian and Linda MacBride (“the MacBrides”) for compensation in relation to repossession proceedings taken against them by GE Money Secured Loans Ltd (“GE Money”) in 2014 in respect of a Standard Security they had previously granted.

In 2009 GE Money sent the MacBrides a certificate of arrears and then raised an action for recovery of possession and ejection on the basis that they failed to pay their mortgage and were in default. The action relied on a shortcut court action for repossession, rather than the service of a calling up notice. The action was not defended and hence Decree granted.

In 2010 the Supreme Court ruled that a lender in a standard security had to first serve a calling up notice where it intended to exercise the power to sell the property based on the debtor's default.

In this case, GE Money did not seek to enforce the Decree against the MacBrides until 2013. The MacBrides disputed that GE Money held a valid Decree. In 2014 GE Money served a charge for ejection and payment on the MacBrides who attempted to repone (recall) the Decree denying that they had had ever received intimation of the original court action. GE Money lodged various documents with the Court but being unable to prove service they sought to abandon the action.

In a counterclaim the MacBrides averred that the enforcement steps taken by GE Money in 2014 were unlawful and sought compensation of £50,000 for financial loss and the stress and anxiety the enforcement action had caused them.

GE Money argued that their Decree was valid unless and until it was reduced (set aside); that no action of damages could be brought on the ground that a Decree was wrongful because the MacBrides had contested the action; and that at most the Decree was one that had been irregularly obtained rather than being unlawful; and damages could not be claimed unless malice and want of probable cause were averred.

Sheriff Kelly disagreed and has allowed a proof to ascertain whether the failure by GE Money to serve the court action and calling-up notices might amount to a “flaw, error or irregularity in process in the light of the Supreme Court decision in RBS v Wilson and as to quantum in relation to what damage the borrowers have suffered thereby".

The sheriff went on to say that if there was some flaw in the process, and if in spite of it the lender persisted to use diligence, it might amount to a “wrongous” use of it and give rise to an action for damages.

The Sheriff concluded: "A person is entitled to damages at common law if the execution of diligence is wholly unjustifiable though formally regular”.

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If you have any queries arising from this article then please contact our Dispute Resolution team on 0131 226 8200.

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