Sheriff Court case in which a creditor (Westfoot) sought to repossess and eject a debtor (EPH) from residential properties secured by standard securities after the EPH defaulted on payments relating to the associated loan.

EPH (a Panamanian company registered in the USA) admitted that the loan had been made and that it was in continuing arrears. However it argued that Westfoot had failed to comply with the strict statutory requirements necessary to repossess the property.

Calling up procedure
As the properties were residential, EPH argued that, when enforcing the security, Westwood required[1] to comply with the range of statutory obligations[2] aimed at protecting homeowners from being unfairly removed from their homes.

The sheriff rejected that argument finding that the protections contained in the legislation were intended for home owners and not corporate property speculators. It was noted that a company (in contrast to a natural person) does not have a ‘home’ in the sense that it would require to find alternative accommodation if it were ejected from the premises.

The sheriff found that:

“the sole beneficiaries of the legislation are debtors who own their home and use it as a security for debt, home owners who allow the home they mostly live in to be used as security for someone else’s debt, occupiers whose home is not otherwise protected by legislation[3] and entitled residents [including, for example, estranged partners of debtors] who live solely or mainly in a home used by a debtor or proprietor to secure a debt…”

However:

“corporate borrowers that grant standard securities over their residential property assets and use these as collateral security, to raise capital on the financial markets, are not included within the scope of the protection created. That kind of borrowing is a commercial activity.”

Ejection procedure
EPH also argued that, because the legislation governing the ejection of a debtor from a property[4] refers to the proprietor being in “personal occupation” of the property, it could not be used to eject a legal person (such as a company) from a property.

However, the sheriff found that, reading the legislation in a way that (in so far as possible) is ECHR compliant (which included protecting Westfoot’s right to enjoyment of its possessions), resulted in an interpretation of the legislation allowing the ejection of a company such as EPH.

Nevertheless, in this case, as there was no evidence that EPH itself was actually in possession of the properties (which were occupied by tenants[5]), an order for ejection of EPH was not required and the sheriff refused to grant it.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] This point was conceded by Westwood although the sheriff noted that he had “no doubt that these measures were never intended by the Scottish Parliament to shield Panamanian property companies from the ordinary consequences of their failure to comply with obligations in terms of contracts freely entered into, on the financial markets.”

[2] Contained in the Conveyancing and Feudal Reform (Scotland) Act 1970 and the Heritable Securities (Scotland) Act 1894 (as amended by the Homelessness etc (Scotland) Act 2003, the Home Owner and Debtor Protection (Scotland) Act 2010 and the Housing (Scotland) Act 2010).

[3] Including, for example, assured tenants under the Housing (Scotland) Act 1988.

[4] The Heritable Securities (Scotland) Act 1894.

[5] Who, if they were assured tenants under the Housing (Scotland) Act 1988, would have separate rights of protection from ejection.